Racing in a Post-Slots World

There's been a narrative in the industry of late that you may have been reading: What's going to happen to a sport that is so dependent on subsidy and slot machines if it all goes away, as cash-strapped governments deal with budgetary pain?

The question is probably a little 'Dr. Doom' I suppose, but it isn't without merit.

I'll take a stab at it.

i) The Big Tracks Get Bigger - If you're bigger, I think you're going to be better. If smaller slots-tracks close we'll see bigger fields, better racing, and more handle. In addition, as bigger tracks gain more control, it gives them power to get even bigger.

WalMart and Amazon don't mind minimum wage hikes because they can eat them through agglomeration, supply chain squeezing and increased pricing power, while smaller competitors can't. They love certain regulation because with their power they can help shape it and create costly barriers to entry. The big tracks would have many of the same advantages and should be pretty fine, in my view, despite lost revenue.

ii) Innovation? Maybe, Maybe Not - Recently there was a shortage of swabs that were needed immediately, and no existing manufacturers could figure out how to increase production quickly (it would take a year or more). But, after creating a little innovation incubator by collaborating and sharing information,  CEO's of various companies, led by a smaller one, shared over 200 prototypes and created a plan over a weekend. In one month's time, millions of swabs were ready to ship via 3-D printing.

We often hear invention is created by necessity; Mark Zuckerberg talks about mission critical innovation. To grow with no subsidy, revenues would be a necessity, and it should be mission critical. Would the bigger companies in racing do similar? If we look at history it's doubtful, but it's not without precedent in the real world.

iii) Higher Prices for Players - With the big dogs okay, the smaller ones are not, and that inhibits competition. Signal fees for the CDI's and NYRA's of the world will probably be high and takeout will probably never come down. TVG, not owning a large track, might even have a comeuppance (despite having a broadcast, which is worth something). Look to Canada and HPI's betting monopoly to see how that works for a preview. This might seem counterintuitive, but it's kind of the way the sport is run, isn't it?


There's a narrative that when the going gets tough, companies get scrappy. They scratch and claw for customers, control costs, market better, innovate better and provide better and better product and pricing. For a good deal of them that's true. But for racing, it doesn't feel, to me, that will be the formula. I could, as I often am, be wrong; it just doesn't seem to fit this sports' model.

There are several issues I did not discuss that are obvious - smaller foal crops, fewer tracks, less employment. But for the core business, I think those three are fair-minded ideas of what a drop in subsidy revenue would mean.

With casinos already seemingly packed, and slot machines sure to follow at some point, maybe it's much ado about nothing. Predicting the future over the last few months has been harder to hit than a twin jackpot pick 6 for me.

Have a nice Tuesday everyone.




Monday Notes - Races, Racing & New Normals

Happy Monday everyone. I hope everyone south of the border is enjoying their holiday Monday.

o_crunk has been tracking some neat stats on handle of late. In effect, the number of races offered has not trended handle up appreciably; or at least how many think it should.


This seems counterintuitive - more races does mean more choice, which does mean more handle. But there are clearly diminishing returns and numerous other variables in play. One of the easiest ways to explain one large factor, in my view, is that bankrolls have not grown, and bankroll growth is needed to juice handles.

How do static bankrolls grow? Here's one way, back of the napkin:

$60M bet, offer a 5% rebate, bankrolls grow by $3M.

That $3M is rebet 5 times and, for example, handle on the following day (or days) is theoretically $15M higher.

Leaving aside the revenue and profit questions with that example - handle growth is about new money, or old money spending more money.


Something I have noticed lately (maybe you have as well?), however, are the fields. I mean, these fields, especially at Churchill have been damn good. They're deep, interesting to handicap, and provide some value. We've long complained the races are carded to dole out slot money - short fields, racing for the sake of racing - but the set over the last month or two is anything but.


