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Tuesday, August 24, 2010

A Little Tea In My HANA Please

I stumbled upon a very interesting segment on TVG on Sunday. I really turned it on for the 5th at Del Mar, but instead of pre-race coverage, Todd Schrupp was discussing Assembly Bill 2414, a measure introduced in the California Assembly which would raise the takeout on exotic wagers (2% for two-horse wagers, 3% for three or more), and allow exchange wagering, though only if the various parties could agree on how to split up the revenues. The bill is, as you might imagine, strongly backed by Betfair, the UK-based betting exchange which acquired TVG last year.

So, when Schrupp introduced company CEO Stephen Burn to discuss the proposed legislation, it seemed merely like self-serving propaganda in the guise of journalism. Burn explained how the takeout increase, the revenues from which are to go 100% towards purse enrichment, would help make California more competitive. Del Mar’s president, Craig Fravel, said the bill could lead to an additional $25 million to $30 million in purses annually. [DRF] And he advocated for exchange wagering [read here for a good explanation of it if you're not familiar] as a fresh, innovative new product which will provide better value for bettors by cutting out the middleman, and attract a younger crowd.

In the past, I've criticized TVG, and Schrupp in particular, for softball interviews, and what could be softer than questioning your boss on a bill which would allow his company to expand their successful business to the US market! But then, to my surprise and to TVG's great credit, they brought on, by telephone, MI Development (MID) COO Scott Daruty. As you may know, MID is the Magna entity which now owns its tracks (Santa Anita and Golden Gate in California), and they and TVG are fierce rivals and competitors in the account wagering and televised racing fields with a history of lawsuits and rancor between them. So full credit to Betfair for letting Daruty have his say. And his say was yes to the takeout increase but, citing concerns about tracks and horsemen being properly compensated and an influx of foreign and offshore companies swooping in, a firm no to the exchange wagering provision.

And Schrupp let him have his say. Stephen Burn replied that he understood Scott's concerns, but that the legislation sets no commercial terms and leaves that all up to the CHRB and the various parties to reach an agreement, the lack of which would simply mean that exchange wagering would not be introduced. Daruty then said that he understood Stephen's point about leaving the details for later, but that, given Magna's investment in the state, he felt that it's only fair to them and their employees that there be some kind of certainty that it would be worth pursuing before being approved legislatively.

Yes, it was a little bit of Faux News here; Schrupp tossed Daruty a high slider by confronting him with Frank Stronach's own words regarding the need for innovation. And TVG surely got in the last words on the matter after Daruty, who sounded genuinely grateful for the opportunity, signed off. But high marks to TVG for inviting him on.

My impressions were 1) Betfair's position on exchange wagering made sense and seemed to present no risk, while Magna was being adversarial on the matter just to be so, and 2) it was refreshing to hear two well-spoken people discuss their disagreements calmly and respectfully rather than being in a studio or on a split screen simultaneously so that they could yell over each other. Maybe the political shows should consider reverting to that format.

Then they brought on, also by telephone, HANA president Jeff Platt. This did not go particularly well. You could tell that the guy was nervous from the get go, and I found him to be alternately rambling and halting. He said that horseplayers like exchange wagering because, say, what if you have a five horse field and one horse is 4-5 and one is 7-5 and the others are 8-1, 9-1, and 11-1, then there's no possible reason to bet the race parimutuelly (huh? maybe you like the 9-1 shot?) and exchange betting presents better opportunities in those cases. To which I'd say, y'know you don't have to bet every single race and if you do, you should probably be logging on to GA instead of TVG. Then Platt was, obviously, opposed to the takeout increase because raising the takeout "never.... works.... for anyone!".......awkward silence here as Schrupp and his audience wait for him to elaborate just a little....never works for whom, for nobody? And why not? At that point, the producer probably whispered in Schrupp's ear to get rid of the guy, and that was that. It was an interview worthy of Sharron Angle.

