04/11/2014 1:13PM

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.