Saturday, January 21, 2017

Racing Concentrates on 0.61% Too Often, and It Holds The Sports' Growth Back

I see some folks chatting about Canterbury Park on the twitters lately, due to Bill's piece at the TDN. There's a good deal of talk that pricing changes "don't work", etc.

Most of the time, and this is no exception, much of this chatter, in my view, is worrisome. Worrisome because we miss the big picture, and don't recognize this is a symptom of a big racing problem.

Bill notes, "Canterbury officials reported that the takeout reduction cost them $318,909, a significant amount of money for a small track. ."

"$318,909" might sound like significant dollars, but it really isn't. Canterbury, through card rooms, beverage sales etc, did $52.3 million dollars in revenue last year.

The amount "lost" through the takeout reduction is a misnomer; a takeout rate change didn't cause fewer races, decimated field size, and the rain; nor does it ensure 2016 revenues would equal 2015 with no change. But even using that language the percentage "lost" is 0.61% of total 2015 revenues. Yep, 0.61%.

Now, the goal of this takeout reduction, explicitly stated, was to increase off track wagering and give the signal a boost. That happened. In 2015, $28.6 million was bet by simo bettors on the CBY races. In 2016, that number jumped to $31.1 million.

What we saw was 0.61% of revenue spent for a multi-million dollar handle gain. Isn't that the point? Isn't that what people have asked from slot tracks for a long time; use alternative revenue to help grow the bet?

I have no idea what long-term takeout reductions mean for horse racing. I don't know what it means for Canterbury, or any other tracks that try, especially in a small data sample.

I do know is that a slot or poker track using 0.61% of revenues to grow handle is something that should be cheered, not jeered.

And I think we need to remember, the alternative sucks. Small tracks who haven't spent revenue to grow the bet are not 0.61% sure to be shuttered, but 100% guaranteed to be when the subsidy runs out.

Tuesday, January 17, 2017

Up the Elevator Dictatorships Ain't All Bad. When it Comes to Horse Racing, at Least

I've been watching this whole Trump-Train (for 47%; for the other 53%, Trump Trainwreck may be more apt) a little the past few months. One of its characteristics, I must say, is pretty entertaining.

You've probably seen various CEO's head up that elevator of doom to meet with The Donald in his office in New York. When they come back down to meet the press - after getting threatened with a cancelled contract, or can of 35%-tariff-whoop-ass  - most of them look like a deer in the headlights. Soon after, we often hear they're lowering the contract price of some good they're selling the government, moving jobs back from some foreign country, or similar. Just last week when The Donald said something about prescription drug prices being too high for people, drug stocks immediately tanked, and we can mentally picture drug company CEO's scurrying for the nearest bottle of bourbon.

A lot of these dictator type actions don't sit well with a whole lot of people (for good reason, see Venezuela), but there's zero denying that fear, and fear of power, gets results.

Count me in the camp of folks this does not sit well with in a larger perspective, but for racing, holy crap, I think can we use a little of this.

Just today, Joe Gorajec in the Paulick Report examined the regulatory morass with out of competition testing, which has been asked for by most in the sport for a dozen years. It's pretty much gone nowhere.

Admit it, don't you want to send the folks who've blocked this at every turn "up the elevator"? I'd push the button for them.

"Try running your sport as I leaf through this Interstate Horse Racing Act," might be the response. I bet we'd see something done by next Tuesday.

Uniform rules have been spoken about in the sport of horse racing since Dwight Eisenhower signed the Highway Act. But there ain't no uniform rules, whether you are an owner, jockey, driver, trainer or bettor.

"Up the elevator", a holding call is the same in an NFL stadium in Minnesota as Dallas (OK, no Dallas officiating jokes), and the functioning of the sport of football depends on it.

Racing's response of uniform rules being "too complicated to fix" turns into "we should be able to make this work" pretty quick when the purse for next Thursday's MSW drops from $45,000 to zero.

It's taken years in California to pass "third party lasix". Something as minor, common sense, and used just about everywhere should take like a day, maybe two, three if it's a long weekend, to pass. "Up the elevator" you go, California people.

There are a number of other simple things in the sport of horse racing that most other businesses would long have fixed, (that probably could be fixed) in less than a month - if the sport had the elevator.

No, a few people being sent up, then sent down with that deer in the headlights look, wouldn't be all bad.




