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Tuesday, July 3, 2012

Should Racing be Picking the Public's Pockets? [UPDATED]

Cangamble has written a great article regarding how racing is facing extinction thanks to its own greed which has shrunken our potential fan base. According to Can, the problem is takeout and the over saturation of wagering opportunities at tracks with regards to exotic wagers as well as the number of tracks a horseplayer can wager. We have lost many 'smart' gamblers, those who realize they can get more bang for their dollar playing other wagering games due to racing's high takeout rates, but what racing is doing to the rest of the gamblers is picking their pockets. Yes, no one is putting a gun to the head of the horseplayer to gamble, but just because the gambler is happy to hand their money over (until they get sick of losing) should racing do it?

I would argue racing should show some restraint. Why? You want to keep the gambler happy, happy to keep coming back and losing; the same way casinos do it. The last thing a casino wants you to do is lose every time you come to their gambling hall, because if you keep losing, you will eventually realize the game is a losing proposition and what's now entertainment becomes akin to paying taxes, except this is one tax the gambler can walk away from. The smart casino wants you to lose slower or win every once in a while so you maintain the entertainment aspect of the gaming experience and keep coming back. The casino knows in the long run you will lose, but they are willing to take their time getting their hands on your money and by waiting, they will get more of it.

In the same vein, is it really necessary for an individual track to import twenty signals on any given day? We all know you can't follow those many tracks at a given time and do well; playing those many tracks is a recipe for wringing the gambler out. For the gambler's own protection as well as racing's long term interests, no track or ADW for that matter should be offering those many tracks, though I am not for cutting certain signals off, but prefer less signals being available at any one time. Not only would this mean keeping players around longer, we would have more meaningful wagering pools.

Exotic wagers have a place in horse racing, but when you offer on every race, exactas, trifectas, superfectas, rolling Pick-3s and Pick-4s, not only do you get smaller individual pools, but you kill your churn. The harder it is to win a wager, the fewer winners there will be putting more money in their pockets instead of the windows. For example, if there is a net pool of $1,000 to pay out, with one hundred winners splitting the pool, more of the payoff will be churned through the windows in subsequent races than there will be if one person collects $1,000 as there is only so much a person will bet per race. Of course, you need a mix of favorites and long shots to win for this very reason, you want favorites or near-favorites to win as more money will be churned, but without long shots, how are you going to attract gamblers? Yes, you will have people wagering a full menu of exotics, but just because they are willing to, it is not in racing's best interest to grab it all at one time; the gambler needs some positive reinforcement.

As you know, exotic wagers have higher takeout rates, namely because the traditionally large payoffs mask the takeout rates. Again, just because racing can get away with the higher takeouts, why should they do it? It doesn't cost a track any more money to handle an exacta, trifecta, or superfecta any more than it costs to process a win wager? Why not have all wagers at a single rate? With a presumably lower takeout rate for all wagers, it will allow gamblers to play longer, thus increase their churn and keep them happy.

Monmouth Park appears to be the only track or casino in New Jersey to be the sacrificial lamb when it comes to sports wagering in New Jersey as they have announced they will move forward despite an anticipated court case. The Meadowlands, Freehold, ACRC, and Atlantic City casinos are going to hold off until there is some clarity as to how the courts will rule. As you are aware, a Federal ban against sports betting exists with the exception of four states that had their sports betting grandfathered, with New Jersey having been given a window to approve sports wagering which it failed to do.

Update:  The Record's John Brennan speculates why the Meadowlands may be holding off.  It has to do with the new grandstand.
Forgetting about the legality of the legislation, I have a problem with the law approved. It seems somewhat hypocritical to allow wagering on sports for professional and college teams except those involving New Jersey college teams or a college game played in New Jersey. Apparently, the legislators feel there is a threat to the integrity of New Jersey collegiate sports but they have no problem if someone attempts to tarnish a college sports program outside of New Jersey.

