Losing the Handle
Photo:
Ray Paulick
Editor-in-Chief
By year's end, betting on pari-mutuel races run in the United States could fall to its lowest point in five years. Compounding that sobering possibility is this: The percentage of revenue to purses from every dollar wagered is also heading in the wrong direction.

The National Thoroughbred Racing Association recently reported a 3.8% decline in wagering in the second quarter of 2005. Combined with the 6.03% drop reported from the first quarter of 2005, handle is down 4.89% for the first six months of the year compared with the first six months of 2004. If that trend continues, total wagering for 2005 will be approximately $14.4 billion, the lowest amount bet on racing in the U.S. since 2001.

An even bigger problem than the decline in handle is the loss of revenue from each dollar wagered. The Nevada Gaming Control Board is poised to allow racebooks there to accept out-of-state customers for account wagering, and that could divert millions of dollars from horsemen's accounts and racetrack operations into the hands of casino companies.

A reminder: Wagering at Nevada racebooks, Native American tribes, and legal off-shore rebate operations returns a small fraction to tracks and purses, compared with money bet on-track either on live or simulcast racing. It's also much less than what is returned to the industry by betting companies TVG and Youbet.com, which pay a fee to the source market of the bettor.

Here are some examples:

- If you go to your local track and bet on a live race, about 18% of the amount wagered will be divided between the track and purses. Bet $100, and $9 goes to local purses.

- If you go to your local track and bet on a simulcast race, about 15% will be divided between the local track and purses, and about 3% will go to where the live race is being run, with horsemen and the track there each getting 1.5%. Bet $100, and $7.50 goes to local purses and $1.50 to purses at the simulcast track.

- If you stay home and bet on a track in your area via TVG or Youbet.com, 10.5% in source market fees and 3% in a host fee will be split by the track and horsemen. Bet $100, and $6.75 goes to purses.

- If you stay home and bet on a simulcast race via TVG or Youbet.com, the same 10.5% goes to your local track and horsemen, and 3% goes to the track and horsemen where the race was run. Bet $100, and $5.25 goes to local purses and $1.50 to purses where the race was run.

- If you stay home and bet on a track in your area via a rebate shop, 3% will be split between the local track and horsemen. Bet $100 and $1.50 goes into purses.

- If you stay home and bet on a simulcast race via the same rebate shop, 3% will go to the host track and horsemen, but nothing to the local track or purses. Bet $100 and $1.50 goes to purses at the host track, and nothing to local horsemen.

Nevada racebooks currently return approximately 3% to the host track and horsemen, similar to the rebate shops. They are in a position to develop an enormously successful telephone betting business, even if they are prohibited by Nevada law from offering cash rebates as some off-shore and Native American account wagering operations do.

Nevada casinos wrote the book on rewarding their good customers with free rooms, meals, and other perks--something racetracks do not have the ability or know-how to do. You can be certain that good account wagering customers will be flooded with offers from racebooks for free trips to Las Vegas.

Tracks and horsemen should be concerned that too many wagering dollars are leaving the horse industry already. Telephone wagering in Nevada will only make matters worse.

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