Apparently the Thoroughbred Owners of California and Magna had seen enough with the 20% drop in SA handle that they have approved a drop in the fee for the three largest rebate shops. According to Mr. Van de Kamp, \"these incentives now in place should bring these big players back to this meet\". Hey, Mr. Van De(duh!!!) Kamp, how are lowering your takeout to 10% so everyone can come back to your meet. After all, that is what these big players are paying.
JB, your shop better be good.
The last thing in the world \"rebate\" players want is a universally lowered takeout.
Most of these \"rebate players\" are in the money churning game, not the handicapping game.
They are trawlers not fly-fisherman. They are to handicapping what Machine Gun Kelly is to marksmanship.
Lower the take out and they have no edge to exploit, no scam to get rich on.
Here\'s the link to the drf article. One point: it is not clear if Magna is reducing their fee(portion of takeout that otb keeps) to the rebate shops to the same ,more ,or less than the fee paid by other otb\'s so whether the rebate shops are getting a \"deal\" is an open question. (Per the article,Magna raised their fees to the rebate shops recently)
Exactly, if you lower the take, everyone will get more money back not just the rebate players but this will never happen so hurry up JB.
Agree with JB.
Cal. is set to raise takeout and not lower it.
Tip
Hmmmm, Thehoarsehorseplayer is correct when he says the big boys are in the money churning game. Mostly , anyhow, you still have to have an opinion (or information) 15% or so better than the crowd to play a break even game. Then the rebate is your profit margin.
Now, the logic that says a universally lowered takeout would hurt the rebaters escapes me. Maybe you could explain the math there.
Maybe you are saying that a 10% take with NO REBATE would be a problem for them, and I would agree. If they were still able to get a 2-3% rebate, then the game would still be in thier favor, and the rest of the players would simply lose less to the track and state.
High volume rebaters are interested in chalk, because chalk is underbet. A reduction in takeout would deflate chalk and erode their margin.
The math, as I understand it, is based on the economic principle of pursuing an optimal pricing strategy, i.e., the idea that in the right circumstances reducing price can result in higher profits due to increased sales, assuming reasonably high fixed costs & a reasonably low marginal cost to produce, let\'s say, each additional widget. Thus, the rebate shops argue, much of their volume is due to & would not exist if they weren\'t offering a 10% price reduction. In addition, assuming a 3-5% signal price & a universal 10% blended takeout rate, the remaining 5-7%, the rebate shops\' current profit margin, would have to cover both the rebate & the rebate shop\'s technology, facility & labor costs. Using an assumed 10% takeout rate, depending on the new rebate percentage & the reduction in volume because it is lowered, the rebate shops\' net profit might then be too low to justify the investment required to start & operate the shop in the 1st place. In other words, given the risks involved it would no longer make sense to invest capital in a rebate shop because the return would be too close to the return available without taking any risk.
I understand the argument that rebate shops are not adequately compensating those that put on the show, as evidenced in recent yrs by the very minimal increases in purses compared to increases in handle, but I also think that the shops have introduced much needed price competition for a product which has been way overpriced for a very long time. Oddly enough, Magna\'s actions may have had, to a lesser degree, the same effect. At present,for the 1st time, brisbet & winticket are offering straight 7% first dollar rebate specials on designated tracks, & one acct wagering service is offering a 25% sign up bonus. CD is taking concrete steps to buy FG, in order to compete with Magna during the winter, & it is not unreasonable to assume that countermeasures by other competitors are in the offing. All potentially good developments if you believe, as I do, that competition, & especially price competition, are good for the consumer, & things to keep in mind when dealing with some of the short term chaos this competition is causing.
Well, the logic quite simply is lower the takeout and you lower the profit margin from which rebates can be paid. With the presumption that this will inevitably reduce rebates.
