Takeout got you down? Be glad you’re not an owner

By Ray Paulick
Horseplayers have complained long and loud in the nearly four months since the California legislature approved SB1072, increasing the takeout on exotic pari-mutuel wagers on races from the state's tracks to 22.68% on quinellas, exactas, and daily doubles, and to 23.68% on bets involving three or more horses or races.

The legislation (which goes into effect Jan. 1, 2011) was designed to help keep horse owners in the game by adding as much as $25 million to purse money distributed annually. California tracks will not get a penny from the increased rate of takeout, which was previously at 20.68% for all exotic bets.

The truth is, horse owners face an even higher takeout than horseplayers. Studies have estimated that for every $1 a horse owner in the United States spends on the expenses of keeping a horse in training, he will get, on average, about 45 cents back in purse money. That's a whopping 55% takeout nationally, and it's probably worse in California, where training costs are significantly higher than in most other racing jurisdictions.

Those studies, incidentally, do not take into account the money owners spend to purchase horses – only to keep them in training. Conversely, it also does not account for any residual value as breeding animals an accomplished horse might have.

With a money pit like that, it's no wonder owners are leaving the game, especially during challenging economic times. What the California legislature did, at the urging of the state's racetracks and the Thoroughbred Owners of California, is an attempt to improve those bleak numbers.

Horseplayers have cried foul, saying they shouldn't be forced to subsidize horse owners. But that's the way the game is played. Money retained from pari-mutuel wagering helps support the very expensive exercise of putting on a horse race, for both the racetrack and horse owners. That's what makes it different from sports betting, poker, blackjack, or slot machines.

Some players and pundits have gotten behind an organized boycott of California racing, saying they simply will not bet on the product. One of the loudest protesters, turf writer Bill Finley, writing at ESPN.com, admitted he seldom plays California anyways, but said he supports the boycott. I assume Finley will continue to play exotic bets at his home tracks in New York and New Jersey, which have higher takeout on average, than California will have, on exotic bets.

Other horseplayers have said they will put more money into the win, place and show pools and avoid the costlier exotics. That's probably a good thing for their survival. California has an extremely low takeout on straight bets, but many horseplayers have ditched these traditional bets because of the lure of higher payoffs in multi-horse or multi-race wagers.

But the infatuation with exotic bets, especially those that tie up a gambler's money for multiple races, has reduced the churn, which veteran pari-mutuel managers say is vital for a healthy business. By day's end, a horseplayer who brings $100 to the track might end up betting five or six times that much by sticking to the win, place and show pools. Conversely, someone with $100 shooting for the moon with trifecta, superfecta or pick six bets is not likely to make as many bets or play as many races. He's more likely to burn than churn his money – especially at the traditionally higher takeouts.

That's one reason, not that long ago when Robert Strub ran Santa Anita, he limited the number of exotic bets offered during a day's racing to one daily double, two exactas (with $5 minimums), and a pick six.  It was a patronly philosophy by Santa Anita management not to let their bettors tap out too early.

Those calling for a wagering boycott of California racing apparently think they will be able to convince someone out there to wave a magic wand and reduce the takeout to where it was previously, or to an even lower rate. But this change was mandated by law, and it would take another legislative act to change it back.

Good luck with that.

In the meantime, my hope is that the desired effect of the new law is successful. Perhaps an increase in purses will reduce the takeout owners pay to only 50%.