Saturday, October 10, 2015

More Optics For Racing Talk. I Think it Means Just About Everything

I was posting this link to an article a little bit ago (pdf, p4):

Draft Kings and others like them have brought a lot of these issues on themselves. Despite them knowing many were waiting in the weeds to pounce, their structure, their lack of controls, their desire to grow at breakneck speed and their inexperience still made them gloss over what’s most important: Transparency, the integrity of a gambling game, and how such is perceived. That’s something that never gets old and they’re getting a lesson in that truism. 

[Meanwhile] racing depends in large part on public money, and government support, and make no mistake, like with Fantasy Sports, there are many in the weeds waiting to pounce. That is all the more reason to be hyper-vigilant with these issues. If any rule change looks bad – no matter how well intentioned - it must be scrapped, because optics mean everything. 

 Just after linking it, I saw the sad news about BC Sprint contender Rock Fall.

The past week we've been speaking of the all-important issues with the framework of a gambling game. Racing is a gambling game and has the same issues the above article explores, however, this morning's news is a stark reminder there is so much more to it. When your sport involves animals and gambling in 2015, it's on an even shorter leash. Optics mean more for racing than they do for casino's, fantasy sports, almost every other one of racing's competitors combined. Sometimes I wonder if we realize that, or we're so caught up in the day to day it, like the DFS issues, are glossed over.

Friday, October 9, 2015

Skill Games

I was chatting recently with a racetrack insider type. I say that with reverence - this fellow, although now in breeding and racing, has done just about everything in the game, including gamble on it. He told me that within the business he can talk to others in power about virtually anything, but , "Trying to have a rational discussion about racing as a gambling enterprise and what it needs to do is like pulling your hair out."

Add gambling to almost any conversation, and at times, it's like you are speaking Swahili.

The DFS headlines have abound of late, and for those of us who love the pursuit of skill game gambling - racing, DFS, fixed odds wagering etc - it's been like pulling your hair out on what seems like an hourly basis. The misinformation, the lack of (if you will) skill in reporting about gambling in the media - much of the media with their knives out regarding these pursuits - is astonishing.

One of the most insufferable narratives about the skill game market is that it's "broken" because people who play it a lot and who are best at it win, and the vast majority loses. As an article, h/t to O_Crunk notes today, this is the exact definition of any skill game market.

Here’s the thing: while these numbers make for a great click-bait headline, in actuality it’s a non-issue. Why? Because betting markets fundamentally demand winners and losers.

One could make the claim that in a fairer world, the winners would win less and the losers would lose less. But let’s unpack that: for starters, the headlines are deeply skewing the numbers. While it’s true that the “Big fish” are losing 44x more than the “Minnows,” they are also playing stakes 66x higher. Keeping in mind that Fanduel spreads daily games with $1,035 buyins, the idea that affluent bettors regularly playing $300-$1k buyin lose $1,000 over the course of “half an MLB season” is not that surprising. If anything, based on my experience, it appears light.

Let’s also not forget that for the “minnows” who lose a full 50% of the money they deposit – $25 of $49 deposited – that wagering on DFS is entertainment. 

This does not fit well in today's world I suppose, but it's irrelevant. The above, in itself, is what a skill game market with negative EV (money is taken out of a pool, i.e. takeout) is.

For racing, that means that Joe who spends $4 million a year, 100 hours a week, $15,000 per annum on tools etc, will likely do so because he is making a couple of points. Jane, who is a great spot player, might play three times a week, risking $50 per bet. She might make 9 points on low volume. Most of the rest, well, they play a couple of times a week, and lose 25% or 35% (the rake plus a bit).

DFS's advantages regarding where they are on the curve are real and apparent (as the author notes). It's moving like a business like this should in terms of growth. The next stage of their life cycle will be to create a vibrant customer base that every skill game needs: One that works together, so that the entertainment value for losers provides them with enough utility (while they win enough), others who are near or at break even are encouraged to spend more time, money and effort to get better, and those who spend the most money betting either grind away at 1% ROI, are replaced, or move on to something else.

Racing's curve is not different, just older and nowhere near optimal. Most of us who are fighting for the customer want to create an environment that is much closer to DFS, or what they hope to do over time (unless it is regulated all to hell like racing has been):
  • Create a vibrant skill game market ecosystem that encourages top-line, and long-term customer growth.
Right now that's impossible. As my breeder friend above notes, the system, and those in charge, are either not on the same page, or handcuffed by well intended, but poorly thought out regulation that discourages growth, investment and innovation. One day, I hope the page is turned to a new chapter based on gambling logic, and principles. If that happens, I am convinced racing - which in my view is the greatest of all skill gambling games - can grow.