Sometimes I wonder if I am behind the curve on this blog (please, no jokes), and maybe I am with my previous post about spectators not being allowed back to the track any time soon. When I open the twitter I see more and more things opening here in North America, people are being pretty fast and loose with the rules, and there's been no significant resulting spike in infections from places that opened over a month ago. If things go well - still an "if" with some of the things we see passed around on social media - maybe I'm all wet. Barring a new wave of infections scaring people into their homes again, perhaps we'll be going to the races sooner rather than later?


As an aside, meaningful of nothing perhaps (it was a different time and different circumstance), I am reading a great book called The Splendid and the Vile, about the Battle of Britain and Churchill's leadership, decision making and home and life during it. With thousands of German planes relentlessly dropping thousands of bombs each evening - some many tons which could wipe out a city block - it struck me how Londoners lived their lives. They went to work each day, and a poll taken months after revealed that 71% slept in their own beds.

I suspect much of this came from leadership direction - Churchill was not surrendering and had the citizenry ready for a fight -  but as I read it, that leadership tapped into a free people's human desire to live life. Anyway, an aside like I said, but it's a strong spirit, and going to the track - and being allowed to should trends continue - might not be as far-fetched as I imagined last week. 


One thing I don't think I was behind the curve on was Ontario Racing's curious decision to suspend the rules of racing and not allow qualifiers. Because, well, it's a qualifierpalooza everywhere else in North America. Racing continues at Scioto tonight by the way, in Ohio, where they qualified about 1,200 horses in less than a week.

As the braintrust in the province heads into today's strategy meeting, I hope they glance outside the bubble to see others have figured out this supposedly difficult chinese finger puzzle just fine. What Ontario displayed is, in my view, the opposite of leadership, it was appeasement. If it was 1940 I'm pretty sure we'd be all speaking German.

Have a nice Monday everyone.


"Into the Abyss with Arrogance"

Over the years, here on the blog and elsewhere, we've shared our concerns regarding the moribund state of the sport, particularly on the demand side. And, over the last few days I was again reminded of Multiracewagers' post here at the blog (one of the most popular posts in terms of traffic over the last year) about why he left racing for other pursuits.

"..... the absurdly poor treatment of customers is the reason I want absolutely zero to do with the sport including this twitter handle. At the end of the day, I hope you have enjoyed my unfiltered takes on the industry as it barrels headfirst into the abyss with unfounded arrogance."

Harsh words, but I don't think I'd find too many on this side of the betting terminal who disagrees with that take.

Arrogance.

We've always had a chuckle about the racetrack executive who defends high takeout rates in the guise of walking the grandstand, with the fact that no one he speaks with "seems concerned about it". This, of course, contrary to the proper lens - a sport which has lost so many customers because of high takeout means they aren't in the grandstand anymore.

More recently, I've spoken to many in the business about qualifier rules being shuttered in Ontario, announced yesterday, and talked about in Sturman's column awhile ago. I can summarize most of these discussions as "what are you crying about", with no realization that i) we don't have many bettors left and ii) we don't have many left, precisely because of things like this.

We speak to many inside the hallowed walls of racing who shout "INTEGRITY!", but only when it comes to testing, or racing rules that directly affect participants. When it comes to the "INTEGRITY!" of the gambling portion - like in this case with the lack of a charted line in a past performance - it becomes an aside.

When a restaurant owner says "I walk around my place and people love my food" when people, in fact, don't really love his food, there's a consequence. The place of business is 40% full, then 20% full (the internal polling stays great even as sample size falls) then it closes down. As someone who has tried and failed with several ventures and ideas, I can tell you, losing a business breeds humility, not arrogance.

Arrogance happens when you have, well, something like horse racing. If customers leave, as they have, it has government backing (like $200M in Ontario has); it has slots. It's easy to not pay attention to customers when you don't depend on them.

But, in my view, despite that, the callous way you're treated is something that really surprises me. It's beyond arrogance. It's a dismissal. It's like you're not even there. You don't exist.

And the sport has the gall to wonder why you left? Wondering why you're writing guest posts on a gambling blog?

I can't say I am quite as pessimistic as Multiracewagers is, but I'll leave you with his last words.

