Updated on 08/16/2014 11:58PM

Beyer: Pick five shows how lower takeout works


DEL MAR, Calif. – On the day that Del Mar opened its summer racing season, fans at the seaside track and horseplayers around the country were immediately betting with gusto. The wager known as the Player’s Pick Five, comprising the first five races on the card, attracted a stunning $620,426 in wagers, more than double the size of almost every exacta pool and triple the amount on the pick six, a California institution.

The pick five’s success since it was introduced in the state in 2011 is due to two player-friendly features: a 50-cent wagering unit and a 14 percent takeout rate. It is arguably the most attractive bet in horse racing, and it has been adopted in other jurisdictions, notably New York. But the evolution of the pick five in California holds significance for the entire racing industry because it is closely tied to a crucial issue: takeout.

Takeout, of course, is the money extracted from the betting dollar that goes to the track or to purse money. It is as important to a gambler as tax rates are to a wage earner or an investor. Takeout rates are crucial to tracks, too. In the mid-1980s, economist and gambler Maury Wolff published an influential study proving that takeout raises often hurt tracks’ business by removing from circulation money with which horseplayers would bet and bet again.

Yet tracks and players often seem oblivious to economic facts. Whenever racetracks or horsemen face economic problems, they believed that raising the take will be a panacea. And horseplayers pay little attention. “I’ve always been amazed,” said Craig Dado, Del Mar’s marketing director, “by the average race player’s lack of knowledge about takeout rates.”

With California’s racing business in the doldrums, the industry sought a takeout increase in order to boost purses, and the state legislature approved a whopper. The takeout on exotic bets was hiked from 20.68 percent to as much as 23.68 percent.

This time, however, horseplayers did not react passively. Jeff Platt is the president of the Horseplayers Association of North America, an organization that tries to represent the interests of bettors – traditionally a futile task. Enraged and frustrated, Platt said, “The only way we could fight it was a boycott.”

HANA got attention and publicity when it urged horseplayers not to bet on Santa Anita’s races when the new rates went into effect on its opening day, Dec. 26, 2010. Santa Anita’s business plummeted, with wagering down nearly $1 million a day compared to the previous season.

Hollywood Park followed Santa Anita on the California racing schedule, and Hollywood was worried. “The backlash [against the takeout hike] had an effect,” said vice president Martin Panza (now an executive at the New York Racing Association). Hollywood convened a series of meetings involving the various constituencies in the industry, and Panza said, “We were looking for a way to appease the gamblers by offering a new bet.”

HANA suggested a low-takeout pick five like the one offered at Monmouth Park. Hollywood instituted the wager with little expectation that it would succeed because it would span the early races that are traditionally the weakest on the California cards.

But players loved it. They recognized that the 14 percent rate was a rare bargain. They loved the fact that the 50-cent unit allowed them to cover many more possible outcomes than a $2 pick six. Yet even with the low cost of a ticket, they had the chance to make a big score. The pick five has paid more than $7,000 for 50 cents on the majority of the 19 days at the current Del Mar meeting, and on two occasions, the payoff exceeded $90,000.

Even with the low takeout, it benefited the industry. When horseplayers handicapped the pick five, they formulated opinions that led them to the races individually. When the wager was introduced at Hollywood, Panza said betting increased significantly on the early races of the card. The pick five became the best argument ever made for the virtues of lower takeout.

Empowered, HANA took up another takeout fight this year. When Churchill Downs announced a substantial increase in its takeout, the organization called for a boycott. HANA’s Andy Asaro bombarded the racing world with e-mails denouncing Churchill’s iniquity. Betting at the track’s spring meeting dropped $48 million from the total in 2013.

There is no way to measure the boycotts’ impact. Like most tracks, Santa Anita and Churchill were affected by other factors (such as a shortage of horses) that hurt their bottom line. The impact of the takeout increases is hard to measure, too, because simulcasting allows horseplayers to bet a mixture of high- and low-takeout tracks and muddies the data about their behavior.

Yet HANA has made a persuasive case to horseplayers that takeout is an issue worth fighting for, and it has demonstrated that takeout increases don’t lead to free money for racetracks. At the same time, another trend in the game has sent opposite messages.

Spurred by the success of Gulfstream Park’s Rainbow Six, many tracks offered “jackpot” bets that pay out the entire wagering pool on a pick six, pick five, or super high five only when there is a single perfect ticket. In addition to the usual takeout, the tracks withhold a significant portion of each day’s pool to fund the jackpot. Occasionally, a high-roller will make headlines with a giant win, but on most occasions, bettors will be collecting as little as 30 percent or 40 percent of the money wagered that day – an effective takeout of 60 percent or 70 percent.

Wolff observed, “The ultimate idiocy is the jackpot pick five, which takes a bet that people actively want and turns it into the worst bet in America.”

