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Thursday, February 25, 2016

There is Something Wrong with This Model

The Meadowlands continues its streak of $3 million handle days and some ask why purses aren't increasing.  Well, let's take a look at the math using this past Saturday's racing card.

The Meadowlands handle for the day from all sources was $3,283,111.  Approximately 12% ($393,973) of the handle comes from on-track sources so using a blended rate, approximately 6% gets credited to the purse account meaning $23,638 gets credited.  This means $2,889,137 (88%) is bet through ADWs and OTWs and using the standard 1.5% horsemen typically get (this can vary), the purse account is credited with $43,337 meaning the total contribution for the night to the purse account is $66,975.  Total purses for the evening were $152,000 meaning there is a deficit of $85,025

Now to be fair, the purses do get a boost from what is wagered at the Meadowlands on other harness tracks where they get the lion share of the funds for the purse account (and track) in addition to the thoroughbred signals they take (the majority of which gets funneled to the thoroughbred horsemen at Monmouth Park),

But let's go back to the original handle from this past Saturday night.

  • $393,973 wagered on-track generated $23,638 for the purse account
  • $2,889,137 wagered off-track generated $43,337 for the purse account

The off-track money wagered on the Meadowlands card is seven times what is wagered on-track yet it only generates less than two times as much towards the purse account.  Clearly the model is broken.

While changing the model with regards to wagering conducted at other tracks and OTWs, it is essential for the tracks to take control of a significant share of the ADW handle.  I realize this is an unpopular position with many horseplayers but it isn't as bad as some may think.  Existing ADWs will continue to exist (at least the larger ones), because of anti-trust laws.  Tracks will continue to offer their signal to ADWs, not only for legal reasons, as some people will continue to wager through them and getting something is better than nothing.

In addition, since tracks won't have a monopoly, they will need to compete with existing ADWs by offering rebates and other benefits to woo customers to use their ADWs.  The bigger gamblers will still seek out the largest rebates.  So where do tracks and horsemen benefit if they need to offer rebates?  The profit the ADWs makes will now be available to be returned to the horsemen and tracks.  Because of the expense in running an ADW, horsemen may not get the full 6% (using the blended Meadowlands rate) they would get if wagered on track, but it is conceivable to get 4%, a big improvement over the 1.5% they currently get.

Now, don't get me wrong.  It would be silly and prohibitively expensive if each harness track (and for that matter possibly thoroughbred tracks) had their own ADW but if a consortium of tracks ran their own ADW economies of scale would kick in, reducing the expense of running it.  The USTA is looking at having their own racing channel of live harness racing.  Imagine what a harness-track run ADW could do with a dedicated harness racing web-channel.

Don't get me wrong, an ADW run by harness tracks will not solve all the problems racing has.  High takeout, medication and integrity are still issues which need to be dealt with, but getting a significant amount of the ADW business back from existing ADWs through competition would be a step in the right direction, enough to allow tracks to reduce their takeout rates, something they can't do now.

Speaking of the Meadowlands, if you play the races there, you may want to check out Harness Trip Notes, now improved as it provides an explanation of terms, something helpful for the less-experienced punter.  If you don't have the time to watch the races, it is a great way to get information about their performances.  The only shortfall is it only reports on races run at the Meadowlands, Tioga Downs, and Vernon Downs but for the price (free), you can't go wrong.  Make sure to check it out and see if it will help you with your handicapping.

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