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Tuesday, August 24, 2010

The Benefits of Exchange Wagering

The Paulick Report has interviewed Stephen Burn, the President of TVG and the Global Director of Horse Racing for Betfair, regarding the possibility of Exchange Wagering being introduced to the United States.  Specifically, there is a bill in the California legislature which will permit California to the be the first state in the United States to offer the product.  As to be expected, the racetracks are up in arms over the possibility of exchange wagering coming to California despite the fact Betfair would have to come to terms with the racetracks before they could offer exchange wagering.  The interview is one everyone connected with horse racing should read.  While the complete interview may be read here, here is couple of excerpts from the interview:  

When asked what he felt the impact of exchange wagering would be on horse racing, Mr. Burn responded:

A positive impact. Exchange wagering is not a silver bullet to provide a solution to all the challenges of the industry, but it is a useful and innovative tool offering a real opportunity to attract a new type of bettor and to win back players who have moved offshore or who have left the sport. It seems as though racing has focused on assistance or subsidies from other sorts of gambling, and while that’s understandable we think it is important for racing to find new ways to draw interest to and generate revenues from its own product. Exchange wagering is one of the few successful innovations that is proven to help racing draw new interest and generate revenues from the racing product itself. 

Regarding fears that exchange wagering will kill traditional pari-mutuel wagering, Burn responds:

I understand the concerns, but the evidence we’ve seen from countries where Betfair operates suggests the concerns will not be born out. In the UK, for example, the state-owned pari-mutuel operator (Tote) has seen dramatic rises in its turnover since Betfair’s inception–52% growth. If we are ever licensed in the U.S., our intention is to sit the exchange alongside the high-margin pari-mutuel products and cross-sell those products to exchange players. Doing this has introduced numerous new bettors to tote betting in the UK who would otherwise not have engaged with the product. Earlier this month, Betfair accounted for more than 40% of all new money bet into the nationwide Tote pool on a “pick six” bet, boosting that pool to an all-time record.

Technology moves on and racing needs to finally embrace it.  The pari-mutuel system is an inefficient model for wagering in the 21st century.  Continuing to rely solely on pari-mutuels means only the continuing decline in wagering handle.  By embracing exchange wagering, standardbred racing has a realistic chance to increase not only wagering handle, but the ability to capture the interest of the younger generation.  Will racing's share per dollar be less with exchange wagering?  Certainly, but what is better, a lot of nothing, or a little of plenty?

While the California bill being discussed includes an increase in the takeout of pari-mutuel wagering, if it means introducing exchange wagering, it should be approved even if the foolish takeout increase can't be stripped from the bill.  Hopefully, New Jersey and other states will look at introducing exchange wagering as well.  The sooner the better.


MainelyPace said...

Fill me in here a little Pacingguy, the term exchange wagering is new to me...I imagine it's something I already know but by a different name, but what is it exactly?

Pacingguy said...

Here is a simple explanation of exchange wagering, sometimes known as peer-to-peer wagering.

MainelyPace said...

Got it, I have heard of it before...Simply put you are matched against someone who has the opposite bet of yours at odds that are agreeable to both parties.

The downside is that it can cost you a lot more for one bet with an exchange wagering system rather than the traditional pari-mutual since you have to actually pay out the winnings to the other person if you lose. At least with the system in use now I can bet 2 dollars and shake it off if it does not come in rather than paying out even more.

I do like it for other sports though.

Pacingguy said...

Exchange wagering is not for everyone but there are people who will love it.