“FAIR” TAKEOUT RATES ON BETS?

Racetrack executives are quick to say they want to provide their customers with “fair” takeout rates on wagers, whereas bettors often lament that racetracks don’t offer “fair” takeout rates.  One thing is for sure and that is the racetracks and the bettors have much different concepts of what is equitable.

When it comes to pricing any product or service the term fair is nebulous and really meaningless.  Take the example of the Ferrari automobile.  Top management at Ferrari limits annual production of the brand to about 7,000 units worldwide with prices ranging from approximately $188,000 to over $400,000.  Are these prices fair?

You might not think so and I may agree, but our opinions do not matter to Ferrari because it can sell out and has a waiting list of customers.  What determines “fairness” is the interaction of supply and demand in the marketplace.

Pari-mutuel wagering on horse racing is in a long-term decline, and the negative trend is even more pronounced when dollars wagered are adjusted for inflation.  The entertainment and gambling marketplace has been signaling for years that something is wrong with the product.  That may include sundry reasons, such as small field sizes, lack of integrity, and prohibitive takeout rates.

The view here is that a major cause and perhaps the major cause for the plummeting of pari-mutuel wagering is uncompetitive takeout percentages on various kinds of bets vis-à-vis the competition.  The “whales” who account for the lion’s share of gambling revenues are keenly aware of comparative takeout cuts on the potpourri of betting products.

When buying or selling a product or service, banish the word fair from your vocabulary because fair requires a value judgment, which is highly subjective.  Instead, just follow the money and let the marketplace tell you what customers in the aggregate think about the value proposition.

Copyright © 2015 Horse Racing Business

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