"I am fortunate to have found my lifeboat to get off the sinking ship. Good luck finding your lifeboat, the time you will need it is quickly approaching."

I don't blame each and every one of you who still read the blog who have left the sport for greener pastures. You've been dismissed and marginalized and ignored, but you've been ahead of the curve.

Have a nice Thursday everyone.


The Ontario Harness Racing Clown Show

For those of you excited to bet a little harness racing, the state of Ohio seems to have your back. Friday night, after a long Coronavirus related hiatus, a full card is set to go at Scioto Downs, with a 14% takeout pick 5 in races 5 through 9.

Glancing at the past performances you'll notice the events are pretty easy to handicap - despite the time off - because the horses have all, of course, qualified. As most know, qualifiers after time off are just about everything for harness horses, because they race so often. Without them the public is betting blind, or even worse - cannon fodder for barns who have a horse ready without anyone knowing about it.

Meanwhile, let's switch to Ontario harness racing. It's only a few miles away from Ohio but in terms of their respect for the betting public, it might as well be a million miles.

The government entity that runs racing in the Province has just this minute announced .... wait for it..... that no qualifiers are needed!

Cue the Clown Show:
  • Summary of Changes: An amendment has been made to reduce the number of horses that are required to qualify. Any horse that has a clean charted line between the timeframe of February 1, 2020 through March 19, 2020 will not be required to qualify upon the restart of racing 
Wait (I just realized I just said that, but wait, again), it even gets worse!
  • Any horse that was racing and eligible to race during that time will be eligible when racing resumes, provided they enter within 60 clear days starting June 5 (can be entered up to and including August 4). 
Awesome. Enter August 3rd! Try and handicap that you poor saps.

And hold it, I know I know, you're saying, "PTP it can't get worse can it?"

Yes, yes it can!
  • While the temporary rule is in effect, the number of days in which a horse must have a clean charted line in order to be entered to race will increase from 45 clear days to 60 clear days.  
So, remember when it was 30 days, now it's 45, and there was a horse off 42 days with no line, that you pitched out of your pick 5 who jogged at 3-1 with half the paddock making out like bandits because they knew?

Now they can do that to you with a horse off 60 days!

This is a classic screw up by a jurisdiction that has taken advantage of you - the horseplayer - since forever. And you know what, they can't even blame a pandemic, because Ohio just ate their lunch.

Enjoy getting taken out behind the woodshed fellow customers. In Ontario at least you're used to it.


Back to the Track

Almost daily we're seeing more and more tracks open, or be given a firm start date. Barring anything too crazy from here on out, you and I will be betting and those who work in the industry will be racing at near normal numbers.

I've seen a few posts or thoughts that maybe, just maybe, we'll also be able to go to the races soon; back to enjoy the racetrack setting and the camaraderie and the sights and smells. Leading with the immutable fact that other than staying at Holiday Inn Express last night I don't know much, this seems problematic.

A WSJ article today talked about "superspreader events" for this virus, and it made for a compelling case. Scientists believe that enclosed events where many people are in close contact for a long period of time - soccer matches, large parties and yes, they specifically mention horse races - are very detrimental to beating the virus.

As time marches on we gain knowledge, and rather than earlier where people were spreading sometimes insane information that was begging to be discounted, things are definitely getting better. And on this point, according again to people who are smart (and not overly political), it just seems right, doesn't it?

If this view is indeed correct, it is highly probable the Breeders' Cup, or the Derby, the Jug, or various racing events that do draw large crowds, might not even have a limited entry attached to them for this year.

From a revenue perspective, fortunately - other than the Derby (where the day is huge in terms of seat sales etc) and to a lesser extent the BC - on-track crowds really don't add a whole lot to the overall bottom line of this sport. It depends more on you and I buying horses and betting them. For that we don't have to be at the track, we can simply watch like most of us always do, from afar.

The sport is set up pretty well from the distribution side where it can be delivered with barely a hiccup and with only a slight increase in cost. In many ways, its distribution is near recession proof and that's a very good thing. 