In fact, HANA kinda reminds me a little of the Tea Party with their unwavering advocacy, and simplification, of a single issue (Small Government = Lower Takeout); as well as their ability, despite being somewhat ragged and rough around the edges, to gain mainstream exposure. I seem to see and read about HANA all over the place these days. Of course, and in my opinion, unlike the Tea Party, HANA is absolutely right in principle about their signature issue. But it's not always as simple as a bumper sticker slogan in my view. Lower takeout would not be a cure for all of racing's ills any more so than extending the Bush tax cuts for the rich will revive the economy. (Well, actually, that's wrong....let's say somewhat more so than the nonsensical idea of adding $36 billion to the deficit at this point in order to cut taxes for the wealthiest 2% of the population.) Casino games and horse racing are different animals with a completely different clientele and aesthetic; I just don't see where many slot zombies would be interested in handicapping horse races even if the takeout was lowered to 5%. Conversely, how many devoted horseplayers cross over to casino games because of the lower rates?

And, as a casual horseplayer who bets the races for fun rather than as a livelihood or obsession, I personally don't accept HANA's absolute position that lower takeout always trumps quality. I can well be willing to be price flexible if the product is worth the cost. No, I'm not interested in betting on Tioga Downs, thank you, and, though I'm aware that the takeout on certain bets in New York is certainly too high, I'll pay that price to play NYRA races over Evangeline Downs given the choice. It's a critical situation in California right now; the industry is desperate for ways to keep up with the states where the racing industries are subsidized by slots. The argument against a takeout increase is a solid one; but, in this situation, if not that, what are the alternatives?

Don't get me wrong; I surely understand that HANA represents large players to whom every percentage point makes a difference...and that, in turn, those players account for a disproportionate amount of handle. So HANA serves a crucial role in advocating for them, and are apparently doing it well. And, unlike the Tea Party, at least they don't have a lunatic fringe. I've never heard a HANA member accuse Alex Waldrop of being a Muslim or demanding to see Zenyatta's birth certificate.


o_crunk said...

I stumbled onto that same segment on Sunday afternoon after someone on twitter mentioned that TVG was turning into surreal version of Nightline for horse players (Hard hitting interviews on TVG? What no softball for Doug O'Neill?). Jeff Platt came off like an highfalutin ass, IMHO. Didn't explain his position very well when contrasted with Daruty and Burn.

As a casual player, takeout is not at the top of the list of things I'd like to see change for horse players, though it is near the top. I've had conversations with regulars and track friends about takeout and of course the dismissiveness always devolves to "so what, you still gotta win!". (strange philosophy that, why deny yourself more money when you do win?)

I'm a member of HANA, mostly because I like the idea of an association for horse players. So it was a bit stinging to hear Platt go all takeout nazi and leave betting exchanges on the table over a couple of points of rake. Nice post Allan, echos my sentiment exactly.

jk said...

My question is why are the NY tracks broke while charging some of the highest takeouts? Where is the money going? OTB went broke even with an additional 5% rake. As a customer I am getting old, rundown facilities for my money. The Cali plan gives all of the takeout increase to purses. Nothing for the bettors. I do not mind the higher rates in theory but some of it should flow back to the customers.

HANABlog said...

Hi Allan,

I am a member of HANA.

Let me say this: It is one of the reasons I like reading your blog. You seem to be fair about things, whether they be praise or criticism.

A couple of points: Takeout is a big issue, and it is gaining traction in and outside HANA. Charles Heyward on CNBC is a prime example, which shows the massive chasm in the business (California raises takeout to 'help the business', Heyward says we need to lower takeout to 'help the business'

What we have tried to do with this issue is to make it a debate. I think we have helped. Perhaps we can one day get to an optimal price point in our business. We all would like to see that in racing, as the best price point makes the most money for purses, tracks, and more horseplayers will play more.

I do take one exception to this line: "Don't get me wrong; I surely understand that HANA represents large players to whom every percentage point makes a difference...and that, in turn, those players account for a disproportionate amount of handle"

- Good point, but an explanation:

The answer is: many of the members - those who we speak with - were small players but grew their betting when they got lower takeout. A lot of these players GET LOW takeout now, because of rebate shops. They are upset that the rest of the players DO NOT get low takeout, because they have increased their volume, and watch the sport six days a week now, rather than once or twice. They want all players to enjoy what they get, and stop the inequity in the game, and perhaps grow it.

One player who emailed bet less than $30,000 a year, now he bets 1.3M with lower prices and is dedicated to our game. He wants that to go mainstream, so everyone has a chance if they want to. It's not about them.

