I totally agree with Len\'s post about takeout reform. I also think that the recent boycott by big bettors was a watershed event that went by almost unnoticed-- because rebate sites have direct access to players responsible for a very big chunk of the handle, going forward it will be possible to use that leverage to gain a voice in what transpires.
There are a lot of variables, interests, and economic pressures here, but one way this could go is-- handle moving to rebate houses forces the industry to cut out the middle man by giving rebates themselves to big bettors, and political considerations then force takeout cuts for all. But without economic pressure (i.e. handle moving towards lower prices) nothing will happen-- track operators and legislators can\'t/won\'t get it unless they are hit over the head.
I\'m certainly not as optimisitic as you that the proliferation of rebates inevitably leads to takeout reduction.
In fact, I\'m more inclined to believe that the proliferation of rebates leads to an institutionalized dependence upon rebates, and therefore the creation of a political lobby working for the interest of people who benefit from rebates.
Why would somebody who is getting a guaranteed return, let\'s say an eight per cent rebate on every dollar he bets, want to see an eight percent reduction in takeout, if such a reduction in takeout costs him his rebate? So that he can play on an even playing field for the good of the game?
I don\'t think so. And, in fact, while I certainly think that rebates represent a good purchase price for any punter and as such will continue to draw the enlightened consumer away from the track, I think the really shrewd guys in the rebate game are in it precisely to take advantage of the economic distortions caused by rebates. The\'re in it not to play the horses, but to play the churn. Which is why I consider rebate handle not to be natural handle growth, but handle growth on steroids.
For the moment the advantage of a guaranteed return on their betting is eliminatd many rebatees are out of horse racing and onto an easier game.
But still, we\'re talking about an industry that is becoming increasingly dedpendent upon \"rebate\" handle and a select group of entrenched bettors who benefit from the structure as it now exits. Seen from their perspective the bill to raise takeouts introduced in the NY State Legislature makes all the sense in the world. Throw the politician a little campaign donation, and let him start talking about raising takeouts. Not because you expect takeouts to be increased, but because as long as everybody is busy fighting against increased takeouts they won\'t have time to fight for reduced takeouts. Which, afterall, as sporting a notion as it might sound, might not actually be in your best economic interests? Ah, so is what we saw in NY last week, not the totally stupid action of some ignorant politician, but perhaps the savy first gambit of a developing \"rebate lobby\" watching out for themselves?
Post Edited (03-29-04 16:48)
I don\'t understand a lot of that-- why would there be an 8% drop in handle? And if what you meant was an 8% drop in takeout, why would someone getting the lower takeout care why he gets it, or who else does? But I\'ll tell you this--
The only reason that Barry Scwartz\'s takeout reduction did not have even more dramatic results is that the big players, who are the most price sensitive, happened to be moving, at exactly the same time, to rebates. If this dumb legislation in NY goes through, it may IN THE LONG RUN work out well for the game because there will be a MAJOR reduction in handle that everyone will notice. That\'s what I\'m talking about-- the only way to make legislators understand is to beat them over the head with numbers that show the handle is price sensitive.
Given your post Jerry, I can imagine you will be less than thrilled with this...but
Something about giving \"big players\" a break that is not available to the little guys rubs me the wrong way.
Don\'t you think the little guys are going to hear about this and resent it, and perhaps take their \"little\" money elsewhere (like slots or something else)? Gambling is very competitive these days.
Pushing this is a little risky (of course I\'m talking about to the industry as a whole and not to your business in particular).
I don\'t see how horse racing can afford to lose ANY customers. I would say that if this becomes common knowledge the \"little\" guy may be the one who votes with his feet and I\'m not so positive that will lead horse racing to a good place in the current environment or the future.
I\'m just saying.... HP
And I\'M just saying---
Yes, I think they will get upset, and while they haven\'t got much economic clout within the industry, they have got enough political clout (that pesky one man, one vote thing) to pressure politicians. So it figures to go
1-- rebates (and Betfair etc.) pull more and more handle from big bettors away from the tracks
2-- tracks finally get it, and cut out the middle men
3-- small bettors start screaming, and track officials (and if not them, opportunistic politicians) react. My guess is the landscape will look different in a couple of years.
First you get the money, then you get the power...
TGJB, I buy your logic through Step 2. But the \"small bettor\" has been screaming for decades without any results other than increased takeouts and larger rebates to big bettors. What will change that outcome? The track officials have no reason to care once they cut out the rebate middle-men. And I can\'t see any politicians rallying to the cause of bettors (whether large or small).
I think that TGJB and Thehoarsehorseplayer are actually dancing around the same bonfire - that the \"middlemen\" (a group in which I guess TGJB is now a member - sort of) are the big winners in the current situation and thus, have a big stake in keeping things as is and, in fact, would love to see increased takeout rates, which would drive even more bettors toward rebate shops.
It is not a stretch to think that some of the bigger shops either individually or collectively may now begin to lobby for higher takeout rates through various \"respected\" third parties in the disingenuous guise of \"helping horseman and increasing state revenues\" (while most of us figure raising takeout will probably have the exact opposite effect) and perhaps eventually even lobby to prevent tracks from cutting out the middlemen in the disingenuous guise that proposed track rebate programs would be \"unfair\" to the little guy (while most of us know that the little guy is not being treated \"fairly\" by existing rebate shops and would not likely be any worse off if the tracks began their own rebate programs and cutout the rebate shops).
I could see how both lobbying efforts might play very effectively for quite some time, regardless of what the data says. Just look at the similar rhetoric (increasing tax rates to raise revenues while ensuring \"fairness\") which is a staple and popular political theme.
