Each year billions of dollars are wagered around the world on horse racing events. Where does the money go you bet at the race track? The answer is not as simple as what you might think. Here’s a closer look at how horse race tracks earn and spend the money that they collect.
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How Horse Race Tracks Earn Money
Just like any other business a race track needs to make money to stay afloat. The track has expenses to meet, race purses to pay out, and employees to compensate. All that money has to come from somewhere, and in horse racing it comes from various streams of revenue.
The biggest source of revenue a race track earns is called takeout. This is the amount of money that is deducted from each wagering pool before the bettors are paid for their winning bets. The takeout on each bet type varies, with larger takeouts being applied to exotic wagers in most cases. As an example let’s say the takeout is 20% on the exacta betting pool for a single race. The bettors wager $10,000 into the pool. $2,000 is deducted from the pool and taken by the race track.
Another source of revenue for a horse racing track is breakage. All bets at the track are paid off in increments of $0.10. If the actual amount that should be returned to bettors for a bet in a race is $6.65, the track will instead payout $6.60 for all winning bets. The extra $0.05 from every winning bet is retained by the track.
Some tracks charge an admission fee,especially when it comes to exclusive areas like the clubhouse. The money that is paid by patrons to access these areas is a revenue stream. There are also programs sold, and money is also earned from food and beverage sales.
When you add it all up the horse race track earns a sizable amount of money on each race day. Where does the money go you bet at the race track? We’ll try to answer that question by looking at all the different expenses a race track is obligated to pay.
How Horse Race Tracks Spend Money
Some of the ways that race tracks spend money should be very obvious to the bettor. We’ll start by mentioning the most obvious of them all. It takes hundreds of employees to operate a race track. There are tellers, stewards, medical personnel, concession stand workers, janitors and housekeepers, track announcers, placing judges, entry clerks, and more. Even a very small race track may have 50 or more people on the payroll. Larger tracks can have 200.
Salaries for these people are determined by their position, just like they are in many other businesses. Executives at a large race track may earn close to six figures, while the counter person in the concession makes minimum wage. Add it all together and that is a lot of money to pay out.
Next there are the ordinary expenses that no one thinks about. Utilities. Repairs. Insurance. Perhaps even a bank note or lease to pay on the racing property.
Another major expense for horse racing tracks is purse money. This is the money that is offered for each race. Some races can have purses that total in the millions of dollars. Others at smaller tracks may have a purse of $3,500. The top horses in each race will earn a share of the purse money for their owners and jockeys.
The money you bet on a horse race goes to cover all of these expenses, but the majority of the money bet on each race is returned to the bettors. 80% or more of each wagering pool is paid out in winning wagers.
Yes, it is true that you are helping fund the sport of horse racing whenever you make a bet at a race track or even at an online racebook. Some bettors are always complaining about the takeout rates for races and how much is deducted from the betting pool. Without that takeout horse racing as we know it would likely cease to exist.
What About Online Racebooks?
You will have noticed that the examples we provided are relative to live race tracks, but what about online racebook expenses?
In truth, they are much the same. The online racebook is tied into the betting pools at the race track, so the same amounts are taken out of the pools. This money benefits the track, but the track typically has a licensing agreement to share revenues with the online racebook. It is beneficial to a track if an online racebook offers their track for wagering.
Online racebooks also have employees that must be paid, and they also have promotions such as matching bonuses which are given to players. About the only difference is that the online racebook doesn’t have to pay purse money to horsemen, nor does it have concession sales.
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