Now if your point is that the guys living off their rebates who are now breaking even at a 15 percent takeout will now be also showing a 5 percent profit at a 10 percent takeout in addition to their reduced rebates, I don\'t think so. There are a hell of a lot of variables at play here, but let\'s just introduce one notion into the mix. In theory, a reduced takeout would bring smarter players into the game. With the result that horses that now go off at 9/2 and in theory should go off at 5-1 with a five percent reduction in takeout, might instead be going off at 4-1, because sharper handicappers are in the mix.
And I know that is simplistic but I do think there are a lot of natural forces at play in the parimutual system that inevitably are going to keep 10-1 horses going off at 10-1 and not 11-1. With the result that the guy who is losing three percent a year now, is not going to be winning two percent a year with a reduced takeout. It\'s an illusion. Like the illusion that a closer is running faster at the end of a race than at the beginning. He\'s just running less slower than everybody else. Reduce the takeout and the people who are making money now will make more money, and different people will come into the game and make more money, but the losers will still be losers.
Which brings us back to the rebate boys who are not really playing horses but are playing the parimutual system, or more precisely are playing off an aberration inherent in the economics of the racing industry.
As it is this idea of selling your signal to outlets that can\'t reciprocate with an income producing signal to you for 3% is an absurdly short-sighted business decision.
You know, not all of take out is fat. Purses and the legitimate expenses of running a racing operation come out of that takeout. But the track operators have decided that only the people who bet at the track should have to bear those expenses.
You go to the track. You pay all the expenses for the operation and get treated like crap. You bet offtrack you get rebates.
You would think that maybe it would be the other way around. That people who go to the track would maybe have to pay less of a takeout than people off-track, that this might bring people back into the stands, but the only thing most race track executives care about it cashing their paychecks, so why rock the boat. If the three percent they get from an Indian Casino is South Dakota pays for their raise next year why bother actually growing the game?
But back to the rebate boys. You know the irony is not that some of these guys are making a good living by breaking even at the races and pocketing their rebates. If you want to say that by staying even they are 15 percent smarter than everybody else, fine. But the truth of the matter is that the way the rebate economics are structered now people can make a nice income while losing at the races. Bet a million a year, lose 2%, get a 7% percent rebate and you\'re still $50,000 a year ahead of the game.
There\'s just something wrong with that picture to me. I mean the backstretch help live in dumps, beers are $6.50, the TVs at least in New York are not clear enough to tell the differnce between the red one and the orange seven as they come down the stretch,[Has anyone in the NYRA heard of HDTVs]and in the midst of all this austerity a select few are making nice incomes by actually losing on the races. Who wudda thunk it?
Now I want to clarify just one thing I said in my earlier post. I might have left the impression that I thought the \"Rebate Players\" were running a scam. Actually, I don\'t think badly of them at all. I think they are smart businessmen taking advantage of a loop hole. The scam is being run by the executives of race tracks, who are sacrificing the long term health of their enterprise for a quick infusion into their bottom lines. That\'s the scam.
I mean carried to its logical conclusion everybody should bet off-track, everybody should bet a rebate, and there is no money for purses. Yeah, sounds like a good growth plan to me.
Post Edited (01-17-04 10:15)
To Thehoarsehorseplayer,
Bravo, Three Cheers,
Now the hard part. How do we work together to lower the track takeout?
I remember when Kee lowered its takeout and its signal was boycotted.
It seems to me that the only way to lower the take is to support (through wagering) organizations like NYRA and Keeneland which have very low takes on WP&S wagering.
What do you think?
Cozzene
Ok, you make some interesting points. But BREAKING EVEN or LOSING 2 or 3% still requires some level of SKILL.
Now, I can think of some ways where you could do that with no skill but we won\'t go there.
If it was such a no brainer strategy, then the big money from Wall Street would be pumping 50 billion a year through the rebate shops , picking up every last loose cent from the game.
The notion that as the take gets lowered , smarter players [ like me ;-) ] would get back in the game, and kill the prices on all the winners is , well, fanciful. So if the take is zero, what happens then, winners on average pay less than fair value? Give me a 5%-10% takeout , I\'ll take my chances against the \'smart\' money.
