Friday, February 12, 2016

Positive Tests for Dummies

By now you've heard that trainers Ron Burke and Julie Miller (and apparently others who have not been named) have been slapped with positive tests for a class 2 drug called Glaucine.

Glaucine - a medication that supposedly helps with breathing and/or bleeding - is reported by Harnesslink as a drug that New York authorities recently developed a test for, but there were positives in North America for the drug in 2012, so this is a little unclear.

At this point there's been nothing "official" from the New York authorities, and both trainers will be allowed to race.

Generally when these things come up we get the "innocent until proven guilty crowd", riding in on a high horse draped in an American flag, but that's misguided. Positive tests are not an episode of Perry Mason, they simply show something was in a horse that should not be. It's tantamount to a driving under the influence ticket. You might've been slipped a mickey, you might've been poisoned by a Russian agent, but booze was in your blood, you drove, and you are held responsible. It's up to you to prove otherwise.

That - proving otherwise - is where these things go with positives next. And a big part of such a case are the levels of the drug in the system.

If the testing shows trace elements, then the trainers will be in good shape, because that indicates a lack of intent to cheat. With a 6 to 8 hour half life, this drug given in pill form will probably show high levels; if it shows low levels, it likely got into the horses system in some strange way - like through feed, or bedding or what have you.

Although "guilty until proven innocent" occurs in horse racing - like with a drunk driving charge, or a positive test at the Olympics - the adjudication and penalty process allows for these questions to be examined and works fairly well.

Trainers are held responsible for what goes into their horses because the public pays for purses, elected officials vote on legislation like slots, and testing, appeals and the like are very expensive. By holding this standard high, it encourages trainers and owners to be vigilant and double and triple check everything that goes into their horse. It keeps people out of court all day. Hong Kong's system is draconian on trainer responsibility, and how many therapeutic or timing positives do you see there? It's super-important.

It is equally important to have commissions wary of intent, as we will likely see with this case. Mistakes, or things completely out of a trainers control should never threaten someone's livelihood.

The above process for Mrs. Miller and Mr. Burke (and any other trainers) is working like it's supposed to. It's never easy or clean, and it's certainly not perfect, but more often than not, truth and fairness usually comes out at the end. 

Wednesday, February 10, 2016

Jersey Exchange Thoughts

In HRU this weekend, Bill Finley had some information on exchange wagering in Jersey, due out sometime this spring.

A few items:

It looks like it will start with in-running betting only. Curious move, but that's the plan.

There's no word from Finley on what tracks will be offered, or if it will be commingled with current tracks trading on betfair. The latter is obviously preferred.

The takeout is reported to be 12%.

The last point kinda sticks in the craw. I remember writing a white paper for exchange wagering in Canada back in '08 and one line was "as long as you do not try to price it at 10%, it has a good chance to help horse racing long-term." 10% leaves money on the table; 12% leaves even more.

I guess they didn't like my white paper.

The 12% want is, of course, linked to the current 15%+ takeout in win pools. If the takeout is too low on the excahnge, then people might leave the win pools, so the story goes.

Racing's obsession with not wanting to cannibalize the wagering pools borders on the absurd. No one thinks like this.

Kraft execs:

Corp Dev: "We want to sell sliced, processed cheese"

Old dude: "What will that do to the sales of our one quarter pound block cheese?"

Corp Dev: "It could go down 5% or 10%, but we hope to make up the sales by selling more cheese overall. People love grilled cheese sandwiches and we are not offering them anything they want, so this could sell well"

Old dude: "Too risky, we can't jeopardize our block cheese sales."

This is why, today, there's only one kind of cheese.

Products have features and benefits. The number one benefit of an exchange is it allows a high takeout game a chance to appeal to price-sensitive customers it has lost, or new ones it hopes to attract. So, what does racing do? It destroys its main selling benefit before it leaves the station.

