JC / Railbird

Price Discrimination

Pricing

Tom LaMarra on simulcasting fees and Churchill’s recent takeout hike:

I’m no math whiz, so correct me if I’m wrong. In the case of Churchill, if its host fee remains the same, a rebate shop and its customers get to keep the extra 3 percentage points when the exacta takeout goes from 19% to 22%.

If you operate a rebate shop or are a large importer of simulcast signals, higher takeout is money. That may explain why racetracks, rebate shops, and [ADWs] don’t complain about 30% trifecta rakes: If they pay the sender 3% for the signal, there’s 27 cents per dollar to play with before taxes.

Matt Hegarty on how those cents might get shared:

If simulcast rates do not go up at the same rate as the takeouts, then some players may not feel the full impact of the hikes. Many account-wagering operations, including Churchill’s mammoth twinspires.com and an offshore site the company bought several years ago, offer rebates to players, and some sites may elect to forgo the additional revenue to increase the rebates to their players on the Churchill signal. Many rebated players, including those who use automated systems employing algorithms to determine their wagers, are highly sensitive to takeout rates.

Posted in Industry on April 16, 2014 / Tagged Business, Churchill Downs, Handle, Price Discrimination, Rebating, Simulcasting, Takeout, Wagering