Shanklin: Opinions on takeout rates largely based on anecdotal evidence
While points of view abound in racing about the appropriate level of takeout rates, very little has been done nationally to scientifically analyze wagering data and determine optimal levels, writes Bill Shanklin in Horse Racing Business.
Shanklin suggests that U.S. racing entities should pool their data in a controlled experiment to determine what handle would be at various takeout rates. The assessment of takeout percentage and handle might be done using the economics model known as the Laffer Curve, which depicts that at tax rates of 0% and 100% the federal government will receive no revenue, but at some point in between revenues will be maximized.
A major obstacle, according to Shanklin, is that racetracks and ADW companies harbor the proprietary data needed to do such an in-depth analysis. But it may be possible for those entities to pool that data anonymously.
“It may be that one or more racetracks have privately undertaken carefully controlled experiments to determine what happens to handle and profits at various takeout percentages, but if that is the case, the racetracks are prudently not telling,” writes Shanklin. “On the other hand, if a racetrack has not conducted such experiments using its vast repository of data, that is a sad commentary on its management’s lack of sophistication.”
