Complaints About ADW Splits Miss One Big Thing

When a business or industry is losing revenue, I often find there's a pretty huge blame game that goes on; especially in the age of disruption of traditional business models. Many times these can miss the mark. When something changes there is some pain involved, and that pain is usually not solved. You can never really go back.

Today, Apple announced a new initiative called "Apple News +". One of the features of the offering (it includes magazines and the L.A. Times as well) is a subscription to the Wall Street Journal.

"It [partnering with a tech company] will enable us to get our journalism in front of millions of people who have never paid for journalism before." said WSJ's publisher.

There is risk - the WSJ monthly subscription, of which they have 1.7 million subscribers, goes for $39 a month. The Apple deal is nowhere near that - it's $9.99 a month for a host of publishers - so the potential revenue cut is real. Also, rumor has it that Apple will retain 50% of the revenue, as a reseller.

The WSJ believes the value lies in broadening the tent in readership, so they have a chance at a vibrant future, in an ever-changing landscape. This has been a tough week for journalism, but it's pretty good news that in response to the new partner, the WSJ has hired fifty new editors and writers.

When we compare their strategy to racing's in the age of ADW's it's pretty much a 180.

ADW's don't take near 50% of the revenue to put your races in front of their customers, but we often hear how they're pirates, and the model is broken. Every fiber of the industry wants more of a cut. It's a constant complaint.

We often hear about racetracks not selling their signals to ADW's because they want these existing customers for themselves.

We hear about racetrack ADW's being better for the sport, because there is an off-chance more revenue will come from existing customers.

We hear about cannibalization of existing customers when or if someone wants to offer a new service.

Notice the difference?

The Wall Street Journal is talking about getting their product in front of "millions of new people" in a quest for growth, and is willing to partner and take less of a share as risk. All racing seems to be  worried about is existing customers (I used that adjective three times above), and that they get too little of the pie.

There's a difference between the current state of racing and publishing, that's certain. However, the broad point I believe is strong. When you are trying to expand a tent in the new gambling and technological age, you won't do it efficiently by yourself. If you try to do it alone, everyone is left fighting for the same customer, and your product, your R&D and offering struggles.

Asking for 50% of a falling revenue number every year still results in falling revenue. It's especially a problem when you have no real hope of growing.

Have a nice evening folks.

Internal Horse Racing Data & Industry Metrics .... Pffft

There was a neat article today on Marketing Dive, talking about big companies and their new approach to consumer data in a rapidly changing consumer landscape.

"Speakers admitted that solving these problems will not be a quick-hit fix, but instead done over time and through deeper collaboration, both internally and across the industry. For a category that's notoriously competitive and protective of its first-party data, that could take some serious adjustments." Rather than be protective, give everyone in the organization all the data," she <Mars Wrigley's VP> said. "It's all content without context — which is what we provide. Connecting the dots is the power."

In effect, across many mediums and products, the industry (and specific companies) themselves must be nimble with consumer insights data. One way Pepsi is going about this, is by empowering its employees, as well as academics and others, to be able to access data.

"In a few weeks, PepsiCo will roll out a new insights and content communication suite. "Historically, we try to solve problems ourselves and we think our problems are unique," Warner said, echoing Gansle. Pepsi has spent time talking to thought leaders, including CPG marketers, academics, experts, people from start-ups and technology solutions, pooling resources in an open source way. "We're all trying to solve same thing," Warner said. "Being totally secretive is not going to work."

This interests me in a racing context, because the industry is "totally secretive". When I want global racing data in North America, I often email o_crunk. And sadly, when the industry wants global data, they do that too. Sometimes he even has enough data to answer their questions, somehow.

I don't expect Churchill or Magna to share betting behavior data, even if it meant a stronger more prosperous industry; they are who they are. But in an industry that so often copies each other - jackpot bets anyone - it might be a good idea.

Have a nice Tuesday everyone.

Horse Racing's Action Bias Is Not Healthy

Action bias is a powerful thing, especially in an outrage biased world. When something happens, it's still very much preferred to be doing something, rather than calmly examining the facts at hand, and, formulating a plan; a plan that could easily involve doing nothing at all.