This isn't Betfair's doing. As I wrote last week, when Australia tried to price up exchanges, volume took a bath and Victorian racing had to acquiesce; prices went lower again. This is old hat. This is just North American racing leaning back onto what it always leans on - protecting a made-up price, and the status-quo. It knows no other way.

It will be interesting to see where this goes from here, but right now, I am not confident an exchange will do anything at all to help New Jersey horse racing.

Tuesday, February 9, 2016

"Secret Cultures" Are a No-No For Any Sports' Growth

The Guardian takes a big swipe today at the International Tennis Federation in a story, "How a Culture of Secrecy Aids Corruption"

"Tennis authorities can have no excuses for an opaque process that only serves to protect the sport's image rather than its integrity"

Further, "The idea that investigations should be conducted in the dark, shrouded in secrecy and accompanied by an air of paranoia and unease, can only add to the impression that the ITF is more concerned about the image of the sport than being seen to root out corruption without fear or favour."

This is a systemic strategy we've seen in horse racing from time to time. "Accentuate the positive", "nothing to see here, move along", the Sgt. Shultz method. It hasn't worked, and it won't work. It can never work; for three main reasons.

i) internal investigations, not releasing negative news, or spinning it in a positive, Pravda way, allows bad decisions to be unaccountable. Unaccountable decisions that are poor, are never corrected, inhibits the sport from moving forward. 

ii) The easiest folks to get back into the sport are those who once owned or bet, and left because of such issues. There's money on the table and the sport doesn't look to grab this low hanging fruit, they step on it.

iii) in an internet age, customers (horse owners, bettors) are more educated than ever before, and when they see "foot dragging" they pushback themselves, and this is unhealthy. As the Guardian notes: "Fans have gone from feeling uneasy about those who run their sports to outright hostility and scepticism."

Jeff Gural, someone who is trying to change the culture, shows just how tough this is. In the DRF yesterday, he was responding to a criticism of his tactics to ban people with bad tests from his racetracks (in this case EPO) that he catches.

"Just so you know, no race track owner in the area or Commission member has ever contacted me to ask why someone is not allowed to race at our racetracks.  You probably saw the press release from Yonkers extolling the virtues of Rene Allard, who is the leading trainer and who is someone we caught drugging horses multiple times.  The reality is no one really cares."

No one cares, or are we just "accentuating the positive?" A strong case can be made they're synonymous.

Horse racing needs sound decision making, it needs to address why bettors and horse owners have left the game and get some of them back; it needs to change the way people think about racing. This is not done in the shadows, following some sophomoric Baghdad Bob public relations playbook. Wishing Jeff Gural would shut the hell up won't help. It's done with leadership, sound ethics and a respect for those who patronize both the horse sales and betting windows. That will take a culture change, just like the one tennis is going through.

Sunday, February 7, 2016

The Donn, Songbird, Big Margin Beyer Anger ®, Sports Betting and What Racing Can Learn From It

Hello racing friends!

Yesterday's Donn card was successful from a handle standpoint - around $20 million - and I thought it was deserved. It was a good deep card with a lot of interesting races. The public took a bath with the Pizza Man and Keen Ice both missing the board. The former I thought was flat again, the latter raced well, but was up against it. Both horses on paper were overbet, allowing regular players to find value, which is the name of the game.

As for Keen Ice, to me he feels like a really solid ten furlong horse, which is rare in the sport nowadays. I have always respected him and I hope he has a good year.

Songbird grabbed an easy lead, and strolled home against a suspect field at 1-9. Races like that - especially early season ones - often result in a fun horse racing phenomenon.

When we see a horse who should win easy, win by a large margin, most go giddy at the margin, and the dominance. Then - oh oh - the Beyer comes out weak. At that point we generally see an apoplectic public question Andy Beyer's sanity.

Horse racing is a super-fun game. It's a great sport for watching horses run; comparing them to others; wondering if we're seeing a great, or only a good horse. Early in the year it's much better to take a breath. Songbird is a nice filly who dominated a BC field with a 99 Beyer and came back in a stroll winning by a huge margin for her first start off a break. She could be a good filly or a great filly, but yesterday's race (and arguably the BC, too) sheds no light on which. January comeback efforts at 1-9 rarely do.

