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Saturday, March 26, 2011

"Taking on the Rebate Shops"

Nothing strikes fear into the heart of serious horseplayers like those words, "Taking on the Rebate Shops".  To them, it is like driving a stake through the heart of the vampire; so terrifying that the first words these horseplayers often say is "I am done betting on horses".  Well, during last night's interview on the Meadowlands pre-racing show, Jeff Gural is the latest person to indicate it is time to take on the rebate shops.

For those unfamiliar with rebate shops, these are non-racing entities that take wagers on racetracks.  With the low overhead and bargain they get on taking the signal, there is enough money to offer rebates to their players yet still make a nice amount of profit; something a racetrack with their expenses of paying purses and running a race track don't have.  As a result, a lot of heavy gamblers seek out these rebate shops to lower their virtual takeout; allowing them not only to play longer, but to give them an advantage over smaller players.  Is it right to offer rebates?  I'll leave that to you to decide, but at present, it is the way it is.

So when rebate players hear words to the effect that a track is going to take on the rebate shops, they cringe.  They think of the plans of Plainridge Racecourse where they plan on taking on the rebate shops by charging them 8% to take their signal versus 1% for those who produce racing.  At an 8% charge, rebates will virtually disappear on Plainridge races; first of all the ADWs will not be able to afford a rebate and secondly, most ADWs will likely drop Plainridge from their menu.  Apparently, Plainridge feels (or hopes) that reducing their takeout to 15% on all wagers will make their signal attractive to those who bet through racetracks that the loss of revenue from ADWs won't matter.  They better hope they are right because many tracks are more than willing to sell their signal for a lot less (the standard rate is 3%, some tracks like Buffalo Raceway, give it a way for 1%).

Jeff Gural is no fool.  As we have seen at Tioga Downs, his management team has no qualms about lowering takeout rates and should they take over the Meadowlands, takeout rates there should drop as well.  Remember, this is a man who believes ultimately takeout rates on horseracing should be no higher than the takeout rate on casino games.  So yes, in time as the Meadowlands takeout rate drops, I expect to see the fee charged to rebate shops to increase.  Eventually, there may be little rebate available on the Meadowlands signal, but if the takeout eventually ends up at 10%, is there a need for a rebate?

Of course, there will always be someone looking for something, but eventually there will be a point where takeouts will be low enough that most people will wager without rebates and for those who still insist on a rebate, the tracks will be willing to leave money on the table.

So the words "taking on the rebate shops" should not automatically strike fear among the heavy gamblers.  If a track takes them on stupidly, there is plenty of reason for concern, but if a track takes them on smartly, it is a whole different game.  It's all in the execution.

One thing Harness Racing Update reported was Gural wants the right of exclusion for the Meadowlands.  Up to now, being the NJSEA is a semi-private governmental agency, the courts have refused to permit the Meadowlands from exercising private property rights.  It is only a matter of time before a court case involving the right of exclusion comes into play should a lease be signed and I wouldn't be surprised if this comes into play soon after the Meadowlands reopens as it has been reported that at least one trainer successful at the Meadowlands has not been allowed to race at Tioga in the past.  No doubt, someone will make the case that while the Meadowlands is leased, the fact it is on state-owned land should preclude management the right to private property rights.

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