As money
from added gaming has flowed into the industry, providing a boost for purses,
most racetracks have missed a golden opportunity to fully take advantage of the
stability provided by that added revenue by trying new approaches-namely
lowering prices--with their pari-mutuel product.
With
that
new revenue from added gaming providing tracks some money and improving
purses, one would have expected such tracks would have used the
opportunity to try some new approaches to strengthen
their core product, pari-mutuel wagering. Specifically, it seemed like
an
opportunity to lower takeout (the money retained from each wagering pool
largely to pay tracks and purses) to make it more competitive with other
wagering forms.
Instead, as
new low-takeout gaming like slot machines was welcomed at tracks, the vast
majority of those tracks did not address the relatively high takeout
pari-mutuel model in place.
In the short
term this approach has allowed tracks to offer larger purses as money from
added gaming was added to pari-mutuel revenues already in place. But by not
strengthening the pari-mutuel product in an effort to attract new players,
pari-mutuel wagering remains, at best, stagnated. With the stagnation of
racing's core product, the sport has reduced race days. Tracks without added
gaming have closed or struggled.
From
2002-2004, pari-mutuel handle on Thoroughbred racing in the United States
topped $15 billion each of those years. But from 2011-2016, racing failed to reach
$11 billion in any of those single years. With no real growth in racing's
economic engine, racing opportunities have declined. The 37,814 races offered
in the U.S. in 2016 is down 27% in 10 years and about half the number offered in
1989. Foal crops have declined to the size of the mid-1960s.
While added
money from gaming has offered some stability in purses, and has helped
tracks that have added-gaming money attract horses from tracks without added-gaming,
the industry overall has not seen added interest in the sport's economic
engine, pari-mutuel wagering
Without
added interest in pari-mutuel wagering, the sport's current model has made
racing more and more dependent on supplements from added gaming, which now fund
about 40% of the purses awarded in the United States. It's a precarious model. That added gaming money to
the industry will always be something closely eyed by lawmakers, who could
easily reduce or shut down the pipeline.
One
track
that thought more long-term when added money from its Instant Racing
operation
began to flow into purses is Kentucky Downs, which is scheduled to open
its five-day meet Sept. 6. It actually lowered takeout when this added
money arrived.
The added
money from Instant Racing still inflated purses, helping attract huge fields, which
are attractive to bettors. The track's added step of lowering takeout when it
received that added money has fueled interest from horseplayers in the meet and
increased churn (winnings bet back into pari-mutuel pools). Wagering records
have followed.
A
record $22,540,761.22 was bet on last year's five-date meet for an average of
$4,508,152 a day. That reflected a 34% increase over the previous record total
set the previous year.
Kentucky
Downs' takeout rates of 14% on the Pick 5 and 16% on win, place, and show
wagers are among the lowest in the country. No Thoroughbred track is lower than
Kentucky Downs' 18.25% takeout on exactas and 19% takeout on trifecta wagers.
"Kentucky
Downs has been able to go from completely off the national radar to a premier
track by going against the norm of the industry, right now, which is to get a
higher percentage from less handle," said professional horseplayer Paul Matties
Jr., who captured the 2016 National Handicapping Championship, in a release. "We need
the exact opposite for the benefit of the game. We need to grow handle and
spawn interest, and Kentucky Downs has been a leader on that front. It's not a
surprise to me horseplayers have responded and their handle has skyrocketed.
Horseplayers are smart and they will gravitate to the best products and the
best value for the betting dollar, and I expect that will continue this year."
Increasing
takeout rates and leaving high rates in place eventually will drive players
from the game or force them to reduce play, whether a conscious decision or
just the fact that there are a few less dollars coming their way when they win.
These high rates also make it difficult to attract new players, who may be used
to lower takeout games that match gambling and skill, like poker and Daily
Fantasy.
Takeout
rates for horse racing will always be higher than casino games, as there is a
whole sport to fund. Most horseplayers understand that, and are willing to pay
a higher price because they love the puzzle of handicapping and the excitement
of watching horses race as opposed to the tedium of pushing a slot machine
button. But it's not an unconditional love.