She looks sound and happy though, and we see so many hot stars at two look nothing like that early in the 3 year old year, so she passed the first hurdle with flying colors. 

The power of football:

"I won't watch the Derby because I hate horse racing, but I'll watch the tweets and my bet is on Mister Frisky.", will never be heard. In Australia for Melbourne Cup day, it probably is heard at times. That race is part of the culture there.

Sports betting is growing rapidly, with handles at Vegas casinos up 8.4% last year alone. Over double the cash will be bet on the Super Bowl this year, than was in 2003, and (illegally) about $4B alone is expected to be bet on today's Big Game.

Today in HRU, sports betting was looked at, in the lens of daily fantasy sports, and horse racing. What's going right for sports betting, and what can horse racing learn from it is explored:

"Racing must come to grips with the fact that people are not falling all over themselves any longer to bet into 25 per cent takeouts in a pari-mutuel system that was invented in 1905. Like with DFS and sports betting, there are complimentary ways to grow market share. The sooner racing looks towards new avenues and mediums for partnerships, rather than looking at them as adversaries, the better. "

The more I dive into the Super Bowl statistics, the more I don't think this game sets up for the Broncos, but I feel Carolina is overbet, much like Keen Ice or the Pizza Man. Horse racing betting and football betting is still just betting. I think I will wait to see if the Denver front five gets some pressure on Cam Newton, where he struggles and go long in-running. The way the OL has been playing since the Atlanta game it probably won't happen, though. Enjoy the game.

Also in HRU this weekend, Finley wrote an article on exchange wagering. It appears the takeout will be 12%. Yes, 12%. I'll have more on that this week.

Have a nice day everyone.

Wednesday, February 3, 2016

For Intermediary Change, Racing Needs a Civil War

The want for change is big in horse racing and it is probably talked about sometimes far too often (guilty as charged). But it is emblematic of an industry presently losing on both the demand (customers) and supply (horse owners) side. When a business is doing swimmingly there's no need for change, when it isn't, everyone wants it. Such is life.

If you aren't printing money - and horse racing is not - the kind of change, and how an industry needs to change is the most important variable to consider.

Professor Anita McGahan's Four Trajectories of Industry Change - Radical Change, Intermediary Change, Creative Change and Progressive Change - can help.

I would suspect most would say horse racing is in a radical change state, but it is not land lines, or hula hoops. What fits more for the sport is intermediary change.

Intermediary change is needed for industries that are in a state of flux; the core product or service is being threatened, but the assets and infrastructure have value, especially if used in new ways. An example the author notes is the traditional auction house who have had their market disrupted by Ebay, but have offered their services for online appraisals, and still own the high end.

The main issue with horse racing, compared to say an auction house, is pretty big. And it throws a big red dart into intermediary change. Horse racing deals with suppliers (horses, owners and purses) and end demand customers (those who make bets to supply money for owners to race for).

As Professor McGahan notes, when it's like the above, without a fundamental structure, it can be a house of cards, prone for failure:
Under radical and intermediating change, it is also important to interpret conflict within your organization in a new way. “Civil wars” can emerge within an organization as divisions with exposure to different segments of the business develop opposing views about the nature and pace of change. It is uncanny how frequently this happens.
In horse racing it's even worse, because it never is a Civil War. Keeneland didn't change their track back to dirt because of handle. Listen to a CHRB meeting, in the four or six hours count how many times you hear the word "customer". When a takeout hike is proposed, how many projections do you ever see of lost handle? Insiders are supply and foal crop driven, and those on the other side are either silent, or not invited to the party.

What does she suggest organizations need to have, to allow intermediary change to flourish? Something racing doesn't.

"Strong, central leadership is required to deal with the problem effectively."

