Has Paulick Jumped the Shark? Is His Article a Paid Advertisement?

[andymays]

http://pullthepocket.blogspot.com/20...ped-shark.html

Excerpt:

But today, it looks to this observer like the Paulick Report has jumped the shark.

In an editorial titled "California's Push for Purses", he extolls the virtues of a purse increase in California which reads almost like an advertisement in itself - which I guess is fine. However, several quotes are not up to his standard.


Here is the article in question by Ray Paulick:

http://www.paulickreport.com/blog/ca...sh-for-purses/

[andymays]

By the way Ray commented under his article. It's comment #27

http://www.paulickreport.com/blog/ca...sh-for-purses/

Comment excerpt from Ray Paulick:

27. I knew in writing this piece it would find few if any sympathetic ears in the horseplayer community (the only possible exceptions being those horseplayers who also own horses and understand the economic burden of putting on the show because they have to pay the bills). However, I am insulted and offended by remarks suggesting I have no understanding of pari-mutuel wagering or could care less about horseplayers and gamblers.

[OTM Al]

So he disagrees that takeout is the be all end all to the "woes" of horseracing. Frankly I don't think he coached his argument well, but I also don't think he is entirely wrong. Certainly reducing takeout increases handle, he does not deny that, but that does not guarantee an increase in revenue, or as I've pointed out before, profit, which is what really matters.

Profit functions can be represented normally as an inverted parabola. The peak represents the maximized level of profit. Lowering takeout past the optimal point will reduce profit or equivalently raising takeout when below the optimal level will increase profit. Draw the picture to demonstrate it for yourself, takeout on the x-axis, proft on the y.

Of course such a simplified picture assumed the principle of ceteris paribus, with all else equal. If all else is not held equal, then other answers can happen. Increases in field size also have effects. Can they outweigh a takeout increase? Theoretically yes. If indeed this money can be funnelled in a way to increase field size enough, an increase in takeout could be more than offset by an increase in field size.

Do I think this will actually happen? No I don't. I think what is being done is a mistake. But instead of blind attacks on Mr. Paulick, who frankly I have never cared for, perhaps it's time to present some actual proof. I am still yet to see it. And you can be sure that big players and ADWs don't want that proof.

[Horseplayersbet.com]

"And you can be sure that big players and ADWs don't want that proof."

What does this mean?

[OTM Al]

Originally Posted by Horseplayersbet.com

"And you can be sure that big players and ADWs don't want that proof."

What does this mean?

It means a reduction in takeout destroys margins for the ADWs and reduces the available rebates to big players. These are 2 sides of the same coin. A rebate trumps a takeout drop, especially in win pools.

[Horseplayersbet.com]

Originally Posted by OTM Al

It means a reduction in takeout destroys margins for the ADWs and reduces the available rebates to big players. These are 2 sides of the same coin. A rebate trumps a takeout drop, especially in win pools.

I guess for most ADWs. I personally welcome takeout decreases as I believe they are good for the overall health of the game.

The big players that I've heard of all would rather have takeout reductions because it is felt that there would be more horseplayers eventually to build the pools, and existing horseplayers would bet more as well.

I don't think a rebate trumps a takeout decrease either. I think they are pretty much the same thing. For example, if you get a rebate of 5% on WPS, and your ROI is .98 before rebate, if takeout were to decrease by 2%, the rebate would most likely be reduced by 2% as well, but because of the extra value in the win pool from the takeout drop, your ROI now is 1.00 before rebate.

[cj]

I don't buy the rebate trumping a takeout drop either. Any big bettor that thinks this is true is probably losing. For the record, all "whales" don't win. Plenty lose lots of money, just less due to rebates.

[OTM Al]

Originally Posted by Horseplayersbet.com

I guess for most ADWs. I personally welcome takeout decreases as I believe they are good for the overall health of the game.

The big players that I've heard of all would rather have takeout reductions because it is felt that there would be more horseplayers eventually to build the pools, and existing horseplayers would bet more as well.

I don't think a rebate trumps a takeout decrease either. I think they are pretty much the same thing. For example, if you get a rebate of 5% on WPS, and your ROI is .98 before rebate, if takeout were to decrease by 2%, the rebate would most likely be reduced by 2% as well, but because of the extra value in the win pool from the takeout drop, your ROI now is 1.00 before rebate.

"It's felt that there would be more..." is a nice thought and a possibility. But what if there isn't? The growth here is the key component to the arguement about dropping takeout, but what if the supply of horseplayers is fairly inelastic? Small gains would be made to be sure, but again, there is no proof that the gains would cause the offset needed. This is especially troubling if there is an industry wide drop. It's possible that initial individual tracks could gain greatly by a drop (though I've also heard a very well reasoned arguement why a single mover would get killed), but they would simply be taking action away from others, not creating anything new, so if everyone followed suit, we'd end up with a tragedy of the commons type outcome where all the tracks actually end up worse off in the end.