Friday, January 13, 2017

2016 Blog Stats

I find posts about blog stats at year end a little self indulgent, but I'm bored at lunch right now, and was looking at something, so here we go.

For the dozen or so regular readers, perhaps you'll find them interesting.

In 2016, you visited from a lot of countries, but not surprisingly, the land of the free and home of the brave led the pack, with 71% of hits. Canada was second - as we often are to the US in everything except curling, and ice packed snow, where we kick your Yankee asses - at 18%. Australia - where harness racing is still pretty big - was 3rd at 4%.

I weeded out the well-publicized visits over Christmas from RUSSIA. There were a full 4,000 hits over the holidays from Moscow. Either a whole bunch of Russian people, drunk on vodka, huddled around wood stoves, wearing fur hats (that's all the stereotypes I can come up with), decided they loved horse racing and visited, or this was a coordinated attack by Vladimir Putin. I'm really not sure.

When it comes to browser usage, youse folks are a savvy lot. IE was 3rd with only 18% of hits. Chrome was first. Google is going to take over the world. As an aside, remember when everyone was buying Netscape stock?

As for posts......

The post on the Sword Dancer - the race where there was more rabbit usage than in Watership Down - was number one with a bullet. It was not only the highest trafficked post in 2016 on this blog, it was the highest trafficked post ever. At over 1,000 hits above the second place finisher it wasn't even close. I thought about this and I think it was because no one else was talking about it. It happened, then silence, except on social media. 90% of the hits came from SM, and it wasn't even linked anywhere.

Second in traffic was The Derby Bathing Index ®. Yes, this is true. I'm not lying. You people are crazy.

Third was a post about harness racing, which is odd because harness racing is not thoroughbred racing (there are "buggies" in harness racing, and people don't like buggies as much). Why Is Harness Racing So Entitled was not a feel good piece by any means, but people read it.

It was another big year for the "Greatest Trotter Who Ever Lived" post from 2009. This thing just won't die. It received 400 views in 2016 and it still gets commented on. Most of these hits are from overseas where trotters are huge. People are finding it organically.

The comments that come in for that piece each year always make me chuckle, like this recent international incident:

"Varenne is the best! I am from Malta. Americans believe they are always the best at everything. In fact, they know nothing of the world and other countries. I breed horses trotting, it is my world, I know the history of all the horses, because I like to study. VARENNE IS THE BEST!"

"Stupid Italian Varenne trolls. Varenne's pedigree is 97% American and 3% French. He is 0% Italian. He got destroyed by Viking Kronos at 3. He dodged Moni Maker in the Prix D' Amerique and Elitloppet. He was a good older trotter, nothing more. Muscle Hill would have destroyed him."

" Response to the last comment. You're a American Envious troll !
You said a bunch of crap"

OK, on a more serious note, thanks for reading the blog for like 9 years now. It seems it started like yesterday.


Monday, January 9, 2017

Racing's (Lack of) End User Understanding

Out of the hundreds of buzzwords the 2000's have brought us, one of them is surely "big data". Looking at trends, the actions of many, smoothed out with fancy software programs and analyzed in new ways has certainly helped in the understanding of people and markets.

But, when we constantly look big, we lose the opinions of the components that are small.

In the book Small Data, the author says, "Big Data is all about finding correlations, but Small Data is all about finding the causation, the reason why."

One of the ways he used small data was as simple as one could imagine. He put executives in the same position a company's (in this case a South American bank) customers are in on a daily basis.


That's using a Dr. Watson, in an IBM Watson world.

Horse racing's most valuable customers -- those who play daily, want to play daily, and want to keep racing a part of their life -- go through a lot to stay customers. But I am not sure anyone in power in the sport knows just how difficult it is to stay engaged.

A worthwhile challenge would be for those in power in racing to open up an ADW account from their state, and play the races for six months, five days a week.

For a Churchill executive, sign up for a DRF account. You'll find out that you may like a horse at your track, but you can't lay a wager on the horse because you don't sell the DRF your track's signal. Then you'll go through the time-consuming exercise of opening up another account, and funding it, all so you can bet your popular track.

If you're a Woodbine executive you might find out that the $132 you cashed on an exacta at Keeneland is short-changed by your company, and it's lower than what everyone else received. Why? You might know, but you'll wonder if your customers do, because it's posted nowhere but in the fine print.