And Cozzene, 15% is not a very low take, its a lower take, something completely different.
I think you should do what\'s best for you. Even if you are getting a 7% rebate you can still go broke, so a rebate doesn\'t guarantee winning if just give you a better chance of winning. As we speak I know of several legal rebate shops being set up and the one that offers the best deal will get the most business. It would be interesting to see if tracks can offer rebates since they are essentially doing it by knowingly selling their signal to rebate shops.
I agree with most of what you say, Hoarsehorseplayer, but my pt was not that rebate players would show a 5% profit with reduced rebates if the takeout was lowered to 10%. According to published reports, daily settlements for players at RGS are minus 10%, which means that at the biggest rebate operation players overall are breaking even with their 10% rebate. Rather, I think betting volume at tracks & otherwise from existing players would increase dramatically if the takeout was lowered for everyone. I also think that a lowered takeout might put a serious enough dent in the business of the rebaters that tracks could reclaim action which would make a bigger contribution to purses. The signal price, as I understand it, was agreed on at a time when no one anticipated that 80% or more of betting volume would be generated off-site. I think the tracks would like to figure out a way to put the genie back in the bottle, & think it noteworthy that a number of yrs ago NYRA did propose a rebate program. As with their recent request to lower the takeout on straight wagers to 13%, the request was rejected by regulators. It is also interesting that the HBPA has announced that they plan to set up their own rebate operation.
RGS has also made the argument that their rebates have created new players, but I think ExPlayer\'s position on this issue makes more sense. It\'s just one man\'s opinion,of course, but it seems to me that the learning curve is too long & too hard for that to happen. I have also seen research which tends to indicate that newcomers are introduced to the game by someone, be it a father,uncle,or friend, whose opinion they respect. The related question of why a certain percentage of those introduced to the game become regulars is also an interesting one, & was the subject of a study in New Zealand approx 5yrs ago. The findings were essentially that there are two personality traits which separate horseplayers from other types of gamblers:(1)a high percentage are very sociable; & (2)most think they are smarter than others.
Logically, one would think that the money churning scenario would apply, but apparently there are restrictions on the rebates(for example,certain place & show bets are not eligible), & I personally haven\'t seen evidence that this is the case. I think P.Eckhart\'s pt is a valid one, as it seems that the late odds drops disproportionately involve low price favorites. At the same time, one of the $1.1 million pk6 tix yesterday was sold to an RGS player, so one might conclude based on the little evidence available that the rebate shops are made up of a variety of different players who are pursuing different betting strategies.
On a completely different topic, best of luck this coming Fri & Sat to everyone who qualified for the finals. Enjoy it, & don\'t waste your precious time walking around the room trying to figure out who is using which handicapping product.
In the long run the tracks will start closing if rebates negatively affect their handles substantially.
It seems to me that the tracks should take action now (if legally able) and raise their cut of the takeout of offtrack handle for everyone except other tracks. Accordingly, more money will be available for purses (the horse owners and trainers will make sure of this) and upkeep of the track facilities, etc and the demise of racing as we know would be averted.
Incidentally, I think TVG is one of the only nontrack-based \"otbs\" to agree to a very favorable takeout agreement for the certain tracks (in return for exclusive rights to their \"otb\" signals).
I\'m not sure if it\'s considered a sacrilege to mention Rogozin on this page, but he does make the point in The Odds Must Be Crazy that if you\'re smart and disciplined enough to be making $50,000 a year at the race track you should be using your skills to be making a few million a year on Wall Street.
The point being is that there is relatively little money to be made at the track and therefore it holds little allure to serious money.
Although I agree with the thrust of your argument that the more these rebate shops proliferate the more chance more low-level operaters will move in and exploit the system. This is the bargain track executives are making with the devil. For again, take out is a necessity. The level of necessary take out is certainly open to debate and ecominic projection, but the reality is that tracks are very expensive operations to run and somebody has to pay the bills. But what\'s happening with rebates (and this is especially true in situations where the betting outlet doesn\'t offer a signal in return) is that the \"take out\" is not going into purses, plant maintainance or customer service.