Assuming New Jersey prevails, it is safe to assume any windfall to casinos and racetracks will be short lived, because as soon as the Federal ban is overturned, Delaware will be expanding their sports wagering which under the current law is limited to three game parlays and we should expect other states to add sports wagering to their racinos/casinos as well, making sports wagering a commodity as has happened to casino gambling. One thing for sure, if sports wagering is approved, there will be less money wagered on horse racing.

Let the countdown to the Gold Cup and Saucer begin!  Grandstand tickets for the Gold Cup and Saucer at Charlottetown Driving Park (or to be technical, Red Shores Charlottetown) have gone on sale today.  Tickets cost $40.  Other than the Little Brown Jug, find me a harness race where you can charge $40 or more for a seat.  My guess is there is none.  For the record, the Gold Cup and Saucer is on August 18.

6 comments:

JLB said...

You make an excellent point about the wisdom of lowering takeouts on the exotics to match that of WPS betting. But there simply exist very few racetrack managers, much less state legislators, who will push for this. You are correct that casinos manage the gambling experience properly, and I agree that the contraction in harness racing (and thoroughbred) will continue.

Cangamble said...

There is a problem with limiting content at ADWs or racetracks, as the most popular tracks will be the ones on the menu. The result will be 15 tracks (mostly thoroughbred) left in North America.
I understand the concept of limiting betting opportunities by limiting tracks, but it is really unworkable. Vegas doesn't limit sporting events one can wager on, so I think fix the takeout, and no one has to go down that route.

Anonymous said...

NJ's not allowing wagers on NJ teams is the same as Nevada's law. No wagers on Nevada teams or games in Vegas for years. As for the idea that racing wagering will suffer because of sports wagering, I don't agree at all. People are already betting billions of dollars on sports illegally, tapping into that market will be a benefit for the tracks as there are very few people out there who have a desire to bet sports that arent already doing so.

Pacingguy said...

Cangamble,

I may not have clearly expressed myself, but when I was talking about limiting the number of tracks to wager on, I meant there should be no more than X number of tracks racing at any one time; not dropping signals.

Race meets should be shorter so the money wagered is not spread over those many tracks. By having less tracks operating on a given day, the pools should be bigger.

Anonymous said...

Are you kidding? Parimutuel racing take-outs are akin to the vig in sports betting or the commission in table games like baccarat or pai gow poker and tiles.

In parimutuel racing when you wager you are wagering against the other rubes in the pool. The takeout is because the house has nothing, no stake in that pool so they take their commission for facilitating the bet.

In the casino the player is playing against the house. That is true on all games except the "vig" games. On those games you are wagering in a pool, against the other players, and the house has little to no advantage. So they have to take the "vig" off the wager. In the casinos every game statistically is unfavorable to the player.

Name one game played in a casino where the house advantage is percentage-wise lower than the percentage of a wager the takeout is. There is none.

That is the problem with racing versus other forms of gambling. It provides a good value for a little work (handicapping). Better value than any casino game even if you play perfect strategy (i.e., poker and blackjack). Yet no one knows this fact or publicizes the comparison. That is the problem with racing and why they have lost fan base. It is too "hard" most people want to sit mindlessly and count to 21 or spin reels, no effort necessary. It isn't the PM takeout.

Cangamble said...

Anon, there is no value or very little value occasionally if the takeout is too high, and that is horse racing's problem.
Sports betting is contrived so that the line will produce equal losers on either side, or more losers on the losing side (when oddsmakers really earn their keep). But bottom line, historically, players lose between 4-5% of what they bet collectively on a straight game. That is around 4 times the takeout on WPS. So in sports, you are really betting against the public to be successful, and the same is true with poker, as the house either gets a straight fee per hand or a percentage of the pot, or a combo of both. To win long term, you have to be better than the other players and beat the rake. Because the rake is low enough, there is the odd long term winner.

No chance horse racing provides better value than slots, or blackjack, when it comes to bang for your buck, with its 21% average takeout. I think you need to look up the word "value."
The reason the racing industry doesn't publicize they have better value is because they don't. They need visible long term winners, and to do that they have to admit that getting rebates gives you a chance, or they have to drastically reduce takeout...and so far they are just going down with the ship instead.