Many fans continue to play these bets because they don’t understand the math, and tracks don’t recognize how unfair these bets are to the majority of their customers. So, there is plenty of education left to be done on the subject of takeout. But HANA and the Player’s Pick Five have at least started the process.

©2014 The Washington Post

Mundo Earwig More than 1 year ago
These thimblebrains are marketing horse racing in a way similar to what would be the state/national lottery targeting as their top marketing priority the miniscule percentage of those who have already won 7-figure and up lottery grand prizes!! Until such time as when horse racing starts targeting the 99% with its marketing efforts, and stops wasting time on the one percent, when the latter only hinder the 99%(while simultaneously hindering racing's connection with that 99%), racing will continue to get nowhere with its dumb ideas. Now how difficult can it really be for even a third-grader to observe that racing leaders are doing it wrong in their efforts to present horse racing to the public? And why does the media fall for, and then promote this stupid business of smoke and mirrors at every opportunity?
Chuck Berger More than 1 year ago
I guess if you like taking a shot, the exotic bets are fine. I find it impossible to play four or five or six races for that matter in consecutive order. Is it really possible to have a definitive one, two or three selections in each race? Race tracks have implemented these "lottery" bets to entice the player to hit it big. Few players do hit them with any consistency. Certainly not the player with a short bankroll. We all remember making the "score." That's because it happens infrequently. I learned a long time ago, that consistent small profits add up to a tidy sum at years end. I pick my spots. I play the race at the track where I feel I have an edge. No need to play on an off track just because there's a big carry over.There are plenty of different places to bet where an astute handicapper has the edge.
Hail No More than 1 year ago
Good post, Chuck. Couldn't agree more that these multi-race wagers are just that, lotteries, and it's more bankroll than handicapping skill that take's these pools.A-B-and C horses in formulating a ticket get's quite pricey, and you'd have to win one for 50,000 probably to just break even on all of your investments on these type of wagers.. Lower takeout on WPS and exactas, and handle will go way up, and might even bring people back out to the track, again, and will put more money in the pockets of astute cappers that know how to pick their spots, as well as a fighting chance for the novice or even the beginner.
Anonymous More than 1 year ago
So Andy, what do you think hurts exotic horseplayer's bankrolls more in the end, High take outs, or using too many combinations? Person A who puts t $10.00 into a fifteen percent pick four pool is paying $1.50 in takeout. Person B who puts a hundred into the pool is paying $15.00. Now, I know the argument becomes that the !5% comes off the winning price, but so what if that is offset by the public's poor wagering strategies inflating the pool? Would a major league hitter rather face Kernshaw in a hitter's park or a journeyman in a cavern? The notion that there is a direct correlation between lowering take out (which is a good thing) and universally raising everybody's ROI is fool's gold. With more money to be raked from the pools current winners will wager more to win more (which also is a good thing) but the inveterate losers will see no advantage to lower take outs. In conclusion, lower take outs are a good thing. But, it's inadequate handicapping that's drains most players in the end. You know, you have to handicap the take out. And what is for sure, the more you spread, the more you play into the perniciousness of the take out.
Dickie RCowles More than 1 year ago
His genius mind revolves again...so dull.stick with what you know.speed figures..yeah right
jim lefferts More than 1 year ago
Another media guppy bites on the low-takeout PR of a Pick 5. Even the HANA track ratings give low takeout credit to tracks with low-takeout horizontal bets which amount to a fraction of the overall handle. HANA rates Sam Houston the 5th among 64 tracks in takeout despite an 18% WPS and 25% on tris and supers all of which are much higher than Churchill Downs which gets boycotted. To be effective lower takeouts need to impact the WPS, exacta and tri pools: That's where the overwhelming majority of the wagering lies. A lower takeout on those pools will increase churn and raise betting handles. Pick 5s are out of the reach of most players, tie up bankroll and far too often feature races that serious players have absolutely no opinion in. These lower takeout gimmicks are used to generate an impression that tracks are actually lowering takeout while takeout on the most relevant pools remain too high, and the media and HANA are along for the ride.
Mundo Earwig More than 1 year ago
Jim, your observations are spot-on. For we already migrated to pick-4's and pick-5's to side-step the most significant part of the takeout (that which would have the comparative parlay taking 15-18% 4 or 5 times in a row). To add another few, minute percentage points of (reduced takeout) just once, is relatively insignificant! As for "impacting" the (single-race) pools - they do, but only through leaving precious money on the shelf, when the whole of racing and its future needs that money to "churn" a handful of times, rather than sit on the shelf for two hours and then be distributed in severely uneven portions upon conclusion. The average dollar wasting away on the "Players Pick Five" now misses dozens and dozens of wager opportunities during that 2-hour window, before the greatest chunks of the net return leave the track with "big winners" and often go immediately to the I.R.S. from those winners. You simply could not be more on-target with your realistic understanding, while the track managers keep playing this game of smoke and mirrors which mainly the HANA sliver is buying hook, line and sinker. The real-world