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Author Topic: It Begins:HANA Blog on The Flawed Logic used by Tom Ludt to raise the DD takeout  (Read 910 times)
AndyA
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« on: August 18, 2014, 02:25:52 PM »

There are a bunch of links that won't show up so click the link to HANA Blog website where the article is posted to see them all.

The Flawed Logic behind higher takeout

http://blog.horseplayersassociation.org/2014/08/the-flawed-logic-behind-higher-takeout.html

At the July 18, 2014 CHRB Meeting, Tom Ludt, speaking as a representative of track management for Santa Anita, told the Commissioners of the CHRB that 18% takeout on doubles had resulted in a net loss to purses of almost half a million dollars.

Link to the July 18, 2014 CHRB Meeting Transcript:
http://www.chrb.ca.gov/Board/board_meeting_transcripts/transcript_14-07-18.pdf

Quote from page 83 of the transcript:
"MR. LUDT: We do listen, and I do think that's very important. And my challenge and in -- not just me, but the tracks and a TOC, in setting these things, we just -- not -- like we said, it was an experiment. The handle went up, but if you look at the net to the purses, it actually went down almost 500,000 to the net purses on daily-doubles, singling that out."

I think horseplayers everywhere deserve to understand how Ludt, as a representative of track management for Santa Anita, came up with that $500,000 number as the net loss to purses he claims resulted from 18% takeout on doubles.

HANA has obtained a spreadsheet from the CHRB which you can download here.

Believe it or not, the spreadsheet contains the following columns:

1. A column listing handle on doubles.

2. A column listing handle on doubles multiplied by 22.68%.

3. A column listing handle on doubles multiplied by 18.00%.

Incredibly, the $500,000 number given out by Ludt as the supposed net loss to purses because of 18% takeout on doubles was arrived at by subtracting handle on doubles multiplied by 18.00% from handle on doubles multiplied by 22.68%.

Incredibly, the CHRB swallowed the $500,000 number given out by Ludt hook, line, and sinker - because they approved Del Mar's application to go to 20% double takeout for their current meet.

This was the same flawed logic used by Los Al to justify their takeout increase back in 2010.

This was the same flawed logic used by the CHRB, TOC, and Track Management at Santa Anita-Golden Gate to justify SB1072 and the takeout increase that went into effect at Santa Anita, Golden Gate, Hollywood Park, and Del Mar on January 1, 2011.

This is the same flawed logic used by Churchill Downs this past April to justify their takeout increase.

The logic?

We make more money with higher takeout because our latest handle numbers multiplied by new higher takeout rates is bigger than our latest handle numbers multiplied by older lower takeout rates.

But in the real world it never works out that way.

Why not?

The logic is flawed because it fails to account for the fall off in handle caused by higher takeout rates.

Betting handle and takeout rates share an elastic relationship.

The fact is handle is created by bettors who are price sensitive. This is something that has been studied at length and is very well documented in the economic studies paid for by the thoroughbred racing industry.

We found a link to one such study on the website of the National HBPA: here.

We put a link to a second such study on the HANA website: here.

Sadly, this fact has been continually ignored by decision makers within the thoroughbred racing industry.

Fact: Los Al's on track handle was down 27% during the first six months immediately following their takeout increase in 2010.

Fact: Handle at Santa Anita, Golden Gate, Del Mar, and Hollywood Park fell almost $250 million (a quarter of a billion dollars) during the first year of their takeout increase.

Fact: Santa Anita cut one third of its staff as a direct result of the flawed logic used to justify SB1072.

Fact: On page 4 of the 2011 CHRB Annual Report then CHRB Chairman Keith Brackpool cited "the economy" as the reason for California's handle woes.

But SB1072 wasn't the only gambling bill to be passed by the California Legislature in 2010. AB142 authorized the CA Lottery to leverage higher prize payout percentage (lower takeout) to drive an increase in total dollars going to education.

Q. If the economy was so bad, how then did the CA Lottery achieve a completely different result through AB142 and lower takeout than CA Racing did with SB1072 and higher takeout?

