Pari-mutuel handle on horse racing in the United States peaked in 2003 and subsequently (not accounting for inflation) decayed 28.3% by 2013. A principal cause of the demand destruction is a plethora of competition from gambling choices that offer much better financial inducements.
The pari-mutuel wagering product may or may not be profitable at takeout rates more in line with alternatives like sports betting, but continuation with the status quo is a confirmed path to further downsizing. Without a significant catalyst for bettors, there is no reason to expect handle on pari-mutuel wagering to grow.
Einstein’s observation comes to mind that “We can’t solve problems by using the same kind of thinking we used when we created them.”
Lengthy and scientifically controlled experimentation at multiple racetracks is imperative in order to determine empirically how handle responds to changes in takeout rates on various types of bets. Realistically, racetracks cannot decrease takeout percentages by small amounts and expect results, much less instant results.
Bettors are not automatons that immediately respond to middling changes in financial incentives. It took years for handle to atrophy and it might require years to reverse the trend and attract new and lapsed bettors.
Decreases in takeout percentages must be meaningful and it might take a year or more to be able to determine optimal rates on straight bets and exotics. In the initial phases of a takeout-reduction trial, racetracks would be apt to see profitability drop, and most of them are unwilling to take the chance.
The publicly-traded racetracks are unlikely candidates for investigating the effects of takeout on handle, over a protracted period of time, because of their short-term emphasis on keeping shareholders satisfied by boosting current earnings and stock prices. The ideal place for research is in the privately-held Stronach Group, with its six racetracks and major ADW outlet and the freedom to focus on long-term strategies.
Copyright © 2013 The Blood-Horse. Used with permission.