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Monday, July 19, 2010

Pocono Takeout Reduction; Where Does the Blame Lie?

Pocono Downs has decided to lower their takeout on Superfecta and Trifecta wagers from 35% to 25% starting August 2 through the end of the current race meet. In the press release, Dale Rapson, Vice President in charge of racing, indicated this is a temporary reduction to see how the change in the takeout reflects in their handle.

Granted, the reduction in the takeout may not have people jumping out of their seat to rush to Pocono Downs, but I certainly hope people do increase their play at Pocono. I am certainly not suggesting people flee tracks with better takeout rates, but players need to know ignoring Pocono will not only result in the takeout rate possibly being restored to extortionist rates next year; it may give other tracks thinking of reducing their takeout pause despite the success of Tioga Downs experiment. Pocono's reduction is like taking a baby taking their first steps. With encouragement they will take additional steps forward; failure will result in returning to their comfort zone; even if it is against their best interests in the long run.

The owner of the now-closed Rosecroft Raceway is suing Maryland Thoroughbred interests for anti-competitive actions and violations of federal anti-trust law claiming they orchestrated the demise of the raceway due to cutting the thoroughbred signal to Rosecroft. Did the thoroughbred interests want the trotters out of the scene? Perhaps they did, but the fact is no one put a gun to Cloverleaf Enterprise's head to sign the original agreement to pay thoroughbred interests for their signal.

The real question should be what did Maryland and national harness racing interests (management et al) do or failed to do which resulted in 95% of Rosecroft's gambling revenue coming from thoroughbred simulcasting? There is a big problem when only 5% of the money wagered on horses at a harness track comes from its own breed. Rather than suing the thoroughbred interests, Maryland harness racing interests should be looking at themselves to see what went wrong and what could have been done to avoid these problems. More importantly, harness racing interests elsewhere should be asking themselves the same question so they avoid a similar situation.


Scott Jeffreys said...

Dear Pacingguy : You should hope that not a single dollar of money be bet in the direction of Pocono Downs at any takeout rate. Pocono and Chester have cannibalized the Meadowlands meeting with their slot infused jackpots. There is absolutely no interest in harness racing at either facility and the sooner that racing can be "dumped", so much the better. We are talking about two racetracks whose parent companies are Mohegan Sun and Harrah's, both with larger interests in casino revenue than with horse racing.

Your recommendation to support a racetrack with a reduction in takeout without representing the whole picture is a tremendous black mark on your blog.

If Pocono is the best that you have for the centerpiece of harness racing, you might as well stop writing your blog.

Do me a favor? Go back to the 2001index for Hoof Beats magazine and look at an article that I wrote (and was crucified for) covering the Meadowlands and the potential downward spiral to be followed, similar to Roosevelt Raceway.

By recommending Pocono, you are part of the problem, not the solution.

Pacingguy said...

Scott, I beg to differ.

First of all, I believe Pocono Downs is a racino that supports harness racing. They have had a partnership with their horsemen in joint marketing and have improved the backstretch. They have invested in their racing product. In addition, they have stepped forward to host the Breeder's Crown, something which costs them money to do. Does this sound like a company that has no interest in horse racing? That being said, we do agree about Chester Downs.

Secondly, even if you disagree with my first point, the fact is if an experiment regarding takeout fails, those tracks who are sitting on their hands saying they can't reduce takeout (like Balmoral) will be given the ammunition they need to resist making a change.

Lastly, you are wrong to blame Pocono and Chester (should include Yonkers) for canabalizing the Meadowlands meeting. Blame for that belongs to the New Jersey legislature which refuses to let slot machines at the Meadowlands. If you don't accept the New Jersey legislature as being responsible for the canablazing of the Meadowlands, then blame it on the horsemen in Pennsylvania who fought for slots who looked out for their own interests instead of looking at the big picture.

Also, if you recall from my blog entry I said, "I am certainly not suggesting people flee tracks with better takeout rates, but players need to know ignoring Pocono will not only result in the takeout rate possibly being restored to extortionist rates next year; it may give other tracks thinking of reducing their takeout pause despite the success of Tioga Downs experiment". Nowhere did I say people should flee the Meadowlands or pour money into Pocono; basically I am saying if you see something at Pocono you like, play it instead of just ignoring their card due to the takeout rate.

I am not part of the problem, I am dealing with reality. I truly hope the New Jersey legistlature finally gets it and gives the Meadowlands slots so the number one track can prosper for many years.

Pacingguy said...

Scott, I don't have access to your article. I would love to read it if possible.

JLB said...

Slightly off-topic, but Pocono Downs, pre-renovation, had one of the best grandstands for viewing a race (if one ignored the birds' "calling cards"; in fact, management placed fake owls at several points in the upper grandstand, to no avail). Now, there is next to no covered seating, which should make for an interesting viewing experience for the fans on Breeders Crown day if it is rainy or cold. A recent visit to the dining room encountered an extremely mediocre meal (in contrast to my experience when the dining room first re-opened: the meal then was excellent and very reasonably priced).