We have spoken to, and are advised by several people in gambling economics, or whom are experts in gambling that tell us this can happen. It seems horse racing rarely listens to those people, so we think someone should.

It has been the number one issue, but there are several others. The mission statement explains those. And we have tried to work on them

- Better tote system: Players are tired of betting 5-1 shots who end up at 7-2. The NASDAQ would have an investigation if stocks were open after the bell for anyone, even once. They would fix their system. If it happens in racing, the answer we get from them is "it does not happen every often, so not that big of a problem"

- Penalties in racing for breaking rules. Horseplayers and everyone do not like the way things are reported and how jurisdictions are a mess. We worked directly with Waterman and his crew, and have been a part of launching a database of penalities (with explanations) about the infraction. It's up on their site now.

- We try and work with technology. The equibase scratches and changes page is a good one, that can be used on mobile phones and fed via RSS. One small step, but a good one I believe. Accurate scratches and changes or off turf at a simo centre is a good thing for our sport.

There are many other issues we work on, but it is volunteer, we have only a few people who are taking the time at working on them, and we can not get to everything players are excited about tackling at this time.

As for Jeff's appearance: His words are 'gosh I did awful'. He looked at this post and emailed me that 'they are so right'!

We have to get better at these things. Daruty and those guys have done this 100 times. This was Jeff's second time. While they are fixing racing and making policy, Jeff is playing the 4th at Saratoga. He's a guy who writes software and plays the horses.

Mike Maloney was also on TVG this year - so nervous.

Anyway, we are all trying. I wish things went as smoothly as we draw them up. Come to think of it, I wish my handicapping worked like I drew it up too :)

If you got this far, thanks for reading!


Anonymous said...

The 10% to 15% increase that Cali. is looking for won't help.

There are only so many people like Allan who will bet a 26% takeout.

El Angelo said...

The HANA response was great to read. Thanks, whoever you are.

Unknown said...

One of the better written articles I've read in a while. Great job.

Alan Mann said...

>>The HANA response was great to read. Thanks, whoever you are.

Agreed, thanks for taking the time. And believe me, I don't blame Jeff at all for having been nervous!

Anonymous said...

Alan, you imply that tracks with slots give you a better break with takeout. Evangeline gives you nothing. WPS Bel/16% Ev/17%, Exacta Bel/18.5% Ev/20.5%,Double Bel 18.5% Ev/25%, Pk6 Bel/21% Ev/25%. Tri's, Supers, Pick 3's and 4's are a little lower.

When NY gets their slot money the betting pools won't matter so I don't expect any takeout cuts to grow the racing end of the business.


Anonymous said...

Why didn't they get Fred Pope on the phone? That surely would have been entertaining!

Steve Zorn said...

Even with slots in NY, handle will matter, a lot. Estimated slots revenue will provide about $13,000 a race in purse money. Where's the rest of the purse going to come from?

Charlie's and Steve Duncker's comments suggest NYRA ,ight be thinking about a takeout experiment. That would be good news for everyone. NYRA has the largest pools in the country, and would be an excellent test of the price elasticity of betting handle.

And I'd love to see a similar experiment at Monmouth, where the current model is unsustainable absent to soon-to-disappear casino subsidy.

Figless said...

Once the VLT's are running (can't believe I actually typed that!!), NYRA will be solvent (or that!!) and be able to experiment with their piece of the takeout. Charlie understands the gambler and fully believes lower takeout equals higher handle.

But there is no way the state is going to experiment with them, and I pray the horsemen do not cut their purse allotment, so they will be taking the risk alone.

Agree this is one of the best blog entries I have read, including comments, excellent job by all.

I wish HANA well, your heart appears to be in the right place and I certainly hope you succeed.

Cangamble said...

Takeout matters to everyone even if you don't have a clue about takeout.
Slot players have no clue about takeout for the most part, but slot operators know that at around a 7% take, their bottom line is maximized.

Horse racing's takeout is much higher than the optimum takeout is for horse racing (it is hard to be sure, but I would estimate it around 6-8% for WPS and 10-12% for exotics).

The more a player cashes, the more they bet, the longer they last. The longer they last, the more involved in the game they get, the less likely they are to devote time to other forms of gambling or entertainment.

