Wednesday, August 20, 2008

Is There a Doctor in the House?

On Andrew Cohen's fine blog at Harnessracing.com there is a good debate brewing about growing the game. Some think that if we improve the racing product we will see handle gains. Other say that the product itself is a good proposition, but we have wasted away with high takeouts and poor delivery.

Of course you know how we feel here about that. Over the last twenty years harness racing has faltered despite the product getting better, and better and better. We have improved the breed, improved speed, have better drivers and trainers. There is no, and has been no evidence that improving times of horses, and increasing the number of races by spreading around slot money has grown the handle in our game one cent. Despite this, over and over again we see our sport ask for more money for breeding, or more racedates. If harness racing was a patient and went to a doctor complaining of stomach pain we would tape its ankle and send it home, expecting it to be fixed. We have done absolutely nothing in a concerted way with slots money to grow handles.

Dave Hoffman's comment is bang on, and it makes so much sense that I assume many will just gloss over it. Dave must have been at the Hambo conference (or maybe not) because the story of Beat the Dealer was relayed by professional bettor James Erickson to exemplify how if a game can be beat, it generates excitement and interest.

The fact that at many tracks we have 2/5 favorites in many races is not necessarily due to the fact that there is poor quality racing -- what did Dewey go off at? what did SBSW go off at? What does Mister Big go off at? Individual tracks may have trouble fielding cards with competitve races due to either an incompetent racing secretary or short fields or something. (Incidentally, why are short fields thought of as too few horses rather than too many races?)

Rather, the problem with 2/5 favorites in lots of races is largely due to small handles -- the bigger the handle the more likely the odds will be more balanced. These are often the result of an owner putting $200 or even $100 to win on his own horse at a track with low handles. Now, it may not be rational to do so, maybe the horse ought to be the favorite, but not at 2/5. But for an owner who has already invested thousands of dollars, the psychological reward of cashing a ticket may compensate for the fact that the odds are too short for a rational bettor. Furthermore, for the owner, the cost of the bet is simply rolled into the cost of owning a horse, and becomes a small part of the total cost.

The quality of racing is not the reason that gambling on horses races has declined. The racing is better than ever. The horses are better (anyone won in 2:12 lately?). The tracks are better (does anyone want to eliminate the passing lane? Eliminate the staggered gate? Have lower banks in the turns?). The equipment is better (seen anyone using an old sulky lately?) Catch drivers are the rule rather than the exception, and they're racing a lot more often than they used to -- which would seem to indicate that the quality of driving is up.

Unfortunately, what's also up is the takeout. What horse racing needs is the perception that you can actually win. Look at the history of blackjack -- it was a minor casino game until Beat the Dealer came out, then it soared to become the most popular table. game. Another lesson to be learned is that it is actually not that people could beat the game, it is that they believed it was possible. Casinos implemented countermeasures to eliminate the advantages from card counting, but quickly reversed themselves because most people cannot play any system reliably enough to get the small advantages you get by card counting. Poker too --- much of its popularity is due to the fact that at least some people for some period of time can support themselves with their winnings at the poker table. You simply cannot do that at horse racing -- the takeout is too big. As long as the takeout is so big, horse racing will resemble lotteries or the slot machines -- which don't take so much work to understand. Where horse racing ought to go is the demographic of poker or stock trading, which are more closely allied, skill wise, with horse racing. But, why would you do horse racing when these other activities don't impose the huge transaction costs that racing does.

For those who believe that the best use of the slots money is for increased purses -- please let me know what metric to look at. Give me a benchmark that will let me know that this strategy is working five years from now. Mr. Langley says "wait" -- Wait until what? The product must be improved, he says -- until what point? Until the 3K claimers at Monticello are winning in 1:52? Until the lowest classes at Batavia have purses of 10K?

We need to listen to people like Dave. We have to get the fingers out of the pie to grow the pie. He is correct, harness racing will not grow if Yonkers races 15 races a day 7 days a week. We won't grow if we race for 20k purses instead of 15k purses. We won't grow if a 3 claimer starts going 53. We won't grow jamming a high cost product down the throats of bettors. We will grow for only one reason, and only one way: If we put money into growing handle. That way when we wake up and slots money is suddenly taken away, we'll still have a game.

