04/11/2014 12:13PM

Churchill Downs increases takeout rates

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Churchill Downs will raise its takeout rates this spring to the maximum allowed by Kentucky law, officials confirmed Friday, a decision that will lower payouts on the track’s races by almost 16 percent in many cases.

Takeout on win, place, and show bets will rise from 16 percent of every betting dollar to 17.5 percent, a jump of 9.4 percent, when Churchill’s spring meet opens April 26, Churchill officials said. Takeout on all other bets, including the most popular wagers, exactas and trifectas, will rise from 19 percent to 22 percent, a jump of 15.8 percent.

The hikes will raise revenue for Churchill and its horsemen. The takeout increases, first reported by the Louisville Courier-Journal on Thursday night, immediately caused an uproar among many horse-racing fans and bettors on social media, with some calling for a boycott of the track. Churchill Downs is owned by a company that operates the largest account-wagering company in the United States, twinspires.com.

John Asher, a spokesman for Churchill, said the track’s management raised the takeouts to sustain current purse levels at the track. However, Asher acknowledged that Churchill and its horsemen will split the additional revenue raised by the maneuver under the terms of its existing live-racing contract, which gives horsemen 51 percent of wagering revenue and Churchill 49 percent.

“If Churchill Downs is to present a competitive racing product, purses must be strong enough to keep current stables in the state and attract new stables and horses to the Kentucky racing circuit,” Asher said in an e-mail. He added that Churchill would have dropped some stakes from its spring meet without additional revenue.

Marty Maline, the executive director of the Kentucky Horsemen’s Benevolent and Protective Association, did not return phone calls by early Friday afternoon.

Churchill would not have been able to legally raise its takeout rates if the track had not held its first-ever September meet last year. Under Kentucky law, tracks with an average live ontrack handle of $1.2 million or more a day cannot charge a takeout higher than 16 percent on straight wagers and 19 percent on exotic wagers. Tracks under the $1.2 million average threshold can charge 17.5 percent and 22 percent.

Asher said the average did not dip below $1.2 million until last year, based entirely on the influence of the 12-day September meet. Though Churchill’s median ontrack handle is less than $1.2 million, the average ontrack handle number is heavily skewed upward by Derby Day and Oaks Day, when attendance tops 100,000.

Asher would not discuss whether Churchill raised the rates it charges simulcasting outlets for its signal in tandem with the takeout hikes, saying only that “contract negotiations with simulcast partners are ongoing, and those agreements are confidential.” Several officials who negotiate with Churchill on simulcast rates said they are attempting to reach new agreements with the track but declined to say if Churchill was seeking to raise the rates.

If the signal rates are not raised, then the outlets will retain a larger portion of each bet made by their customers on Churchill’s races under the new takeout scheme because the outlets keep the difference between the rate they pay Churchill and the takeout. Approximately 90 percent of all wagers on a major track’s races are placed at offtrack locations.

If simulcast rates do not go up at the same rate as the takeouts, then some players may not feel the full impact of the hikes. Many account-wagering operations, including Churchill’s mammoth twinspires.com and an offshore site the company bought several years ago, offer rebates to players, and some sites may elect to forgo the additional revenue to increase the rebates to their players on the Churchill signal. Many rebated players, including those who use automated systems employing algorithms to determine their wagers, are highly sensitive to takeout rates.

Regardless of the simulcast contracts, Churchill will be retaining more of each wager on its races through twinspires.com, which handled approximately $1 billion last year, nearly one-tenth of all North American handle. That will allow the track to adjust its rebate programs to its own players, offering it a competitive advantage over account-wagering sites that may now be paying higher rates for the signal.

Jeremy Clemons, the vice president of marketing for twinspires.com, did not return phone calls Friday.