The longer they last, the more likely they are to expose family and friends to their passion. Lower the takeout, and growth can occur.

Anonymous said...

i like to play horses but i no longer think i can win...the high takeout and that fact that there are so few fish in the marketplace have made me a losing player.this does include a rebate.
my wife likes to play blackjack. she plays basic strategy and will invest up yo $50 per session.while the money is small i would NEVER let her play if dealer wins ties.only a fool would play...the exotic takeout is much worse..sad

Anonymous said...

You far-left wingers are so wrapped up in your own cocoons, you don't realize that whenever you inject your fringe politics into a subject that has nothing to do with politics, you lose all credibility.

I imagine you are so out of touch, you're actually looking forward to Nov. 2.

Alan Mann said...

Dude, if you think there are any far-left opinions or fringe politics from my side being discussed here (ooo, that's really radical for me to oppose extending tax cuts for the richest 2% of the population), then you're the one that's out of touch. And I am actually rather looking forward to Nov 2, at which time the voters will either reject the far right candidates that are upsetting the ones preferred by the GOP leadership and thus thwart their glorious opportunity to take back Congress, or provide us all with some good belly laughs for the next few years.

El Angelo said...

What I do know is if I inject my politics or thoughts into anything--and I would hardly call being a Democrat in this country far left; care to check out European politics anytime soon?--I don't do it behind a cowardly wall of anonymity. Neither does the author of this blog, to his credit.

Anonymous said...

Far left, far right, you're both complete a-holes. But especially the dudes on the far right. They are plain nuts. Tea party bozos, I'm looking at you. -jp

Anonymous said...

Most Americans are not Happy.The Dems will take a Beating.

It won't be a good night for Allan and friends on Nov2nd.

Alan Mann said...

A Beating with a capital B, eh? :-/

Anonymous said...

Yes the dems will probably take a beating. Either way the economy is going to go further in the toilet, so I'm glad the republitards will maybe take the house and senate. This all has to do more with global macroeconomic realities (rise of India/China etc) than it does national policy. And the answer certainly isn't "Less Government," tea party tards. -jp

Anonymous said...

A BEATING!on November 2nd.
It's not going to be pretty.Yeaaaaaaaaaaaaaaaaaa!

Anonymous said...

Don't count your chickens before they hatch, ignorant spaz. -jp

PS: read a book.

Anonymous said...

I read a book last called

"Liberalism is a Mental Disorder" by Michael Savage I recommend It.

Democrats privately fear House prospects

It's 3-5 the Repubs. take the house.

3-1 they take the Senate,down from 6-1 two weeks ago.

El Angelo said...

Why are right wingers proud of a party that has the IQ of a chimpanzee and can't come up with anything tangible to say except b.s. that our president is born in a different country and is a muslim? It redefines No-Nothings.

Anonymous said...

I agree E.A we have to change the subject.

Anonymous said...

For those of you who aren't braindead, Jane Mayer has a good article in this week's (Aug 30) New Yorker. She reveals the true driving force behind the tea party movement. These people are incredibly wealthy, powerful, and certifiably crazy. The good thing for them is they have been able to hoodwink the vast clusters of nimrods this country has to offer. The good thing for dems is that they are driving the republican party to the extreme right and I don't think it bodes well for their longterm success.

Either way, I like Fly Down in the Travers. -jp

Indulto said...

Your observations regarding HANA were useful. I didn’t see the segment, but I’m surprised that it wasn’t Barry Meadow representing HANA to articulate the position of players who support exchanges. I haven’t seen much posted by Jeff Platt on exchanges, but he is assuredly one of the most coherent and convincing advocates of lower takeout.

If indeed a sub-par performance occurred, it should be noted that the individuals who run HANA are a very small group without the resources of BetfaIr, TVG, and MID. Whatever “services” they perform as HANA “representatives” they apparently do on their own dime, and have been doing so for just over two years now.

Considering Platt’s work as a software developer -- which has recently enabled casual players to affordably automate their handicapping -- is being performed at the same time that he’s involved with the CHRB regarding the takeout increase issue, it would be amazing if fatigue and frustration weren't factors in this situation.