equivalent to advertising these "low take-out pick-5's" is the manager at the grocery store advertising his plan to move the cereal to the back of the store so it will be adjacent to the milk, "as a convenience to you, the consumer". You still have to walk past a whole lot of his other 'products' to reach either one, all for his benefit and none for yours. The entire industry would gain across the board from renewed emphasis on single-race wagering, where money could/would churn from all angles through hundreds of satellite locations and on dozens and dozens of races from all over the continent. It has been horse racing management's CHOICE to take the exact opposite path which has doomed them to the present-day malaise, and the inevitable-under-current-stewardship cessation of horse racing as we've known it in North America. Racing management is doing this entirely to itself, largely without even seeming to realize as much.
Anonymous More than 1 year ago
Interesting arguments made all around. I have to agree most people at the track don't know what a takeout is never mind how much it is. The serious bettor knows that it means less money in the pools so less returned as winnings. But the average bettor at Del Mar and Saratoga they are not the average bettor who goes to Aqueduct and Santa Anita regularly. The summer bettor is a tourist who goes to the track with a set amount to bet and bets it win or lose. They may play an exacta or 2 but they are not playing pick 3, 4, 5, 6 no matter what the take out is. Gamblers recycle their winnings tourists take it home or spent it in restaurants off the track. I was a regular carryover pic 6 player in both NY and California but switched to the early pic 5 because of the lower take outs and lower base bet. I play it more regularly and hit it more regularly too. If I do hit it I almost always play the late pick 4 too.
Anonymous More than 1 year ago
That lower take outs are better for the horseplayer is axiomatic. But I'm going to need more than anecdotal proof that a lower takeout in the pick five increases the pools of other wagers in the pick five sequence. Especially since my own experience is just the opposite: I tend to bet less on individual races when I'm alive in a multiple race sequence. And it does seem that the overall trend in Racing is that as betting options increase overall handle decreases. This is due partially to the fact, as an earlier poster pointed out, that high end exotic wagers allow players to permanently take money out of a game built upon churn, but also because as other pools shrink because of betting transfer, they become inherently less attractive wagers. At some point the wise bettor needs to bet less money in order to take the same odds out of win pool. The thousand bet on a 10-1 two years ago would only yield 9-1 in a shrunken pool so why not bet $900 instead of cannibalizing yourself? So, lower take outs good; more betting pools problematic. But you know, here's a wagering promotion I would like to see a track offer: A bettors guaranteed million dollar pick six (or pick four). Let's use 15% as the base: The track gets a guaranteed $150,000 take out. If the bettors bet less than a million the take out is much greater than 15%, but when the handle passes a million the de facto takeout falls proportionally. At two million it's a 7.5% takeout. Now that would be an interesting experiment in the economics and psychology of take out.
william More than 1 year ago
1.5% takeout for each starter.....solves the takeout and short field problem.
John Murray More than 1 year ago
Both Woodbine and Northlands Park are below 15%, both Canadian tracks.
Mundo Earwig More than 1 year ago
Beyer's thinking is upside-down on this matter. For one need only observe his reference to "an effective takeout of 60 percent or 70 percent" when deploring the "jackpot" pick-six before cross-referencing that with the "Players Pick-five", which has an effective takeout of 100% for almost everybody involved on a given day, to begin to see how wrong Beyer's understanding must be. Horse racing has for far too long been fully absorbed in the wrong thinking which has been to attempt to appease the 1%, at the direct expense of everyone else in society. What would happen if Beyer, who is seemingly so obsessed with outdated studies from "the mid-1980's", would instead pay more heed to the more recent and much more relevant study which assured that "fewer than 2% of racegoers even know about takeout"? Horse racing changed markedly some 25 years ago, and it is precisely the unwillingness of the Andrew Beyers of the world and the Craig Dado's of the world, to even understand the change, let alone change as well, which continues to slowly burn-off what is left of modern day horse racing in North America. The newcomer is less and less competitive with each passing year, and with each stupid new bet introduced by the Dados, than the newcomer was a year earlier, and that alone is what is killing horse racing today. Drugs, deceit, and animal welfare concerns rate the sum total of nothing, when projected against the upside-down thinking where it relates to pari-mutuel matters inspired by the Dados and the Beyers of the racing world. Until racing begins to reverse the absurdity constantly bantered about in such columns, it has no chance to thrive in the distant future. Can someone please explain what good it did to give the whole jackpot to Dan Borislow? Do you really believe that money is going to return to the pari-mutuel waters at any point in the future? Racing as a whole is losing touch with what kept it thriving for many decades before the big change. We used to go to the track and trade punches in WPS at 17% all day. Now almost everybody loses at 100% on all but a sliver of his/her wagers, and the Dados of the world sit around wondering why the handle is down. You did this yourself! Now the only solution is to undo all of the wrongs you have collectively brought upon racing during the past 25 years. See if you can get it right by the time you spend 25 more years of racing's dwindling margin for your repeated errors.