Wednesday's TDN calling for lower take-out, it is not accurate to say that slots players are given a fairer chance than horseplayers simply because the house edge on slots is lower than the take-out on racing wagers. It is true that one wager on a slot machine has a higher expected return than one random horse wager, but the difference is that individual slots players are subjecting themselves to a game that is mathematically determined to be unbeatable in the long run no matter what while the financial fate of the individual horseplayer is not so rigidly bleak. The house edge on slot machines and table games is derived from the discounted return one receives on a winning wager versus fair value for that outcome. To simplify things, when I hit 7-7-7 on a slot machine, the pay-out I receive does not accurately reflect the likelihood of that outcome--it pays less than it should. That's how the house makes its money. So, using Bill's figure of a 9% house edge at Chester, the only possible result of playing slots in the (true) long run is a loss of 9%.
Even though the take-out on win wagers in horse races is almost double that of slot machines (and higher for exotic wagers, which Steve Crist would very compellingly argue is actually lower because of the number of horses involved), the pari-mutuel system does not mathematically predetermine inevitable losses. We wager amongst ourselves, rather than against the house, so there are bound to be winners and losers. And since odds are determined inexactly by human evaluation, there exists the potential for something that can never, ever exist in a slots parlor: an overlay or market inefficiency. So, while someone betting completely at random on races will lose more than he would have playing the slots, he is not resigned to that outcome if he chooses instead to attempt to handicap and seek out positive expectation wagering opportunities.
Bill also argues that winning at the races under the current take-out structure is impossible and that "The only players that have so much as a prayer are the whales getting huge rebates," but I can say with 100% certainty from personal experience over a very large sample size that that is not the case. The best players will be more than 16 or 20% better than the average player. Lower take-out would allow more players to be winners, and would obviously produce a more appealing wagering product, but even without any adjustments to take-out, horse racing should be much more mathematically enticing to the right type of person than slots or other casino games. It just needs to be presented correctly.
Racing is a great product, much better than we in the industry give it credit for much of the time, but the problem lies in racing's complete ineptitude at locating the right demographics to which it would appeal and marketing to them effectively.
Exactly a year ago, I wrote a piece for this blog entitled, "Can exchange wagering fill the void left by online poker?". It came on the heels of poker's "Black Friday," in which American customers were essentially shut out from online poker by the Department of Justice. I sought to point out the general similarities between those who play the horses and those who play poker, focusing on the younger generation of internet poker players who were now without a place to play. I advocated for a swift introduction of exchange wagering as a way to decrease take-out while further appealing to a tech savvy group of potential customers. My concluding paragraph read:
This is the time for the racing industry to actively and aggressively seek out a larger percentage of the gaming pie. With the very significant advantage of current online legality over one of its most formidable competitors, racing can generate a new consumer base through the introduction of exchange wagering. Readjustment of the pricing model coupled with innovative marketing strategies can appeal to a large group of young people that are currently without a product to consume. New Jersey and California already have the necessary legislation in place to implement exchange wagering, and tracks, horsemen and potential exchange operators in those and other jurisdictions would be very well-served to work out all the kinks as soon as possible before their competitor for gaming dollars is reborn and fortified through government support.
Well, since then, only minor steps have been taken by the racing industry to take advantage of poker's temporary shutdown. The Breeders' Cup did enlist well-known poker player Michael Mizrachi to promote its event, which was a positive, albeit very small step in the right direction. And the California Horse Racing Board has begun the arduous process of approving exchange wagering with a tentative goal of having things in place by the time Del Mar opens in July. But little has been done in other states (New Jersey might deserve a little slack due to issues involving the leasing of Monmouth Park), and we might be running out of time.
Recent news of a potential deal for major site PokerStars to buy out troubled competitor Full Tilt hints that a resolution with the Department of Justice could be on its way, at which point the prospects for legalized online poker in the U.S. could improve. The general consensus among experts is that legalized poker is an inevitability--state and federal governments need new sources of revenue to fund their massive balance sheets, and poker certainly fits that bill. The window for horse racing to make its move is closing.
Racing seems to be under attack from all sides right now. We've been propped up by slots, but that model is unsustainable and will become less and less viable as people point out what a black hole racetracks can be for casino revenue (unless, of course, we get some of those slots patrons to wander over to our side). We're also under attack due to a very poor public image, which is grounded in some truth, but has been poorly managed by industry officials. Yes, racing has serious issues that must be dealt with, but it's not the un-bettable, fixed, inhumane blood sport that certain factions both inside and outside the game have made it out to be. Racing is still an excellent and appealing product--it's time we ditch all the self-loathing and figure out ways to get noticed by the right types of potential customers. I hope when I look back in another year I'll see more progress to that end than I did this time around.