I do think that Mohegan Sun management does have a different view towards harness racing than does Chester; but the track seems far inferior to what has been built at The Meadows.

Pacingguy said...

If I recall correctly, temporary stands which have been put in for summer concerts will remain in place until the Breeders Crown has been run.

Scott Jeffreys said...

Dear Pacingguy : The article was entitled "Prevent the Greying : Start Thinking Young"; it appeared in the February 2000 Edition of Hoof Beats magazine on Page 114 in the Grandstand View feature. After an introduction based on a conversation that I had with Fred Noe and Dean Hoffman, the article opened with the following :

"Will harness racing still be here in 2025? This question would have been greeted by laughs some 25 years ago [1975]. Of course, the game will go on forever, some would answer, funded by a new influx of wagering dollars and an endless supply of new fans coming through the doors.

We are now halfway thought that 50-year period and suddenly the cynical laughter has stopped."

The article closes with the following observation :

"By 2025, the Meadowlands, our sport's centerpiece, will be 50 years old. In today's environment of luxury boxes and tomorrow's super stadiums, does a 50-year-old racetrack hace enough marketing appeal to attract the same number of fans? Probably not."

Alas, who knew in February 2000 that New Jersey racing would go from solid attendance to a last ditch $50M/50 Day meeting, to extinction ... and all before the 25 years had passed.

Remember this in closing : Roosevelt Raceway never made it to the fifty year celebration.

Sincerely, Scott Jeffreys

Scott Jeffreys said...

Dear Pacingguy and JLB : One thing that I have done well for Hoof Beats Magazine over the last decade was predit the future even when it was unpopular. I can show you an article that was written in March 2004 but was left on the cutting room floor at Hoof Beats. The title? "Exchange Wagering : A Dangerous Revolution".

The article was cut as it was seen as a thoroughbred centric topic (via Betfair) as opposed to being seen as a wagering and ADW platform issue.

Here is my point : if you are backing Pocono because you believe that Mohegan Sun is harness rscing friendly, you are absolutely, positively backing the wrong "horse". If you cannot explain why a corporation is in a particular business, aside from your own personal projections of the sport being fun, the chances are that the corporation does not really have an interest in the game.

Sorry for filling your blog response page with these comments however, I truly think that you are all missing the Pocono vs. Meadowlands issue.

Sincerely, Scott

Scott Jeffreys said...

Last entry for this thread : some of the introduction from the March 2004 article referenced follows.

"Demanding value at the betting windows has been the horse player’s creed for as long as pari-mutuel wagering has existed. Since Joseph Oller’s first totalizator equipment was introduced in 1868, exploiting undiscovered value in a racehorse’s chances has been the key to beating the withholding rates from the wagering pools.

The New York Racing Association has been the leader in takeout reduction in North America with their straight pool surcharge set at 14%, the lowest rate of any racetrack. These pari-mutuel pools offer the best value proposition to a player despite the fact that only eighty six cents of every dollar is being returned to the on-track wagering public. NYRA has cheered that the lowered takeout has resulted in millions of additional dollars being returned to the betting public. Many bettors ignore this takeout rate under the guise of an entertainment tax, but balk when faced with paying that same surcharge as a front load fee on a mutual fund or on a credit card revolving balance.

As with any business model and particularly when large sums of money are involved, technical innovations are invariably introduced that take advantage of inefficient markets. A consumer would clearly prefer paying less than 14% takeout, however when no other organization is offering a better deal, if you want to be an occasional or frequent punter, you place your action despite that takeout. With all dollars on the racetrack’s product flowing through its own pari-mutuel pools, the host racetrack can set the takeout based partially on the cash required to operate its business and local legislative requirements. Does this form of wagering represent an unchallenged market, thereby allowing the rates to remain artificially high?"

Yes, it is about the takeout - until you have no business left.

Pacingguy said...

Scott, thanks for a summary of that article. You unfortunately were very perceptive.

VicD said...

To say that Pocono and Chester cannibalized the Meadowlands meet is incorrect and ridiculous.
When Dover offered slots more than 10 years ago, how much did the Meadowlands really suffer? How about Yonkers? Remember how many years that place was a wasteland, because the Meadowlands took all of its business?
The problem here is that the companies that run Pocono and Chester are actually concerned with making a profit, unlike the State of NJ, which could not run a newspaper stand properly..
The Meadowlands was NOT cannibalized, it was exposed as a business entity that was a complete fraud, and unable to compete among others in the same business.
As for lowered takeout at Pocono, this will do little for the handle, as the interest in that track and the sport in general is approaching zero.
I like Tioga Downs, and I like the low takeout, but I have no idea what the handle numbers are, other than to guess that they are very low, and without the slots, well, you know the rest of that story...