Shanklin's Take on CDI & Other Notes

Bill Shanklin recently sung the praises of Churchill Downs Inc, and remarked on how well it's run as a publicly traded company. Some of the negative comments focused solely on Churchill's ADW - Twinspires.com - and how it is taking money away from live-track revenues. Today Bill responded by showing how the world is changing, and that disruptive technologies are here to stay:

• The inescapable lesson for those of us who are aficionados of horse racing as it once was is this: Regardless of how fervently traditional horse racing fans would prefer to bring back the halcyon days of the past, when fans spent leisurely sunsplashed days at the racetrack and bet with a real, live pari-mutuel clerk, we cannot excepting at a few venerable throwbacks like Saratoga, Del Mar, and Keeneland

As we have spoken about here on the blog before, it's not unlike the NFL in 1960 when the choice was to use or not use television. There were those fervently against televising football games because it was believed this would hurt the live gate, and concessions. That argument seems ridiculous now, but racing (almost daily) is barraged with similar arguments regarding advanced deposit wagering.

One area I do feel Mr. Shanklin did not touch upon, which I will here, is that disruptive technologies succeed in the new world because of mainly three distinct features and benefits:

i) They're convenient
ii) They are long tail and provide reach
iii) The economies of scale, and cost effectiveness, provide a superior product to consumers at a reduced price, which (at times) can increase demand a hundred-fold or more (e.g.online stock trading)

Twinspires.com (CDI's wagering arm) is definitely convenient. For the most part they are fairly long-tail, and they do provide reach (there are people 500 miles or more away from an OTB or racetrack who can now bet most tracks almost 24 hours a day). This is not dissimilar to an Ebay. It's convenient for me to sell my #1 Spider-Man comic there. I can sell to comic collectors from all over the world, via that website's reach. It's something I could not do even 20 years ago.

But, if I want to sell that comic on Ebay, I can at a 1% commission. If I wanted to sell it at 1993 Sotheby's, the commission would be 25%.

This is where Twinspires.com and CDI have failed to make a dent, in my opinion, and it's where the three legged stool breaks down.

CDI pretty much charges the exact same price online that they charged 40 years ago at a live venue. Only two thirds of this winning formula has been enacted, and this is happening despite Churchill receiving signal fees of 3% (or even lower) for some tracks. At the same time they charge a very high fee for their own tracks.

Does this mean that I disagree with Mr. Shanklin's assertion that Churchill Downs Inc is a well run business? No, absolutely not. Maybe, just maybe, it is in their best interest to shoehorn as many players into their platform at a huge margin e.g. CDI handling $1B at 20% margins at Twinspires might be better than handling $2.5B of wagering at 7% as a corporate strategy. I do honestly wonder, however, what it could do for racing overall, if the third stool of the Internet chair was on the floor.


Notes: 

First Dude is retired with a tendon "strain". Press releases like that make me think of gastronomical infections or chips that are not chips. Apparently eight months of rest is now press release-speak for retirement.

Tioga Downs is working it's way to major racetrack status. They now hold the keys to the Cane Pace.

Imagine what would happen if horse racing did what Domino's did here? The comments might be "colorful".

There was a big battle down under for aged horse of the year. The best part: It was Monkey King versus Smoken Up, two of the best named excellent horses I can remember.

Hambo elims are this weekend. I'm excited.

A newbie racetracker shows why slots have 5% takeouts - because winning is important.

Horse racing in AZ is not doing well. It's been three years since Arizona passed that crazy ADW law. Ironically, horseplayers were the ones who tried to correct that last year.

Del Mar and Saratoga ain't hurting so far this year. We've been on the Big Event wagon for a long time here, and it is one opinion I have barely modified over the years. Big events are what every marketing dollar is made for because it can grab eyeballs, and it is the future of the "sport" of horse racing.

Speaking of eyeballs: How quickly can an innovation take hold when you have them? Pretty quickly. Google + is at 18 million users already. Linked In, Facebook, Twitter, and a whole lot else out there is probably getting pretty worried.

Have a great day everyone!