That doesn't mean individual organizations in this sport have to throw up their hands and use that as an excuse. I know there are a lot of you in the business who understand betting, handle and customer concerns. My challenge to you is: Stand up and be heard. You need to, when presented with yet another supply side argument say, "what does this mean for our end user?" You need to be a part of that Civil War; be that force for the demand side, be the catalyst for discussion from all facets of the business, not just one. It's the first step for your organization to forward much-needed intermediary change. Without you, change will never happen.

Tuesday, February 2, 2016

A Little Buzz, Wet Blankets & Other Worldly Betting Volume

I think this was the year the NHC got it right.

I have watched, or wanted to watch and follow the National Handicapping Championship over the years and I found it was not easy. There were some (taped) interviews, the odd leader board and general data and coverage, but it was not in the least bit engaging. When compared to a trip to Hong Kong racing for some local tweeters, a horse racing 'event' with everyone's headwear on full display, and feature video on a stable pony who likes beer, it really was no comparison.

This year it was different. With some marketing money, a push to share the event via social media, and all hands on deck at racetracks where mandatory races were being raced, it was easy to follow. Dare I say, me and a lot of you were "engaged"?

Considering racing gets most of its revenue from betting, and trying to draw eyeballs to betting is important, this should not come as a surprise, but to me it did. It was well done. It showed that someone cared to get this event moving outside the confines of a Vegas casino.

Now the question remains, what more can be done to promote this National Championship? I am sure they can do better and with the apparent success they had this year, they'd be wise to try and build on it.

I watched Mohaymen this weekend. I am probably the first person to look for chinks in the armor of a horse, and do it often when I think it's warranted, but after his win in the Holy Bull, the wet blanket police were out in full force and I was not one of them. I get it - he didn't seem to beat much and wasn't tested - but otherwise, no, I don't get it.

This is not a Pletcher speedball with one nice Florida score. Mohaymen has sparkling efforts at other racetracks.

It was off a mini-layoff, where if a horse does not fire in his 3YO debut, the excuses come out. There are no excuses needed when you win like that.

He was pinned down on the inside for a spell, split horses in tight quarters at the half and showed seasoning and moxy.

He sprinted home in six without being asked, like a push button horse does. Others in there could not come home in six and they went slower fractions.

He was straight as an arrow in the lane, showing no signs of soreness. He galloped out like a sound horse and returned to the winners circle like he wanted to race again.

I learned a lot from that race. 

I understand when a horse wins by more than two lengths twitter goes overboard and it can be annoying, but any criticism seems reaching. It, in my view, was a fantastic three year old debut from what looks like a really nice horse.

I've been doing a little reading about Australia racing the past week or so. A few snips.

When handle changes are brought up, they are all qualified with the rate of inflation. If the inflation rate is 3% and handle is up 3%, the next statement is usually, "we're stagnating and we have to make changes" In North America, if handle is up 2%, the industry calls it growth.

In 2014, $26B (about $US18B that year) was bet on racing and sports (the vast majority - $22B - on horse racing). That's $1,200 for every man, woman and child. The average bet size is $43. In North America, we can see 40,000 at a race, where for the whole day only $40 is bet per capita.

Australia's GDP is about the size of Texas's. So, if the environment was the same, that would be like Texas betting US$10B or so on horse racing alone. Of course, it's not the same. ADW's are banned in Texas.

90% of bets are $50 and under. The smaller folk - say the nice hat crew at the Melbourne Cup - still come to play.

Out of that $26B, about $2B is held. Last year for California horse racing, 21.2% was held.

Digital growth is paramount, at 45% in 2014 for bets placed at TAB, the main horse racing pari-mutuel outlet. This is interesting from the North American perspective, because ADW taxes hurting online wagering growth, getting more people on track to bet, and trying to get a bigger share of any new wagering is the policy of the day.

For horse racing, close to half of all wagers are made in the WPS. This is not considered glass half empty - or should not be - because that means your customers are grinding and churning. In North America it would be glass half empty. "Get those people into the Rainbow Six, stat."

I hope y'all have a nice day and thanks for reading.