The seemingly obvious, \"best\" solution that would benefit just about everyone in the long run is to lower takeout rates but that would definitely not be popular with the rebate shops who suddenly have a much larger stake in the game than they did only a few years ago and which makes things that much more complicated.
The sad part is that technology has recently provided a platform upon which Racing could grow significantly in a manner that could benefit just about everyone involved but there is a good chance that it will become yet another wasted opportunity.
Chris
P.S. I hope we are not giving anyone any ideas...
I\'ll tell you what I\'m going to do. I\'m going to go to the track less and play less. I\'ll still play the Derby and its preps, the Breeders Cup, and some stakes in between, but my days of spending weekend days playing full cards either from the computer or at the track are over until the rebate situation is corrected.
Frankly, I don\'t want to play against those (or maybe it\'s you) guys. They\'re good handicappers, they\'ve got more information than I\'ve got, they\'ve got technological wagering advantages that I don\'t have, and they\'ve got the economic incentive (courtesy of rebates) and the bankroll to drive odds to levels at which I can\'t make money. Why do I want to spend a lot of time handicapping a card and watching the tote board to look for value plays, only to see my \"value\" disappear when the odds drop precipitously after my money is down? Life is short. I\'ll find other ways to spend my time and money.
And I edited it in my post.
My point is simply that I think getting an 8 percent rebate on an 18 percent takeout, is a better deal for the person receiving rebates than a universal takeout of 10 per cent.
It's not the same thing. It's a better deal.
And it's not the same thing because, and this is only one of many reasons,reducing takeout by 8 percent would not automatically guarantee payoffs that were eight percent higher across the board. It's just the nature of the game that there are many horses that are going to pay off at 9/2 whether the takeout is 10 percent or 25 percent. What lower takeouts would mean is that the people who can actually pick more winners than losers would bet more money on the 9/2 and make even more money. That is a good thing. And I support lower takeouts. What rebates mean is that guys don't actually have to win more money than their fellow competitors to turn a profit at the track. That creates "distortions" And that is not a good thing.
Another way to look at it: Would you rather bet your last thousand dollars on an even money shot with a ten percent takeout or with an eighteen per cent takeout knowing you'll get $80 back if you lose?
And my larger point is the advantages to people getting rebates are so large that people now receiving rebates are not willingly going to give them up. I mean, if the numbers that Steven Crist used in his "Rebates for all" column last week are true, that rebates account for ten percent of a 16 billion industry handle, then "rebates" are by themselves a 1.6 billion dollar (and growing) industry. Which I think might be interested in using politics and politicians for protecting what it perceives to be its own best interest.
And, in fact, where is the outcry?
Aqueduct hasn't had a "live" million dollar handle all week. And I say "live" advisedly because I'm pretty sure those paltry numbers include the money called into the NYRA accounts.
The truth is that rebates only exist because tracks are willing partners in the process. The corruption of rebates has already taken hold. And in the absence of decisive action being taken to stem the tide, I'm thinking there is already enough money being passed around to make racing officials deaf, dumb and blind to what is obviously a cannibalization of their franchise.
And while I do give the scenario you propose some chance for success, I think supporting rebates to achieve lower takeouts is kind of like introducing rattlesnakes to your farm to keep out the rats. It should take care of the rat problem, but then what do you do about the rattlesnakes?
Listen, I don\'t think I\'m being too melodramtic when I say the future of racing as we know it is at stake here. Either local tracks will figure out a way to get the big bettors back at the track betting through their windows, or the Industry will bend over for the soap and make like a lady for the Economics of Scale. Some desperate State out West will gladly provide the land and regulatory climate to build a complex of indoor and outdoor tracks designed to provide simulcast races on a 24 hour basis. With concentrated overheads, and all betting being run through one agency, lower takeouts will become quite achievable.
Well, if that\'s what you want from racing fine. But if you really would like your local track to be what it should be, the most sporting place in town, then I think we have to come up with more creative solutions than rebates offer.
It\'s complicated, but I can\'t help thinking that people are overlooking the fact that the big bettor needs the little guy desperately! It\'s parimutuel betting. The money the big player wins has to come from somewhere. Sharks don\'t eat other sharks, they eat fish. Ergo, racing needs fish. All this attention being paid to the sharks turns me off.
Racing has to devote ALL of its energy to getting people to the track and getting NEW fans. They need to sell the sport, and they are doing an awful job of it.
Giving rebates to the big players is a classic case of Preaching To The Converted. Those guys are already there and they\'re already betting heavy, so why do you have to give them a break? What purpose does it serve? If they didn\'t have rebates would they stop playing? Rebates help rebate-oriented businesses and big players. The effect on the sport overall needs to be studied a little more carefully.
They should do something like luxury boxes at racetracks. You want to give the big players something? Give them free seats and food in a luxury box AT THE TRACK. That\'s what casinos do. They give comps to get the sharks to stay in the tank. It works, and racing should take a lesson.
How about rebates where you can\'t withdraw the rebate as CASH, but you can use the rebates as credit towards betting. That makes some amount of sense to me.
Plus, if the states allow this, they are allowing the poor to subsidize the rich, but what else is new?
I say the best thing for racing is an absolutely level playing field. If racing was thriving like casinos are thriving it might be a different story. Racetracks are empty, and there is a debate over...rebates for big players? In terms of public relations, I would say, \"not good.\"
I would say Jerry is right in terms of the likely evolution of this, but if I was calling the shots I would do things differently... HP
Hey you two guys need to quit complaining. They have a hat and coffee cup waiting for you at the admissions gate.
Besides I thought the game was all about who picked the most winners not who bet the most.
Bring those big syndicates on.