How Profitable Is Horse Racing for the Sports Books?

How profitable is horse racing for the sports books? Seems a lot of cost involved to provide betting availability for a small target group. Sports books would not be the same without horse racing, but can they be making much profit from having it?

According to Gaming Control Board statistics, for the 12-month period between 8/1/16 and 7/31/17, there were 127 race books in Nevada, next to or within 194 sports books. So apparently, 66% of the locations figure they can be sports books without horse racing.

As for profitability, we can’t know the net profit that horse betting earns; we don’t know the overhead of the books and how much it’s divided between racing and sporting events.

However, we do know, from GCB reporting, that in the one-year period ending last July 31, the race books won a little less than $44 million from a handle (total wagers) of a little more than $297 million (a 15.3% win rate).

That’s compared to a sports betting win of $218 million on a win percentage of 4.81%, for a handle of just under $6.2 billion.

By that metric, horse racing sees a fraction of the action of sports betting. Indeed, the handle on the 2017 Super Bowl alone was fully $138.5 million, a little less than half.

Other yardsticks, as well, support the assumptions behind your question.

In 1998, horse racing’s handle at Nevada books hit a high of $736.6 million (mainly based on Real Quiet missing the Triple Crown by a nose). In 1999, the handle dropped 23% to $568.5 million, and it’s been on a downward trajectory ever since.

In addition, in those years, sports books grew and race books shrunk. Factors have included accelerating track takeouts from the parimutuel pool, no more rebates to race bettors, too many races at too many tracks diluting the fields, and horse-race bettors dying off, while younger generations have little to no interest in it.

Still, as you rightly point out, races are a big part of the sports book culture, and while there are still major events like the Kentucky Derby and Triple Crown, we’d bet that the race books won’t be disappearing completely anytime soon.

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Comments

[email protected] Oct-03-2017

Your Math

Your math is a little off.  If there are 127 race books in 194 sports books, then 35% of the books don't have race betting, not 66%.  Another reason for the drop in race book handle is that most bettors now have access to online wagering options, which are legal in much of the country.  I suspect even when visiting Las Vegas those bettors use their online accounts.  Finally, your comment on no rebates also isn't true, since big online bettors actually get significant rebates.  As far as "little to no interest" by younger bettors, I suggest you attend a day at the races at Keeneland or Del Mar and see if you still think that's the case.  Racing certainly has it's problems, but generalizations still miss the point.  There is probably no other gambling option in which pure intellectual skill can give the player a significant edge.

Ray Oct-03-2017

Racing profits

If your figures are correct, keeping race books in the "sports book" area seems to be a no-brainer. a 15% win rate, 3 times the rate of sports betting, with no extra space needed since they use the same space, and races can be bet on at times when there are no games...I guess I don't see a reason to NOT have the races. And since they are part of the pari-mutuel system, it's a guaranteed win, unlike the race books of years ago who were actually booking the bets.

Horsesrus1 Oct-03-2017

Confusing

The terminology of the answer is a little confusing. The race books don't actually win, they receive a commission out of the track's takeout on the wager.  That takeout ranges from around 12-30% with the host track getting a much smaller percentage than the venue where the bet is placed.  Tracks sold their soul for off track betting revenue several years ago and created this mixed up percentage where the costs to run a race meet use up a large portion of the host track's revenue. The otbs and Vegas race books get a significantly higher percentage of the bet takeout (a blended 15.3% would be pretty accurate) than the host track, which as mentioned in other comments is guaranteed revenue like a commission.  There is no wins and losses for the race book.

Question of the Day - 03 October 2017

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