Fact: Handle at Churchill Downs was down $49 million vs. the prior year's spring meet in the wake of their takeout increase this past April. Further, Maggi Moss reported on Twitter that Churchill will have a 20% purse cut for their upcoming September meet.

Fact: Handle at the current Del Mar meet is down approximately $30 million vs. the prior year - IN PART - because of player reaction to seeing Santa Anita Track Management use this same flawed logic to blame 18% double takeout as causing a net loss to purses of $500k.

My questions to the CHRB:

Have you not learned anything from all from this?

Can you not see how your continued belief in the flawed logic behind SB1072 is causing you to harm the very industry you are sworn to protect?

Jeff Platt

President, HANA

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honest & balanced terry
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« Reply #1 on: August 18, 2014, 03:19:26 PM »

Fact: They do not consider horse players "customers" at all, but lowlife gambling addicts who will buy anything no matter what the price, and therefore could care less what players think of takeout.
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« Reply #2 on: August 18, 2014, 03:25:24 PM »

Fact: They do not consider horse players "customers" at all, but lowlife gambling addicts who will buy anything no matter what the price, and therefore could care less what players think of takeout.

Sort of a blunt, but pretty much accurate portrayal of the tracks' view of horseplayers.  Many of the players would have a hard time defining takeout or would be aware of it unless they hit a big score.
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AndyA
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« Reply #3 on: August 18, 2014, 04:39:13 PM »

We are laying the groundwork for a boycott of Santa Anita.

Is anyone in if we do?
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« Reply #4 on: August 18, 2014, 04:57:11 PM »

We are laying the groundwork for a boycott of Santa Anita.

Is anyone in if we do?

lol.  Another boycott of a track that has no supplemental income.  How many are left now? Let's run all of them out of business.  Racinos put racing, horsemen, and horseplayers first.  Let's put the future of racing in their hands.
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honest & balanced terry
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« Reply #5 on: August 18, 2014, 06:37:41 PM »

lol.  Another boycott of a track that has no supplemental income.

You seem to be a little unclear on the concept of boycott. It should have some economic effect. A boycott of a racino track would have no effect. The money comes from slots.

Oh wait, you do have an idea on the concept of the economic impact of a boycott, because you constantly jumped into the boycott [you weren't observing] threads to bray that the CD boycott was having no economic impact on CDI. So what's the problem this time? This one will have no effect either, right? Or at least, The Great Carnac hereby predicts that if Andy DOES initiate a SA boycott, good old beobob will be along like clockwork pooh-poohing its effect. Right?

Quote
How many are left now? Let's run all of them out of business.

I guess Andy will have to put you in the "nay" column. Case closed. no beobob.
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AndyA
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« Reply #6 on: August 18, 2014, 06:44:46 PM »

You seem to be a little unclear on the concept of boycott. It should have some economic effect. A boycott of a racino track would have no effect. The money comes from slots.

Oh wait, you do have an idea on the concept of the economic impact of a boycott, because you constantly jumped into the boycott [you weren't observing] threads to bray that the CD boycott was having no economic impact on CDI. So what's the problem this time? This one will have no effect either, right? Or at least, The Great Carnac hereby predicts that if Andy DOES initiate a SA boycott, good old beobob will be along like clockwork pooh-poohing its effect. Right?

I guess Andy will have to put you in the "nay" column. Case closed. no beobob.
Is that the industry apologist and the defender of the status quo chiming in?  LOL
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« Reply #7 on: August 18, 2014, 07:24:36 PM »

You seem to be a little unclear on the concept of boycott. It should have some economic effect. A boycott of a racino track would have no effect. The money comes from slots.

Which means they could care less about racing.

Oh wait, you do have an idea on the concept of the economic impact of a boycott, because you constantly jumped into the boycott [you weren't observing] threads to bray that the CD boycott was having no economic impact on CDI. So what's the problem this time? This one will have no effect either, right? Or at least, The Great Carnac hereby predicts that if Andy DOES initiate a SA boycott, good old beobob will be along like clockwork pooh-poohing its effect. Right?

