Wednesday, November 25, 2015

Derby Wars, Exchanges & the Fight For Lost Customers

Today we saw some news from New Jersey, where it appears (finally, unless something happens) exchange wagering will be offered to residents of that state, sometime in 2016.

Meanwhile, back at the ranch, Derby Wars (and others) were looked at in an excellent piece by T.D. Thornton in the TDN.

There's a lot of chatter about both betting systems; cannibalization, cheating, not giving anything back. Pick one, or a few of many. It is what it is.

The first rule, since we can remember (I think it started in North America with beaver pelt sales), is that when you lose a customer, you find out why. Did they not like your product, your hours, your store, your staff? From those answers you can likely improve your sales.

When it comes to horse racing, not nearly enough has been done in this vein, but from what people speak about, and using a little logic, we can make an educated guess. Lost customers were tired of losing, the product was not a good enough gambling product, pricing was too high, the delivery systems were lacking (four ADW's to bet all tracks due to protected signals), etc.

Derby Wars and Exchanges are two avenues that can help get them back. Derby Wars through offering a casual game on a Monday (interestingly enough I played the new harness game on Monday and bet a few races in the pools because of it; I never play Monday), can entice some to play. It's a completely different experience when compared to making a pick 4 ticket.  Betfair offers lower juice and a new way to play the win pools. Losing too much on jackpot, single ticket, pick 30's at 57.5% juice? Ready to give up? Here's something for you to try instead.

Horse racing insiders often complain there is not enough marketing money being spent. That's probably true. As everyone knows, Draftkings and FanDuel have spent the GDP of a small country on marketing recently. That marketing is about the pro sport in question; it markets for the NHL, NFL, NBA and MLB, and does not cost those leagues a dime. That's why major league sports like the avenues so much, and even with the silly press recently, are reticent to cut the bait.

Places like Betfair and Derby Wars do that, as well. As Mark Midland alluded to in the T.D. Thornton piece, they are operating at break even and sinking money into marketing. Betfair spends oodles on marketing - they will likely operate at a loss in Jersey for some time -  and that only can help Monmouth, for example.

What alphabets can you name that are currently operating at a loss for the sport?

Betfair, Derby Wars and others like them are speaking directly to lost customers in a way in which the tracks are not, and can't, and are using hard dollars to forward that discussion.

Betfair came to North American racing long ago - about 12 years or so - and was rebuffed at every turn. Derby Wars, as we saw at last month's CHRB meeting, drew the ire of old time racing. It's time to embrace some new avenues, because when it comes to lost customers, it is innovative and fresh delivery systems like these which can speak to the lost markets.

In business parlance the partnership with resellers acts like an accretive acquisition. That's a good thing and it's something that racing cannot do alone.

Friday, November 20, 2015

It's More Than Just Being an Immature Market

Some of you might have been following the lack of effort drive in last week's TVG prep at the Meadowlands. The New Jersey judges responded by giving driver Brian Sears a 15 day holiday.

Meanwhile back at the ranch, if you look at the entries for Saturday night at the Big M - 7 days later - there's Brian Sears driving Bee a Magician in the TVG Final.

I'm not sure why he is driving. Maybe President Obama knows.

Conversely, let's look at Aussie racing. I could give you a litany of "lack of effort" fines and suspensions, customer and bettor protection decisions, etc. But it's much easier than that.

Here's a stewards report from a few days ago. Just an average day at the races.
All trainers with multiple engagements in any one particular race were questioned in regard to their tactics.
 Stewards questioned trainer R Veivers in regards to the performance of EMPTY ENVELOPE. He said that he had adjusted the gelding’s training regime in recent times and felt that this was a contributing factor for the improved performance.  Stewards noted Mr. Vievers explanation and outlined they expected the horse to race in a consistent manner.
Connections were advised that MAJOR LEXUS would be placed on its last chance to race truly and trainer M Butler was advised to take corrective measures.
There are many more examples, testing procedures, vet reports, etc. This is protecting the public and the game from monkey business, it's about giving bettors ample information about the health of a horse, intent, and making sure the participants follow rules.

Here, I have no idea why Brian Sears is driving tomorrow. I see chat boards about "it's none of anyone's business how a horse is raced." I hear "bettors need to stop whining." and "if you want to drive a horse go buy one." No insider seems to want to talk about it.

Overseas especially - Australia, the UK - this is taken seriously and there was no government decree making it so, no AG's, no lawyers. It was just considered proper business in a business that had to compete from day one, or die.

In Australia, telling a customer about the intent or health of a horse is a part of the game. Here it's a nuisance. Pricing a bet - here done by a formula that would make Karl Marx pause - was never done like that overseas. They had to compete, so pricing was done with those wacky supply and demand curves. It's why there are no "TOC's" leading the pricing changes, no states taking a percentage of the cut, no price floors. "Will people bet more football instead of racing if we do this", yes, OK then we won't.

People like to wax on about differences abroad, and at times it borders on the silly, but it means so much, fundamentally. You are seeing a crowd on Melbourne Cup day, you are seeing $15B Aussie dollars bet in a country with a smaller GDP of Los Angeles, you are seeing some handle growth in places like this, because it's a market that's had a lot of practice being a market. In a lot of places two or three centuries worth.  It's not about TV commercials or food trucks. It never was.

