Report: Industry Must Maximize Customer Benefits

A recently released report on wagering trends concludes the "handle up, purses down" situation isn't new, and that "incentive wagering service providers"--rebate operations--improve the competitiveness of the pari-mutuel industry.

The report, authored by Cummings Associates of Massachusetts, was presented to the National Horsemen's Benevolent and Protective Association, which endorsed a draft of it July 25, and the National Thoroughbred Racing Association Wagering Systems Task Force.

Rebating was a topic of discussion Aug. 3 during an Albany Law School conference in Saratoga Springs, N.Y.

The report, titled "Analysis of the Data and Fundamental Economics Behind Recent Trends in the Thoroughbred Racing Industry," looks at the role of pari-mutuel takeout rates, the practice of rebating, and competitive pricing, among other things. It comes just weeks before the NTRA task force is scheduled to release its findings Aug. 15 during The Jockey Club Round Table.

The report, authored by Will Cummings, suggests purses have lagged behind handle for some time, but the trend was masked by purse contributions from alternative gaming. It says though off-track, account, and inter-track wagering have kept handle steady, they have added costs. Higher takeout, the report says, have depressed handle.

The report says "substantial differences between purse and handle data" provided by The Jockey Club and racing commissions are problematic. (By 2002, handle reported by The Jockey Club was $1.9 billion higher than the figure reported by racing commissions.)

"Here, as with purse data, I would recommend that the National HBPA work with The Jockey Club and racing commissions to reconcile their figures so that all stakeholders in the racing industry can make better-informed decisions regarding its future course," Cummings said in the report.

On the subject of high-volume betting shops, the report says there is no evidence they have cannibalized handle at racetracks or other wagering outlets.

"The consumer looking for gambling entertainment has many choices available, and over the past 20 years, he or she has largely been choosing something other than racing," the report says. "If we do not seek to maximize benefits to the consumer, we will not be in business for long."

The report notes how handle at six tracks this year fell when they stopped doing business with high-volume shops. (Track officials have argued rebaters steal their customers and don't contribute new money to wagering pools.)

"What the industry needs most, in my opinion, and has been working on for 20-plus years, is a diversified set of delivery mechanisms to bring our product to the customer, as well as attract more customers to our product," Cummings said in the report.

The task force looked at rebating and other practices. Because members signed confidentiality agreements, there has been no word as to task force findings.