I just pointed out that the increase that brought about the CD boycott pretty much covered the amount lost from the boycott.  If they boycott SA, it will be for not setting the DD takeout at the level Andy wants, not because they have raised takeouts across the board.  A boycott probably will have a negative effect on their bottom line, because they haven't raised takeout to offset it.  I just don't see people lining up to boycott the difference of 1 or 1.5% on a daily double bet.

I guess Andy will have to put you in the "nay" column. Case closed. no beobob.

I will happily boycott anything that will help improve our sport or increase the likelihood it will survive.  I just don't think that attempting to destroy an important track like SA that is 100% dependent upon handle for its survival because you don't like where they set their DD takeout is the hill upon which we should choose to die, but that's just me.  Mark me down as a no.
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« Reply #8 on: August 18, 2014, 11:21:30 PM »

Which means they could care less about racing.

An opinion we moved into the column of "accepted wisdom" many years before you joined the forum. And exactly why boycotting them would be an utter waste of time.

Quote
I just pointed out that the increase that brought about the CD boycott pretty much covered the amount lost from the boycott.

If their goal was "break even" then they accomplished that goal. But that's not what we read when they raised the rates. They were looking forward to adding a lot of money to the purse account.

Quote
If they boycott SA, it will be for not setting the DD takeout at the level Andy wants, not because they have raised takeouts across the board.

I don't think Andy specified a reason today, did he? But I'd agree that's probably it.

Quote
A boycott probably will have a negative effect on their bottom line, because they haven't raised takeout to offset it.

A raise in takeout rates hurts the bottom line of bettors, so what's the issue?

Quote
I just don't see people lining up to boycott the difference of 1 or 1.5% on a daily double bet.

Well, then you're probably of the opinion that no one would boycott Dmr for the same reason. So no need to worry yourself about what might happen to Santa Anita.

Quote
I will happily boycott anything that will help improve our sport or increase the likelihood it will survive.  I just don't think that attempting to destroy an important track like SA that is 100% dependent upon handle for its survival because you don't like where they set their DD takeout is the hill upon which we should choose to die, but that's just me.

Who said anything about "destroy"? If the Mothers Against Idiots Totin' Guns in Public Places threatens to boycott Applebee's over its open carry policies, it's not an attempt to destroy the company, it's an attempt to get their attention and change their policy by targeting what they truly value, their pocketbook.

Quote
Mark me down as a no.

Already done in a previous post.
« Last Edit: August 18, 2014, 11:23:37 PM by honest & balanced terry » Report to moderator   Logged

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« Reply #9 on: August 19, 2014, 06:48:27 AM »

My "take" on takeout:

1) When takeout is raised all the bigger players see an increase in their rebates equal to the takeout raise.....so basically anybody playing 50k a month and up is unaffected.... so a raise it takeout really hurts the little guy who goes to the track and a takeout raise only furthers to "unlevel" the playing field between the little and big guy.....which I agree is unfair

2) Tracks cut their throats permanently when they allowed guys like the Gallo's to open up their own ADWs and bet at 3-4% when everyone else was paying 16-35%....These guys then recruited all the other whales to play with them and promised they would only hold 1-2% of their "vig"......Whales play a Pick 6 with a 25% takeout through Gallo.....Gallo pays the track 4%.....Takes 1-2% for themselves.....and "rebates" 19-20% back to the whale......That's why everyone disappeared from the tracks.....You can go to the track and bet 20k on a Saturday and maybe get a sandwich and a free program......Or you can sit home and bet 20k and get 3k back in CASH......3k or a sandwich.....hmmm let me see

I applaud anyone who takes up the gambler's cause because nobody ever does.....but these boycotts dont really affect the people betting the bulk of the money because they get rebated everything back over and above that 1 or 2% cost the ADW charges them.....It actually probably better for them because they get an extra 2% back on their handle instead of getting an extra 2% back on a payoff
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SHOWTIME!!!
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« Reply #10 on: August 19, 2014, 09:28:57 AM »

Here's the definition of Optimal Takeout:

The PRICE POINT that drives total wagering handle upward to where total LONG TERM REVENUE becomes MAXIMIZED for TRACKS, HORSEMEN, and
Governments.
=======================================
This was sent to my email list:

Does anyone see anything in OUR definition of optimal takeout that mentions HANA or Me or Gamblers?

