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Author Topic: It Begins:HANA Blog on The Flawed Logic used by Tom Ludt to raise the DD takeout  (Read 1226 times)
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Posts: 2601

« 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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Posts: 497

« 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

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Posts: 497

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


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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