Caitlen Coursic More than 1 year ago
I've had a Derby/Oaks box for 40 years, and I am a CHDN shareholder. Have many plans in Louisville Derby week, so too late to cancel trip this year. But I am offended by Churchill's short-sighted move to increase takeout at a time when executive comp at CDI has increased dramatically in the past four years. The amount they are trying to raise through increased takeout is less than the increase in executive comp. Ridiculous. Even worse, they are trying to push through a proposaI to dramatically increased the number of CHDN shares to make available for yet more executive compensation. By proxy, I voted against it, but it will pass at the stockholder meeting. I will attend Derby/Oaks this year, but I will do it as a spectator, not as bettor. Next year is the last year of my seat contract. I will not attend in 2015 and will most definitely not renew my seat contract. I will be selling my CHDN stock shortly as well. This is all sad. Churchill Downs was so customer oriented under the regime of Tom Meeker. It was refreshing. Since he stepped down, the march downhill has been steadily increasing to the point where it is becoming a plummet well below mediocrity. Farewell Churchill. My last visit next week will be sad, and I will take the time mainly to say goodbye to many friends in the Louisville area. I won;t be returning anytime soon.
Joey W More than 1 year ago
So it seems the only reason Churchill took Turfway's September dates was in the hopes of there average handle going down. So they could hike up there rates.
Joey W More than 1 year ago
CROOKS
Walter More than 1 year ago
Kee & CD may be in the same state, however, they are worlds apart in how they treat their fans. Keep up the good work Keeneland, the bettors will respond.
Starks43 More than 1 year ago
Matt you should be ashamed of yourself for putting your name on this article. Seriously. Could have been written by Churchill. You write this will raise revenue. Implication of raise is increase. Have you studied what has happened from other tracks similar attempts? You state as a fact will raise revenue when it is very likely this will have the exact opposite effect. Where is the leadership on this in press?
Walter More than 1 year ago
This is one of the bigger stories of the weekend, I wonder why it's not getting noticed by drf.com readers. Most of the other big stories are pay per view lately.
Joey W More than 1 year ago
Because they took it off the front page rather quickly. And the news comes out during the week of the final two big prep races.
Swagger Stick More than 1 year ago
This article was sure yanked off the DRF interface page in a hurry. Gee I wonder why? Do you think they were reading our comments?
Walter More than 1 year ago
Yep, I noticed that also. One would think this topic would be very popular among horseplayers. This article seems to be tucked away.
patrick mcintyre More than 1 year ago
Just closed my twin spires account. Paying sky high taxes to bet on horses mistreated by trainers, practicing "chemical warfare" has lost all its appeal. I'm done with American racing.
Steve More than 1 year ago
It's not going to raise revenue if people stop betting on their races. This is insane. Another example of racing shooting itself in the foot
VanSavant More than 1 year ago
Folks; A couple of things here regarding Churchill Downs increasing The Take on wagers; I have written about this before, so without going through it all once again, I’ll simplify it thusly: It is probably a bad business decision, because “studies show” that decreasing The Take actually tends to decrease overall handle and operating income (profit). Most people don’t understand how businesses actually operate (race tracks included) but most businesses do (race tracks excluded). Politicians and bureaucrats don’t understand this, because most are corrupt, don’t care, and don’t live in the real world…and I don’t care if you are a member of the Republican Crime Family, or the Democrat Crime Family… (These Crime Families sure know how to take care of each other when the heat is on, don’t they?…)… but I digress. If you should happen to hit the Superfecta in this year’s Kentucky Derby, then hopefully you have factored the increase in The Take to how you have crafted that wager, so you aren’t underlaid as a function of the odds (which are factored into and reflect The Take). If you haven’t, then be happy with what you earned as a function of what you wagered, but understand that your wager was a bad wager in that it was underlaid. If you lost, then who cares? You didn’t pay The Take. Only winners pay The Take. Your $2 wager only cost you $2. It didn’t cost you $2 plus 25% (or whatever The Take is). But because this Superfecta will likely pay five-digits, if you win, you can wring your hands all you want about the confiscatory takeout rates, but understand that I won’t care one bit (and it’s my good guess that you won’t care either)… Takeout rates… yes… they should be lowered, for everyone’s sake. But more so for Track Management’s sake. Players? Factor this into your betting, and then decide. There are so many races out there to choose from, that you shouldn’t feel enslaved into playing races that you don’t have an edge. Don’t let Takeout Rates become an excuse for not showing a profit. Discipline, people. Discipline. Later gators vs