Tuesday, September 11, 2001
Bettors win in Keeneland allocation
Percent of payoff increased
The Associated Press
LEXINGTON Keeneland will increase the payoff to bettors at its fall race meet in an experiment meant to help the track compete for entertainment and gambling dollars.
The track will increase the portion of each dollar returned to bettors in exotic wagers including the Daily Double, exacta, trifecta, superfecta and Pick Three from 81 cents to 84 cents. Instead of withholding 19 percent of the money bet on those wagers, the amount taken out will be 16 percent, the same taken out of win, place and show wagers.
Of the money bet, 3.5 cents of every dollar goes to the state, and Keeneland will now keep 12.5 cents for purses and operating expenses.
Keeneland's decision is a response to increased com petition for gambling dollars.
The industry really needs to know more about what the market response is going to be to the pricing, said Keeneland president Nick Nicholson.
Keeneland's move mirrors one taken in New York this summer, beginning with the Saratoga meet, which lowered the takeout rate on win, place and show bets from 15 percent to 14 percent. The takeout on some exotic wagers was lowered to 17.5 percent from 20 percent.
Keeneland's approach should tell whether the market likes the exotic bets better than straight-forward wagers, Mr. Nicholson said.
It's a given in economics that if you lower the price, people will buy more. The takeout is the price of wagering, said Richard Thalheimer, a University of Louisville equine economics expert.
His research indicates that cutting the takeout can be a win-win situation for bettors, tracks and the state.
You have to offset the price cut, he said. If handle doesn't go up enough to offset the drop in price, you won't gain revenue. ... Betting will go up. The question is measuring the increase due to the (lowered) takeout rate.
The results were mixed at Saratoga. On-track betting rose, but betting on simulcasting, which is now more than 80 percent of all wagering revenue, did not.
The experience in Saratoga seems to indicate and confirm that you can generate more betting on-track, said Tom Meeker, chairman of Churchill Downs Inc., the corporate parent of the Lou isville track. It hasn't been demonstrated that it will work in the simulcasting market, where off-track betting operators must also risk a pay cut.
Alex Waldrop, president of Churchill Downs racetrack, has said that Churchill wants to lower its takeout rate but can't because the state's share makes the profit margin too tight.
Cutting taxes and other costs proportionally is key to increasing racetrack revenue. If you don't, then it becomes a larger percentage of the takeout, squeezing the profits, Mr. Thalheimer said.
Keeneland can afford to try it because the race meet is short, Mr. Nicholson said. Keeneland also has significant revenues from its sales operations to cushion any losses from lowering the takeout.
Mr. Waldrop has lobbied for changing the tax structure so that Churchill can lower its takeout.
Tracks are taxed on the total amount wagered, including the more than 80 percent that goes back to bettors.
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