Harness: Customer understanding of takeout is irrelevant

This past Monday night (1/28), Pompano Park featured a Pick 5 Carryover north of $23,000. That carryover prompted handicappers to swarm to the south Florida oval, inflating the pool to over $145,000 at post time. Sure, Woodbine-Mohawk cancelled racing and it was a Monday night with no competition from a major signal like The Meadowlands, but this was still an impressive result.

There can be much credit given to track announcer Gabe Prewitt, who is one of the best advocates harness racing has. He is essentially a hype-man for his product on top of everything else he brings to the table, and that is a great thing. But, the resulting Pick 5 pool at Pompano was also a product of bettors displaying an understanding (whether it be consciously or subconsciously) of effective takeout.

Admittedly, this is about the fifth time I am writing about this subject and there is an old saying about doing the same thing expecting a different result. But this is an important message to get across.

Recently a Twitter conversation broke-out on the subject of takeout. In the midst of the conversation taking place amongst some in the racing industry, a position that is held by many in racetrack management was presented. It is simply this: “The average racing fan is oblivious to takeout.”

That is a very common opinion. It was one I faced quite a bit when lobbying for lowering takeout. Personally, I think it is a phrase that racetrack management hides behind in order to avoid the issue. There are other factors that need to be addressed, like the current state of the price of host fees, but let’s focus on the impact on bettors here.

For the most part, horse bettors have nothing to compare to when looking at takeout rates. It’s not as if there is a racetrack out there offering 10-percent across the board takeout that they can compare their performance to tracks with higher takeout rates. Over a large enough sample size, the horse player would determine he was better off wagering at the lower takeout track.

Even if every horseplayer in the country had no understanding of takeout, or simply didn’t care, the positive impact of lowering takeout rates would still exist. It’s not difficult to understand. Lowering takeout returns more money into a bettor’s pocket when they win. If you give a gambler more money back, they are going to bet it back and churn that money. This is a long-standing concept which is applied by racetrack and casinos all over the world in the form of rebates back on losses or player reward points.

If a racetrack has a “player rewards program,” and they are giving money back on bets through that program, in doing so they are lowering the takeout that player is betting into. Why? They know the player is going to remove the points, turn them into cash and bet more. But despite that, they still exclaim that players don’t understand takeout. When a racetrack promotes a large carryover into one of their pools, they are promoting a lower effective takeout. Sometimes the racetrack references the effective takeout in a press release promoting the carryover pool. But again, despite that, they still exclaim that player’s don’t understand takeout.

The really wild piece of this puzzle is that alongside the advertisement for the carryover pool, racetracks are promoting jackpot-style bets that have effective takeout rates of 40, 50 or 60%. Some of these bets tie up bettor’s money for the majority of a racing card. In essence, one company or industry is promoting two products whose impact on the customer are in direct contrast to one another. Ironically, the impact of the two products on the company are in direct contrast to one another as well.

One counter argument to my point is that all businesses offer varying products to their customers. For example, Toyota sells the Prius, one of the most fuel and cost-efficient vehicles in the world, alongside the Tundra, a complete gas-guzzler. The problem with that argument is the person buying the Prius is not the same person that is buying the Tundra. The two customers want different products. There is no horseplayer that wants to bet into a 50% effective takeout rate, and the same customer that is betting into the win pool is also being offered the jackpot wager at three times the takeout.

Why? Because racetrack management believes horseplayers are oblivious to takeout rates. But if you think about that position, the scary thing is what it actually means, whether this is how it is intended or not. It means that the average horseplayer simply doesn’t know the difference.

Well, sports betting is here and the price of every bet to the customer is roughly 5%. The most conservative estimates of how much is wagered on sports in the United States is $60 Billion annually. Thoroughbred and Standardbred racing combine for about $13 Billion. I guess sports bettors understand the difference. If horse racing’s position is that the average horseplayer doesn’t understand the difference, then racing better hope they don’t figure it out.