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Reduced takeout is good news for everybody

7/1/2001

There has been plenty of good news this year for thoroughbred racing.
Television ratings for the Triple Crown races went through the roof with the
switch to NBC. Point Given's dominance in the Belmont suggests racing will
have a legitimate superstar on its hands for the foreseeable future. The NTRA
weathered some rocky moments, rejoined forces with several keys tracks and
seems poised to fulfill its primary missions. But it is an under-publicized
decision by the New York Racing Association and its fan-friendly chairman of
the board Barry K. Schwartz that should prove to be the best news in decades
for not only just horseplayers but the entire industry.

A bill sits on the desk of New York Governor George Pataki that should be
signed any minute now. The brainchild of Schwartz, it will enact significant
reductions in the takeout rates on wagers made at the NYRA tracks.
The bill reduces the takeout from 15 % to 14% on straight bets (win,
place and show), from 20% to 17.5 % on multiple bets (exactas, doubles,
quinellas) and from 25% to 20% on the Pick Six on non-carryover days. The
most important change will occur with the exactas and doubles, which
generally account for about 60% of total wagering. The same exacta that used
to pay $40 will pay $41.20. And while that may not seem like a huge
difference, the long-term affect will be substantial, improving the financial
well-being of both the NYRA tracks and NYRA horseplayers.

Multiply that same $1.20 difference by five for a $10 exacta bettor.
Multiply it a couple more times for every decent-priced exacta the player
will hit on a given day. Multiply it 100 times or so for the 100 trips a year
the player takes to the racetrack. Before you know it, even the small to
medium-sized player has a couple thousand more dollars in his pocket, money
that he is putting right back through the windows in increased wagering
activity. According to racing economist Maury Wolff, the rule of thumb is
that for every 1 % you decrease the takeout, handle will eventually increase
by 7 %.

"I applaud this to death," said Wolf, one of the nation's foremost
experts on takeout issues. "There are going to be two effects. One is the
churn, whereby people will have more money in their pockets and will
therefore be betting more. The other is a goodwill effect. People are going
to have a better feeling about racing because they won't be losing as much
money."

To experts like Wolff and most savvy horseplayers, lowering takeout is a
no-brainer. Every credible survey on the issues shows that over time a lower
takeout will result in significant increases in betting handle. When it's all
said and done, the tracks will be getting a slightly smaller slice of a much
bigger pie and will improve the bottom line. They benefit and so do
horseplayers.

Yet, surprisingly few racetrack executives see it that way. The trend for
the last few decades has been to raise the takeout because that brings in an
infusion of revenue in the short term. The Maryland tracks did just that
recently and even the NYRA was guilty of this philosophy when it raised the
takeout on exactas, daily doubles and quinellas in 1995 from 17 to 20 percent.
But in Schwartz, NYRA has an executive who, quite simply, gets it. A
horseplayer himself, he knows that excessively high takeouts have made
winning money at the track close to an impossibility. Customers with empty
pockets and empty bank accounts are not going to keep coming back forever.
Winning money at the NYRA tracks might still be hard to do, but it will the
player will now be getting a much fairer shake.

Wolff thinks NYRA's handle may eventually go up 10 to 15 % due to the
takeout reduction. But could it be even more?

When takeouts were raised or lowered 10 years ago, the main people they
impacted were the fans who showed up at the tracks and had nothing else to
bet on but the races being run in front of them. Eighty-two percent of all
dollars wagered on New York racing are bet off-track, most of them coming in
from simulcast bettors who can choose from among dozens of tracks. It won't
take off-track players long to figure out they're getting the best bang for
their buck when they bet on New York races. The betting handle on NYRA races
should go up at the expense of tracks charging higher takeouts. Might other
tracks have to cut their rates or else risk losing their customers to tracks
like NYRA? For horseplayers, that is an exciting possibility.

"You're seeing a much different attitude among racetracks these days,"
Wolff said. "Tracks are actually hyping the fact that they might have a
bargain takeout on certain bets. Maryland has done that with its Pick 4 with
its 14% takeout. Tracks are talking about prices and hyping them. Everyone is
more price conscious. Tracks are starting to realize that price matters, just
like it does with an airline ticket."

Impressive TV rating and star horses are great, but it is gambling that
drives this business and the fans' dollars that generate the millions in
revenue taken in by the tracks. The fans have to be taken care of and the
best way to do that is to put as much money in their pockets as possible. In
the end, everyone should win. This is something that Barry K. Schwartz
understands. Let's hope he's started something.