Regardless, I can't help but think of my trip to Mountaineer several years ago for an evening at the races (it's actually a decent place if you have not been, the hotel is great and it's a mere walk to the track). When I walked in the grandstand I immediately said to myself "where is everyone?". I dodged some construction apparatus and strolled to the tarmac where me, two barn cats and a groom watched the first. It was an odd experience.

To think that same experience might happen this summer at Saratoga, or on Derby and Preakness Day is hard to get my head around. But by the looks of it, it could be a new reality for this year at least.

Have a nice Wednesday everyone.


Tradition

Things can really get messed up during this odd time we're living in. It's just a matter of fact.

But boy, do we in horse racing love tradition. The Belmont Stakes going to 9 furlongs (not a typo, I saw a DRF guy tweet out the news) spurred some of the most-excellent diatribes I've ever seen on my twitter timeline.

We can propose to change the NBA playoffs so they're played in gyms in Las Vegas; we can talk about a quick NHL season where it closes out and four teams make the playoffs. We can talk - even without COVID issues - about whatever it is the baseball playoffs now are, where Mr. October plays in November; we can expand the NFL playoffs system where everyone gets a car!

But a shorter Belmont?!


This characteristic, I find, is pretty unique to this game.

Sometimes this is maddening - I'd love people to not love the tradition of high takeout so much - but in this instance, it's an arrow right to the bullseye, isn't it?

The Belmont is the test, the final leg, the one that has doomed so many horses for so long (unless he's trained by Bob Baffert). It has a certain panache, it's special, it's unique, it's the freaking Belmont.  The Belmont is not the Donn that has been turned into the Pegasus; the Met Mile raced in June; it's not a race where a past winner, looking down from horse heaven, is neighing, "one turn, seriously?".

I get why they're doing this, and I know you do too. But it doesn't mean we have to be happy about it. As my old pal Chip on twitter said when he tweeted the news, "it's gross".

Have a good Tuesday everyone.

Racing's Betting Customer Professionalism

The TDN has a series going about what racing can do to attract more gamblers of all stripes. Yesterday, Brian DiDonato gave his take. It's here and I encourage you to read his ideas. 

Brian's ideas have a common theme, in my view: Business professionalism.

Let's take his idea about "regulating workout information" as an example. If you look at the vital lines of data on workouts there's a good chance you're looking at some fantasy. There are workouts that are charted wrong; timed wrong; wrong horses are tabbed with wrong workouts; in some cases (like in Louisiana) workouts are not even charted.

Here's a MSW with eight FTS's - please give me your money!

Try that kind of thing on Wall Street with information dissemination; you'll end up rooming with Bernie Madoff.

The above statement, however, is simply considered a part of the game.

I had a call a week or two ago from a horse racing regulator (in this case primarily dealing with harness racing, but it was a call about opening things back up in general). One thing discussed was qualifiers - if they need to be allowed, if two months' stale date is acceptable to customers, etc.

It struck me as odd that this question needed to be asked, but it should not have been. As most of you know, the various jurisdictions changed the stale date criteria last year to 45 days - an eternity for harness horses. For those of us who have not yet fallen off the turnip truck this made no sense. And it's confirmed whenever we see a horse off 42 days romp in leg three of a pick 5 at 5-2. The customers are the last to know - hold it not the last to know, they never know - the horse schooled on Tuesday in 1:52. Sometimes I think the industry must think we're all happy to shovel our money to insiders.

Those are two examples of a lack of professionalism when it comes to customers. There are, as we all know, many of them.

In the real world - on twitter of course - there seems to be two tribes on "regulation". One team are right wing lunatics, one team of left wing ones.

But there's only one team in the real-real world - Regulate when something clearly doesn't work, and stay hands-off when it does. Racing proves again and again, in my view, that it needs a heavier hand. It needs someone overseeing it. It just can't - when it comes to customers at least - protect them as other industries do.

Have a nice Monday everyone.



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