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Track Tracts

It's the Takeout, Stupid!
by Gordon Pine

The Horseplayer Magazine offers an interesting chart which displays the takeouts for most North American racetracks. It can be seen at this web address:

Takeout is the price we pay to bet the ponies. All the money wagered in a particular pool is added up, the track removes the takeout percentage, and the rest is distributed among the winning tickets.

The size of the takeout in thoroughbred racing is a scandal. It dwarfs the takeout in other games and is second only to the lotteries and a couple other sucker bets. In roulette, the takeout or "house edge" is 5.3%. In craps, the house edge can vary from 1.4% up to 9.1% or more. In much of sports betting, the house has a 4.5% edge. So why are we playing a game where the very best situation you can find has a takeout of 15% (win betting in New York, giving credit where it�s due)?

The answer, of course, is that we can turn handicapping into a positive expectation game with good handicapping and value betting. But only a small minority can ever win money in a game that has as big a negative expectation as horse racing. The profitable NetCappers you see on Player Picks or the No-Prize Contest are the exceptions, not the rule.

The worst situations burden you with a 30% takeout (trifecta wagering in Pennsylvania, again giving credit where it�s due). I urge you to look at this takeout chart and favor the situations with lower takeouts, such as win betting in New York tracks, California tracks, and other tracks like Emerald Downs and Hawthorne.

And while I�m ranting, where is it written that exotic bets must always have a larger takeout than win bets? I guess it�s a matter of what you can get away with.

The reason they can get away with this usury is that it�s an invisible tax. You bet your two dollars, you win or you lose, if you win you get paid, so where�s the tax? Well, it�s in the smaller payoff. It�s like payroll taxes � they take them out and you never see the money, so you don�t miss it. If the tracks were more honest about it, they�d leave the pools alone and charge you an extra 18% surcharge whenever you made a bet. But that would discourage betting, and we don�t want that. Imagine life without takeout. Your 3/1 horses would pay 4/1. Your $40 exactas would pay $50. Think you could make a profit then?

Track managements and racing muckety-mucks search high and low for the cause of the malaise affecting horse racing. Is it poor customer service? Is it drugs in racing? Is racing too slow-paced? Is handicapping too complicated for today�s attention-deficited young-uns? Do we need more advertising? Do we need better technology? Do we need horses whose careers last more than six months? Do we need Goose Girls in the infield? No. It�s the takeout, stupid!

What track management doesn�t seem to understand is that the takeout is already discouraging betting. In fact, it�s a slow death for racing. How would you like to handicap for hours, go to the track, make your bets, and lose most of the time? That�s what the average horseplayer deals with. If that was what I had to face when I went to the track, I�d take up some other recreation, too. The average bettor is going to lose the takeout (plus breakage, which is another scandal). Since most bettors� bankroll is whatever�s in their pocket, look at it this way: in about 12 trips to the track, they�re going to lose 90% of whatever�s in their pocket, on average. Quicker than that if they�re playing exotics. Then it�s time to either find a new pocket or a better game. Back in the 1930s when racing and bingo were the only (legal) games in town, racing could get away with this. But times have changed, bucko.

I understand that some kind of takeout is necessary. Horsemen need their purses. Governments need their cut. Overpriced hot dogs and parking fees are not enough to finance a modern company. But somebody ought to take an Economics 101 course. For every product that you offer, there�s a sweet spot where income is maximized. You lower prices, volume increases. You raise prices, volume decreases. Would you rather sell 100 widgets at $100 each or 200 at $60 each? Sometimes you can make more money with lower prices. It�s the same way with takeout. If takeout was mandated at a flat 5% for every pool nationwide, my bet is that handle would increase so much that the tracks would be raking in a lot more money than they do now.

"If takeout was mandated at a flat 5% for every pool nationwide, my bet is that handle would increase so much that the tracks would be raking in a lot more money than they do now."

This, of course, is a pipe dream. Another pipe dream I have is that some enterprising company on a Caribbean island sets up their own internet-based parimutuel system predicated on a 5% or thereabouts takeout. Action would flow their way like water down the Nile. Sign me up. NC

Copyright �2001 NetCapper Inc. All rights reserved.

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