Is the Price Right?

By Alex Waldrop, President and CEO of the NTRA  

Last week I told you I would be speaking to marketers from across the country at the NTRA's Marketing Summit in Las Vegas.  I asked for your ideas and you responded -- man, did you ever respond!  I received almost 50 substantive, insightful, passionate responses.  Read all of the comments for yourself but be aware that to see all of them, you have to go to two places now.  My blog is posted not only on the NTRA website but also on in the Blog Stable.  

I was so impressed by the effort that I actually incorporated paraphrased versions of almost every one of the comments into my remarks.  I think it is fair to say that your views had a very positive impact on the Summit.  Portions of my remarks can be accessed online.  Take a look and send me your comments.  By the way, several experienced horse players, including the last two DRF/NTRA National Handicapping Championship winners, who participate in the NHC Player Advisory Panel were invited and did attend most of the sessions. 

I organized the speech around a series of questions. The first two questions were coincidentally the questions posed by Rosie (posted 9/26/09 on  "What are we selling?" and "To whom are we selling?"  Here's how I answered the questions.  Given the stiff competition we face from casinos, Internet gambling options, and other forms of entertainment, to recover the losses we have suffered in this economy, we must get back to basics.  We have to recommit ourselves first and foremost to selling our game as a unique, challenging, exciting opportunity to wager on live horse racing.  To that end, our primary customers are and must always be horseplayers.

I did add one twist that is essential. Tracks are also selling racing opportunities to owners and trainers. Full competitive fields are what horseplayers want, so marketers working in concert with their respective racing departments must sell great racing opportunities to owners and trainers just like they must sell great racing and wagering opportunities to horseplayers.  The tracks with full, competitive fields will attract the bettors.  

The third question I asked is the most important, and for many tracks, the most difficult. At what price are horseplayers willing to buy what we are selling?  Said another way, do some tracks need to consider a reduction in takeout?  From a pure economics perspective, the answer is clearly "yes."  

Takeout is the amount of the commission withheld by tracks from all winning wagers.  Typically the takeout rate averages about 18 % -22 % on a blended basis.  Price, or in our case takeout, is the single biggest driver of value and it is overall value that determines whether people will buy your product for the price at which you are offering it.  If you listen at all to horseplayers, they are saying over and over again to this industry -- "Your price is too high for the product you are offering."  "We love horse racing but at your prices, we are forced to seek other forms of gambling which may not be as exciting but are more profitable for us."  "Reduce the takeout and we will wager more money and more often."  Why else would rebaters be able to lure our biggest bettors away from the live track?   Tracks have tested these waters before with mixed results but it's time to plunge back into the process and find the optimal takeout rate for all parties- tracks, horsemen and players.

As I stated to the audience, the industry spends a lot of time and energy fighting over the "price" paid to host tracks and horsemen by distributors of the simulcast signal (receiving tracks, OTBs, ADWs and the like). This important discussion relates to the wholesale pricing of our racing product.  It's time for this industry to also concern itself with the retail price or the price paid by the consumer (i.e. the horseplayer). Every other industry fighting to survive in this economy is taking a hard look at its retail pricing structure and it is high time horse racing considered doing the same.

Such a change will take creativity and experimentation by tracks and horsemen, and some distributors may object because it may eat into their margins.  Nonetheless, now is the time to once and for all prove (or disprove) the overwhelming majority of academic research concerning takeout which says, in essence, less is more.  Now is the time to determine whether in fact, less takeout actually means more wagering and ultimately more revenue for tracks, horsemen and horseplayers.  Said another way, let's focus on growing the economic pie instead of always arguing among the participants about how we will carve up a shrinking economic pie.  See the 2004 NTRA Players' Panel Recommendations for more detail on the relationship between handle and takeout.

I spoke about these topics at length then ended with this thought which is a paraphrase of an idea provided by one comment to "Marketing 101" posted on   "Treat the gamblers (and I would add "the horse") right and the rest will take care of itself." Well said, Volunteer.

