Wagering Task Force Report Gets Public Airing
by Scott Davis
Date Posted: 9/21/2004 7:34:43 AM
Last Updated: 9/22/2004 3:09:52 PM

A mixed reaction greeted the first public presentation of the National Thoroughbred Racing Association Wagering System Task Force report Sept. 20, first day of the International Simulcast Conference in Miami Beach, Fla.

The conference is presented by the Thoroughbred Racing Associations, and co-hosted by Harness Tracks of America, American Quarter Horse Association, and the American Greyhound Track Operators Association. About 350 people registered for the conference.

A three-member panel delved into the task force report, which was officially released Sept. 17. An overriding theme in the report, in the making for months, is the pari-mutuel industry's need for technological gains and security improvements.

NTRA deputy commissioner Greg Avioli noted that while overall handle increased about 1% from 2002 to 2003, racetrack revenue derived from handle and corresponding purses declined 1.7% for the same period.

"It is no longer the case that if your handle is up, your net income will follow," Avioli said.

Economist Louis Guth and TRA executive vice president Chris Scherf each presented detailed financial analysis in regard to the "handle up, revenue and purses down" situation. Both cited the explosive growth in signal export, largely to off-track wagering outlets including rebate shops, as the primary reason.

Guth, the report's co-author, cited research that shows just the top six secondary pari-mutuel organizations--defined loosely as account wagering outlets that provide rebates to bettors and don't conduct live racing--experienced a more than 50% increase in handle from the previous year.

Guth and Scherf drew conclusions from confidential 2003 handle data culled from 15 racetracks that represent more than half of the overall U.S. handle. It found that certain secondary pari-mutuel operators have consistently and significantly higher returns to their customers than the population at large, in some cases returning up to 99% of the dollars wagered. That, in turn, has harmed the track's core, on-track customers, they claim.

The report also discusses the explosion of computerized robotic wagering or program wagering, in which large bets are placed by sophisticated bettors via computer just prior to start of a race. The bettors seek to take advantage of overlays that exist, largely in exotics pools, by having access to real-time odds that other bettors do not have.

"These informed bettors are good for the industry, but not unambiguously so," Guth said.

The report recommends 12 steps to improve wagering systems, including improving technology so that real-time odds are available to all bettors, and allowing tracks more flexibility in setting their takeout rates in order to better compete with rebate shops.

The report also urges tracks to more diligently monitor wagers placed into their pari-mutuel pools to enhance the integrity of the system.

"We can't tell you that we're even close to knowing who is betting into our pools," Avioli said. "We need this integrity and transparency to maintain the confidence of the public and the government regulators."

It was a model presented by Scherf in which a track could actually increase its revenue by choosing to decline business from certain secondary operators that drew the harshest criticism.

"This shows a complete lack of understanding of how (betting) works," argued Australian bettor Zeljko Ragnodivic, who contended the model's estimation of the percentage of churn, or re-betting of winning wagers, was dramatically flawed.

Overall, the panel stressed that track operators should more carefully monitor their returns from each wagering partner to, as Avioli put it, "make sure you are making money from the people you do business with."

The consensus from racetrack operators in attendance seemed to be favorable.

"I thought the report did a good job of putting the facts in front of us," said Vern Glaenzer of Maywood Park in Illinois. "It's really up to us to decide what to do with them."

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