In behavioral economics I thought this was best explained through soccer goalkeepers. It's been proven that the action that gives goalies the best chance to stop a penalty shot is by standing directly in the middle and doing, well, nothing. This doesn't happen, and if it did, the goalie would likely be looking for a new job after his or her first loss. "I can't believe he just stood there, he has to go!" So much for following math.

In horse racing this is so very prevalent.

When people call for lasix to be banned, it, in my view, has plenty of action bias. When's the last time in the response to a crisis have you heard, "let's have a look at this and come up with a smart phase-out plan for lasix over five or ten years, and reexamine the results for efficacy and business interests." That doesn't make cable news.

In 1920, 1940, 1965, 1970, 1990 and 2010 when horse racing had takeout hikes to make more immediate money (and in some cases appease money-hungry governments), it represented the ultimate action bias. Have you ever heard anyone put a multi-year, multi-jurisdictional pricing plan together to examine efficacy? The flip side is even worse when it comes to using numbers and data and patience - just ask Canterbury Park.

Even synthetic tracks, which science has been very kind to in terms of their reduction of fatal breakdowns, was a mess. Dead horses in California made for "immediate action" of ripping out every track and replacing it with poly or pro-ride. Then, after complaints, many of which had more action bias than a political speech from a total wacko, they ripped 'em up again. Nice use of science, folks. Gold stars.

The very odd time racing looks at things long-term, there tends to be some good done more often than not. Take for example NTRA accreditation and the EID database. Your average, every day action bias guy or gal doesn't think much of them, but the data they've allowed for, and the PR (at times) is pretty darn effective. If your track is not a part of it, why the hell not?

One of horse racing's biggest issues is that they're married to the status quo, and this doesn't bring about change. This is valid. However, an often overlooked criticism is that when they actually do do something it's filled with action bias. I think this might be as important as the former.

Have a nice Monday folks.


Questions Abound (Well, for me Anyway) for Santa Anita and TSG

During this whole troubling spectacle - summarized and updated, story by story here by Jessica Chapel - I've had a devil of a time figuring out a lot of things. Leaving aside jokes about my lack of brain power please, here are some basic kind of questions that you may or may not be able to answer.

I've heard over and over again from people in power that "The Track is Safe!". This has been trumpeted a lot the past while, and it may well be true.

The experts like Mick Peterson are in charge, and they tell us its "safe". What I'd like to ask them is, what do you mean by safe? Is it that there are no glaring problems; no holes, base issues, slabs or otherwise bad material causing noticeable issues; is that the meaning of safe?

What I'd like to know, for instance, is if the just noticeable difference is wide as a chasm or pinpoint. Meaning, if Santa Anita dirt is a historical 2.51 deaths per thousand, would the experts, and their instruments know if it's now a 4.22 per 1000 or a 5.02 per thousand (doubly less safe) racetrack? No one has asked, that I have seen.

Speaking of fewer people asking questions, I'd like to know what happened to Jeremy Balan. It's none of my business what private businesses do with private employees, and this is not a reality show, but the now-apparently-unemployed recent Eclipse winner is gone. I can't help but wonder why, and if the reason is something that all of us who like the sport should find troubling, or not.

I'd like to know how in Heaven's name PETA quotes made it into a press release from a huge racetrack. I sure hope it wasn't, "I'll put your name in it and you'll never bug us again right?" I find this confusing, and am pretty perplexed.

I'd like to know why the horse racing media haven't asked why these big spikes in dirt breakdowns never seem to happen on artificial surfaces.

I'd like know if there's a causal relationship between breakdowns and lasix use. If not, this new policy kind of feels like asking your plumber to perform your appendectomy.

If the track is safe as reported, and all's well with the new protocols (like the ones NYRA initiated years ago that seemed to work well), why wouldn't Santa Anita and TSG just wait this out? The randomness should die down, and hopefully all would be well.

