Computer Bettors Survey Industry Landscape

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Proponents of computer-assisted wagering sought Sept. 21 to dispel what they say are misconceptions—and they also offered some advice to the struggling pari-mutuel industry.

The individuals, who participated in an engaging panel discussion during the International Simulcast Conference in Clearwater, Fla., outlined the way they do business and why they participate in pari-mutuel horse racing. CAW, as it is called, accounts for 10%-15% of total United States handle, according to industry estimates.

Bill Wass, chief executive officer of PW Enterprises, which has one major CAW client, said it all comes down to using a sophisticated mathematical model to select horses and place bets. He did confirm what many believe: CAW players make money, but it requires a long-term investment.

“If there is positive equity, you bet, but if there’s negative equity, you don’t bet,” Wass said. “You win some and you lose some, but in the long run, you make money.”

The programs vary according to the individual bettor and the software. The panelists said they have no more information, or racing data, than any other player, just high-tech computer programs that crunch numbers and recommend plays based on anticipated return.

For the most part, they bet what the computer program says to bet. Thus, CAW players can be at a disadvantage to players at the track that perhaps focus on one or two tracks and look at every horse in every race, said Don Johnson of Heritage Development.

“The variables may be plugged in at the beginning of the day,” Johnson said, “so you can’t account for things not in the database.”

Common misconceptions of CAW players are that they always win, and that their programs allow them to access betting pools after “off” time of races. Neither is true, the panelists said.

“That’s absolutely false,” Johnson said. “Nobody is past-posting (bets).”

“The bets are getting to the track the exact same way other bets do,” said David Bernsen, a Thoroughbred owner and breeder with Global Wagering Group, which deals with international CAW players.

“This chasing a boogeyman that doesn’t exist has been a 15-year waste of time,” said Dana Parham, a CAW player through Racing and Gaming Services and longtime owner of Standardbreds. “If I could past-post, I wouldn’t do it. There are so many things we could do to make the industry better, and we waste time on things that don’t matter.

“We’re heading south. What we’re doing is not working. Fast changes need to made, and we need to stop worrying about silliness.”

The panelists addressed other industry issues as well.

Rebates: Parham said it costs him about $6 million a year to operate his business, which has 30 employees. So, as a high-volume bettor, he should get a return.

“Something has to come back our way to compensate us, just like in any other business,” Parham said. “Take away our rebates, and we will bet less money.”

Johnson said if the industry agreed to lower the average pari-mutuel takeout rate from 20.5% to 10%, all bettors would benefit because it would put more money into the pools and perhaps grow handle, which is down several billion dollars from last year. Current margins for rebates would be eliminated.

Pari-mutuel wagers: Panelists said from a handle perspective, tracks would be better off having seven races a day with 14-horse fields rather than 14 races a day with seven-horse fields, because the number of exotic combinations increases tremendously.

Bernsen questioned the minimum pricing of some wagers. “Pick six minimums should be 10 cents, not $2,” he said. “It’s insane. You want to focus on lowering minimum units.”

Parham mentioned short fields and the Breeders’ Cup Head-to-Head wager as offering no value to bettors. He rejects high takeout rates combined with a minimum number of combinations.

“The whole world is watching and (Breeders’ Cup) does $30,000 in handle (on a Head-to-Head) wager?” Parham said. “I can find more than $30,000 in wagers at Denny’s.”

Offshore bookmakers: Parham and others believe their involvement in U.S. racing is blown out of proportion. He said CAW players and other big bettors have too much to lose by using offshore bookmakers, including damaging the pari-mutuel system, which they want to grow.

“We deal in tens of millions of dollars,” Parham said. “I don’t think the way to bet is to go through bookmakers. I think it’s a fallacy. It doesn’t exist to the magnitude (we’re led to believe). It’s another boogeyman in my mind.”

Johnson said the U.S. and other jurisdictions could all but eliminate bookmakers through competitive pricing.

Growth in CAW handle: There are conflicting opinions on the impact of having more such players would have on pari-mutuel handle. There could be an initial bump, then some leveling off, panelists said.

“As you get large players you’ll have some creation, but you’ll also have diversion,” Wass said. “I don’t see handle going from $15 billion to $30 billion because of it.”