There is only one definition of optimal takeout and by the way it cuts both ways.  If it is proven that takeout on a particular wager is too low after a "PROPER" optimal takeout experiment is done then WE ARE FOR RAISING TAKEOUT.

What was done by Santa Anita didn't cost me or HANA money it cost everyone who directly or indirectly gets money from the takeout a lot of money.  And the best part is that they used 6th grade level statistical analysis to do it.


In the real world (not the bizarre world of Horse Racing) anyone would be demoted or fired for what was done by Santa Anita.  But in the bizarre world of Horse Racing people and groups that depend on funding from takeout, and purse revenue, and track commissions don't even check the information and take Santa Anita's word for it.  Did anyone at the CHRB or anyone at the TOC study the numbers of the alleged "experiment" to make sure that it was done honestly and competently? I don't think so.  Why not?  And by the way if you're running a proper experiment with one wager to find optimal takeout you set it up so you can compare apples to apples from the prior year's comparative days. Not rolling the 18% takeout Daily Doubles from the beginning was a huge blunder and it's not like they weren't warned that they were making a big mistake.
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« Reply #11 on: August 19, 2014, 09:45:19 AM »

He did make the statement "the handle went up", and should have used last year's DD handle and the revenue from it as the comparison.

I don't think the CHRB commissioners are really so dumb as to not catch that, but I do think they just don't care about any impact on players (despite whatever bones they might have thrown you) and will always put the wishes of tracks and horsemen first. Those are their licensees.

If you boycott all Santa Anita wagering they will just blame the economy, or the weather, or the horse population, or little green men from Mars, or whatever. If you could really damage that DD pool, though, in isolation from other wagers, that would better illuminate your point I would think.
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« Reply #12 on: August 19, 2014, 09:52:00 AM »

In a shortsighted World the optimal thing to do when revenue falls is to take more of a cut from the gamblers.....its only natural thinking......the problem is the more you cut from the gamblers pie the less churn he will have and the people making these decisions are bean counters not gamblers so they dont even understand that concept.....It is very difficult to tell if a lowering or a raising of takeout helps or hurts overall revenue.....It clearly raises handle but does it raise revenues.....If it was a closed shop and every track had the same rates across the board and then dropped or raised them you could tell.....but when people are playing 60 tracks on a Saturday with takeouts varying from 14.5 to 35% the effect of one track raising the takeout of one bet type really cant be evaluated from a track owners standpoint....for the gambler obviously any increase in takeout is pretty much a bad thing
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SHOWTIME!!!
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« Reply #13 on: August 19, 2014, 10:07:53 AM »

The key is to maximize LONG TERM not short term revenue. 
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« Reply #14 on: August 19, 2014, 10:08:24 AM »

Even high takeout crapholes like the Pa tracks get some handle, so you really can't blame the track owners and horsemen for believing bettors will buy anything no matter how odious the takeout.  
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« Reply #15 on: August 19, 2014, 01:34:57 PM »

I applaud anyone who takes up the gambler's cause because nobody ever does.....but these boycotts dont really affect the people betting the bulk of the money because they get rebated everything back over and above that 1 or 2% cost the ADW charges them.....It actually probably better for them because they get an extra 2% back on their handle instead of getting an extra 2% back on a payoff

It sounds like this wasn't enough for the ADW guys because they are now also manipulating the odds. This occurred with a race at Thistledown on Sunday:

"It turns out, according to William Crawford, executive director of the Ohio State Racing Commission, that someone put $20,000 on the race ($4,000 on each of the other five starters) betting through an advance deposit wagering service affiliated with the North Dakota-licensed Lien Games.
 
(Editor’s Note: The original version of this article incorrectly identified the source of wagers as coming through the Greyhound Channel advance deposit wagering service. The bets were made via an ADW affiliated with North Dakota-licensed Lien Games. Greyhound Channel and Lien Games are not affiliated with each other in any way.)
 
