Simulcasts: Price Is Right. Or Is It?

David Pascale, president of the Southern California Racing Fans Committee, calls it "The Keeneland Incident." He said there are two responses to it: The "stick it to 'em approach" and the more reasonable, logical "Jesuit approach." He opted for the latter, and not just because Jesuits are always right, as he noted tongue-in-cheek.

The incident cited during a panel discussion on the first day of the International Simulcast Conference in Louisville, Ky., concerns the decision by Mid-Atlantic racetracks and New York state off-track betting corporations to drop the Keeneland signal because of an expected revenue reduction given the track's lower takeout.

Pascale said that from the perspective of the average racing fan, the decision was short-sighted from a customer-relations standpoint. But he also called the pari-mutuel business "very humbling," and said the industry must explain to the public why receiving outlets believed taking the Keeneland signal without additional compensation made business sense.

"It's very complicated from our side," Pascale said during the panel session titled "Factoring in the Price of a Bet."

Actually, it's complicated from all sides, and there doesn't appear to be a right or wrong.

Dr. Richard Thalheimer from the University of Louisville Department of Equine Business offered numbers from a study that indicated there is a point (16% to 15% in this example) at which lower takeout doesn't generate more revenue.

Consultant Michael Shagan said not all outlets can share in the benefits of a takeout reduction because of tax-related issues that vary from state to state. Lower takeout rates, he said, have the ability to "create a hardship" for receiving sites.

Bill Nader, senior vice president for the New York Racing Association, called the decision by the Mid-Atlantic Cooperative "bad customer relations" because it "sends out a bad message that good pricing isn't going to be available."

Andy Skehan, senior vice president of corporate marketing for Churchill Downs Inc., said he figured that, from a business standpoint, Saratoga and Keeneland would be the last two meets to reduce takeout given the fact their product regularly outdraws others in the simulcast market.

Eric Halstrom, director of operations at Canterbury Park, said that during the summer, handle at the Minnesota track was up 10% on Saratoga -- and down 10% on other signals. "If we're just shifting handle, what do we do to make up revenue lost to lower takeout?" he said.

Good question. And no apparent answers. Nader said guest, or receiving, sites, are getting bargain prices from host tracks (the industry standard is 3%), but "they want to spin or conceal the truth, and continue to put pressure on sellers" by saying their profit margins are being cut.

Skehan hedged on wholesale takeout reductions. He said Churchill prefers to experiment with lower rates on specific wagers or on specific days as a "promotional tool."

Halstrom said he speaks for the masses, or the small to midsized tracks that generate a lot of revenue from incoming signals. He said reduced takeout isn't a "magic bullet" for a few reasons: There's no guarantee found money from lower rates will be put back in the mutuel machines, and furthermore, the whole concept of churn is based on people cashing tickets. If a patron is in a slump during the 17-day Keeneland meet, lower takeout may be of no value for that individual, he said.

The simulcast conference, with about 350 scheduled attendees according to Thoroughbred Racing Associations executive vice president Chris Scherf, continues Tuesday and Wednesday. Topics include computerized betting, wireless technology, international simulcasting, the cost of simulcasting, problems in simulcasting, Web sites, and the importance of live attendance in developing off-track business.