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Sunday, November 16, 2014

Pricing is the Threat to Racing

An opinion piece in Oklahoma talks about how the General Manager of Remington Park has no idea about what is the biggest hurdle to increasing revenue at racetracks.  The General Manager, blames illegal sports wagering and gambling machines for the problems racing has with declining revenues.

According to the author of the piece, the problem racing has is the high cost of betting.  If we assume racing has a blended takeout of 20%, it is over priced when compared to casinos.  It just costs too much to bet on the horses.  The writer, wants to know with many tracks subsidized by slot revenue, why can't they cut the takeout rate to make it less expensive to play the horses?

A very good question indeed.  Why won't many tracks cut takeouts, especially when there is so little handle to begin with?  Does it really matter if you cut the takeout rate to a blended rate of 10%  Probably not.  Of course, it isn't that simple.  Cutting takeout too much and you will find ADWs no longer carrying your signal which puts you at a competitive disadvantage,  How many ADWs would drop the Meadowlands, perhaps the most popular signal in harness racing, if they cut their takeout to a maximum of 10%?

If tracks can't cut the traditional wagers' takeout rates, what can be done to get around the ADWs?  Since Exchange wagering is market-driven, all which is needed is a small commission which permits volume wagering.  Yet states like California which have approved exchange wagering (though there is resistance to it from the thoroughbred owners) and New Jersey, which authorized exchange wagering, has yet to approve rules for it.  The time has come for these states and others to permit exchange wagering so we can see handle increase.

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