It's probably a whole lot more than a business being allowed to be a business, however.

What we see here in North American horse racing is something that is thrown some slot cash or government protection and tolerated. It's a business for each state to play footsie with, to use as it chooses, and to disregard as it chooses as well (likely soon in more slots states).

It's not only racing, of course. Penal regulations are being talked about in each state for "daily fantasy sports" as we speak too, which will cause it a good deal of harm, and might very well end up killing its business model. The states, one by one overregulating that internet business, are doing just what they did to racing and customers of it 100 years ago. The issues we all see today like signal caps, taking cash out of margins, ADW taxes, Internet betting bans in Texas and Arizona and Michigan, stopping places like Twinspires from advertising, were all borne from zoot suit politicians in a different time.

The bottom line is, those who want action regarding reversals of form, drivers or jockeys not trying, vet reports, and all other things so many around the world do as a matter of course, are left forever wanting. The gambling market in North America, whether it about fielding a team or making a superfecta bet, is not about us as a customer. It's never been about us as customers. That's not changing anytime soon.

Thursday, November 19, 2015

Getting Things Done the Right Way Is Difficult

Satire works when there is a grain of truth to it.

Today I read something satirical that made me laugh. A petition to the Attorney General of New York to stop bingo in the state.

This petition has the formula down.

Introduce something that people are doing down the block, show how said activity is a "gateway" to something more sinister (without evidence, of course), add a little horror like "theft and murder", and voila, you now have a full-blown crisis.

This is a New York Times editorial waiting to happen. Get Drape on the case.

This represents so much more, though. And in horse racing it's taken to the nth degree because horse racing has little leadership, or structure to get to brass tacks. It's a New York hyperbolic DFS debate on satirical steroids.

Lasix articles abound and they are filled with so many of the same tactics, it's astonishing. Field size is down, because of lasix use. Starts are down, because of lasix use. Breakdowns are up, because of lasix use. If you sign this, we can ban lasix and these things will be fixed.

This weeks "issue" is computer wagering. I have read this week that these computers are betting at the half. They are responsible for late odds drops (but conveniently not late odds rises). They are probably being run by Matthew Broderick and if he is not stopped, a superfecta algo is soon to bomb Togo.

If 'computer robots' are betting at the half with an ADW feed, they are probably doing a hell of a lot worse than someone by hand with an ADW feed (there are hundreds of them) punching $2,000 by hand on that nice lone speed at Finger Lakes with the easy lead.

Considering the ADW and off-track betting dump is about 80% of wagering at the bell, and CRW is at most 20% of it, we're all the other 50%; maybe we're the smart ones.

As for lasix, well if banning it can cure all of racing's horse ills, falling foal crops and starts per year and more, holy moly, Europe's field size must be growing and massive! Pop the champagne, let's have some crumpets.

Yes, once a little old lady slashed the tires of someone who beat her at bingo. But she might've done the same thing if she was beaten at checkers. Yes there are issues in horse racing too, with tires being slashed everywhere in some form, but it doesn't mean the crisis du jour is the culprit.

Racing, in my view, will move forward with reform when the reform makes sense, and has some sort of logical, fundamental business evidence behind it. Takeout studies done by smart people say what might be tried, there is likely truth to the fact that horses are on lasix who don't need to be, synthetic tracks (we had to get rid of them because people like betting dirt, and handle was falling, you know?) and other items, too, show some empirical, logical merit.

Good policy comes from good research and good decisions, not from scaring people and whipping them into a frenzy to support your pet project. Maybe one day, not soon, but one day, things can get better.

Wednesday, November 18, 2015

Horse Racing Business Fundamentals

Whenever something goes wrong two things invariably happen:

i) The masses want someone to blame for it, even when force majeure is the culprit

ii) Some antithesis of growth policy gains steam

Horse racing, because handle is losing more and more volume most years this century (when inflation is factored in, almost all years), has had their fair share of some major anti-growth policies.

Horse racing handles are down, so it must be Derby Wars!

Horse racing handle is down, so we should stop accepting bets from computer wagering!

Horse racing handle is down, so we need to eliminate rebates!

Horse racing handle is down, so we need to increase margins!

Fundamentally none of those things make any sense whatsoever.

The NFL, NBA, NHL, Nascar, PGA Golf and MMA all love the Derby Wars type platform. Studies have been released showing how they engage customers to watch the sport more and more.

Computer assisted wagering - conditional wagering, looking at overlays etc and batch betting and dutching - adds money to the pools from people who will not sit at their computer all day betting. It attacks the tech demo.

Horse racing takeouts are too high to attract many, and a large gambling demographic with a proclivity to gamble will not touch the sport. Offering lower takeout to them, and me and you (through ADW's that offer them), helps increase handles, not lower them.

Joe opens up a Flapjack Shop on Main. For outreach he decides he is going to sell some of his delicious flapjacks on Saturday morning at the Farmers Market outside of town. He makes little on the excursion, but he hopes people come into town and think about brunch at his restaurant.

