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 Bloodhorse.com 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 ntra.com). "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 Bloodhorse.com:
"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.