If the people involved in the odds manipulation made a $10,000 bet with bookmakers on Missjeanlouis, it would return $41,000 at track odds. In that scenario, it would mean an $11,000 profit from the amount wagered ($20,000 through the pools on the five non-winners and $10,000 on the winner through bookmakers). It’s possible more than $10,000 would have been bet through various bookmakers and offshore operations so the profit could have been considerably more than $11,000.
 
If $30,000 had been bet to win on Missjeanlouise through the pari-mutuel pools, the profit would have been five cents on the dollar, or a total of $1,500."

http://www.paulickreport.com/news/ray-s-paddock/pool-manipulation-suspicious-betting-spotted-in-thistledown-race/
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« Reply #16 on: August 19, 2014, 06:12:52 PM »

CHRIMS Handle breakdown by from Cal Racing.com

TOTAL HANDLE
--------------------------------------------
2014 [24 Days / 215 races] = $232,656,632
2013 [25 Days / 218 races] = $263,281,715
------------------------------------------------------------------
DOWN - $30,625,083
=============================
=============================
ON - TRACK HANDLE
-----------------------------------------------
2014 = $46,393,947
2013 = $52,214,561
---------------------------------------
DOWN - $5,820,614
=======================
========================
BRICK / MORTAR [CA Satellites]
---------------------------------------------------------
2014 = $33,207,450
2013 = $37,423,515
-------------------------------------------------
DOWN - $4,216,065
===========================
=============================
ADW -CA
---------------------------------------------
2014 = $26,263,700
2013 = $28,333,988
-------------------------------------------
DOWN - $2,071,288
======================
=======================
OUT of STATE
--------------------------------------------
2014 = $126,791,535
2013 = $145,309,652
-----------------------------------
DOWN - $18,518,117
=======================
========================
DMR MEET - 2014 LOSS HANDLE
------------------------------------------------------
OUT of STATE = 60.4%
ON-TRACK = 19%
Brick/Mortar = 13.8%
ADW-CA = 6.8%
-----------------------------------------------------------------------------------------
100% ......OUT of STATE = 60.4% // IN STATE [CA] = 39.6%
====================================================
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AndyA
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« Reply #17 on: August 19, 2014, 09:15:21 PM »

This in from my email list from Steve Davidowitz reply to all on the list.

Just a quick personal note from me (Steve Davidowitz) to thank many of you on this list who sent along so many "get well" messages over the past month.
 
Had Spinal chord surgery July 28 and just got home a few days ago with some residual pain still lingering accompanied by day by day improvements in my legs and back.
 
While preparing for my next series of columns in different forums, 'been watching the goings-on in the sport, especially Del Mar and Saratoga via my laptop. . .Frankly, the Del Mar season could not have gotten off to a worse start with the numerous fatalities  and weird race results attributable I think to racing surface issues and to the seemingly unwarranted higher DD takeouts implemented with weak statistical info.
 
Suggestion:
Would think that DMR (and SA to follow in the fall) could do something positive for its loyal fans by quickly reverting to the 18 percent DD takeouts (and rolling DD's) during the final portion of the summer-fall season.
It's never too late to do the right thing.
 
Anyway, Thanks again to all the people in this game who care about it as well as caring for people in it.
Kindest Regards/SteveD. 
 
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« Reply #18 on: August 19, 2014, 09:43:42 PM »

Click the link to see the charts!

HANA Blog:  Daily Double Gate Part 2

http://blog.horseplayersassociation.org/

Yesterday we exposed the flawed logic used by track management, horsemen, and state regulators to justify takeout increases at Los Al, Santa Anita, Golden Gate, Hollywood, Del Mar, and Churchill Downs.

In case you missed it, the logic goes something like this:

"We make more money with higher takeout because last year's handle numbers multiplied by this year's higher takeout rates is bigger than last year's handle numbers multiplied by last year's lower takeout rates."

But in the real world it never works out that way.

Why not?

The logic is flawed because it fails to account for the fall off in handle caused by higher takeout rates.

In California, this same flawed logic has been used by track management, horsemen, and the CHRB to lobby the Legislature and Governor’s Office for changes in state law. (SB1072 is one example of this.)

Yesterday we also pointed out that takeout increases based on this flawed logic have not helped racing as their proponents had suggested – but have had the opposite effect.

