Friday, August 29, 2014

Horse Ownership, Owner Breadth and Reasons to Leave the Game

I had a fun conversation today with Brad Thomas and Chuck Simon on twitter about horse ownership, big stables and the ever-changing game.

We've all seen what's been happening: Big stables get bigger, vet bills and supplement costs grow, partnerships are formed which drives down the price of breeding stock (both on the higher and lower end).

There's a real crowding out going on, and it has been going on for some time.

Why is this an issue? Because it has decreased owner breadth, and made for bad betting races. Since owners (suppliers) and horseplayers (the demand which allows for supply to occur) are the complete, unequivocal lifeblood of the game, this is a huge issue. With slots especially, aggregate demand for horseflesh is looked at and trumpeted, but the make-up of such demand is as, or more important.

In HRU over two weeks, this ecosystem was looked at. Some of it is probably hard to read, but I feel it is steeped in logic. The horse ownership demand curve is hurting, and needs some fixing.

Part I - About Charles Dombeck's comments in leaving the game to others (some of these very same points) (pdf page 4) & Part II - some lighter fare - What Can the Track and Industry do to make things more attractive to a new owner.

Have a nice long weekend everyone. Good luck and good racing.

Thursday, August 28, 2014

Thursday Notes

Happy Thursday everyone.

It's a good weekend in racing.

Tom Durkin's last day is Sunday. "End of an era" is used a lot these days in sports and entertainment. This time it really means something. We grew up with Tom - both in harness, "here comes Nihilator on the outside with swift and powerful strides" and in thoroughbred racing, "Sunday Silence in a racing epic" - and I, like many, can't feel anything but a bit sad about him leaving. Good luck Tom. Enjoy life.

The card on Saturday at Mohawk is astoundingly good, from a fans perspective. We've still got that silly "winners pick posts" thing going on, which makes stakes finals more of coronations, not races.  Unlike previous or some current big cards, however, Mohawk has at least tried to make things better for the punter too. The Super High Five will be paid out, and we should get good value. 

The Zweig is Friday at Vernon and Monday is the Cane Pace, the first leg of the very popular Harness Racing Triple Crown.

Churchill Downs names a new CEO. Bill Carstanjen, which to me is always tougher to spell than Leroydeserdesonomeaux, is the dude. I think we can expect more of the same with this appointment. Let's hope after the terrible spring meet he does not raise rakes to 30% to "make more money", though.

I am almost through the fascinating "The Sure Thing", a book about Irish professional punter, horse trainer and jack of everything racing, Barney Curley. There are plenty of unique and interesting stories, but one made me laugh.

Learning he was going to be in New York in the early 1980's, The New York Post decided to interview him. When asked about American racing, the only thing the long-time professional racetrack gambler said was "At 18% pari-mutuel takeout I would not last twelve months." Maybe we should send that quote to Bill Carstanjen.

What doesn't fit in this DRF article on Saratoga handle? Handle is down (expected), ontrack handle is near flat (expected, I guess) but attendance is up 12.1%.  We'll get Columbo on the case to see if they're counting barn cats in the attendance figures.

Old school time and why John Campbell is the best who ever lived with a square gaiter: They gave Nuncio time to learn to race from the back, and it's worked well. 98 out of 100 horses nowadays are not given that much patience.

Speaking of patience, Barney Curley was a friend and fan of Charlie Whittingham. He marveled at how patient he was with horses, along with his ability to get them to peak.  He shared the often used Bald Eagle quote about the Arlington Million back in the 1980's. A reporter asked when he thought his charge - Estrapade - was a winner. Charlie responded, "when I entered her"

Kentucky Downs opens soon. Get your handicapping sheets ready. It's got the best betting value in North America.

Loved this. A horse went a big mile at Charlottetown and set a track record with new driver Billy Davis on her. Some cried "juice" but a nice post on a chat board in defence sets some straight.


I got a gazillion hits on yesterday's post. People must like to hear about iPhones or something. Thanks for reading and sharing it. 

I think Bettors Edge beats Sweet Lou this weekend in the CPD final.  I thought he would get beat two races ago as well, so beware any PTP Sweet Lou Proclamations.

Have a great day everyone!

Wednesday, August 27, 2014

The Betting Spiral, To the Power of Two, And What's an iPhone?

I follow some fun, smart people on twitter and last evening, one (Crunk) tweeted that he thinks handle for August will be off close to 4.5% in the US, year over year.

A link followed from Alex titled "Is Horse Racing Entering the Final Furlong" from a UK paper.

“It’s football and these other sports which are helping to counter the ongoing decline in attractiveness the industry is seeing in the dog and, in particular, horse-racing markets,” Ladbrokes’ chief executive, Richard Glynn, warned at the bookie’s half-year results earlier this month.“If turnover trends do not improve and if the current cost structures are maintained for horse betting in particular, it may rapidly reach the point where it becomes unsustainable as a product.” 

