We're actually kidding... but not for the reasons you think!

No doubt you've heard the recent buzz regarding takeout.  Handicappers are the customer and as any successful business knows, you should always listen to your customer.  The oddity about the recent upheaval is the strong attitude towards the California takeout.  It's as if Crest toothpaste raised their price to $10 and instead of just selecting another toothpaste, consumers rioted at the Crest plant. I guess they must really like Crest.

To Hana, we say the fan pays more to attend a Major League baseball game than a Triple A game. So, why shouldn't tracks like Del Mar and Saratoga contemplate charging more than Tampa Bay Downs? We're actually surprised Churchill Downs doesn't raise takeout to 35% for the Kentucky Derby.

We understand the Tampy Bay Downs experiment. They dropped takeout and handle "soared". But we suspect the real reason was simple pricing. If Generic Cola and Coke charged the same price for a soda no one would buy Generic. Their experiment actually proves the point that takeout should be a product of supply and demand at each track.

The fact is total handle essentially went up every year from 1990 to 2007, dropped from 2008-2011, and started its uptick again in 2012. The economy drives handle, not the takeout which has remained fairly unchanged for 75 years. Did you know in 1990 the takeout on NYRA's WPS was 17%? Today it is 16%.

Some have discussed lowering the takeout for "the churn" factor.  In our research, we determined you need a higher multiple coupled with the reward of winning to "churm".  Churn works when you can spin a slot 200 times. In horse racing, the player only gets 8-10 churns a day.  If you could only spin a slot 8-10 times, we're not sure the churn would be as potent.

The secret truth is most sophisticated handicappers use legal rebate houses anyway. In most cases, they probably receive the lowest takeout of anyone - even at the biggest tracks. Therein lies the real issue. 

Since the advent of Advanced Deposit Wagering (ADW), the tracks have continuously made deals to sell their product under a pricing system that has produced virtually the same handle with lower revenue.  Even worse, the ADW/rebate shops now control the customers. If pricing changes, the ADW can and will drive their customers (through marketing) to other racks which increase their own bottom line.

Only in horse racing can the wholesaler undercut the manufacturer and get away with it.

Here are two suggestions.

For now, all tracks should lower its takeout. Not because it will raise handle and not for the churn.. but to compete and drive the rebate shops out of business. This will allow the tracks and horsemen to regain the flow to their customers. Additionally, the tracks need to provide more on-track bonuses. Offer not just a 20% bonus for an on-track pick six win, give the player a 10% bonus for any on-track win. The customer has many options to wager. Tracks need to be more competitive and make their portal the most enticing.

Once tracks regain the flow, they can sit down with horsemen, and handicappers to raise the takeout to a more optimal level.

What do you think?