Thursday, October 8, 2015


"A different kind of political massacre is unfolding in horse racing at the local level, though it will have ripple effects throughout the country. Shockingly, Joe Gorajec, who for nearly 25 years has been executive director of the Indiana Horse Racing Commission, has gotten word he is being fired this Saturday by his politically appointed superiors."

If horse racing wasn't a rudderless ghost ship, governed in an anachronistic regulatory morass, Joe would probably getting yearly awards, not fired. But it is. And it's shameful.

Great piece by Paulick. Please give it a read if you're interested. 

Tuesday, October 6, 2015

The DFS & Racing Brouhaha's & My Pal Joe Drape

It's been a fun time to be a fan of the machinations of old versus new, new versus old, horse racing and the new kid on the block, Daily Fantasy Sports.

Seriously, when we get twitter memes from tweets like these about Joe Drape, it's a pretty exciting time.

What would we talk about without Joe around? We'd probably just get mad at Richard Dutrow, and he hasn't been around since Nicolas Cage's last good role.

This DFS "scandal" which involved an employee posting ownership values too early on the interweb (in this case twitter), has Joe fired up. Maybe there is more to this story, who knows, but he's fired up. However, getting all excited about this doesn't really fit when it comes to horse racing land, and consistency.

Back in the early 2000's, racing had the "Fix Six" scandal. This involved changing tickets after the races had been run - pure fraud - to take money from others in a game. This DFS thing, at the present time, is nothing compared to it. In fact, we do not even know if the employee in question had what percentage was owned by who before 1PM when he could use it for an ROI edge (Draftkings is reporting he had the data after 1PM). Apples to antelopes.

Regardless, what happened after the "Fix Six" scandal is a lesson that should not be lost. There was pure fraud and an absolute hole in the system. Was there a call for new rules and regs and third party oversight, for congress to make new rules on betting? No, the industry, led by the NTRA and Alex Waldrop, fixed it themselves. Racing had good people in charge of one slice of it (in this case, Amtote and the betting systems), with the power to get things done, just like any other regular business who has a similar internal problem. There have been no problems since.

Unlike Joe (I really do like Joe, he is a good writer and a pleasure to converse with), unless we get evidence of massive fraud, I think the Feds need nothing to do with this DFS internal data issue as it stands. Like racing, they can fix it themselves. I think this view is consistent.

When it comes to third parties in racing in the drug and horse safety area, I am for it (like Joe), and some might think that inconsistent. I don't believe it is. Regulation or third party oversight is needed in industries that have had much time to fix something, but the tools and systems are not in place to get the job done. Racing's myriad horsemen group fiefdoms are not overly worried about consumer protections, so they ceded power to someone who is - in the fix six case the NTRA - and when they did, the alphabet was free to succeed. When it comes to drugs, rules, and all the rest, they're a complete and utter mess. The inmates, in my opinion, do need a warden; the only way they've proven they will cede power is if it's forced.

Optics rule the day in any sport, or game. I get that the media is agenda driven, and that anything disruptive is scary to an old guard, and an old guard has power and a will to protect a slice. Sometimes it's fair, sometimes it isn't. But, with something like a fix six scandal, a private market, and private business can usually clean up its own issues; the incentive is obvious - the profit motive. As far as racing goes, it has been proven for years that it can't take care of its drug and penalties and horse safety issues. Others - I am not sure how, or who - need to be in charge. At this point I don't think there is anyway around that.

Monday, October 5, 2015

Gambling is Bad

There's been quite the brouhaha in Daily Fantasy Sports this past week. You see, some employees of the major DFS sites can see large scale big data about what lineups are taken for a given week, and some was "inadvertently published". Employees can not play on a site they work at, of course, but at the present time that doesn't stop them from playing at others. There's no hard evidence anything wrong has been done with this "data leak" (not to mention seeing lineup percentages are not much different than projected) but the optics are bad.

When a site, or a gambling game gets big in the new world, it's PR that they have to worry about. The purse strings for everything related to most things are controlled by politicians, and politicians love to regulate. It's even worse for gambling because gambling - something you and I happily do with our after tax dollars - is constantly attacked from the left and the right. They don't agree on many things, but they - from the nanny staters, to the puritans -  plenty agree gambling is bad.

