Strange as it seems, this concept is foreign to some tracks

Keeneland Race Course is trying to help its customers and is asking other racetracks and outlets that take its simulcast signal to do the same. This sounds like a reasonable request, but several tracks, notably in the Mid-Atlantic region, have refused. These tracks appear to be more interested in their own profitability than that of their customers. One wonders where their customers will come from in the future if they do not take care of them today.

When the Keeneland fall meeting opened on October 5, the Lexington track had lowered its takeout on all exotic wagers from 19% to 16%, which makes it the lowest in the nation. This is good for bettors, who will get a higher return on all winning wagers on exactas, daily doubles, trifectas, and pick fives bet on races at Keeneland. Takeout on win, place, and show wagering at Keeneland is already 16%.

Keeneland officials announced this initiative as an experiment to gauge whether reducing the cost of betting helps to spur growth in handle. The principle is relatively simple: If more money is returned to bettors, they will have more to bet, increasing the churn.

Reducing the takeout has been tried several times in the last several decades, notably in New York, for a short period of time; wagering handle has increased, though not enough, it should be noted, to make up the difference in lost revenues. But those experiments have generally always been short-term and confined to one state. What happens when takeout is reduced over a long period of time, say five years, has not been tested. When racing was enjoying its peak in popularity in the 1940s, takeout was around 10% in the vast majority of states.

A secondary consideration for Keeneland officials was to make betting on horse races more competitive with other forms of gambling, notably casino gambling, where the cost of betting is far lower.

So, for a period of 17 racing days, the length of Keeneland's fall meeting, the track is experimenting with its fee structure to test the effect of a takeout reduction. If handle increases, tracks across the country can take this information to their state capitols to encourage state governments to reduce their shares of the takeout to spur growth of handle and thus to develop and maintain a strong racing industry. A strong racing industry, in turn, is supported by a strong agricultural industry as breeding activity in the state increases.

Some track executives, however, have failed to see the big picture, and this shortsightedness has led the Mid-Atlantic Cooperative, a band of ten tracks, to collectively refuse to take the Keeneland signal because they would not lower the cost to their customers. All six entities of the New York Off-Track Betting Corp. system also refused, though the New York Racing Association will take the Keeneland signal. These tracks and off-track betting outlets say they cannot afford to reduce their price, and they asked Keeneland to waive all or part of its 3% fee for its signal. Keeneland declined, saying the industry should be in this experiment together.

For its part, Keeneland has the most at risk. Keeneland has not asked the state to reduce its share, nor is it reducing the amount of money it allocates to purses; rather, Keeneland is using this experiment as an opportunity for the industry as a whole to take the initiative.

To this experiment, Keeneland is contributing all of the 3% reduction in its on-track handle on exotic bets. Keeneland handled approximately $1.5-million per day on track at last year's fall meeting, so if 50% of the track's handle comes from bets on exotics, that equates to a total of $750,000 per day. Keeneland then will be giving up $22,500 per day in its share of lost takeout on exotics due to the 3% reduction. Over the course of a 17-day meeting, that is $382,500 in lost profits if there is no offsetting increase in handle.

It should be noted that a large number of the tracks that refused to participate are the same Mid-Atlantic tracks that had pulled out of the National Thoroughbred Racing Association. National unity of purpose does not appear to be part of their agendas.

One day, the operators of the Mid-Atlantic tracks will look around and wonder where all their customers went. They will be the only ones who won't know the answer.