A Second Take on Takeouts

There has been a lot of chatter recently about track takeout. The knee-jerk response is that the takeout is too high, and as a result, the two-dollar bettor is slowly going broke or leaving the game while the big bettors are wagering through rebate shops getting as much as 7% on every dollar wagered. But what many horseplayers fail to appreciate is that tracks get a relatively small portion of the takeout. For example, in California about 73% of the takeout is out of the track’s control.

Some suggest that reducing this tax on the bettor not only keeps more players in the game through increasing the churn, but also attracts new players, which in turn increases wagering pools and as the saying goes: you’ll make it up in volume. Well, let’s suppose a track has a handle of $1M per day with a takeout of 20%. Then the takeout is $200K per day. Now suppose the takeout was reduced to 10%, then the track would have to handle $2M per day to maintain its takeout. If this is the only track with a 10% takeout, then it may attract enough bettors from other tracks, but if this move is successful, then more tracks will follow suit. And once enough tracks had done so, where will the extra revenue come from? Bettors are not going to start doubling down, and slot players in the racinos will not be racing to the windows. And don’t count on the big money players. The rebate shops are not going to give up their best customers without a fight. And also there’s the unintended consequence of limiting wagers from off-site locations. This is what happened in 2007 when Ellis Park had a 4% takeout for the Pick 4. Sportsbooks in Vegas weren’t accepting bets because the 3% fee they were required to pay to carry the signal left only a 1% margin to cover their cost.

The argument of lower takeout is a straw man; if takeout was such an overpowering factor in the mind of horseplayers, then why do exotic wagers account for roughly 70%of all monies wagered on horse racing. The takeout for WPS is normally 17% - 18%, while the takeout for exotic wagers are mostly 25% or higher. Smart players will tell you that’s because there’s more value to be found in these wagers. And why is there more value, because the overwhelming majority of players in these pools are just looking for a big score – to heck with takeout.

In the end, the great takeout debate is less about keeping the two-dollar player at the track and more about the big bettors getting just a little more edge on the game. If you’re a player pushing a half-million dollars through the windows per year, then just a 2% reduction in the takeout puts another $10,000.00 in your pocket. As tracks do a better job catering to their high-end customers with their own version of rebates and incentives, you will hear less about high takeout. After all, it’s cold hard cash that wins the hearts and minds of horseplayers.