In the world of Thoroughbred racing, a topic that never fails to stir discussions is the complex issue of takeout. It's a subject that intertwines with various aspects of the industry, from death and taxes to the very survival of smaller-scale casual horseplayers. This article delves deep into the nuances of takeout and explores potential solutions and future trends.

Unraveling the Takeout Conundrum in Thoroughbred Racing

Keeneland and Del Mar: Pioneers in Takeout Experimentation

Marshall Gramm, a renowned professor and chair of the Department of Economics at Rhodes College in Memphis, outlines how Keeneland Race Course and Del Mar Thoroughbred Club hold a unique position in the current pari-mutuel era. He believes these two premier boutique-meet tracks have the most to gain from experimenting with lower takeout rates. "They're the ones who have to do it. The smaller tracks, the ADWs won't let them. If a smaller track reduced takeout, [the ADWs] would make them reduce host fees, so they can't do it," Gramm said. For instance, at Keeneland, Gramm suggests lowering takeout, especially on tris and supers to 18%. "All you lose is the margin on your on-track players. The CAWs, they're getting their rebates cut. But their effective takeout's the same. And then you could go and advertise, 'Hey, we have the lowest takeout, across every pool, in the country.'"This approach not only benefits the tracks but also presents an opportunity for the industry as a whole. "TwinSpires, Xpressbet, NYRA Bets, they may not like it. But they're not going to cut your signal off. So [Keeneland] and [Del Mar] have a unique opportunity to actually experiment with lowering [the] takeout, and you don't have to move your host fee along with it. I would love to see that happen," Gramm added.

The Impact of CAW Teams and Rebates

In this era of pari-mutuels, the setting of takeout rates is complicated by opaque contractual agreements related to host fees and betting-volume rebates. CAWs, which are largely anonymous individuals or entities, play a significant role by tying sophisticated wagering technologies directly into tote systems. Gramm began his takeout riff by responding to an audience member's postulation that tracks like Keeneland and Del Mar might be the least incentivized to lower takeouts. However, he believes that contrary to popular belief, these two meets have the most to gain. "They're looking at their takeout rate, not the size of their rebate. In fact, the teams should benefit, because if takeout comes down, people will bet more and more into those pools, and they'll churn more. So it's a win/win," Gramm said.

The Future of Horse Racing's Betting Landscape

Panelists were asked to predict the biggest change in horse racing's betting landscape five years from now. Matt Feig, the chief operating officer of NYRA Bets, highlighted the "exasperation of the seasonality of our sport" as a challenge that needs to be addressed. "We're kind of seeing it now, where you get into the fall, which used to be really robust from a wagering standpoint. But now, there is some stagnation that's happening in [the third quarter of the year]. And that's something that needs to be looked at from an industry standpoint," Feig said.Nelson Clemmens touched upon the consolidation and reduction of racetracks as a troublesome trend. "Five years from now, if the worst happens–and we know the dynamics within the industry–we might not have an 'A' track west of the Mississippi," Clemmens said. Zach Taylor, the North American director of sales for Global Tote, believes that while some tracks might not be here in five years, it could be a boon for the wagering industry if done in a measured way.Gramm also emphasized that five years from now will be a benchmark for horse racing as it represents roughly a decade since the national legalization of sports wagering. The relationship between racing and sports betting, which does not generate direct revenues for purses like pari-mutuel horse betting, could have an erosive effect on the Thoroughbred industry. "Will we look back on this, and this will be another one of those things that we hoped was going to change the game? Or will [sports betting] be something that we'll be able to capitalize on?" Gramm asked.