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Originally Posted by cj
They do, and they have ignored them at every turn.
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I am going to go off on a tangent for a moment.
I'm a bit of a passenger rail buff. Not hard core, but I like a relaxing two day train ride once in awhile.
But I can't stand the enthusiasts who dominate Internet discussions of Amtrak, who are called "foamers" (because they foam at the mouth when they see a train).
And the reason is because if you go to any of their websites, or the website of the foamers' lobby, the National Association of Rail Passengers, what they do is take Amtrak's financial reports and go through all sorts of machinations to prove that long distance trains and sleeping cars make money for Amtrak.
The problem is, if that were true, Amtrak would of course gladly expand the service. They don't, because, of course, it isn't true. Amtrak has the real numbers. They know how much it costs them. Which is why when Amtrak does cutbacks, it almost never does them on popular commuter lines (indeed, they add service on the Acela, the commuter services out of Chicago, and the San Joaquin and Surfliner trains in California). They have been trying for 46 years to get costs down on long distance sleeper trains. And before that, their private railroad predecessors did the same thing. Turns out there's these inventions called the airplane and interstate highway which really destroy the market for sleeper trains.
End of digression.
My point, of course, is that I suspect the takeout studies don't exactly say what a lot of horseplayers think they say. I'm not saying that lowering takeout is a money loser. I suspect that in certain situations, it could be a moneymaker. But you'd need a significant amount of handle coming on track or from non-rebate players, you'd need attractive races that people want to bet on at the lower takeout, and you'd need a pretty carefully calibrated reduction (e.g., the exotic takeouts might go down less than a lot of people here would like).
And I bet the studies also show that where wagering product is particularly attractive, takeout could be profitably raised. Churchill could probably get away with a pretty high takeout on the Derby, for instance.
Finally, I bet that the studies show that takeout reductions are subject to a significant matching effect, where if one of the big players did one, its competitors could probably blunt its effect by lowering takeout themselves, which would leave the market at a less profitable equilibrium. This is a familiar problem to the airlines, which have to be somewhat careful about discounting because of this. The discount is only profitable if the competitors don't match it.
Now, that's just based on my background knowledge as a lawyer with a fair amount of economics training. I'm not saying any of that conclusively. Perhaps takeout reductions can more broadly attract business than I think. I'm not weighing in on that.
But what I am pretty sure of is that the major players have studied this, and like Amtrak and the sleepers, have concluded that broad-based across the board takeout reductions are unlikely to be profitable for the major players in the industry. Instead, they nibble around the edges (such as with the Players' Pick Five in Southern California).
People who run major, multi-million dollar businesses with national reach, are not stupid, and do not ignore their economic studies.