How would you answer these fundamental questions? Are we selling the right product to the right people? Why have most track experiments with lower takeout failed to generate new handle? Do you pay attention to takeout when you play? Let me hear from you.


Leave a Comment:

Jim C

Mr. Waldrop,

I'm sorry but "back to the basics" is the last thing we need. If this industry continues trying to cater to the horse player "bettor" it's going to fail. Does the NFL cater to bettors? Do the thousands who throng to NASCAR races only do so to bet? Enough already!

01 Oct 2009 2:21 PM
Rachel A. (for real)

You have a hard job...I can tell you reasons why people aren't attracted racing (and have ;-))...but the true players will have to give you insight on your questions on the gaming end..I only bet for fun.

01 Oct 2009 3:17 PM
Rachel A. (for real)

I forgot to add a thank-you for all your communicating with us...a lot more than any other sport out there. I wish you the best.

01 Oct 2009 3:19 PM
Graeme Beaton

The problem, as I see it, is we are selling a defective product and consumers are onto us.

The reason consumers are increasingly rejecting our product is because they have no confidence in it. They cite the reality or perception of doping, cheating and corruption, break-downs and questions that we rarely consider. For example: Are the jockey's hurting the horse with that whip? Are those ponies allowing the horses to warm up sufficiently to avoid injury?

Let's take the first two major perceptions. They relate to race-day medication. As I argued in The Bloodhorse Final Return recently, Lasix (salix) masks other drugs which stokes the perception that certain trainers (and their vets) have an unfair advantage. Bute and other legal substances mask injuries resulting in break-downs.

But, unless I missed it Alex, you have not addressed these issues in the article above. The NTRA Safety Alliance would seem the perfect forum for dealing with these issues and explaining to fans and potential fans why the rest of the world is wrong on race-day medication and we are right. And, to take things a step futher, to explain why we are doing so much better than the rest of the world because we tolerate race-day medications other countries do not.

I am not arguing that betting take-out is not an issue. It is, but to elevate it above race-day medication is, to me, misguided to say the least.

01 Oct 2009 3:41 PM

I have to agree with Jim C.  Mr. Waldrop the major problems that you are having with regards to the horse racing industry are, and let me list them:

1. There needs to be a governing board in place that handles the set up of race series, this would allow for competitive horse racing on the highest level with the "Greatest Fields" of competitive horses.  Not just good to decent fields of horses that show up and run in races against allowance company horses.

2. Exposure of the industry does not need to be dictated by a company like the MSG Network, such historic races like the Woodward and the JCGC, Beldame, Personal Ensign and Mother Goose, and any other race that is historically significant with the top horses running in the race should be televised not just nationally but Internationally.  All of America should have been able to see the history making Woodward Stakes, and it’s a shame that many millions didn’t even have the opportunity to follow and watch the race, other than Rachel Alexandra not going to the Breeders Cup; this is the biggest failure of horse racing this year.

3. The movement to synthetics "which is the Unknown Surface" has led to many horse players keeping their hands in their pockets, and sadly this will continue.  Can anyone mandate that all tracks go back to dirt racing, im sure the answer to that is NO.  But those tracks that keep the synthetics will have to suffer the fate that is pending.  Numerous people will be happy to tell you that they will not pull a single $1 out of their pockets to take a chance on synthetic surfaces.  Please understand that I've talked at long length with those in the West that have to endure this situation and they have been dealt a hand that is unfairly thrust upon them.  It seems interesting though that the man that chaired the committee to mandate the synthetics has himself in an article stated that this was and is the wrong decision for horse racing as a whole, but especially in California!!!

4. This Governing Body or committee should be in place to develop a series of races for older horses that would warrant the connections of horses like the: Street Sense, Hard Spun, Any Given Saturday, and others that have such potential to continue to run their horses into their 4 and 5 year old seasons.  The quality of the older horse division minus standouts like Curlin in 2008, Invasor in 2006 and Ghostzapper of 2004, Saint Liam of 2005, and the commentator of the 2006, 2007, 2008, and 2009 season, would be 2nd rate at best, why, because some of these same 3 year olds that never saw a track at 4 were retired to stud way too early.

