Report defends rebates

A report commissioned by the National Horsemen's Benevolent and Protective Association argues that racing would be "leaving money on the table" if it took drastic action against rebate shops.

The report, written by the economist Will Cummings and underwritten by the NHBPA's simulcasting consultant, Stevenson and Associates, which also advises several rebate shops, said that rebate shops have filled a need in the racing industry by matching "price-sensitive" customers with lower takeout rates. Without the rebate shops, the report argues, racing would lose those customers and fail to benefit from business practices that are routinely employed by other industries, including casinos.

"Customers have different sensitivities to price," Cummings wrote. "If we try to shoehorn all our customers and delivery systems into one uniform cost/price structure, we'll be leaving money on the table."

The report was released five days after a task force set up by the National Thoroughbred Racing Association to examine racing's revenue streams described its initial findings at The Jockey Club Round Table conference in Saratoga. Those findings included an analysis of rebate shops that said that the industry's revenues have not increased as a result of exponential growth at the shops, which reward their customers with rebates on their bets, win or lose.

The NTRA's task force recommended that the industry stop using handle figures to assess its business decisions, and instead rely on revenues. The task force was commissioned after purses declined in 2003 compared to 2002, despite rising handle figures.

Chris Scherf, the executive director of the Thoroughbred Racing Associations and a member of the NTRA task force, was critical of the Cummings report for failing to use revenues from tracks to make its conclusions.

"The entire study is based on handle numbers from The Jockey Club and racing commissions," Scherf said. "What's the point? It's the wrong metric. It's not apropos of anything, at least not of our real problems."

Task force members said that they expected the Cummings report to be attached to the task force's report when it is released in September.