At Sam Houston, Takeout Rate Cuts Working for Players, Track, Purses

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Sam Houston Race Park officials could offer opinions on the track's many low-takeout wagers, but they figure that pricing every horizontal wager (Daily Double, Pick 3, Pick 4, Pick 5) at 12% for a fourth straight year says volumes.

That is to say, if low pricing wasn't working; Sam Houston wouldn't be bringing the 12% rate back each season. Examining the track's numbers suggests the low rates are working for horseplayers, the track, and horsemen.

Takeout is money removed from each pari-mutuel pool to fund the sport, with most of it divided between tracks and horsemen's purses. In 2012 Sam Houston had industry-typical takeout rates for its Daily Double and Pick 4 wagers of 21% and 25%, respectively. But in 2013 the Houston track reduced those rates to 12%. Sam Houston previously had lowered its Pick 3 rate to 12% and also offered its new Pick 5 at 12%.

For players this means winning tickets return more money. For instance, for a $25,000 Pick 4 pool that sees 15 winners, a 25% takeout would see each winner receive $1,250, but a 12% takeout results in each player getting $1,467.

But cuts in takeout rates can't only work for players. Long-term, they have to work for the track and horsemen's purses.

Using the previous example, at a 25% rate the wager earns $6,250 for the industry but at 12% it's just $3,000. In general terms, when the Pick 4 takeout was more than halved and the Daily Double was nearly cut in half, the track would need to double its handle on the wagers to continue to generate the revenue it had been garnering on those two wagers.

While handle on these wagers at Sam Houston hasn't doubled, the track has seen enough improvement to keep the rates in place. Since cutting the Pick 4 takeout rate, Sam Houston said the wager's handle is up 59% (2012 compared with 2015). Daily Double handle is up 39% (using 2013 for comparison as that was the year rolling doubles were added.)

While those numbers have not doubled, the track believes the low-takeout wagers have attracted players and added action (churn as players return added winnings to betting pools). Sam Houston's numbers point to those trends.

Sam Houston's Thoroughbred meet handle has increased 33% from 2012 to 2015 to $51.3 million (handle per race day is up 35% to $986,538.) This improvement has come in years that total U.S. handle is down 1.9% and per-day handle is up 14%.

The most telling numbers may be purses. From 2012-2015, Sam Houston's total purses improved 6.9% to $5.2 million, a stretch that saw U.S. purses fall 3%. The improvement is especially impressive because Sam Houston does not have added gaming and relies solely on its pari-mutuel product to generate purse money.

Of course a lot of factors can impact pari-mutuel handle, and one can't say that lower takeout on horizontal wagers is the sole reason handle has spiked and purses have increased at Sam Houston. But the track certainly believes the low rates are contributing to the success; after all they keep bringing them back each year.

"I do know that it's definitely made us more marketable," said Sam Houston marketing director Jamie Nielsen of the low takeout rates. "It's something we push every time we get a chance, both on our big race days and on Mondays and Tuesdays when we're one of the few tracks running."

Nielsen also noted that because of the low rates, the track picks up strong word-of-mouth promotion on social media from players who appreciate the low rates.

Bottom line, as Nielsen puts it, "It's working for us."

This is a Dollars and Sense column that appears in Blood-Horse Daily. To read this column each Saturday, download the app or subscribe to the .pdf newsletter; it's free.

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