Exchange Wagering 1,2,3

Scott over at Sport is made for Betting went through a few of the hurdles that Jersey exchange wagering will probably be going through over the coming months.I am not quite as pessimistic as he is. We'll go through a couple of his very good points.

First he rightfully speaks about the debate about laying horses:

"That [the debate] hasn't occurred yet, and there's no reason to believe American racing people will be any less antiquated than the rest of the world when it comes to explaining that you can effectively lay a horse via current wagering systems"

This was one of the big criticisms used in the past in all new jurisdictions, as Scott alludes. It always struck me as being a bit of a red-herring because racing using this argument is essentially saying "our participants are corrupt and if you give them a chance to be corrupt, they will." Sure there are corrupt people in racing, but with large purses are a lot of people out there going to take the chance with a betting coup for a few dollars? So far the answer has been a big fat no. Betfair has caught more corruption in tennis or other sports via their excellent tracking system than they have in horse racing.

Clearly racing must take these things seriously however. Right now you can get three soda positives and get a slap on the wrist. Racing must agree that if someone does abuse this system to take money from players, they are gone. Goodbye.

Scott also talks about the smear campaign, which has occurred in other countries.

"In Australia, Betfair had to cop such rubbish as senile Senator Bronwyn Bishop accusing them of laundering money for al-Qaeda. They've got a long way to go to win the PR battle in the States, the negative campaigns haven't even started yet and if there's one nation that loves their baseless smearing political campaigns...."

This is a good point, but again time has marched on. I would suspect that very few people will say a company that is listed, and is a part of racing by owning TVG for two years, who has also been a good corporate citizen in several countries, is funnelling cash to terrorists or other such tripe.

Last he talks of the cash component and dealing with the various racing fiefdoms.

"Currently the horsemen get a big chunk of wagering turnover to pay prizemoney. That's easy enough to do when the totes take 20% out of the pools on each and every race. Are the horsemen really going to agree to a deal which will equate to around 1/10th of what the tote (pari-mutuel) gives them?"

This one holds the most merit, in my opinion and is a real stumbling block. Unlike in the UK where taking a smaller amount per bet to try and up handles/turnover is part of the culture, in North America taking as much as possible without going bankrupt seems to be the major belief.

Racing has lived with the thought of high take per bet for so long it has become the culture. We see it each day, even in 2011. "If they are betting $1M and we are getting 20% of it, why not up take to 25% and make $50,000 more?"It's difficult to believe we could actually grow a pie with dynamic and discretionary pricing to new markets. It's simply very hard for racing to grasp.

I can envision a fight about revenue whereby the horsemen will want to take a huge hunk and completely change the business model. In that case we will have cannibalization, and any potential long-term revenue gains will be muted. They would simply be selling their same cheddar in a slightly different package to people wanting to buy a brand new type of cheese. That will not make the game grow.

Although the above has real merit as an argument to how this can be derailed, I believe perhaps the toughest hurdle to overcome is the fact that New Jersey will be hearing from old time racing folks who vehemently disagreed with exchange wagering, were proven wrong, but still hold some of their beliefs. A lot of the people who warned exchange wagering would kill the business are still in power and they will be considered de-facto advisers to Jersey.

For example, in the Australian newspaper last year we had the head (and still head) of Aussie wagering exposed. One of the largest breeders in Australia was too. In an article titled "The Death of Racing is Still Some Way Off" a few quotes and empirical data was offered.

"You have been duped. Racing figures in NSW have misled you in a scare campaign worthy of Australia's flailing politicians."

Quotes from Peter V'landys and Gerry Harvey back about 2008:

"Here is what these men said last year on ABC television. Harvey: "If they (corporate bookmakers) are successful, there's no racing, it's as simple as that, and they know that. It will all go back to picnic races. So it's just total destruction of the racing industry as we know it. They know it, we know it."

V'landys: "This is the biggest problem the racing industry has ever had, because this is a direct threat to its funding levels." Then again: "It has a massive impact. As I said, 70 per cent of our income comes from wagering, so if that money is being pilfered out -- and we are not getting paid to put the show on, it means that all our 50,000 participants in the end will lose.""

They could not have been more wrong.

"Betting on thoroughbreds topped $15 billion for the first time in 2009-10. With the $5.074 billion wagered on harness and greyhounds betting on the three codes burst through the $20 billion barrier [up from $19.369 billion]"

Pari-mutuel wagering was up, betfair was up, purses went up, more people were betting racing and the pie grew, all in the midst of a world-wide recession.

Racing in Jersey, if they honestly want to grow, must avoid anecdotal evidence from people like that at all costs. Our game deserves better.

I hope New Jersey racing chooses numbers and hard-data, over hyperbole. If so, exchange wagering in the spirit it was intended - although nowhere near the panacea some give it - can help kickstart the sport in the Garden State.

Related: Betfair is like Chocolate Ice-Cream