Instead of bigger field sizes, more betting handle, and more purse money being paid out as promised: The real result has been a worsening of an already falling handle trend, fewer dates, fewer races, less purse money paid out, cutbacks in hours worked, and lost jobs for workers.

We also pointed out that California’s handle woes in 2011 were not caused by the economy. During the same fiscal time period that California racing handle was falling off a cliff because of SB1072 – the California Lottery was generating record dollars going to Education because of AB142 and its higher prize payout  (lower takeout) provision.

For those of you who might not know, racing is facing a crisis in the form of a downward handle trend. According to The Jockey Club website North American handle peaked in 2003 and has fallen sharply since.

We at HANA can’t emphasize strongly enough how critically important it is that decisions about changes in takeout rates not be based on logic that is flawed.

To that end, we prepared a spreadsheet that can be downloaded: here.

The spreadsheet contains a look at Santa Anita Double Pools. There are six tabs going across the bottom.  The right-most tab is labeled DD SUMMARY.

The above image shows the first section of the DD Summary tab. Here we are presenting a year over year comparison of handle numbers for double pools in isolation for the first Santa Anita meet that was run this year vs. the Santa Anita meet that was run at this same time last year. As indicated on row 4, this year's meet began on Dec 26, 2013 and ran through Apr 20, 2014.

For this meet, Tom Ludt of Santa Anita fought for, and obtained permission to implement 18% Takeout Doubles on an experimental basis from higher ups at Magna, the TOC Board, and the CHRB. For that Ludt is to be applauded.

However, Santa Anita was not allowed to offer Rolling Doubles at 18% takeout. I am unclear as to the exact reasons why but instead of rolling doubles they were allowed to offer three doubles only each race day.

Thus, the wide differential in doubles offered: 545 last year vs. just 207 this year.

This accounts for the wide differential in double handle: $20.55 Million last year vs. $13.98 Million this year.

Despite being handcuffed, Ludt's reduced takeout double experiment did show some promise. Average double handle per race rose 79.16 percent.

----------------------------------------------------

Before diving into the numbers on the second section of the DD Summary Tab, for benefit of those interested in examining the numbers closely, I should disclose that last year's Hollywood Park meet began on Thurs Apr 25, 2013. However, there was no live racing at Santa Anita on the same calendar Thursday this year. Also, Hollywood Park conducted live racing last year on Thurs May 16, 2013 and Thurs May 30, 2013. There was no live racing at Santa Anita on either of the same calendar Thursdays this year.

In an attempt to achieve as close to a like date (apples to apples) comparison as possible, handle numbers for Thurs Apr 25 2013, Thurs May 16 2013, and Thurs May 30 2013 are purposely not included in the analysis presented in our spreadsheet.

Also, before diving into the numbers, it is important that I point out we are comparing handle numbers from Santa Anita against handle number from Hollywood Park and that Santa Anita traditionally out-handles Hollywood Park. For that reason, it is important that we establish a benchmark.

The above image is a screenshot taken of the lower right hand corner of the Side by Side tab on our spreadsheet. It shows that Santa Anita outhandled the Hollywood meet we are comparing to by about 17%. (17% is our benchmark.)

With that out of the way, let's dive into the numbers on the second section of the DD Summary Tab:

The above image shows the second section of the DD Summary tab. Here we are presenting a year over year comparison of handle numbers for double pools in isolation for the second Santa Anita meet that was run this year vs. the Hollywood Park meet that was run at this same time last year. As indicated on row 10, this year's (second) Santa Anita meet began on Apr 25, 2014 and concluded on Jun 29, 2014. As indicated on row 9, Hollywood Park ran at this same time last year.

Unlike the first Santa Anita meet that was run this year, Ludt fought for and was able to win permission to offer rolling doubles at 18% takeout for this Santa Anita meet - albeit on an experimental basis.

The result?

Double handle rose about 24 percent.

Keep in mind that this is after a lot of players became turned off because top decision makers had refused to allow Rolling Doubles to be offered at 18% takeout the previous meet.

Also keep in mind that at 24 percent, the growth rate in Double handle was more than 1.4 times the growth rate in overall handle for the meet. (1.41 = 24 / 17 our benchmark number.)