If you're a member of the TOC, you might find that Jane from Florida received 4% cash back, but you didn't because of where you live. You scour social media to find out what others do in this situation and you find out that they call their grandmother in South Dakota to open an account for them, so they can play on a level playing field with everyone else.

If you bet a horse and your jockey stopped riding for some reason, coming 5th, you'll wonder why, and the judges won't say anything, and the racing media covering the race won't even ask. 

You'll - after watching horses circle at Gulfstream with a post drag, for seemingly an hour - get frustrated. That frustration will be heightened when you think you finally timed the post-drag right, but got shut out; and your horse crossed the wire first.

Maybe you'll be alive in a last leg of the pick 6, and the final leg will be cancelled with barely a moment's notice, because the track won't wait 20 minutes to see if the storm passes. 

You'll probably find a hundred things that will annoy you.

I doubt you, as a lone racetrack executive, will do a whole lot about these problems. The "big data" says you shouldn't worry about them much anyway, and if the rest of the industry doesn't help, what good will it do?

But at least you'll understand, and that's never a bad thing.



Friday, January 6, 2017

Racing's Betting Revenue Resurgence (If it Happens) Will Probably Be Forced

The headlines have been blaring -- Sears Bleeds Cash, Macy's Cuts Employees - and in retail this is nothing really new. Those not positioned properly are having a very tough time of it in today's world. They don't want to close, they are being forced to close. Incrementally losing market share never ends up very good in perfectly competitive markets.

Meanwhile over in the world of music, much of the talk about its death might be exaggerated. We as consumers used to purchased CD's for $3 a song, and when that cratered (and after pulling some teeth) the industry changed to a download model. That, once again, has changed.

Infographic: Audio Streaming's Stunning Resurgence | Statista
You will find more statistics at Statista

That's an 80% growth in streaming in one year.

But the margins are bad, right? Yes, you and I can stream ten songs for peanuts, not pay $18.99 in 1991 dollars, but at this lower price point, and with modern technology available today, more people are consuming more music.


It is estimated that over 130 million people will be in the digital music space in 2021 in the US, each spending $39.37 on consumption. Revenues are growing, and are slated to grow even more.

I am no expert on the space - I have a few books on it, ironically purchased at full price on my iPad I have not read - but the tenets are clear:

The music world did not want to change; they wanted high-margin-low-volume to be its forever. But, record stores were closed, "free" models took over, revenue fell, the industry changed, then revenue began to grow again.


At the present time, the sport of racing - like Sears for many years - has been able to plug holes, to nickel and dime, to scrape by. Slots have kept humming, government with legislation (like the UIEGA) has helped with almost monopoly protection. Gross purses are near unchanged, and it has been able to survive.

But it won't be that way forever.

Racing's move to a betting sport where top line growth matters most, where margins are sliced, where delivery avenues are encouraged not shut out, where new ways to play the game are explored, where the data ecosystem is changed and modernized, where resellers are embraced, will, in my view, have to happen. But it won't be chosen as a strategy, it will be forced as one. At that time - like Sears - it might be too late.


Tuesday, January 3, 2017

Racing's Elephant in the Room - In One Chart

Supply and demand curves are about as dependable as a rusty hammer. Whether it be consumer behavior, factors of production, or the shift in capital, the curves work just fine for just about every free business.

Except, perhaps, when it comes to the horse racing business.

In the 2016 Australia Fact Book released today, we see one chart that tells an interesting, if not sordid, tale. (sorry for going all Vox.com on you with the blog title, but it fit)


Ignoring the 2015/16 foal crop bar (this was pointed out to me to be wrong, it's about equal to 2014/15's number), we see no correlations, where there should be correlations.

Prize money has gone up almost precipitously. The demand for horseflesh, at the same time through foal crops, continues to fall. The number of races during this time period has remained relatively flat.

There's more gross money to race for - it's about doubled, or up 32% inflation adjusted since 2001 - and there's more average purses to race for.  During the same period, the supply of horses (foal crops) is down by about a third.

This is occurring in an environment where stock markets around the world have increased by 1500% or more since 1985, while consumer prices have barely doubled. It's happening in a world where the wealth class has done very well, and collectibles, luxury items etc, have seen big growth.

Although there are a number of reasons and much conjecture why this is happening, the salient point is that it is happening, and it's against everything we're taught to believe.

The next time your track or alphabet tells you that "if we raise purses all will be well" like we hear ad nauseum in racing, it's pure folly.  The problems run much deeper than Adam Smith ever imagined.