Joe's flapjack shop has customers who come in for lunch from local businesses. He only offers cash as payment, and because these people are working on expense accounts, they keep asking for Visa. He decides to implement an Interac and credit card payment system.

Joe sees McDonald's coupons in the mail. He decides to offer coupons, too. 10% off if you come in on Tuesdays and some buy one get one free offers. He looks at his margins and decides that he can lower the price of each flapjack by ten cents, too.

Joe sees his business rise, because the things he did aren't rocket science, they're proper business fundamentals to growing his business.

If Joe does not see his business rise after all that work, he won't stop doing them and expect things to get better (and he sure as heck ain't going to raise prices and put barriers in front of his store to welcome fewer customers). At that point he will look deeper at his pricing, his product, how courteous his wait staff is and his location.

Horse racing does not want to look at their pricing and product; they're offerings, systems, or how they fundamentally do business. That's too hard.

They want to look for scapegoats for the problems. And when the scapegoat they want to kill, or inhibit, is a fundamental business truth, they're only making things worse.

Tuesday, November 17, 2015

Skill v. Luck is Difficult to Illustrate, Because Professional Gambling Is Boring

The peeps were chatting about "skill vs luck" in pari-mutuel games today, in this case daily fantasy sports.

This, as we've seen, with statements from the press and others during this debacle (in my view, that's exactly what this is), is often misunderstood.

Winning long term at a game that involves skill versus luck is not sexy. It's not something you can "show" on a short youtube video. It's not something you can show on a TV commercial.

It's a grind, and it's really boring.

Picking a player that will likely do well, with some confidence, is not difficult. Todd Gurley should have a good game against the Vikings. Tom Brady should be able to score some fantasy points against Washington. Anyone should score some points against the Saints.

In horse racing, we can all pick winners. In fact, the odds board picks the top two places about 6 or 7 of ten times.

Look at any graph at odds levels with low variance choices and expectation. It's a pretty smooth curve with the takeout your loss level.

So it's all luck right, or fraud, like early on some newspapers led you to believe?

No. The skill in any game lies solely on the margins.

It's what you do with your choice - ticket construction, sound betting philosophy - that tends to matter. It's the one of twelve times you successfully fade Todd Gurley or the chalk in a race that tends to matter. It's the 1% ROI you receive on these bets over a year that tends to matter.

You can't follow that with a camera and a big plastic check. It's completely boring.

The skill to win at racing, or DFS is Warren Buffet. After a short period of time some of his investments look silly, and he doesn't have the flash of a fly-by-nighter that just scored a check because she wrote naked puts on cocoa before an unexpected tropical storm. But when the cameras are off, this boring, ugly grind wins.

Managing the boring, sticking with a plan, not getting caught up in the day to day trying to look like a winner, is the definition of winning at a skill game.

Monday, November 16, 2015


Perhaps you've seen a commercial recently with "Brad".

Out of the thousands of players who play and have fun with DFS partake in unregulated gambling that everyone with law degrees seem so upset about, Brad, with "$349" in winning teams was chosen as a poster boy.

Awful Announcing found Brad and asked him a few questions. It turns out Brad is really a regular guy who plays some tournaments with friends for fun, and just happens to have won a couple of dollars.
That’s one of the main reasons my winnings were $349. To be completely honest, last season was my first season in fantasy period. I had a lot of fun and kind of got bit by the fantasy bug. Then I started playing DFS with FanDuel primarily. So probably just a little bit over a year ago. I don’t play $25 buy ins to win a million bucks. Mainly just these fun games between me and my buddies just to make the season more interesting.  Or I’ll play some buddies in a 1 on 1 heads up $1 game, because if I lost it in the week before in a season long game I can play then for getting back at them, or maybe I’ll lose again. It’s that kind of thing as opposed to using it trying to make money. A lot of people on those commercials, yeah you won $2 million bucks, you are gonna be sitting there every week putting in 900 lineups and researching these stats and doing that. I’ve got a real job and a real life outside of playing games on the internet. It’s just a lot more fun for me.
How's old Brad doing now?
 Those commercials were from back in April and that $349 was real, and I can tell you that as of a few days ago the actual number is $650. Like I said, I’m not blowing chunks of wads, I’m still the regular guy.
That's real marketing.

A newbie with a few buddies play a game. The game is fun and with a little work you can win a few dollars.

We read a lot about today's gambler and most of it is true. You have to work hard, study often and dive into a game to succeed. However, for the masses, they mostly just want to have a little fun and have a chance to make money.

FanDuel, DraftKings and other games like this offer that, and they're not blowing smoke. They don't scrape everything out of a pot. They don't nickel and dime at every turn. They don't make the betting experience painful (although AG's and some states are wanting to do just that). That's a big reason why they've succeeded thus far.

Horse racing, on the other hand, is an older game fighting an old tagline: "You can beat a race but you can't beat the races." "Bradley C" knows that and marketing this same way to people like him is a non-starter.

Changing that stigma, that tagline, will take reform and a major cultural shift for the sport of horse racing. Thus far that has been elusive.