Monday, July 15, 2013

Racing Can Learn Something From Advance Deposit Wagering

The following article originally appeared in Harness Racing Update in their "Brush and Crush column.  This article is reprinted with their permission.

I think Nick Salvi of the Big M loves writing press releases. And lately, he has a lot to write about.
The Meadowlands handle has been fantastic this meet, and it shows few signs of slowing down. Almost each week there is a release trumpeting the handle for an evening, and rightfully so; if the Meadowlands is on its way back, for gosh sakes tell people.

A couple of weeks ago a funny thing happened, though. Sure there was the usual Salvi release talking about another $3 million dollar night at the Big M, but out popped another press release, this time from Yonkers.

“$1 Million Plus Handle on Tuesday” the headline screamed.

It seems someone out there wants people to know that Yonkers has been doing some good things, too.
Further, on the heels of the Jeff Gural interview published at several industry websites where he mentioned he offered some incentive to large players if they take a dip into the Meadowlands pools, another Yonkers story came out. This one about giving rebates to players who play Yonkers, and a new betting deal with Ebet. The hopes, of course, are to increase handle.

This competition is good for Yonkers, and it’s good for the Meadowlands. It’s also good for harness racing, because one of the biggest knocks on the sport is pool size. When handle is increased, pool size goes up. This allows harness racing to benefit not only by selling themselves to thoroughbred players who need pool size to wager, but also to existing harness bettors who want to increase their volume.

This represents a new way of thinking for harness racing. For many years the benchmarks for success was not the betting handle, but was the racing product itself. If you had nice stakes races you were a good track. If you got a slots deal with the government, you were the bomb. If you got people out on a Saturday – no matter if they bet any money or not – you were doing great things.

In my time following racing I have never heard of a track owner giving an incentive to an executive or manager that’s related to handle. 

“If we hit $800,000 in average handle this year Tom, your bonus will be big!”

“If you hit $1 million this year Tom, your bonus will be bigger”

This industry tends to complain about ADW companies “stealing our customers”, but if you look at the ADW structure, and culture, incentivizing handle growth is exactly what they’ve been doing for years. 

An ADW owner, large or small, does not make money if he or she get a slots contract, if the box is filled, or if they offer a free gym bag. They make more money if their handle goes up, because they get a percentage of each dollar wagered. If they get Bill from Brooklyn to bet $100,000 a year, they may make $4,000. If they get him to bet $200,000 a year, they make $8,000. $8000 is greater than $4,000, so they try their best to get Bill to change his ways as a player.

With 20% takeouts an ADW owner who pays, say, 10% for a signal, and has operating expenses of 3% of handle, can keep 7% for him or herself as profit. That’s great, but 7% of a small number is not overly worthwhile. They need more volume. To get that volume they incentivize their players with lower takeout, player rewards and innovations like conditional wagering, or watching 4 track video’s at the same time. They also try to help their clients win, by offering free handicapping tools, like Pacefigures or Thorograph.

This is why innovations have occurred in computer wagering at such a quick pace and also why rebating has emerged.  These companies reinvest their profits into the player to get them to bet more.
The result has not been surprising. If you give a player 5% back at the end of the day, and help him or her win, they have extra money in their account, and they rebet it. Much more than that, however, is this 5% can turn a losing player who gets tired of reloading and thinking about poker, into a break even player. A break even player thinks he can beat the game, and he plays more, and concentrates on racing more.

What ADW’s recognized early on, is that it’s not only big players this works well with. It’s small players too.

I received an email from a smaller player who discovered a rebating ADW for the first time.  He had played racing for years and stopped because he was losing too much money trying to beat the massive takeout, but he decided to give it one more shot playing from home.  He wrote:
I registered for the account and I must say I am impressed. I like the smaller tracks like Monticello and Northville. I even tried a place ticket on a 3-1 greyhound. The best yet, though, is that I started with $100, betting frivolously and stupid, I blew it all, but the next day I had 23 dollars in my account. Then last night I got the $23 all the way back up to $100 (and then blew it all again). But anyway,  I managed to bet about $700. Now they throw $35 back in my account! I'm back to the slow grind.

This is a customer who played racing for years and found he had no shot to beat the game. In the old days he would lose the $100 and go home from the track.  The track would make their $18 or so on his wagering and that’s that. With the ADW owner incentivizing him to play more, he bet over $700 on his initial $100 load and he was still in the game.

I love what Yonkers and the Meadowlands are doing. They’re following what online wagering providers have been doing for years – trying to up their handle. It’s about time they did.


Anonymous said...

I haven't been keeping up to date on all that is going on at Yonkers or the Meadowlands in terms of HOW they are bolstering their handle but are they now providing the same type of incentives back to the on-track bettors??

HANA Harness said...

Each track has programs for on-track customers. The Meadowlands has their Big M club, and my understanding is Yonkers is now allowing bettors to use the cards casino players get to use to be tracked. What the rates are I can't say.