Anyhow, those are my dumb questions. If you want to keep following the story, Jessica's micro-site is a pretty good resource.

Have a nice weekend everyone.

Horse Racing's Tasty Steak....... With No Sizzle

Yesterday a few of us were chatting about the Racing Ideas report on Equibase, and data. It's ground a lot of people have covered before, but I thought the paper was well written, and interesting.

In the end, the "ask" on 'racing' is generally like it is with a lot of other things. Raise some money for innovation, invest, and hope it expands the game.

Racing, in its current state, makes this a hard sell. There's might be some steak, but there's no sizzle.

I remember back when I was 27 or so. I was working in the small cap space in Toronto, and the street was pretty dead; heavy industry wasn't doing anything, the economy was a bit soft, and I wasn't making too much scratch.

One day the phone rang and it was an entrepreneurial dude I'd done some work for (who, coincidentally, hit it big a decade or so later, and he put some of it into a string at Woodbine). He was getting into bed with a company that created some new technology for fleet management. He asked if I'd help them raise money. I'd get paid a half warrant (that may or - more likely - may not be exercised in a year or two), and I wasn't exactly flush so I jumped at it.

The company was pretty neat, and this was a new, new thing, so I thought it (Zenin Industrial, I think was the original name) would be a fairly easy sell. The .com stuff was kind of happening, as well.

It wasn't. Crickets. "There's PTP, let's run!"

Maybe six months later we tried again, but this time it was different. They changed their name to "Zenin.com" and the stock was up to around $1. They priced the flow-through at around $1.15.

"Oh, it's a .com? Let me have a look at this!" was the usual response. No one ran when they saw me. We raised something like $4M in three weeks.

The stock did fairly well for awhile, and it was up to about $2, so they were going for another round. They were producing more and more product and it was a good product, but it wasn't a .com, it was more about wireless. And at this time, the buzz in the markets was all about "wireless". They changed the name again to (if memory serves me) Zenin Dispatch Wireless.com.

This turned out to be sizzle on steroids. The stock got great buzz and boom just like that, the financing went. After a few years the stock hit $28. Like most bubble stocks in those days it came back to earth, and someone - it might've been Motorola - bought them.

I'll always remember that episode.

Meanwhile, sports betting, and sports betting data has its Zenin Wireless.com sizzle going on right now. Just yesterday I saw the VP of the PGA Tour talking about having shotlink data integrated into overseas betting markets by 2020. There's a good chance that for next year's British Open, you will be sitting in a pub in England and betting via your phone what quadrant of the green the next player will hit; how long this player will hit his drive; you'll get +2700 that he hits his next ball in the water.

There's buzz for the sport, mostly via data. There's some blue sky. Private and sports league partnership is nascent, but electric.

There has been no similar story with horse racing, and frankly, there should've been. Its .com was its monopoly on internet wagering. Its big data age was equibase. Do you remember any excitement? I don't.

As we've spoken about before, Derby Wars did something pretty neat in this DFS world - in fact, they modeled themselves after FanDuel before most even heard about FanDuel. All it took was a little success and the U.S.S, Magna flooded the torpedo bays and fired.

When the Thoroughbred Idea folks ask for racing's data company to change, or for it to take a chance, we're not dealing in the same lexicon as other businesses. There's pretty good steak - it's a great betting game, it's data driven and smart, with myriad possibilities - but the sports infrastructure makes it a non-starter for a lot of people, and companies. Racing is Zenin Industrial.

For them, and others who seek change, my two cents is simple - pilot projects, testing and incremental change is probably the way forward. It's just the way the business is.

Have a nice Wednesday everyone.

Groundhog Day

Crunk's tweet last night started the firestorm, and when he made his way into work today, his mentions were tantamount to Trump's.
His tweet references the track problems at Santa Anita this year in terms of equine deaths. They've been having a rough run - death up, field size on the dirt down, and handle is too.

Funny enough, back around 2006, Santa Anita was complaining about five horse dirt fields and high breakdown rates. So they tried the poly.

 In 2019, several years after ripping it out, they're complaining about the same thing again.

