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Letter of the Week

Playing the percentages

 For mine, those looking at the funding of racing and the impact of corporate bookmakers and betting exchanges need first to answer the question: "What is the most efficient achievable cost structure for the industry?".

The answer to that question will then greatly inform the next question: "How much does the industry need to take from each dollar of punters’ turnover?"

For several decades the industry, based on the effective monopoly of the totalisators, has enjoyed its share of (in round figures) a 20% deduction from each dollar bet.

Some appear to be arguing that such a deduction must continue, to allow racing to survive and thrive. I think the industry first needs to look at its costs at all levels before coming to that conclusion.

For example, it seems apparent that such a large takeout has allowed the antiquated and duplicative multi-club structures to continue in several states.

The merger in Brisbane, and studies undertaken to examine similar approaches in Sydney and Melbourne, would indicate that substantial savings (flowing through to significant increases in prizemoney) are possible through consolidation.

On another front, one must question just how much prizemoney is really necessary to sustain the industry, and to what extent excess prizemoney ultimately flows through to the big breeders and stallion owners through higher prices in the sale ring.

I don’t claim to have analysed that aspect but it should be done, to ensure that punters aren’t being asked to deliver super-profits to a select few in the industry.

Some may view the deduction rate as something to which punters are not particularly sensitive — in other words, we might as well keep it at 20% or as high as possible because punters have shown they’ll keep betting anyway.

Not only is this no longer possible due to the proved constitutional inability to protect tote margins through anti-competitive practices or state legislation, my view is that it will sooner or later become unsustainable to punters as well, and they will start to desert racing as a gambling medium in increasingly greater numbers.

A key reason for this is the very efficient nature of betting markets these days — that is, most horses’ actual winning chances are now quite accurately reflected in their market prices and therefore it’s much harder for the punter to find value than it was in the past.

In fact it’s this efficiency that allows the corporates to offer products such as "best tote or SP" which give the punter a 5-10% edge over a single home tote market (equivalent to a 10-15% deduction rather than a 20% deduction), even though those products are "at risk" to the bookmaker rather than the "risk free" businesses of the tote or Betfair, and even though their client bases are presumably more heavily weighted to sophisticated punters.

For a punter, the same market efficiency means that the better value offerings are absolutely essential to success. In my own case, as a reasonably serious punter, my small (approximately 6% of turnover) profits over the last couple of years have been due totally to the better prices offered by the corporates — the same bets with my local TAB would have returned a break-even result or small loss.

For more recreational punters who accept that they will lose over the long term, the greater market efficiency of today, while not changing the total amount they end up losing on average, may in fact mean their losses are more regular and consistent and, when they do win, the wins are smaller.

This may negatively impact on the overall punting experience, where there are limited "big wins" to remember and keep the punter coming back, just a longer stream of small losses, which could cause many to lose interest.

Therefore, a deduction rate/market percentage that will sustain punters’ interest, while also allowing an efficient industry to be adequately funded, is what we should all be trying to establish.

Paul Bell
Elwood (Vic)
Today's Racing
Thursday 28 March
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