I disagree with your assumption about ROI as well. It assumes that a 2% takeout decrease would be uniform in returns. I claim it won't be. Bigger returns will be realized on longer price horses and smaller on low price ones. My valuation of a horse that should be 5-2 based on it's chances to win is unchanged by the takeout level. Therefore, the low price horses are still much more likely to be bid down to almost exactly the same levels as with higher takeout, especially if more money is coming in as you predict.

Look, I'm only arguing these things because these are questions people aren't asking and ones I feel are very appropriate. Instead all I hear is "10% WPS" based on absolutely nothing. The position must be supported by more than insults if it has any chance of working.

[cj]

Hasn't the takeout drop thing been proven overseas in real life?

[Horseplayersbet.com]

If you are looking for empirical proof, there is none, because part of takeout reduction theory is that it takes time in order to create a bigger base, and also in today's environment it takes more than just dropping the takeout in one betting type as an experiment. In fact, it has to be done across the board, by most tracks in order to realize full impact because of churn from a low takeout venue going to a high takeout venue.

There is evidence though that lowering the price increases revenues. The California lottery just found that out. Slots found that optimum takeout isn't 15% but closer to 7%.

Horse racing has never bothered to try to find out what the optimum takeout is.

And of course, there are a few studies done by astute economists that show that takeout rate is far from optimum right now.

[Greyfox]

The Paulick article is very well written and the depth of research into the economics of California racing versus other tracks is broad enough to raise suspicions that it could be "an informercial."Assuming for the moment that it wasn't a paid for ad, Paulick makes a very positive case for increasing take out.

He's right though. The vast majority of horse players do not want increased take out. I certainly don't. In the simplest scenario it just becomes that much more difficult to beat the ponies.
From another perspective though, I don't want to be betting 5 horse fields.
In fact I won't.

If increasing the purses for horsemen is correlated with better wagering opportunities, then in theory the shrewdest of players should still be able to do well. The flip side of that coin though is that the bar for being shrewd at the track will be raised by the takeout increase.

On a personal level, I'm just going to have to wait and see how the increase in takeout impacts my wallet at the end of each month. For all I know, there is a chance in doing better if wagering opportunities increase.
I won't join any boycotts until I've made that assessment.

[chickenhead]

the best chance a track has, is for a major, either Cali or NYRA, drastically reducing takeout on track, increasing payouts on on-track simulcast as if all other tracks also had the same takeout, and having an integrated ADW open to all that does the same. Not via rebates, but through paying out winners as if takeout were lower. I have no doubt they would absolutely kill it.

Smaller tracks are along for the ride.

If there is an inelastic supply of horseracing dollars that probably is best addressed by limiting the supply, not by raising the takeout. Better to have a cluster of thriving profitable businesses than having the industry leaders moribund.

Set the takeout to maximize play by your best customers, set the number of races to match up with what smaller players will stay interested in and support, and you should get to the happiest place you can get too.

[johnhannibalsmith]

Originally Posted by Greyfox

The Paulick article is very well written...

...for a pamphlet.

[andicap]

I've known Ray for close to 20 years, first when he participated on the Prodigy racing board and then as a free-lance writer for the Blood-Horse. And I know Ray would never sell out to anyone in return for renumeration.

Could his opinions coincide with those of an advertiser? Of course. That happens in all publications, from the Wall Street Journal to BusinessWeek to the Economist.

I may agree or disagree with his opinion in this case -- and frankly I don't know enough about the subject to comment -- but one thing I DO know: Ray Paulick has integrity and deeply cares for the horseplayer. But doesn't mean every column will agree with the likes of HANA -- he is also looking at the greater good of the entire industry.

Why does every disagreement in today's climate have to include a political or personal attack on the other party? No one can disagree in good faih anymore. Those on the other side are "traitors," or some such vitriol.

FYI, I am NOT questioning the rationale for the poll. The phrase "appear to be" is appropriate in this instance.

[PaceAdvantage]

Originally Posted by andicap

Why does every disagreement in today's climate have to include a political or personal attack on the other party? No one can disagree in good faih anymore. Those on the other side are "traitors," or some such vitriol.

FYI, I am NOT questioning the rationale for the poll. The phrase "appear to be" is appropriate in this instance.

That's the way it is these days for some reason. It's that way in politics...it was that way in the Zenyatta vs. Rachel debate...it is very tiresome as you point out...