That said, for HANA to move forward in significant fashion, it may have to espouse policies that more broadly and clearly reflect their entire membership -- not just that of some of its directors -- and start involving its existing and future members more directly. To maintain equal footing with reps from Betfair, TVG, MID, et al, perhaps HANA could use a dedicated racing customer advocate to actively pursue the potential for takeout reform recently suggested by Duncker and Hayward. That, however,would require regular financial support that doesn't currently exist.

In following your blog since the NY racing franchise renewal process, I’ve come to respect many of your opinions, but I feel your trivialization of the importance of low takeout for all bettors -- regardless of bankroll -- is misguided. . Even recreational players like us would benefit greatly if we could compete on a level playing field with professionals. I’m surprised that you’re so willing to accept the disparity in opportunity for profitability that is forced on the majority of us by selective rebating to a tiny minority.

In my opinion, it isn't "lower takeout" that "always trumps quality," it's equal takeout for every participant in each pari-mutuel pool. To increase participation, winning payoffs have to increase along with purses. If only horseplayers and horsemen could see eye-to-eye ...

El Angelo said...

The takeout issue hits two different levels of players. There's the attempt to appease the whales who bet enormous amounts of money every day, and that's where rebates and the pressure for reductions comes from. They're obviously important, but often it seems they're held up as representative of "horseplayers" at large, which is like saying that partners at Cravath are representative of all lawyers.

The other level are people who play the horses but don't qualify for rebates because they bet somewhere between $100 and $1000 a month. You can scoff and say these players aren't relevant because they're not putting big money into the game, but (a) so what?, (b) aren't we always saying we need more people interested in racing anyway?, and (c) you're never going to get poker players and the like interested in a gambling venture when the odds are so stacked against them, and those new players are NOT going to just walk in and start betting $10,000 a card.

SaratogaSpa said...

Great Post as always, and enjoyed the various feedback from all- I sometimes feel we have to define horseplayers as Horseplayer-1 (the whales) and Horseplayer 1A (bets between $100-$1000 per month). How do we keep both players gambling?

Figless said...

I bet about $2k per month and takeout is somewhat meaningful to me, but I have to admit I am a tad ignorant of takeout comparison to other gambling such as table games.

How much is the takeout on various table games and slots at a Casino, compared to our racing and VLT's?

And how much of that Casino take goes directly to government?

Are they taxed on Gross Handle like the tracks or on net profits like most other businesses?

El Angelo said...

"Takeout" is the wrong word in casino gambling, it's really the house edge. It varies somewhat based on your skill in blackjack, but unless you're a nut, it's usually not more than 5%. Dice, roulette, etc., varies on your bet.

Poker, the best analogue, depends on the table rake, but is generally less than 5%, in my experience.

Figless said...

El Angelo, Thanks.

So then Casinos are taxed on the net win, not the gross handle?

If they did that with racetracks it would change the whole shebang.

Casino Games Slots said...

thanks for a good article on Mars Rover. i like it.

Roger W said...

Thank you for this article. But, HANA has helped contribute to the demise of the Del Mar Fan Forum and the Chat Room by their strong armed tactics, so I can never respect them. They cannot take criticism, that is why Platt had no response to Schrupp's questioning. That inability to accept criticism is the #1 reason the Del Mar Fan Forum (really HANA run) cannot be criticized. I am happy that Platt embarrassed their organization in that interview, and was glad to hear the contrasting viewpoints, though I was not watching live.

Sure, everyone wants lower takeout, who doesn't want more money in their pocket? But, I know that without slots, something has to fund the purses, and for this game that I love (I consider it a sport, not a bet), I'm willing to pay a higher price to ensure that quality is maintained or even improved.

Lester said...

Believe, me, on this, the only, the takeout, should be higher, to get, a dirt, track in, and make california playable, again, there, should, be full, dis closer, on everything, including, takeout, and jockey information, and neither, anymays, or, rwwupl, told, me to, write this,

Anonymous said...

Racing, as we know it, is disappearing because the wagering portion of the game has become increasingly unattractive. Aside from the festival meets (Del Mar, Saratoga, Keeneland), tracks are empty. 15-25% takeouts do NOT hunt, when some many other forms of gaming offer better odds

Betfair, however, has grown from inception to its current massive state in 10 short years. We cannot deny its succcess nor the viability of the exchange concept.
This success is based on fixed odds and reduced take.

Racing needs The Exchange.