8 comments:

Allan said...

The reason you get so many 2/5 shots is not just handle; it is the introduction of conditioned racing. The way these conditions are written makes it so easy for a classy horse off form a little to drop into a cheaper class and romp. This is what is causing uneven fields.

Back when NY used the classified system A1....C3, you rarely ever had blow outs and the races were more competative. While favorites did win, the number of odds on winners was not as great.

This is one reason why betting is off. Lets say you are a casual bettor (fan) who bets the same amount on every race. You can win half the races on the card and still loose. That is not an incentive to keep playing. If this is running away the casual fan, what do you think it is doing to the heavy hitters? With classified racing, while you may not come up with a lot of long shots, you definitely will end up with more 5-1 thru 8-1s.

We also keep talking about the takeout. Let me ask you this? How do you want to pay for the expense of putting on the races? Even without purses, there are a lot of fixed costs (facilities, wages, etc) which are involved. This is why takeouts need to be greater. The ADWs can afford to offer rebates and the like becasue they lack these fixed costs and they probably don't pay their fair share to produce the product.

To address the takeout issue, you need to address how to pay the fixed costs with holding a race meet. This needs to change. Otherwise, the only way a track will be able to operate with a lower takeout will be for the track to own the horses themselves and hire trainers, grooms and drivers to race the horses on a fixed salary; thus eliminating the need for paying purses.

Anonymous said...

If..."slots money is taken away", from purses. That is a most significant statement and issue. Hopefully the Ontario gov't will wake up and redirect some of that "slot money" to social causes of greater value than enriching horsemen.

As a former hard-core harness player of some 30 years, I gave up due to the shenanigans of WEG racing and the lack of enforcement by the ORC.

After the Bill Robinson and Doug Berkley suspensions some years ago, the ORC has been asleep in enforcing integrity and/or investigating extreme form reversals, (a specialty of certain trainers).

When a hard-core player like me abandons the game, there can be no expectation for growth from others.

Pushing for lower takeouts is clearly a necessity, but to me the number #1 issue is integrity of the product. Without integrity takeouts can be 1%, but many will still not play. Memo to ORC: start enforcing ALL the rules.

Pull the Pocket said...

Hi Allan,

We can't go over the takeout issue again here. We have many posts about it.

http://pullthepocket.blogspot.com/2008/01/lower-your-prices-gain-bettors.html

We have to realize that we are not optimally priced. We don't extract the most revenue we can when we charge too much. I don't really blame this business. As the most comprehensive takeout report ever written said "we have lived with rising takeout for so long, it has become a way of life". We have lived as a monopoly and it is just the way it is. McDonalds knows they will max revenues at a $3 Big Mac, not a $5 one, but they are in a perfectly competitive business and were forced to price right, or die. At a churn factor of 7 (the number racing itself uses and is industry accepted) we max revenues in racing at a 13% blended takeout, but we are at 21%. With slots, we glide along and have money to keep afloat, so we never have had to make these decisions.

It is a long road, but we better learn quickly that we can not keep sending people home, or churning in an account with no money. In 1975 when Las Vegas lowered slot machine takeout to 8% from 30% I am sure some people said "how will they pay for all the expenses to run the casino if they lower takes?". Of course, they do not say that anymore - 8% was the right price, not 30%. We in harness racing tend to be 40 years behind the curve, so I sincerely hope that racing does something soon to optimize betting revenues. Maybe by 2015. That'd be 40 years on the dot.

PTP

Allan said...

I agree we can't keep talking about take out. Until this gets addressed (sooner than better) what can we do to make races more balanced with the existing racing stock tracks have to at reduce the number of obvious stand outs which occur; especially at our smaller tracks?

Eliminate conditioned racing and return to classified racing. Back when we had classified racing (A1, B2, C3, etc), you seldom had run away winners, win prices were higher and the races were more exciting. Gamblers don't want just to win, they want excitement. I can't help but feel the return to classified racing will help make the racing more exciting and increase payoffs, even without dealing with the takeout issue which needs to be addressed.