Clearly the 18% Takeout Double Experiment was showing some promise.

Clearly the decision to not allow Rolling Doubles for the first Santa Anita meet was a mistake.

Clearly the differential in cost to net purses was nowhere close to $500k because of the differential in takeout rate as claimed on page 83 of the July, 2014 CHRB Meeting Transcript and quoted in our write up from yesterday.

Frankly, if Santa Anita were my racetrack - and my management team had shown me that they had raised double handle by 24% (or more than 1.4 X my handle growth rate in general) once they had been allowed to offer Rolling Doubles at a reduced takeout rate:

My decision would have been to continue the Experiment!

Jeff Platt
President, HANA

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« Reply #19 on: August 20, 2014, 02:07:31 PM »

i wonder why all the hana horseplayers have not teamed up and bought a track or adw to run the way they advise others to do ?
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« Reply #20 on: August 20, 2014, 06:15:04 PM »

Pull The Pocket:  Analyzing Industry Decisions, Properly

http://pullthepocket.blogspot.com/2014/08/analyzing-industry-decisions-properly.html

Excerpt:

Horseplayers are generally pretty bright. To have a modicum of success you have to analyze hundreds if not thousands of factors, put those factors into an overall odds line and pull the trigger. Even when you do that, then you have to structure tickets properly. It's like analyzing a business case.

Jeff Platt is a pretty smart horseplayer, and analyzes data better than most.

In a two part series on the HANA blog, he looked at the thinking behind the daily double takeout changes in California. As most know, they changed the double takeout from last year to this, dropping it about 4%. They also, for some reason unbeknownst to anyone I have spoken to, eliminated the rolling doubles, only offering three per day.

So, when analyzing the above, you have to take into account variables like the overall handle change, daily double handle changes, and the lost number of daily doubles. Some standardization is in order.

At the CHRB meeting last month, as Jeff spoke of in part one, this was not done. Overall double handles were looked at without looking at any other variable. Clearly handle would be down, because only 207 doubles were offered, from 545 during the apples to apples period but they did not take this into account. Politics? Probably. If McDonald's dropped the price of Big Mac's by 10 cents, closed 62% of their stores and saw (the only obvious result with that many store closings) gross Big Mac sales go down they would never say the 10 cent drop was a bad idea.  But Cali racing did.
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AndyA
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« Reply #21 on: August 21, 2014, 05:33:38 AM »

Will we hear anything from the CHRB on Daily Double Gate at tomorrow’s meeting?

We’ll all be listening at 9:30 AM tomorrow

Here’s the link to listen live or to listen to the audio of the archived meetings.    http://www.selectstreaming.com/live/chrb/audio.php
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HarnessFanDE
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« Reply #22 on: August 21, 2014, 08:24:37 AM »

i wonder why all the hana horseplayers have not teamed up and bought a track or adw to run the way they advise others to do ?

Many of the whales have.....and it was the beginning of the end for race tracks
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SHOWTIME!!!
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« Reply #23 on: August 21, 2014, 08:25:34 AM »

i wonder why all the hana horseplayers have not teamed up and bought a track or adw to run the way they advise others to do ?

My exact thought.  
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« Reply #24 on: August 21, 2014, 08:43:30 AM »

Do you two see anything in our definition of optimal takeout that mentions me, HANA, or Whales/Gamblers?

Do you see any mathematical errors in the Daily Double handle analysis that was done on the HANA Blog?

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« Reply #25 on: August 21, 2014, 10:19:03 AM »

Do you two see anything in our definition of optimal takeout that mentions me, HANA, or Whales/Gamblers?

Do you see any mathematical errors in the Daily Double handle analysis that was done on the HANA Blog?

No one can argue your logic or facts but, as TM points out, it is all theory and doesn't take into consideration current realities.  If this were 1975 and every penny wagered went through the track you'd be spot on, but it's not.  I'm sure that HANA has access to the % of money wagered that flows through ADWs, and how much of that money is rebated. 