I mean at some point, and that point is rapidly approaching, why would any sane person go to the track to make a bet? And here I have to ask myself, if I\'m not missing the larger picture when I say that track executives have a short-term vision. Maybe it\'s much longer than I think. And their vision doesn\'t include horses at all, but the gaming emporiums they can build in their plants when they go to the legislature and prove to them that \"tracks\" can\'t generate money for the State.
So the \"politics\" of what\'s going on here are so screwy to begin with--basically track managemnts are saying to their customers, screaming at their customers, you are fools for being here, go bet someplace else--that I\'m not sure these issues could be resolved by reasonable argument. I\'m not sure all the parties involved want them resolved. But..
But if we accept that the dynamics of the capitilistic system are at play here, that cost competition is not only good but salurbrious for any industry, then logic would dictate that the tracks will be forced to lower the cost of their product to their live patrons either through rebates or takeout reduction. Now, it seems perfectly reasonable to me that takeout should never be higher than a track needs to fulfill its obligations in a professional manner, and almost by definition the rebated monies would be monies that tracks have admitted represent an excessive levy; monies they can afford to return to the public. So it would be so logical to assume that the way to go would be to lower takeouts. But no, the politics are now on the side of the rebate guys. They control and will increasingly be controlling the money that make the handles look good. And the last thing they want is an even playing field. Because, again they are not playing horses, per se, they are playing a glitch in the parimutual system.
And yeah, they have to have a rudimentary knowlege of handicapping. But I really don\'t think it takes a whole lot of knowledge or skill to break even at the track. I\'ll give you a methodology right now for making $5,000 a year profit from the windows. You can take any of twenty angles. But for now let\'s say bet only horses that have never run for a lower claiming price in their life and are going off at at least 15-1. Or if you want a little more action 12-1. You buy the PPs every day, you go to the track every day, and you wait these out. Bet $100 to win on every one of them (you should get three or four opportunities a week, at least one winner every two weeks) and at the end of the year you\'ll show a profit. I\'ll even give you one to start. Weds. 6th race at Aqueduct, Your Abc\'s paid $31.60. You\'re already ahead $1480. But at the end of the year even though you may show a profit, you\'re really a loser, unless you can live on the $5,000 minus expenses you have won. And again the irony inherent in the contrast between this \"winner\" at the windows who is a loser at the end of the year and the \"loser\" at the windows who is a winner at the end of the year because of rebates is both starkly hilarious and illuminating. As in \"What the hell is going on with that?\"
So anyway, I\'m not impressed with guys who make a little money at the track. Good for them, but..You know I think Allen Iverson could probably lead the league in field goal percentage if he so wanted. He wouldn\'t help his team, he would be out the league in a year, but if he sat on his shots, and waited only for those break aways he could get himself a nice plaque for his wall. So yes I\'m saying its a good thing that Allen Iverson misses a lot of shots. He\'s a better basketball player because he is willing to miss a lot of shots. So it should be with horseplayers. If you\'re losing I hope it\'s because you\'re trying to win big, not because you\'re trying to break even. And always remember this adage: The track Gods hate fools and cowards, but they are more inclined to throw the fool a bone once in awhile. Again, my feeling is if you\'re not at the track to win big money, or at least trying to learn how to win big money, you really should be doing something else.