Every day is Groundhog Day in horse racing.

Horse racing is a particularly different beast. In business, or in sports which move with some alacrity on issues, a problem is presented, the problem is addressed in some way. Then its given time to work or not work.

In horse racing, the problem is presented, then it's argued about. Even if the problem is corrected, there's a mysterious pull from the Groundhog to entrench back into what was. And it's rarely given time to show what it can or can't do.

Horse racing - ten years ago and today - have the same set of problems.

I'm coming to the rescue with my magic ball. This magic ball can fix these issues:

There are too few foals, so to increase handle, and the return on investment for owners, we need more starts per horse. I can help.

It costs $40k to $50k for a track to cancel a card because of weather (not to mention the cost to owners and horsepeople), so with my magic ball no cards are cancelled.

If it rains, the turf horses can still race. Cancelling a turf race is mucho dinero lost. Even at Woodbine, where both surfaces can be used, it costs 10% standardized to field size.

I'll cut the breakdown rate in half. This seems pretty amazing; if I was someone who cut the infant mortality rate in half I'd get the Nobel Prize.

We need handle right, and our customers complain these five horse fields aren't bettable (they are right). My magic ball increases field size, so we'll have more money for purses.

My magic ball can deliver all that, and it will result in more betting, more horse owners, less bad press from people wanting to shut the sport down, and more horses will live. It could mean hundreds of millions of dollars extra per year.

The kicker - This can be fixed, but we have to race on cottage cheese. In 40 years, the lineage of a Derby winner will not be Mr. Prospector but Flintshire (he's proficient on cottage cheese). And Beyers will be lower, because the cottage cheese isn't as fast. There will, of course, be bumps along the way - it'll take some money, and at least ten years to perfect.

Still game?

I didn't think so.

Even if someone showed this would happen, without question, as a poll question on the Bacon Report wouldn't the result be about a 50/50 tie?

I'm not saying horse racing should jump at every new thing, or change for the sake of change. And don't conflate my argument above was about polytrack as a panacea (it wasn't).

But, bluntly, sometimes the sport really needs to get its head out of its ass. It certainly can't stay the same and thrive, and arguably, it can't stay the same and survive.

Have a great Tuesday everyone.

Cheat...... if you Know How

In Everybody Lies - an interesting look at big data in the Internet age - the author shares a data study from one of his mentors who looked at reams of IRS data.

The study examined at how much single, self-employed people with one child claimed on their taxes and found that the most popular earnings number was $9,000. It just so happens that $9,000 is the point where the claimant gets the biggest refund. When examining audits, almost all these returns earned less or more than $9,000; some wildly so.

Although that's interesting in itself perhaps, the study looked at the data a little more deeply.

The researchers subset these $9k claims and found there was some serious variance between locales. In Philly, for example, 2% triggered a positive, Miami, 30%. When they ran this data for demographics, income and other factors, two things stuck out. First, the higher the incidence of self employed people in an area, the much higher the likelihood $9k (exactly) would be claimed. Second, the more tax professionals in the area, the higher the incidence of the $9k number.

They conclude if you had i) knowledge and ii) friends, or professionals nearby to spread that knowledge to you, you were likely to know the magic number; the best number to cheat at. The authors contend it wasn't really about wanting to cheat, or being bad people. It was an effect of what marketers call "contagion".

This helps, I think, explain cheating in horse racing. If there are a lot of guys and gals pushing the envelope at your favorite track (we won't name names), it might not be by chance. It might be because knowledge of how to cheat is more readily available. It might be because (some) vets - like tax professionals - are there to spread knowledge of what they can do for you.

For regulators, this probably helps explain why it's smart for them to concentrate on certain tracks, barns and vets. If they stop one, the contagion spreads in reverse, and they end up stopping many.

Have a nice Wednesday everyone.

No One Knows What Sports Betting is Going to Look Like, But it Ain't Going Anywhere

I was digging through some old electronics recently and came across my  Slingbox . For those who don't know, a Slingbox attached to your...

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