02/20/2004 12:00AM

New rebate outfit formed


Jerry Brown, the owner of the popular Thoro-Graph handicapping service, has formed a company that is recruiting horseplayers to receive rebates that would increase the more they bet, Brown said Friday.

The formation of the company, which was announced in an e-mail that Brown sent to certain Thoro-Graph customers, underscores the extent to which rebates have penetrated the racing industry. The recruitment of rebate players is sure to inflame concerns of racetracks that rebate shops are soliciting customers from grandstands and putting pressure on the racetracks' traditional revenue streams.

The e-mail said that customers who wagered $5,000 a week would receive rebates of approximately 4 percent of handle. The rates would rise to 7 percent of handle for players betting $10,000 a week and 9 percent of handle to players betting $25,000 a week. Bettors who wagered more than $25,000 a week would "get more in a customized deal," the e-mail said.

Rebates are typically awarded by offtrack betting sites that do not have the obligations to purse accounts or the upkeep of large racing facilities. The rebates are awarded out of the difference between the blended takeout rate - which averages 20.5 percent - and the price that sites pay for a racing signal. The margin is typically at least 15 percent of handle.

Brown said that the e-mails were sent to between 500 and 1,000 people, but declined to be more specific. He said that e-mails went only to customers of Thoro-Graph and not to addresses that Thoro-Graph had obtained from racetracks.

"We vetted that very carefully," Brown said. "It's very important that racetracks know that we are not trying to steal their customers."

Brown said he started the company - in partnership with Don Johnson, a professional betting syndicate manager whose group receives rebates - because it's a "win-win-win" situation.

"The model of the industry, in terms of pricing, is hopeless," Brown said. "The takeout is way too high, and this is a price-sensitive game. The better our players do, the more data they buy, and, ultimately, the more they bet."

Only five years ago, rebates were a niche concern among racing officials. At one time, rebates were offered only to the sport's biggest bettors, but now even some racetracks and small account-wagering services are getting into the act. Hawthorne Racecourse, for example, awards ontrack handle with cash awards of up to 4 percent, and the account-wagering sites run by AmericaTab offer rebates on selected signals on certain days.

Johnson, reached by cell phone, declined to identify the rebate shop that would be used by the new company. Johnson, however, has been associated with a Native American casino in Coeur d'Alene, Idaho, in the past. He said he would not confirm or deny that the bets would go through that operation.

Critics of rebates have said that the awards introduce inequities into the parimutuel system because players who receive rebates play against a lower effective takeout than other players while simultaneously eating into racing's betting revenues. Supporters say that rebates allow big bettors to bet even more, and that racing derives a net benefit from the awards through increases in handle.

Chris Scherf, the executive director of the Thoroughbred Racing Associations, a racetrack trade group, said that the latest rebate offer was a signal of where the industry was headed, for better or worse.

"Tracks are asking themselves, can they survive on a 13 percent cut of the handle?" Scherf said. "I don't know the answer to that, but I do know that what you hear from racetracks is that no one has any money for capital improvements, and all you hear from horsemen is that 90 percent of owners lose money. You figure it out."