Sunday, September 21, 2008

We Are What is Wrong With Racing

When he took over in 1960, as a little known fallback choice of the league's owners after 23 rounds of voting, professional football was chickenfeed - an uninspiring hotchpotch cluster of local teams, local markets and purely local enthusiasms. By the time he retired, the NFL had outstripped major league baseball to become a national institution, the country's richest, best run and most widely followed sport.

That is from the official obit for NFL commissioner Pete Rozelle.

Does the fractured NFL/AFL of the 1960's sound a lot like us?

We have spoken a couple of times about what the NFL has done to grow. I won't go into another central organization or commissioner tirade, which I am sure you are happy to read, but it is interesting to look at that history. I was watching the NFL Network last evening and they had a decent show called "Top Ten" on. This shows topic was "Top Ten Innovations of the NFL". There was a common thread in these innovations, but primarily they were borne by a response to the customer (i.e. viewer).

One interesting one was rule changes. We are seeing how we handle rule changes in our sport now with whipping. It does not seem to go very smooth when you have upwards of 30 commissions and so forth. In contrast, the NFL adopted rule changes in 1978. Defense was ruling the game and fans were turned off with defensive football. What did the NFL do? Simple, they responded to fans and changed the rules. The result? Growth.

How about the AFL? When they were started there was suddenly a competitor to the NFL football monopoly. What did they do? Took the best ideas and teams from the NFL/AFL and changed their league. Oh, and of course, just for good measure this new-found partnership resulted in a little game called the Super Bowl.

The NFL embraced another thing, and that was television. They were one of the first sports to recognize this medium. There were some that wanted to ban televising games because they thought that people would not come to games if they could watch them on television and that would hurt the sport (sound familiar folks, who constantly comment on 'live racing'?). Luckily leadership ruled and the NFL took over television sports, like no sport ever has before. Now 2% of people who watch football attend games to do so. $5 billion dollar TV deals are the norm.

What did they do with the money? As we all know Rozelle (and anyone else with a clue) knew that each team had to share in the revenue to build the league.

In contrast we have not done as well listening to customer complaints, competition, technology or revenue sharing, have we?

What do we do when fans have complained about high takeout? We have raised takeout even higher.

What do we do when fans try and go offshore to get better prices and/or mediums because of a new entrant to the horse betting monopoly? We try and shut them down and do not recognize we have a problem on what we are delivering, not what others are.

What does racing do with new technology and high value added low marginal cost mediums like the Internet? Not much. A buddy of mine called from work wanting to watch the Little Brown Jug last week. Sorry pal, in the vernacular you are 'SOL'. In fact, there are rumblings that if there was not offtrack betting or TV betting that people would go to the track instead and all will be wine and roses. Oh my head. The NFL learned that was nonsense 48 years ago.

How about sharing that revenue? I would guess that there will be about $4B distributed to racing in some way, shape or form from slots in the next year or so. Did we do anything with it to grow handles? Let's see, it would cost no more than $50,000 to start up a harness racing website with all free video of all tracks a la TwinspiresTV. Is there one? No. I read a bit about starting up an ADW like Day at the Track or Premier Turf Club. We could have started an All Harness ADW with all kinds of bells and whistles. It's a revenue driver for sure. Cost? Let's say $1.5M. Do we have one? No.

For something as simple as a harness racing website with free programs and free video ($50,000 to create) it works out to 0.0013% of our slots revenue. To equate that to a lawyer making $200,000 (after taxes) that would be about $6.50, or a Big Mac meal.

When someone emails me and asks me what I think is wrong with racing I know how to answer it: We are what is wrong with racing.

4 comments:

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We watched it from New Zealand through racingday.com - but you'll be hard pressed convincing casual fans to pay $30/month if they just want to watch a few races a year.

My theory is that eventually there will be official websites for pretty much every sport with seamless video integration. I think racing will eventually do it, but by the time it happens we'll just be following the trend, not leading it. The harness racing industry has perhaps a 1-2 year window to do something truly remarkable.

Racing is in a unique position in that for every unique race view the marginal revenue/view must be much greater than say the NFL because it's primarily a betting game. So surely there is more incentive to ensure it's easily accessible to all?

The internet can keep marginal cost way down, and that means average variable costs fall as well. Win win win, right?

P.S. Thanks for the Harnesslink TV mention. We've been in a continuous struggle with our servers this year, but good to hear that that section at least loads reasonably for you.

Anonymous said...

Thoroughbreds are my preference. I read your blog and because of it I'll probably watch some of the races you mention but probably not wager on them. I have a Twinspires account with which for harness racing to get any benefit I'd have to wager. I don't see how having free videos for the masses is going to make harness racing grow. I know that I can download free programs from Windsor, Western Fair and GeoD and also Twinspires. You are kind of wanting to duplicate what in a lot of cases is already there. Commentator running at Suffolk Saturday against six nobodies paid $2.20 to show. If it had been a harness track I'm sure they wouldn't been willing to take the hit. I never see anyone blame the stock market for taking away any racing dollars. Video (CNBC& Bloomberg) all day. One can pick stocks,options,etc just like the horses.
RG

Anonymous said...

Wow!!!

What a hard-hitting and astute commentary. Clearly this should be mandatory reading/study for all racetrack executives. If not the downward spiral currently in progress will not abate.

Racing must act or become irrelevant. (On a personal note: for the past 20 years all my Saturdays were spent at Woodbine racetrack. Last Saturday I decided to go to Casino Rama. To my surprise that venue was standing roon only. I guess many others had the same thoughts as me).

Anonymous said...

Thanks for the post fellas.

RG,

I am speaking of simple branding, which we do not do very well. NFL.com is doing nothing extraordinary really. Much of the information is on ESPN or whereever. But what they have done is brand the NFL thru that website. The NFL is their sport and there is one site that puts on the face of the NFL. You can of course get value added there - fantasy football, merchandise, much more.

Is a professional harness.com website worthwhile? I would bet it is. We could get all video, have a harness wiki, have replays, have proprietary speed ratings, distribute harness racing data, encourage that data use through an API, start a community, add handicapping contests, have merchandise. All of that would not save the sport, of course, but it would put us at least on a level playing field with all other sports.

Instead we have about ten or twenty mini racing sites for news and so forth. God bless them, but they do not do a job that one site, funded through slot money can.

It takes money and imagination to brand, and the point of my post is that every other sport and every other betting site does it. For a betting site check betfair for their magnificent branding - video, betfair radio, betas, API's, partnered software, deals with software providers, downloadable data. Betair started eight years ago in two fellas basement's with less than $2M of capital an they have branded. Our sport started in 1870 and has gone through billions of dollars and we have not. It just makes one shake their head.

PTP