10/09/2013 1:42PM

Fractional wagering gaining favor with racetracks and fans


LEXINGTON, Ky. – Racetracks are likely to continue to lower the minimum wager on many bets but are unlikely to put any significant downward pressure on takeout rates, officials of racetracks said on Wednesday during the closing session of the three-day Simulcast Conference in downtown Lexington.

Horseplayers are constantly asking racing officials to lower the minimum bet, especially in multi-leg wagers like the pick four and pick six, the officials said. And the data on lowered minimums has so far indicated that lowering the minimum wager increases the size of the pool for the bet, according to Scott Finley, a member of the panel who is the top simulcasting official for the New York Racing Association.

NYRA lowered the minimum wager to 50 cents from $1 on its pick four two years ago, and the average pool for the pick four is now 20 percent higher, Finley said. NYRA also debuted a daily 50-cent pick five at the start of the Belmont meet in September, and the bet has yet to negatively impact either of the two pick four pools offered daily on the Belmont card or the $2-minimum pick six, Finley said.

As a result, NYRA is now planning to lower the minimum wager on its trifecta bet from $1 to 50 cents “in the next month,” Finley said.

Starting with the adoption of the 10-cent superfecta by some tracks in the mid-2000s, many tracks have been lowering the minimum wager on a variety of bets. The fractional bets are especially valuable to players with limited budgets, because they can cover more combinations with their bankrolls, particularly in multi-leg bets that are targeted by the sport’s most sophisticated bettors.
John Walsh, the simulcast director at Hawthorne Race Course in Cicero, Illinois, said that bettors at his track consistently request that bet minimums be lowered. But, to the chagrin of many horseplayers who maintain that takeout rates are too high, Walsh also said, “I never hear anyone say anything about a takeout rate unless I read a blog.”

The issue of takeout rates is complex because of an enormous array of factors. In an ideal world, one that exists in an economic model, lower takeout rates would lead to higher levels of betting and additional churn because bettors would receive more money back in the form of higher payouts. It would also make racing more competitive with other gambling games by more closely aligning the price of bets on horse races with other games such as poker or slot machines, where the takeout is usually around 5 percent, compared to racing’s 20 percent.

But limited real-world studies have failed to demonstrate the dynamic conclusively, in no small part because a track that drops its takeout rate to a sufficiently low level is usually ostracized in the out-of-state simulcast market because the lower rate cuts into signal takers revenue, rendering any study of the resulting betting figures too complicated. As a result, tracks that have lowered takeout rates significantly over the past 10 years are few and far between.

Still, many groups representing horseplayers consistently press the industry to adopt lower takeout rates, even though many racetracks can ill afford to give up revenue at a time when betting on U.S. races is only finally stabilizing after a six-year decline.

Kentucky Downs, a small, all-turf racetrack in southern Kentucky that held five days of live racing this September, dropped its exacta takeout from 19 percent to 18.25 percent for this year’s meet. Handle on the track’s races was up 69 percent compared to last year, but purses at the track were up 104 percent, to nearly $900,000 a day, and the track’s field size averaged 10 horses per race, an astounding figure.

As a result, Corey Johnsen, the track’s president and part-owner, said he could not make a confident assessment of the impact of the drop in the takeout for the exacta, a pool he targeted because, he acknowledged, “the president of that track likes exactas.”

“I’m not here to tell you the takeout rate was the sole reason, but I think it was an important part of the combination,” Johnsen said.