Weighing in on California’s takeout

Weighing in on California’s takeout increase, Daily Racing Form publisher Steven Crist says horseplayers are right to be upset about higher takeout’s and the lack of explanation from the tracks about the “necessity” of them. At the same time, Crist says horseplayer groups are being unrealistic and a bit unclear about what it is they want. The article is below our comments.

There is a lesson to be learned from all this and all you need to do is look to Florida of all places for the answer. When slots were approved here in Dade and Broward counties Jeb Bush and his religious zealots forced a 50% tax on slot machines. All this did was stop business growth and job creation.

Now with Jeb and his ilk gone, the tax was lowered to 35% July 1st and the results are astounding.

The largest available figures cover the fiscal year from July 1, 2010 through Jan. 9, 2011. The total amount of money that has been wagered at the racinos at Gulfstream Park, Calder Race Course, Mardi Gras (Hollywood Dogs), Flagler and Pompano Park in the little more than six months is an astronomical $2,338,941,982. Yes, despite the depression, and an unconscionable number of people out of work in the state, more than $2.3 BILLION dollars has been crammed into the slot machines. at the five pari-mutuel facilities.
The net revenue to the racinos comes to $167,837,000, an average of about $33 million per track. Broken down by facility, in order of success it looks like this: Pompano – $49,940,363; Flagler – $34,995,864; Calder – $32,944,088; Gulfstream – $25,486,626; Hollywood – $24,468,139. With Gulfstream and Hollywood so physically close, both their numbers are worthy of mention, since if one was closed, the other, seemingly, would be in the $49 million range.

The state, however, benefited the most from the racinos, even with the tax rate cut from 50 percent to 35 beginning last July 1. The amount of taxes the five facilities paid during that period was $58,837,950.
Bettors deserve more after takeout hike
NEW YORK – The 2011 racing season began with two major changes on the parimutuel landscape: The absence of New York City OTB for the first time in four decades and a sharp takeout increase in California starting Jan. 1. If you were handicapping which would be more costly to the racing industry, the shuttering of the nation’s largest offtrack betting system would have seemed like the odds-on favorite.
Instead, NYCOTB has vanished almost without a trace or much impact as if it were a 40-year bad dream. The California takeout, meanwhile, remains a hot issue at the Santa Anita meeting, where business is down – though no one seems able to agree exactly how much and why.
NYCOTB has been the nation’s leading bet-taker for a generation, handling nearly $1 billion annually in its best years. The overnight closure last month of dozens of parlors throughout the city, and the suspension of more than 20,000 telephone and Internet wagering accounts, seemed a cinch to spell disaster for the Aqueduct winter meet.

It’s still a shame that there was an overnight abandonment of NYCOTB, caused by stubborn state lawmakers who tried to lard up a bankruptcy-agreement bill with questionable tax breaks for the state’s five other OTB corporations. The original bill would have assigned the bankrupt NYCOTB’s creditors – the largest of which are the state’s tracks – the wagering accounts on a pro-rated basis instead of declaring a free-for-all in the market and would have kept the company in business.

While some of that account wagering has undoubtedly leaked out of state, there has been surprising resilience among customers. NYRA’s account-wagering and ontrack business have been closing the gap, thanks to some smart reactions, such as underwriting a bus service for stranded city residents, offering enticing NYRA Rewards promotions, and upgrading the presentation of the in-home signal on out-of-state races once NYRA’s own racing is over for the day.

While the NYCOTB closure has disappeared from public discussion, the California takeout increase continues to agitate some vocal fans and horseplayer groups, who claim to be laying off playing Santa Anita as a protest against the hikes. They have claimed victory, pointing to lower handle at Santa Anita. Track officials and state regulators dispute the size of the declines and their impact, saying that their lucrative ontrack business has been relatively stable and arguing that the Hollywood Park fall meeting was showing similar declines before the takeout increase took effect.

Regardless of whose numbers are right, customers remain angry, and officials aren’t helping things by the way they executed the increase and have defended it.

The schedule of increases was inconsistent: no change in the rates on straight wagering, a two-point jump to unusually high 22.68 percent takeout rate on exactas and doubles, and a three-point jump on exotics. The blended rate is now similar to New York’s or Florida’s. It also didn’t help that the two ranking commissioners on the California Horse Racing Board called the old rates “underpriced” and claimed that racing needs to compete with the Lakers and Dodgers, not alternative forms of gambling with lower takeouts.

No one from the tracks or the board has explained the rationale for the nature of the increases or adopted a tone of regret about the supposed necessity of them. Asked for reaction to the situation last week, Santa Anita president George Haines said a committee was being formed to locate and hire an official spokesman on the issue.

Officials also could have leavened the increase by at least experimentally lowering takeout on some pools or on new bets. Santa Anita’s sister track in Florida, Gulfstream Park, quietly raised its exotics takeout from 25 percent to 26 percent this year, the same as New York’s and 2.32 higher than the new California rate. But it also put in new low-minimum pick-five and pick-six bets, at respective 15 percent and 20 percent takeouts, and have gotten 10 times as much positive reaction for the latter as complaints about the former.

The fan groups have their heart in the right place and are correct in arguing that takeout increases are always counterproductive because they provide at best a short-term bump before the inevitable plunge due to lower churn and customer dissatisfaction. Still, their efforts to make a statement have been blurred by a haphazard call to action: It’s unclear when they wanted people to send a message about the issue, what pools they were targeting, and what specific countermeasures they would like the tracks and state to consider.

It does little good to keep lecturing people about how the optimal takeout rate is somewhere between 8 percent and 12 percent. There is zero chance that any track in California – especially in the absence of any hope for racetrack slots, which are going to begin in New York later this year and will probably come to Kentucky eventually – will reduce its takeout revenues by 50 percent in the hope that handle will double.

What the tracks can do, however, is better explain their plight, rejigger the rates, and give something back to the players in the form of new and cheaper bets. It would at least be a start to telling those customers that they are heard and they are valued.

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