Contrary to the belief of many Horse Racing Executives the takeout rate, or the percentage of money that is removed from the wagering pool, has a negative correlation with wagering handle in Thoroughbred Horse Racing. If the takeout rate is increased the wagering handle decreases and vice versa. In this presentation three case studies are examined that affirm this idea.

1. The Effect of Changing the Takeout
Rate on Thoroughbred Horse Racing
Wagering Handle
By: Lenny Moon
www.equinometry.com
@equinometry

2. Takeout Rate vs. Wagering Handle
• Hypothesis: There is a negative correlation between takeout rate and
wagering handle, wherein as one increases the other decreases and vice
versa.
• Test: Review the impact of increasing and decreasing takeout rates on
wagering handle.
– Case Study #1: Laurel Park Pick 4
– Case Study #2: Tampa Bay Downs Pick 4
– Case Study #3: Fort Erie Pick 4
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3. Case Study #1 - Increased Takeout %
Laurel Pick 4

4. Case Study #1 – Increased Takeout % Laurel Pick 4
• The takeout % for the Pick 4 at Laurel was:
– 2006 = 14%
– 2007 = 10%
– 2008 = 14%
– 2009 = 25.75%
– 2010 = 25.75%
• The data used for this example is the Pick 4 pools at the August meets
from 2006 to 2010.
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5. Case Study #1 – Increased Takeout % Laurel Pick 4
Laurel Park P4 Pool Size vs. Takeout %
15,000 30%
12,500 25%
10,000 20%
Avg P4 Pool
7,500 15%
Takeout $
Takeout %
5,000 10%
2,500 5%
- 0%
August '06 August '07 August '08 August '09 August '10
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6. Case Study #1 – Increased Takeout % Laurel Pick 4
• From 2006 to 2010:
– Takeout increased from 14% to 25.75%.
– The average Pick 4 pool decreased 53%.
– The average takeout dollars generated decreased 13%.
– The one year takeout was lowered handle increased 16%.
• Simple conclusions:
– Higher takeout resulted in decreased handle.
– Higher takeout lowered profits generated for the racetrack.
– Higher takeout is, therefore, a lose-lose situation.
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7. Case Study #2 - Decreased Takeout %
Tampa Bay Pick 4

8. Case Study #2 – Decreased Takeout % Tampa Bay Pick 4
• The takeout % for the Pick 4 at Tampa Bay was:
– 2008 = 20%
– 2009 = 20%
– 2010 = 19%
– 2011 = 18%
• The data used for this example is the late Pick 4 for the first two weeks of
February from 2008 to 2011.
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9. Case Study #2 – Decreased Takeout % Tampa Bay Pick 4
Tampa Bay P4 Pool Size vs Takeout %
90,000 22%
75,000 21%
60,000 20%
Avg P4 Pool
45,000 19%
Takeout $
Takeout %
30,000 18%
15,000 17%
- 16%
February '08 February '09 February '10 February '11
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10. Case Study #2 – Decreased Takeout % Tampa Bay Pick 4
• From 2009 to 2011:
– Takeout was reduced from 20% to 18%.
– The average Pick 4 pool increased by 97%.
– The average takeout dollars generated increased by 77%.
• Simple conclusion:
– Lower takeout resulted in increased handle.
– Lower takeout generated more profit for the racetrack.
– Lower takeout is, therefore, a win-win situation.
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11. Case Study #3 - Decreased Takeout %
Fort Erie Pick 4

12. Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The takeout % for the Pick 4 at Fort Erie was:
– 2010 = 26.20%
– 2011 = 14.00%
• The data used for this example is the June Pick 4 pools from 2010 to 2011.
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13. Case Study #3 – Decreased Takeout % Fort Erie Pick 4
Fort Erie Early Pick 4
15,000
12,000
9,000
2010 - EP4
2011 - EP4
6,000
3,000
-
1-Sun 1-Mon 1-Tue 2-Sun 2-Mon 2-Tue 3-Sun 3-Mon 3-Tue 4-Sun 4-Mon 4-Tue
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14. Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The Early Pick 4 averaged $3,579 in 2010 when the takeout rate was
26.20%.
• The Early Pick 4 averaged $5,833 in 2011 when the takeout rate was
lowered to 14.00%.
• The Early Pick 4 average handle increased 63% from 2010 to 2011.
• The Early Pick 4 average handle:
– Increased 38% on Sundays
– Increased 75% on Mondays
– Increased 70% on Tuesdays
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15. Case Study #3 – Decreased Takeout % Fort Erie Pick 4
Fort Erie Late Pick 4
15,000
12,000
9,000
2010 - LP4
2011 - LP4
6,000
3,000
-
1-Sun 1-Mon 1-Tue 2-Sun 2-Mon 2-Tue 3-Sun 3-Mon 3-Tue 4-Sun 4-Mon 4-Tue
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16. Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The Late Pick 4 averaged $7,563 in 2010 when the takeout rate was
26.20%.
• The Late Pick 4 averaged $8,810 in 2011 when the takeout rate was
lowered to 14.00%.
• The Late Pick 4 average handle increased 16% from 2010 to 2011.
• The Late Pick 4 average handle:
– Decreased 7% on Sundays
– Increased 15% on Mondays
– Increased 36% on Tuesdays
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17. Case Study #3 – Decreased Takeout % Fort Erie Pick 4
Fort Erie Total Pick 4
25,000
20,000
15,000
2010 - Total
2011 - Total
10,000
5,000
-
1-Sun 1-Mon 1-Tue 2-Sun 2-Mon 2-Tue 3-Sun 3-Mon 3-Tue 4-Sun 4-Mon 4-Tue
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18. Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The Total Pick 4 averaged $11,142 in 2010 when the takeout rate was
26.20%.
• The Total Pick 4 averaged $14,642 in 2011 when the takeout rate was
lowered to 14.00%.
• The Total Pick 4 average handle increased 31% from 2010 to 2011.
• The Total Pick 4 average handle:
– Increased 8% on Sundays
– Increased 33% on Mondays
– Increased 48% on Tuesdays
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19. Case Study #3 – Decreased Takeout % Fort Erie Pick 4
• The average Total Pick 4 handle increased 31% when the takeout was
reduced from 26.20% to 14.00%.
• The Early Pick 4 outperformed the Late Pick 4.
• Monday’s and Tuesday’s outperformed Sunday’s likely as a result of less
competition from other tracks, especially the major circuits.
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20. Final Thoughts

21. Summary
• In each of three case studies a negative correlation between Takeout %
and Wagering Handle existed.
• Increasing the Takeout % resulted in decreased Wagering Handle and
stagnant Takeout Revenue for Laurel.
• Decreasing the Takeout % resulted in increased Wagering Handle and
increased Takeout Revenue for Tampa Bay.
• Increased Wagering Handle as a result of decreased Takeout % can be
amplified by racing on days with less competition as was the case with
Fort Erie.
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22. Conclusion
• The results from the small sample presented affirmed the hypothesis that
there is a negative correlation between takeout rate and wagering handle.
Therefore if the thoroughbred horse racing industry wants to increase
wagering handle the takeout rates on all wagers should be reduced.
• Please visit my website www.equinometry.com for an in depth look at
each of the case studies presented in this presentation.
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