5. The Breeders Cup is an event that the organizers apparently wanted to open up to the European and other turf horses of the world by allowing the event to be played out on a synthetic surface for the last two years.  What has that led to, well the awful feeling of knowing that a horse like Rachel Alexandra was going to finish up her year in September instead of in November at the Breeders Cup.  It seems that the money involved with the Euro’s coming over especially those that are not nominated to the event would cause an influx of cash, which I am sure is a correct assumption.  But think about the number of horses that will not be leaving their stalls back East while this Turf event is being run.  

The most important aspect of the frustration that most of us that truly love horse racing feel is the so called leveling of the playing field, by taking the B.C. dirt races and putting them on a surface that translates so well to turf that turf horses train on the synthetics.  It seems as if after 25 or so years of traditional racing on dirt where a European horse would have to come over to acclimate itself to the surface the Breeders Cup and its partners have decided that the American Horses should be put in this awkwardly precarious situation.  A foreign surface that dirt horses don’t train on or race on but it is called the “Championship Event”.  In many opinions it’s far from being that. As a matter of fact if you take the horses that will not being coming and line them up in a race at Belmont on the same day it would be a much more exciting race.  It’s basically a slap in the face to the connections of horses that run on dirt.  The Barclay Taggs, Nick Zito’s, Todd Pletcher’s, Steve Asmussen’s, Kiaran McLaughlin’s, Bill Mott’s, Graham Motion’s, Larry Jones’s, Rick Dutrow, Tony Dutrow, Tom Albetrani’s, and there are many more that wont be shipping to the Breeders Cup with some of their horses. Why, well because we want more European exposure, and as I think back to the ridiculous comments of Jerry Bailey last year after Raven’s Pass won the Classic and he said it will make the Breeder’s Cup better in the long run.  It makes me realize that even Hall of Famers such as himself and Gary Stevens who are both out there drinking all of the Kool-Aid of West Coast racing, can make mistakes and at times with all of the knowledge that they have really can come off as rank-amateur in their thought process.

Last let me say sir, you seem to be very passionate about trying to fix the problems that face horse racing and you are to be applauded for this, but instead of doing a lot of talking, and showing us that you are willing to do something by means of these blogs and forums, let us see some action.  We are not asking that anyone save the world by making huge swift changes, but we are asking that someone take the initiative to step up to the plate and start making some decisions, especially in regards to the health of these magnificent creatures.  We’ve seen very little about your thoughts on the number of break downs at Delmar this year.  We’ve seen very little about what you want to do to correct issues like this nationwide where there are issues that pop up.  We see your thoughts on money and how to save the industry but it you want to take it back to basics, lets focus on the horse which is the entity that drives the industry each and everyday.  The humans or the connections are fine, the economy is bad but it will recover, these horses dying day in and day out at these tracks is not something we want to continue to hear about.  Let’s get a fix to these problems also.  Action is needed not just words, we realize you are a stand up, man of your word, and we would like to see this continue in the future.


01 Oct 2009 4:33 PM

Jim C.  The industry has not catered to the bettor, that is why it is not growing, that is why the big bettors have left.

In the US, internet gambling (other than horse racing) was banned a few years back, but guess what?  It didn't help horse racing one bit if you look at the numbers.

Horse racing is not Nascar or the NFL.  It never will be.  Unless there is 10 races a week across the country that is.  I'm sure nobody is pushing for that.

Without the bettor, horse racing is dead, and gamblers will be something else.

Most people aren't cognizant of track takeout, but they realize how long they last, and at other venues they last longer because the house take is smaller.

The longer they last, the more likely they are to expose friends, family and coworkers to the game.

Plus, if the game advertises winners (and that can only happen with lower takeouts), it will create a buzz and others will have a reason to learn and try to beat the races.