Which brings us back to my contention that lower takeouts won\'t automatically turn small losers into winners. Listen the takeout at the track is not perfectaly akin to the takeout at the casino. Casino takeouts are perfectly wedded to probability, while the probability of any horse winning in any given race generally bears little relationship to the odds being offered at the windows. How to take advantage of these discrepancies is, of course, the art of hanicapping, the grist of horseplaying. And here is where the takeout does come into play. At the casino you can never be \"smarter\" than the probabilities. On the other hand, to be 15 percent smarter than the probabilities (to break even) is a pretty onerous task. Again considering how much money there is to be made at other endeavors not necessarily a pursuit that is going to interest, as presently structured, truly intelligent people. And I don\'t know how much time you\'ve spent at racetracks, but I can tell you this: for the most part the race crowd doesn\'t attract the best and the brightest. (Though, I feel obliged to say at this time, the reason I\'m even bothering to post on this site, is because I do think there are some very bright contributors to this page who have thought about these issues, with whom meaningful and hopefully mutually influential dialogue is possible. Which itself is a rarity in my travels through the horse world in both the real time and cyberspace)
Anyway to get back to the best and the brightest coming to the track, the lower the take out is the greater the chance truly smart people will motivated to play this game. Because the same people who now look at the situation now and say I can work the probabilites in my favor, but not more than fifteen percent in my favor, very well may confidently decide they can be more than ten percent smarter than the crowd. But the larger point is that you don\'t need a whole lot of these people to change the dynamics of the game. One person who bets a thousand dollars can make the differnance between a horse being 9/2 or 4-1. And if this new blood really does know what he is doing because well he\'s smarter than everybody else, he\'s taking home the reduced take out money not you.
And you\'re right, at some point it is a zero sum game. At some point the super-computers will all be playing each other and the payoffs will be $2.10, $2.10, $2.10, $2.10, $870.00.
So my advice is if you want to make money at the track you better figure out how to do it now, rather than wait for the takeout to be reduced to five percent. That seems like a long and perhaps unnecessary wait to me.
Once again, I find myself agreeing with the vast majority of your pts, particularly the one regarding mutual & meaningful dialogue. The argument typically thought to favor racetrack gambling is that unlike casino games, one doesn\'t have to deal with a mathematically based negative expectation. However, in 10 mins or less one can learn to play craps in such a way that the negative expectation is .25%, & there are certain video poker games, most located off the strip, which have a positive expectation. In contrast, learning how to handicap at a skill level high enough to overcome much higher \"juice\" takes a very long time & a lot of hard work. The problem with craps & video poker, & almost every other alternative, however, is that they are mind numbingly boring over any extended period of time. My take,then, is that handicapping has more appeal to intellectual-types than other forms of gambling.
While it might be correct to say that the probability of any horse winning in any given race is not related to its odds, the percentages over the longer haul have remained pretty much the same since they were 1st calculated. Two thirds of races are won by the 3 horses with the lowest odds, & the others win at the percentage suggested by their odds.
Finally, I could not possibly agree more that if one can make money handicapping, then the same set of skills can be used to make much more money in just about any field other than handicapping. In fact, I vaguely recall saying just that to a poster who announced on this Bd that he had decided to quit his job & become a professional. Not that the source of such wisdom is important, but I\'m pretty sure that this concept originated in an article written by a handicapped handicapper yrs before the Ragozin book was published. I remember the article & that it influenced my thinking, but I can\'t for the life of me remember the name of the author. That alone should tell you something about how many yrs I\'ve been going to racetracks.
Intersting discussion. Rebate shops have definitely changed the dynamics of the game and have temporarily created some new winners/losers. I use the word temporarily because, as is always the case, \"If its in the papers, its in the price.\" This is no longer a secret and everyone is now trying to get into the action. Many examples have already been mentioned.
As has also been mentioned, the fundamentals have been screwed up for a long time and the takeout has simply been too high. Technology enabled rebate shops to take advantage of this and the track management let it happen because they stood to gain for the reasons already mentioned. However, the horseman and horseplayers not currently using rebates have been the big losers for all the reasons already mentioned. Both those groups are now trying to rectify the situation and I am sure they will. Track Management and the Rebate shops will have to respond to this development in some fashion and eventually things will probably settle down once the \"net\" takout (takeout - average rebate to bettor) finds its \"natural\" level and is more evenly distributed across all parties involved.