..... and as turnover has fallen, racing has been after more money.

"The bookie believes that next year racing will only account for a fifth of winnings at its betting shops — down from 40pc in 2005 — unless “drastic action” is taken to reinvigorate interest in Britain’s second biggest spectator sport. Over that nine-year period, the bookie says, the costs of racing to the betting industry have doubled. The two main costs are the horse-racing levy, a statutory duty on bets placed “off course”, plus media rights"

So, cost of betting up, betting demand down. As betting demand goes down, the stakeholders ask for more of the existing pie by raising costs again.Sound familiar?

We can talk cost and pricing 'til we're blue in the face, but there's more to it.

In the UK since 2006, field sizes have crumbled (from around 12 entries per race to 9), while events have increased. (see stats here). Bottom line? They're asking players to make gambles that are poor. And they expect them to play bad racing events in the same frequency. Round peg, square hole.

Further to that,the evidence that racing itself has usually lived for the here and now, and reacted later to changing environments. In the UK, and here.

I presented on a panel with Mark Davies back in, oh 2007 maybe. Mark's a UK racing nut, one of the original founders of Betfair, and one of those guys who looks forward, not backwards.

Many years ago now, Mark was working on his "2020 Project" - what racing can and should do, to ensure viability and growth in 2020. One of Mark's thoughts was to have wifi and clouds at racecourses, cutting edge betting conduits on course; flashy apps to take advantage of bettors on course, who use new technology like iPhones, which was starting to gain big market share.

"With the explosion in iPhone and Blackberry ownership in the last two years, and with the demographic of race-goers almost certainly having a significantly higher level of such ownership than the general public, it seems foolish to me for racing not to be developing solutions for this now, rather than turning to address it in a few years’ time, when someone else has beaten them to the punch (whereupon everyone can start whinging about the fact that they don’t own the product)."

I guess we can give him a pass when he mentioned blackberry, but remember, this was awhile ago.

When discussing this with racing's stakeholders at the time  .........

 The answer I got was, “Not everyone owns an iPhone.”

In both UK and North American racing, excuses about why people are not playing horse racing like they used to are frequent, sometimes comical, but certainly overused. Racing is in the state its in for many, many reasons. One of the reasons is that it has lacked vision, an understanding of the betting market, and the changing world.

Much of the hand racing is dealt is out of its control, but some of it is clearly self-inflicted.

Notes:

The word "great horse" is thrown around way too much nowadays, but one horse retired yesterday - I Luv the Nitelife - who I think it was right for. I can only think of one filly since 2000 who was as dominant, tough, fast and versatile, doing it against a decent crop of horses and that's Rainbow Blue. What a shame she had to bow out off an injury. She would've been great to watch for a couple of years. Great horses usually are. To watch her in defeat, which showed her greatness more than any of her wins, click here.

Hey, I read twitter and everyone says only harness people do this stuff? In the famous words of Mike (@gatetowire), "head in the sand". Nothing to see here, move along.

The super high five mandatory payout takes place on Saturday at Mohawk. We're looking at over $600k in the pot and one might expect (with an amazing card) that might be close to $2 million when all is said and done.

Have a great day everyone.

Tuesday, August 26, 2014

Fantasy Sports & the NFL's Multi-Pronged Attack; Much Different Than Horse Racing's

Good Tuesday everyone.

With the NFL Season approaching, people who play Fantasy Sports are in high gear, ready to draft their teams.

Fantasy Football, long ago a part of a geeky stats and football subculture, has gone beyond mainstream. The market is worth billions and information is at your fingertips. The culture keeps on growing and growing and with it, so do revenues.

How big is this market? Well, ESPN alone (one of many companies or media enterprises who run leagues) has 14 million players. There are dozens of ESPN's, and sites like FanDuel where much dinero change hands have exploded.

This has now, as the article above alludes, caused some hand wringing by governments and others, because Fantasy Football had a carve out with 2006's Unlawful Internet Gaming Act of 2006 (the same carve out horse racing has gotten).  This is gambling, no doubt about it.

This niche market, that has grown beyond niche, is a testament of the power of a medium, when intertwined with gambling.

While racing relies on betting revenues to pay for virtually everything, the NFL does not. This medium is a way to encourage people to become football fans for life - to watch the games on TV, buy shirts, etc. 

Let's think about that 14 million number at ESPN.com alone. That's about the number of people who watch the Derby every year. While racing can't do virtually anything with these casual fans, ESPN has already signed them up. It's astounding.

The NFL has been pretty mum on the issue. There are sites outside theirs who are "using" players and the league to host these games. Money changes hands, there's gambling going on. The NFL has not tried to block them, or charge for stats, or anything along those lines. They are a partner, albeit a silent one; one which the NFL doesn't only tolerate, but tacitly approves. 