02 Oct 2009 12:52 PM

Mr Waldrop,

I assume you chatted with many of the horseplayers who gathered there, and that is a very good thing.

You are clearly up against it with this view, as witnessed by the first comment on this thread "If this industry continues trying to cater to the bettor it's going to fail."

No one in any business on earth would say if you cater to the customer, the business will fail. In fact, all businesses live by the exact opposite mantra, of "if you do NOT cater to the customer it will fail." But in horse racing, with all the factions, and fights and people with a voice, it is commonplace to hear such things.

I do not envy you one bit in your task, however I give you 100% support, as a horse owner and betting customer.

Good Luck to you, and thanks for writing this piece, which the silent majority of our customers (who pay for the purses) have been saying for years.

02 Oct 2009 4:40 PM
Umatilla Joe

I agree completely with Cangamble. Jim C is obviously not aware what takeout differences are or where the money comes from in the first place. The game has ignored the bettor for as long as I can remember and now the price is being paid.

04 Oct 2009 6:55 PM
Steve K.

Mr. Waldrop,  Thank you for your insightful and thoughtful comments.  I am a long time lover of horse racing and betting.  However, the issue of high takeout is driving me out of the game.  To me, horse racing is intrinsically the most exciting and thoughtful form of gambling.  But, when i see so many alternative gambling opportunities with less takeout its hard to resist shifting to them(eg. poker).  I actually feel insulted by the lottery level takeout on some exotic bets and by the illussionary marketing of $500,000 Guaranteed Pick 4 or 6 pools as if there is some value being offered in this proposition.  You cant treat your fans like they are idiots. If you create a FAIR commission that allows the fan to experience more success, you will naturally create more excitement and a larger new and returning fan base. Success breeds interest and reinforces return. thank you.

05 Oct 2009 1:31 AM

Alex, thanks again for putting yourself out there to hear from us the fans. Yes the move for horse racing should be to attract the big bettors back into betting horse racing. It is a shame that some have left horse racing to bet on something else but the take should be investigated as to why it is so high. I'm a small $20 a day guy betting mainly pick 4's. Will I not bet because the Pick 4 at my favorite track because the pick four takeout is 25% versus 16%? No but I would suggest that the big bettor watches the take more than I do. You may have to guarantee maybe a 12% takeout to bettors who bet $1,000 per day. I would suggest to find the big bettors in Vegas and around the country and wine and dine them. TELL the big bettor you want to earn his business. The sharp handicapper can make money on the rarces. As another blogger said before, the $2 bettor is nice but they don't pay the bills to run the place.

06 Oct 2009 3:57 PM

Some warmblood breeds require horses to be inspected and approved before being accepting into the studbook.  (See this website for explanation:

Something along these lines could eliminate some of the conformation problems that lead to unsoundness, increase the quality of our breedingstock and reduce the supply thus increasing demand.

08 Oct 2009 4:13 PM

I doubt I have all the answers, perhaps not even one, but my opinion is that the underpinnings of horse racing have been lost.  Horse racing (to my way of thinking) is about which horse is fastest, sturdiest, and most wanting to win - naturally, not because of drugs, whips, connections, or "vitamins."  When the public believes that's what they're seeing, they will flock to horse racing.

I have lately returned to my childhood love of horse racing because I am able to watch on TVG.  I agree many more races should be on network television, but the networks have to tell viewers why the races are worth watching.  Viewers have to have reasons to follow certain horses just as they have reasons to follow stars of other sports - one is a perpetual underdog, one is supernaturally talented, one is playing long past the typical age of retirement, etc.  If major networks aren't following horses and telling their stories, no one knows they exist.

10 Oct 2009 1:16 PM

This is the optimum window to reduce retention rates. The revenue from alternative gaming will replace the dollars lost to the purse accounts & track operators during the course of the trial. If the theories on churn generated by lower take-out are correct, the issue will resolve itself in time. NOW...NOW...NOW!!!

23 Oct 2009 9:10 AM

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