Can anyone tell me what is wrong with going back to classified racing?

Pull the Pocket said...

Anon,

I think the ORC and trying to rid the business of blood builders has done a fairly good job. The form reversals in Ontario are much less than they used to be, and I think they have done their best in sounding the bell that it will not be tolerated. It is a tough job, imo, as you are dealing with finding a needle in a haystack at times. Regardless, I understand your post, but progress is being made I think. I think we are better off than we were six or eight years ago, when you might as well be using a dart board to handicap. JMO!

Allan,

Surely there are many things like that that should be worked on. In the old days when the M had the best entries (eg pre-Yonkers with slot fuelled purses), great races could be carded. Handle was good. Anything that can be done to card full interesting races has to be a good idea. Again JMO!

Cangamble said...

Dave sounds a lot like me.
Of course, lowering takeout doesn't equal less money for the tracks, whoever is arguing that, is dead wrong.
As for 2-5 shots. Put them on a Betfair exchange and watch $100,000 in match money.

Dave Hoffman said...

Thank you for your attention to my comments. I was not at the Hambo conference, but was familiar with the story of Beat the Dealer.

There are several comments regarding the return to classified racing from conditioned racing, but I am skeptical -- assuming for the sake of argument that this fostered more competitive racing --that this has anything but a minor role in the decline of harness racing. I was not around when classified racing was the norm, but for major tracks I understand that all but Yonkers and Roosevelt had abandoned it by the mid-1970s (at least according to Ainslie, and I am willing to be corrected on this point). Thus, most tracks were using conditioned racing in the "good old days".

I don't have anything against reintroducing classified racing on a limited basis as an experiment, but I would suggest that the horsemen would howl if their fates were suddenly put at discretion of the racing secretary. Overall, I doubt it would be worth it.

As to winning tickets paying less these days (I haven't seen a study on this, but let's assume its true), a significant cause of this may be attributable to the decline of the casual player. I do not think that it is out of the question that the vast majority of the handle is contributed by hard core harness bettors -- larger amounts bet by more knowledgeable bettors. Thus, the average dollar wagered is much "smarter" than it used to be, and it should be no surprise that it is harder to find overlays. What is absent are casual players -- heck, my great grandmother loved to play harness horses, but I can assure you she did not spend hours with the program. Where are those people now?

For gamblers "beginner's luck" is a trope that hides a significant reality -- those who win in their first outings are more likely to continue to engage in this form of recreation. Those who immediately lose their bankroll never get in, i.e., they don't have "beginner's luck". With these punishing take outs, the occurance of "beginner's luck" comes less and less often. Why are we surprised that fewer people come in?

My casual observation is that the decline of all horse racing, and with that harness racing, is almost entirely due to the loss of monopoly status on the gambling dollar. The decline was not gradual, but quick.

Look at pictures from races in the mid-70s - filled stands. Those were gone ten years later. My casual observation is that racing stopped taking in new customers in about the late 1970s.

It took some time for this to catch up as the established fans died off, but now the full grip of the demographic decline is upon us. Well -- what happened in the late 1970s? Atlantic City, airline deregulation (fostering cheap trips to Las Vegas), state lotteries, etc. that eroded the hold that horse racing had on gambling dollars.

Dave Hoffman

Anonymous said...

I think the farm system is gone. On my block when I was a kid we had a drug store where they sold forms and scratch sheets. When the early papers came out around 3:30 they would have the first few results from the eastern tracks on the front page. Later in the evening probably a dozen older horse players would gather waiting for the evening papers with all the days results. The guy that owned the poolroom took bets. Saturdays special at the grill on the corner was pancakes with a form. The barber on the next block took the horses and always had the form and scratch sheet sitting around. The Fairgrounds was only about 3 miles on a steetcar. There was always somebody from the neighborhood who would bet for us. So how could I not grow up a horseplayer? Now the old neighborhoods are gone and everything thing I do now is on the computer. People who I have taken to the track will go back if I ask them but they never go on their own.
RG