It can be argued that the NFL has done more for its sport with gambling and the 2006 UIGEA than horse racing has.


Racing is not in this position because it does not have TV contracts supplying revenues. However, it clearly has not done enough (knowing that the UIGEA of 2006 provided racing with a near monopoly in online wagering, and seeing where it stands is evidence enough). While the NFL encourages partners to sell the game for them through these various means, racing tries to more often than not, shut them down. ADW's are constantly being bombarded for more fees because they're "pirates", Betfair is the devil according to most. In racing, a past performance is treated like a piece of gold, not like a box score.

I think it's obvious this has been a big mistake. 

Back in 2000 the NFL could've played hardball with fantasy football. By making a strategic decision they didn't.

14 million people are signed up in only one league this year, and come next Sunday the bulk of them will be watching Sunday Night Football, at the bar having a beer, wearing their favorite players shirt or hat. They'll bring friends to watch and play with them, their families will grow up in the same culture and it's very likely that for generations they'll be watching football.

The NFL was very smart to embrace a new way of doing things, despite fantasy football being looked at like a defacto "competitor". Realizing this early on has grown the game leaps and bounds.



Monday, August 25, 2014

Monday Musings on the Racing Weekend

Hello horse racing peeps.

Although I don't mean it to, these Monday posts with weekend musings are becoming a trend. Somehow I don't think it's overly groundbreaking, but, anyhoo, here we go.

I watched the Pacific Classic and was pretty impressed with the Shared Belief victory, despite it being trip and pace aided. It's nice to see a horse win a big race like that, look fresh and sound doing it, when the connections skipped the Kentucky Derby and Triple Crown to do just that. We've seen horses scratched the day of the Derby, or before it, because it was on the calendar. It was on the calendar for Shared Belief, too, but they didn't take the bait.  As for his Beyer, well, I agree Mike.

I am unsure why old Game On Dude takes so much flack. The old boy shows up, and even with a ridonkulous 45 and change (on poly no less), he still didn't give up.  It seems every time the horse loses, twitter chimes in with "Dude no good". Dude is very good.

Sweet Lou won his 10th in a row Saturday in his CPD elimination. I didn't think he looked fantastic but the depth of field he faces next week is not overly stout. In the other CPD elimination, Clear Vision rolled home fast like a little fish, off way too slow fractions on the front end.  I'll be betting against Lou in the Final, I am just not sure with who.

Bolt the Duer, who has been flat as a pancake with some sort of maladies this season, won Saturday at Pocono and driver Mark MacDonald said he felt like his old self. 

The Canadian Pacing Derby card will be a good one, and the last race of the day has a mandatory payout of the super high five, aka the only day people should probably be playing that bet.

Palice Malice's work Sunday was reported as poor and this was confirmed when owner Cot Campbell (guys named Cot are made for racing, I think, but I digress)  said he's out for the Woodward. Palace Malice's issues appear to be deeper than originally thought. Something is wrong with him, I suspect. .

I watched the Travers. I, like everyone in racing except people who did not watch the race, or those who have real trouble with numbers, was surprised Joel Rosario pushed that pace. Tonalist raced super, I thought.  I really like that horse.

Speaking of the Travers, attendance was announced at 45,557. I don't know about you, but when I hear NYRA attendance numbers now, I think of stories about Fidel Castro winning elections with 99.3% of the vote.

I saw an exacta payoff or two at Del Mar today (I don't play Cali racing, so I never pay attention), and saw just how terrible that exacta rake is for punters. If you have a positive ROI in the exacta pool in Cali since late 2010 when they jacked the juice, you are probably the greatest horseplayer alive.

I was surprised that Pacific Classic day only handled around 17 million. Satuday's Travers card handled something like 40 million. 

Captaintreacherous was scratched on Saturday. It was announced his next race is the Winbak Pace on Jug day. They said they were going there early in the year; and it's ballsy. It's been no secret the Cap'n has little quick speed and is not the best gaited horse around the turns. He'll likely need a good post, or park the mile first over to have a chance.

The four year old male pacers continue to have a terrible year. Sunshine Beach looked nothing like the horse he was last year on Saturday (or even off his qualifier this year), and horses like Lucan Hanover are non factors. Conversely, the four year old mares are not too bad (despite no ILTN), female trotters aren't either, with Classic Martine, Ma Chere Hall and others doing well. Bee a Magician is not going as fast as she was last year, but she's done alright, too.

Joe over at the VFTG blog looked at harness horses who have disappointed in 2014.  I have to take issue with Foiled Again. If one thinks he would do super-well having to pace 1:47.4 each week at age ten, I don't think that was wise. He's Tom Watson. Last year at age 55 in human years, Foiled could really contend in the Major's. But this year at age 65 in human years, he is not quite up to snuff. But he's still a really fast, nice horse, who can win races.

