Why takeout matters

Among serious horseplayers, takeout, or the amount of money taken out of every bet, is a four-letter word. But how big a concern is it for the average player? Given its economic impact on anyone’s winnings, it should be high on the list of factors to consider for anyone making a wager.

This summer, there’s a great solution to put more money back in your bankroll. DRF Bets is giving players a chance to bet 10 tracks – including Del Mar and Saratoga -- at an attractive 10 percent takeout rate in the win and place pools. It’s called “10 for 10” and will be available to all new DRF Bets customers.

Let’s review how takeout works. In pari-mutuel wagering, players bet amongst themselves. There is no wagering against the house, as in a casino or with a bookmaker. Instead, the “house” simply takes a cut of every dollar wagered. This means the house – in this case the tracks and other bet-takers (ADWs, OTBs etc.) -- win no matter which horse wins. The lower the takeout, the more money that goes back into bettors’ pockets.

Mike Maloney, a professional horseplayer with a book coming out later this year called “Betting With an Edge,” explains why takeout is so important to players:

“[High takeout rates] have a significantly negative impact on any customer’s bankroll, whether he understands what’s happening or not,” Maloney writes. “Bettors bring a certain amount to the track. If that amount can take a player through the entire day, even if he loses, he’s had a much better entertainment experience than if he’s lost his money after the seventh race.

An old industry saw goes something like this: “Takeout only matters if you’re an overall winning player.” Maloney tackles this one as well.

“After a day of wagering, the impact of high takeout can easily turn a winning day into a losing one because most players are making several bets each race. The churn effect magnifies the takeout raise.”

Let’s pause for a moment on the concept of churn -- the amount a player can turn over his or her starting bankroll in a gambling game.

If the takeout is 20 percent and $100,000 total is bet race one, the track returns $80,000 to players who’ve hit the race. Let’s assume that $80,000 will be bet again by players in the second race. After that race, $64,000 (take 20 percent from the $80,000) will be returned. After just five races the players’ collective balance is just over $30,000. The players are on their way to busting out.

Now let’s look at a takeout rate of 10 percent. The $100,000 bet in the first race becomes $90,000 afterward. After race two, it stands at $81,000. At this rate, after five races the players’ balance is almost $60,000, still relatively high. In all, this player is able to wager on at least twice as many races as in the first example. The lower takeout leads to more churn, a better chance to win, and a more fun entertainment experience overall.

When lower takeouts are put in place, the economic impact is significant and immediate. Lower takeout means more money in circulation, more churn, and more revenue for everyone -- players, tracks and horsemen.

The logistics of instituting takeout change are difficult to implement, but with DRF Bets’ “10 for 10” promotion, players can enjoy more chances to win and put more money back in their pockets.

More details can be found here.