Maybe I have this all wrong, but the people who bet the most $$ get the highest % rebated, and they get that on what they bet, not what they win.  So takeout doesn't have the same effect on ADW bettors, especially the ones betting big.  When CD raised their takeout, ADWs had even more money they could rebate.  So the whales probably made out better.  Whatever they lost in smaller winnings was more than made up for with increased rebates on gross wagers.  That's one of the reasons I was so sceptical of the boycott results.  Had CD offered anything worth betting on, the whales had every incentive to play and play big.  But if half or more of the races in a day had 5-7 runners, there weren't enough combinations to pump up the volume.

Terry's right that any increase or decrease in takeout % does nothing to disrupt the % that goes to taxes, purse, tracks, and ADWs.  However every additional dollar the ADWs get is a dollar more they can rebate, and any decrease in takeout decreases money available to rebate.  If I'm a whale and I have a choice between an extra point or 2 on my winnings or an extra point or 2 on my total wagers, that's a nobrainer.
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« Reply #26 on: August 22, 2014, 07:56:17 AM »

I come on about 5 minutes into segment A.  Haven't spoken publicly in a while so my delivery was shaky.  The fun begins after with questions from the CHRB Board.

Click the link for  a
August 21st Segment A

http://www.selectstreaming.com/live/chrb/archives.php

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« Reply #27 on: August 22, 2014, 11:39:13 AM »

http://pullthepocket.blogspot.com/2014/08/chrb-meeting-if-you-cant-ask-proper.html

Excerpt:

As most know, I have long given up on California Racing steering themselves out of the abyss, and don't pay much attention anymore, but I got an email with a link to yesterday's meeting. And I listened.

"Racetrackandy" on twitter - not employed by the industry, but a guy who probably works harder for it than a lot of people who are paid by it - drove up to make a public comment, as is customary at CHRB meetings. His comment - well thought out - regarded takeout rates in California, their changes, and the analysis of them.

It was an academically sound question and comment: 'There is a proper takeout rate for wagers in California that increases purses and increases payouts to customers to encourage more betting, both short-term, but particularly the long-term. Can California racing move toward this number, professionally and academically, rather than specious, arbitrary changes that no one can learn a thing from?'

The response, and question, from CHRB member Madeline Auerbach shows how far racing needs to go to change its preconceived notion of what gambling and takeout is, and how to begin to move the sport forward.Paraphrasing, she said "How can you guarantee these takeout changes will not hurt the people who invest in horse racing."

The thinking is: We now have "$X" because takeout is "set". We may have less than $X if we adjust off this "set" number.

That question is misguided (the easy answer to that is, "with real handles off 50%, purses down, racedates down, foal crops down, the threat of online poker from Indian casino's up, and everything else, how can you afford to not find optimal takeout rates."), but it's much more than that.

Racing has clung to a takeout number that has never been set by the gambling market. It's guaranteed to be wrong. I'll type that again: The current pricing structure in California (and elsewhere) is 100%, bet all you got, Secretariat in the Belmont, never a doubt, no question, unequivocally, wrong.

Neighborhood bookies are not charities; they did not come up with 5 cent or 10 cent lines because someone told them to. Slot machines, long in Vegas priced at terrible 15-25% takeout rates in the 1960's and 1970's, did not come down to their present 2%-7% levels because a politician told them to set them there. Poker, long played in more than spaghetti westerns over the years, does not rake 4% out of a pot because someone liked Bobby Orr's number.

Those rates were all set by markets.

Racing's current takeout structure was not created from analysis, trial and error, the market, or anything else. They were set in 1907, and changed based on whims. As a monopoly, this could be done. Cash strapped governments who haven't liked a program they did not want to fund, needed more and more money; racing happily went along for the ride. Even though this price setting did not work and never really has (read up on the handle and revenue changes in the 1940's to see evidence of that), at least racing had a monopoly, where some sort of average cost, rather than marginal cost pricing could allow it to get by.

That all changed in the 1970's, 1980's and then through the massive disruption of the Internet beginning in about 2000.

Ms. Auerbach is asking a question that has no basis in reality, in terms of academically and fiscally sound pricing policy. She's asking to protect a takeout rate that has never been set by the market. She's protecting a phantom number.

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