This weekend someone asked me why, with computers and technology, tracks don't payout to the penny. Short answer: They don't want to.

I played a few races this weekend with TimeformUS PPs, and their website only. If you have not tried it, I recommend it. It's good, and modern, with a lot of clickable stats that are useable.

I have never felt this way before, but I think the two year old pacing fillies - as a group - are faster than the two year old pacing colts.

Have a nice Monday everyone.

Friday, August 22, 2014

CHRB Meeting: If You Can't Ask a Proper Question, You Can't Get a Proper Answer

As most know, I have long given up on California Racing steering themselves out of the abyss, and don't pay much attention anymore, but I got an email with a link to yesterday's meeting. And I listened.

"Racetrackandy" on twitter - not employed by the industry, but a guy who probably works harder for it than a lot of people who are paid by it - drove up to make a public comment, as is customary at CHRB meetings. His comment - well thought out - regarded takeout rates in California, their changes, and the analysis of them.

It was an academically sound question and comment: 'There is a proper takeout rate for wagers in California that increases purses and increases payouts to customers to encourage more betting, both short-term, but particularly the long-term. Can California racing move toward this number, professionally and academically, rather than specious, arbitrary changes that no one can learn a thing from?'

The response, and question, from CHRB member Madeline Auerbach shows how far racing needs to go to change its preconceived notion of what gambling and takeout is, and how to begin to move the sport forward.Paraphrasing, she said "How can you guarantee these takeout changes will not hurt the people who invest in horse racing."

The thinking is: We now have "$X" because takeout is "set". We may have less than $X if we adjust off this "set" number.

That question is misguided (the easy answer to that is, "with real handles off 50%, purses down, racedates down, foal crops down, the threat of online poker from Indian casino's up, and everything else, how can you afford to not find optimal takeout rates."), but it's much more than that.

Racing has clung to a takeout number that has never been set by the gambling market. It's guaranteed to be wrong. I'll type that again: The current pricing structure in California (and elsewhere) is 100%, bet all you got, Secretariat in the Belmont, never a doubt, no question, unequivocally, wrong.

Neighborhood bookies are not charities; they did not come up with 5 cent or 10 cent lines because someone told them to. Slot machines, long in Vegas priced at terrible 15-25% takeout rates in the 1960's and 1970's, did not come down to their present 2%-7% levels because a politician told them to set them there. Poker, long played in more than spaghetti westerns over the years, does not rake 4% out of a pot because someone liked Bobby Orr's number.

Those rates were all set by markets.

Racing's current takeout structure was not created from analysis, trial and error, the market, or anything else. They were set in 1907, and changed based on whims. As a monopoly, this could be done. Cash strapped governments who haven't liked a program they did not want to fund, needed more and more money; racing happily went along for the ride. Even though this price setting did not work and never really has (read up on the handle and revenue changes in the 1940's to see evidence of that), at least racing had a monopoly, where some sort of average cost, rather than marginal cost pricing could allow it to get by.

That all changed in the 1970's, 1980's and then through the massive disruption of the Internet beginning in about 2000.

Ms. Auerbach is asking a question that has no basis in reality, in terms of academically and fiscally sound pricing policy. She's asking to protect a takeout rate that has never been set by the market. She's protecting a phantom number.

In regular businesses, we have discounted cash flows, internal rate of return targets, and opportunity costs of capital. Those are taken into account with a capital project, pricing changes, what have you. A company who sells widgets for $4 (because the market says so) can raise their price to $5, analyze the changes beforehand with forecasting, and analyze the emprical results afterwards. it's been done forever. They can ask the question "will this price change hurt us" and do so with sound logic.

Racing's pricing is phantom, a ruse, a number that might as well be made up. Protecting it, or not wanting to move away from it to ensure the business is doing the best it can is not logical. It's not sound. It's not right. And it's bad for horse racing.

I see on chat boards and on social media, Ms. Auerbach is getting criticized. I guess I did the same above too, but I don't mean to, nor do I blame her. The culture of racing has taught her, and others, to think that way. They think at current rates the pie is full, and a change off them lower will cause a "piece to be taken away" from them. It's wrong, and it's detrimental to racing, but like Will Cummings in his pricing study paid for by the HBPA said in 2003 "racing has lived with high takeout for so long" it really knows no other way.

One day - and I am sure of this - racing will move off the numbers. The old guard will be purged and change will come. When that day comes, racing will begin to move forward and be priced like the rest of the gambling world. For the people Ms. Auerbach speaks about who invest everything in this sport, I hope that day comes sooner rather than later. 

Have a nice day everyone.