This post is an adaptation of my April 2007 Harness Eye column, discussing churn. Churn refers to the continued effect of takeout on the wagering dollar. For the track, which gets a flat percentage of every wager, it is important that the number of dollars wagered be maximized. If I come to the track with $100 in my pocket and I cash a few tickets, I can wager far more than $100 over the course of the night. With takeout typically around 20% on win-place show wagers and higher on exotics, it doesn’t take long for a bankroll to diminish. If $100,000 is bet on the first race of the night; $80,000 is returned to the bettors. If that entire $80K is wagered on the 2nd, $64,000 goes back to patrons. After the 3rd race, only $51,200 remains if the full $64,000 is wagered. Now, I know that not everybody bets every race and, of course, additional money is brought in, but the above example illustrates the futility of betting every single race.
Takeout affects the gambler in a number of ways. In Ohio, WPS wagers have a takeout of 18% and exacta wagers are 22 ½%. Those numbers are a bit higher than many tracks. But our trifecta and superfecta wagers are also 22½% wagers, making them comparative bargains, although certainly not as good a deal as the Meadowlands 15% specials on four-horse wagers. In the $100,000 example we gave above, if we change takeout to 15% from 20%, it means an extra $11,000 is returned to the bettors by the third race. If the takeout increases to 25%, the amount returned to bettors has dropped to $42,187!!
Unfortunately, racetrack operators (and more importantly race commissions) often don’t understand the importance of this. While they make more money per dollar with higher takeout, there are less dollars available to be wagered, often resulting in net wagering decreases, and, obviously, less income to the track and horsemen. Many years ago, I wrote an article in HoofBeats called “Not all Takeout Eggrolls are Alike.” It had lots of charts and graphs and boring analysis like the previous paragraphs, but it did include some great information from Maury Wolff. Maury is often introduced as a “racing economist,” but the fact is that he is a “whale,” one of the very few huge players who is looking for a way not just to pick winners, but to negate the “house advantage,” that takeout provides. In the days before rebate shops (the most obvious way to reduce effective takeout) he did numerous computations and projections that basically showed the ideal takeout rate was around 12-13%. This was the price-point where the advantage of lower takeout and the profit margin of the tracks intersected. Obviously, 0% takeout would maximize wagering and 100% takeout would maximize racetrack profit. But, I doubt many of us would be betting if we knew we were going to lose 100% of our money with every wager. And save the comments about how betting my picks has the same effect. I’ve heard it before, smarty-pants. Few tracks would offer wagering if they weren’t making something, so a “happy medium” must be reached. I hope that all makes sense.
So how do we minimize the house advantage? Perhaps we go to a “rebate shop,” a website or facility that pays us back based on our volume of wagering, without regard to whether we win or lose. The simple fact is that, while these facilities provide a clear and easy way to lessen the effects of takeout, but while doing so, they cannibalize the sport. They are like a tapeworm, slowly eating away at the host. But, the tracks themselves invited their business model when they were too short-sighted (or perhaps just not business-savy enough) to understand that the pricing model they developed with the advent of full-card simulcasting was not sustainable. The tracks prostituted themselves to expand their market for marginal income, giving the bulk of income to the guest track and opening up the possibility of these companies to thrive. I do not like the rebaters, but they are here to stay, whether we like it or not.
If wagering on track, use a player’s card. This is a smaller version of the rebate shop model, sponsored by the track. (for instance, Northfield’s card returns between ½-3% depending on volume. Now I know what you are saying. Giss, how can you endorse the track’s player rewards system while damning the rebaters? I’m not. The difference is that the racetrack is actually providing a product and it should have the right to determine the price of its product. In other words, if the originator of the product wants to reduce its price through an affinity program, I am fine with that. Of course, I also believe the tracks, NOT THE STATE RACING COMMISSIONS, should have the right to set their own takeout, too. Not that it’s likely that will happen anytime soon. But, if we can get back even 1% through a rewards card, it helps offset the money-grabbers at the racing commission who think they can constantly sneak takeout increases past us, the customer.
Next, we look at multi-race wagers instead of parlays, where we pay just one takeout (even if it is slightly higher than a straight win bet). The net takeout on a win parlay at 20% is actually 36%, because you have made two wagers. That makes the 21% (or even 25-26%) we pay in a double a bargain. If we can find a multi-race wager (or even superfecta, like at The Meadows) with a carryover or seeded pool, even better. Pick Fours are easily playable without huge bankrolls, and with a carryover or guaranteed minimum pool, you get the effect of reduced takeout. Actually, at the smaller tracks, you may get the effect of a negative takeout. The track will pay out more than 100% of the money wagered. Anybody should be able to that math! The same is true with pick sixes, but they are not as easily accessible or hittable, due to the large number of possible combinations. Unless sharing a ticket with friends, pick sixes are not readily playable for the average bettor.
We also want to make sure we know the takeout we are dealing with. I am a not a superfecta player, but when the Meadowlands is offering a super with a 15% takeout, as opposed to nearly twice as much for the trifecta, why wouldn’t I play the four-horse wager? Most tracks now print takeout rates in their programs. Take a good look. Some tracks will increase their takeout for special events. For instance, in the Ladbroke days, The Meadows increased takeouts across the board during Adios week! The reasoning was that so many casual players would attend, they wouldn’t notice the difference. When they started doing that, I stopped traveling there for the week. They not only lost my handle, but the Washington, PA- area economy lost four nights of motel rental and a lot of restaurant bucks from me. As I have said so many times, an educated bettor is a better bettor. You don’t have to take my word for it—or even agree with me. Do some of your own research into takeout. And then go cash.
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