I am not sure where things will land but I have to believe it will get better for the horseman and the current non-rebate players. How much and how it will happen is hard to tell. Right now it looks like everyone will start going the \"legal\" rebate route at least for a while (sort of like buying a car in recent years) but maybe that will shift toward an overall lower takout or some combination of lower takeout and rebates.
Right now I am trying to figure out if I am \"sociable\" or \"think I am smarter than everyone else\" or \"all of the above\"...
Chris
PRICE ROI
4-6 -1.9%
8-11 -2.3%
4-5 -9.4%
5-6 -14.1%
10-11 -2.3%
Evens -3.4%
11-10 -6.5%
6-5 -6.5%
5-4 +3.9%
11-8 -6.9%
6-4 -6.5%
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snip
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9-2 -12.1%
5-1 -11.5%
6-1 -14.2%
7-1 -19.6%
8-1 -19.2%
------
snip
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14-1 -33.8%
16-1 -37.7%
20-1 -37.3%
25-1 -47.3%
This is the so called \'favourite longshot bias\' market inefficiency in all its glory. This is how you would do blindly backing all horses at these starting prices over the last 10 years. Ok, it\'s a UK example but it wont be hugely different for you. After all, the f/l bias was originally found in US pari-mutuel markets over 30 years ago. Currently, sane and serious rebaters channel their action in one direction only, on to favourites.
But as you tinker or hopefully root and branch prune your system, change will occur that will alter the dynamics of the market.
It is entirely predictible what will happen to the market if you do X or Y, only the extent of the change is debatable.
For instance if a 20% take actually did result in a loss on favs of -7% and on longshots of -33%, would a 10% take result in a loss on favs of -3.5% and on longshots -16.5% ie a linear change, or would it be something else. I\'d say \'else\' and in a specific direction, what I can\'t say is by how much. Either way, 10% or lower would would be decent step in the right direction. But from here, it looks like tinkering is what the \'horsemen\' have in mind, if anything.
Several years ago I did a two year study in NY on this supposed betting bias and it wasn\'t even near this pronounced.
You\'re right it definitely isn\'t as pronounced. I also did it about 4 years ago using the results from about 15000 american races and would\'ve posted them instead if I hadn\'t changed computer in the interim and lost them.
The pari-mutuel machine doesn\'t have the additional risk aversion to insider trading on longshots like flesh and blood bookmakers, which accounts for a deal of the difference. Nevertheless, the f/l bias was there and it was pronounced. So we\'ll have to agree to disgree on this point.
Rebates are bound to reduce the f/l bias and not just from wiseguy action. So would takeout reductions and in a non-linear fashion. Think of this rebate corollory - when UK bookmakers stopped surcharging their customers 9% (due to govt. abolishing General Betting Duty) total handle went up, predictably. But also, significantly, punters began to bet proportionately more on favs, so much so that horseracing profit margins are significantly down. (But there is compensation by the increase in handle) The point is that in this case it was not organised behavior it was \'organic\'. (That is why I\'d guess your wiseguy computer traders wouldn\'t be keen on takeout reductions.) Why proportionately more money will be bet on favs through rebates or takeout reductions is because takeout itself does not affect everyone equally. Who pays most for takeout? Rebates or reductions cause a greater incentive to bet on favs. I have given the example above to show it. Also, how else would we get to an efficient market at near 0% takeout, but to eliminate the f/l bias and to eliminate it means proportionately more money will be bet organically on favs. The lack of f/l bias in Hong Kong if it is true, and I have no reason to doubt it, I would describe as entirely artificial. Artificial in the sense that there are serious minded people (who know fully about the f/l bias) that are deliberately driving their market to theoretical efficiency with some obvious gain. The f/l bias I would describe as an entirely understandable human market inefficency caused by the unaturally high and skewed costs of market entry. (And of course for some like Explayer these barrier costs are judged too high) (PS When I refer to favs, I dont literally mean \"THE fav\")
Sincere apologies to all for this drivel, I am getting boring beyond belief now. Time to go, back (hopefully) in October, to see Russian Rhythm take over the tiara from the great Islington. Cheers.