Why Doesn't Anybody Go to the Horse Races?
It pays to stay home.
I was walking into Hawthorne Race Course outside Chicago when I stopped to bump fists with Dino, the parking lot attendant. Dino sees everyone who goes in and out of the track. He doesn't see many people these days.
"Aw, it's terrible," he said, in the put-upon tone that all horseplayers learn after throwing away a few thousand tickets. "There used to be a guy here, the Greek, he did 25 percent of the handle. He had two or three runners. Mike the Thief—he used to make a living just by skimming [money off the Greek]."
It's not surprising that a whale like the Greek stopped going to Hawthorne. It's surprising he stayed so long. When I went inside, I did see a few of my racetrack buddies. Snow, the "stooper" who picks up tickets off the floor, looking for a tossed-away winner. Plumber Bob, whose jeans sag like those on the man who comes to fix the sink. Blonde Jimmy, who's so focused he never makes eye contact with anyone but a horse. We're the regulars, but we make $5 bets with soiled bills from Velcro wallets. Of the $1.5 million wagered on Hawthorne's races that Saturday, only a tenth came from the track. Weekdays are worse: 4 percent or 5 percent.
Close to 150,000 people will jam into Churchill Downs for the Kentucky Derby, making it one of the best-attended sporting events in America. But the rest of the year, racetracks are emptier than ever—not because the sport is getting less popular but because the track is a terrible place to bet on a horse.
The whales, the big bettors who support the industry, don't show up at the track because they can get a better deal elsewhere—by calling in their wagers to phone-betting hubs in exotic, loosely regulated locales like St. Kitts or North Dakota.Say you want to lay $1,000 on a horse running at Aqueduct. You call the hub in Fargo, then an operator takes your bet and relays it to New York, where the money is fed intothe racetrack's pool. Why not just bet directly at the track? Because you get a better return on your investment by staying away.
The phone hubs take advantage of the economics of simulcasting. Racetracks "sell" their signals to one another in exchange for 3 percent of the handle. If a horseplayer sitting at Santa Anita bets $100 on a race at Belmont, Belmont gets $3. The hubs pay a little more for this privilege than the tracks—between 7 percent and 9 percent—but since they don't have to maintain a grandstand or feed horses, they can kick money back to their customers.
The bigger the bettor, the bigger the rebate. The average racetrack's house take is 20 percent. You're subject to that bite whether you bet at the track or over the phone. The difference is that the highest-rolling players—who have the clout to negotiate rates—are refunded 10 percent of their wagers by the phone hubs. That cuts their disadvantage in half. Suppose you've been betting $5 million a year at the track and only breaking even. If you bet that same amount of money through a hub, you'll get a $500,000 rebate. Suddenly, instead of spinning your wheels, you're a professional horseplayer earning a fabulous six-figure income.