Draft Kings and FanDuel (who released a joint statement today) have been rolling, and when you're rolling, you bring this attention to yourself. This is not at all unlike folks wondering if a bookmaker in England is piggybacking a winners bets, a betfair employee has built a bot mimicking a winning players bot, if a poker site's CTO's dog groomer can see hole cards, or an ADW or offshore horse racing site's employee is hammering someone's choices in the pools. This is old hat. In gambling, common conceptions like this have been discussed, and been worked on, for generations.

But, in America, with tens of millions of DFS TV spend, billboards everywhere, and everyone talking about it, it's not old hat.

Me, being a gambler, this is just a whole lot of nothing. I don't worry about someone violating a policy and stealing my bet on the third at Keeneland. I trust CDI and Twinspires and whomever else to employ ethics regarding this, because if they don't, or didn't, their businesses would have failed already. I know that's old school economics, and in today's right left world that doesn't garner much support, but it's worked throughout business history in gambling, and will likely work for FanDuel and Draftkings. The Comcast's and NBC's of the world who hold stake in these companies will do what needs to be done, just like dozens of others before them or they won't have a business. And with the Times and Adelson on their tails, they'll probably do it with a little more alacrity.

Friday, October 2, 2015

45% Hit Rates With Chalk? Big Keeneland Opener, Pick 5's, Suffolk Downs

Good morning racing folks.

Earlier this week at the TDN, Younger gamblers - Millennials - and horse racing was examined.  Today, in Harness Racing Update, the phenomenon was explored with a focus on harness racing. It's a long piece, but I hope you read the harness version and let me know what you think.

It did dawn on me that millennials who are smart, educated, like playing games of some sort, are not unlike anyone, any age, who is smart, educated and likes playing games of some sort. Really, if you fix one issue, you fix others.

One of the examples used in the piece was hit rates for favorites driven by a top driver, in this case Brian Sears and Jason Bartlett at Yonkers. Those two win at 45% rates with the chalk at Yonkers, over the last two years. Their ROI's are somewhere around -15%. That's the type of win proposition you are giving people who are smart gamblers, and it's just a non-starter.

Conversely, the industry constantly tries to attack "lotto players" with jackpot bets. Jackpot bets can work and do drive some handle, but we are selling them to existing players, not like they do in Sweden for example, where the V75 is sold to the masses.

For racing handles to improve, to go bigger tent, it needs to attract skill game gamblers with targeting on the low end - win and exacta, for example. The high end needs to be sold to the masses, who might play Keno at a casino.

I remember a conversation I had a few years ago at Keeneland with Mike Maloney. He said something that stuck with me and I agree with when it comes to the younger bettor. "You can't out-casino a casino".  To attract younger bettors you won't get them with free drinks or hats, you will get them - long term - by giving the smart subset of them a good gamble.

Speaking of Keeneland, the opener is today. Lenny has a preview up on HRN here. Dirt chalk has made the track a harder gamble - not unlike the piece linked above talked about - but with the highest juice at 19%, with well bet pick "n" pools, you can still swing some value. Other than Kentucky Downs, there might not be a better track to play for gamblers looking for an edge. The meet should improve on last year's poor numbers Fall meet, because at the end of it is the Breeders Cup. Field size should be a lot better, as long as the weather cooperates.

Woodbine started a Standardbred pick 5 last night, beginning in race one, at 15% juice. That number does not mean a lot to rebated players, but to the smaller player it can make a world of difference. I saw they did $17,000 last night, on a relatively poor handle night. I expect this bet to be a decent one ongoing for punters. Woodbine's betting menu for them is generally pretty poor, so this is a nice addition.

Yonkers is seeding their pick 5 for the International Trot card next Saturday. Take a look.

Tomorrow, Suffolk Downs debuts their "Kentucky Downs playbook" with 15% across the board juice. This is a very small, staggered meet, and the first day of it had higher chalk. It's probably going to be a tough sell, but I wish them luck. I will dabble with it tomorrow, because 15% on tris and supers is a really good bet. It's something you have a shot to beat.

I will also be having a look at the Red Mile today and this weekend. The meet is in full swing.

It shows just how good a game racing can be if done right. I have not, in the 500 words in the above, even mentioned that the Jockey Club Gold Cup is this weekend. Gosh this game, in my opinion, can be huge. It's got so much going for it.

Have a nice Friday everyone.