Monday, August 15, 2011

McKinsey Report - Nothing New

I have not spoken too much about the McKinsey survey here too much (if at all) when, or since, it was announced. I felt - mainly because they were interviewing (for the most part) industry insiders (the ones who have presided over our lost viewership, handles and revenues the last twenty years) - that there would be nothing new in it.

Source: thisisbroken.com
The results are in:

"The nine recommendations involve fewer, better race days; innovative wagering platforms; integrated rewards systems; improved television coverage for racing; free-to-play online games to educate the public; social games to develop interest; safety improvements; new ownership tools; and best practices at racetracks."

I think we all knew the above needed fixing before, but we now have a survey that tells us it's broken. I am guessing that was why the company was hired: The Jockey Club needed a road sign containing long talked about recommendations to rally the sport around, and they got a road sign.

What did trouble me in the report is that it seems insiders (or existing customers) were interviewed on pricing and exchanges; not gambling people who run successful exchanges, or gambling businesses and the people who patronize them. These are items that the industry knows little about (e.g. if our industry insiders knew how to run an exchange, we would have had the foresight to create one; if they knew how to attract low takeout poker players, they would have already).

"The report touched on exchange wagering, which is not yet available in the United States. McKinsey believes exchange betting has the potential to attract new patrons; Singer said the platform is “unlikely to be profitable at a takeout rate under 10%."

For takeout it was similar:

".....fewer than 2% of most fans know about takeout. Thus, the report makes no recommendations on an issue that has boiled over this year, particularly in California."

This is directly opposed to what gambling people like Richard Thalhiemer, Eugene Christansen and companies like Betfair have said. If you talk to a betfair customer, or betfair themselves, and ask if a 10% rake is profitable, they would probably say no too - for the opposite reason (price sensitive players who patronize it, would stop and they would not have a business). In fact, this is from Betfair's annual report:

"Racing knows that customers who go racing, and a) feel they had no value for money at the racecourse, and b) don’t win a single bet all day, don’t have much fun. They may not come back. In just the same way, we know that the least valuable customers to Betfair are the ones who lose all their money quickly. They go away and never come back. So, we are happy to take less off our customers per bet. Business is all about offering your customer the product he wants at the price he wants. If you can do that, he’ll spend his money with you."

In my opinion, this study is a good example of what Seth Godin said (from Free Prize Inside) a few years ago, while he was studying why old businesses have trouble making huge, necessary changes :
  • Your growth will come instead from the dissatisfied and unsatisfied. The dissatisfied know they want a solution, but are not happy with the solution they’ve got. The minute they find it, they’ll buy it. Yahoo’s best customers were not google’s first users. Nope. The happy Yahoo customers were not looking for a replacement. Google focused on dissatisfied web surfers- people who were online but were not blown away by what they had been using (and who wanted to be blown away).
  • The unsatisfied are the folks who do not even realize they have a problem that needs solving. That is why focus groups are often so useless. The people you really need to hear from are the great unwashed, the people who are not even looking at you. That is where you will find the customers you need when your current line becomes obsolete.
  • The problem is that management really likes those satisfied customers. The first question they’ll ask about any innovation is “Will our satisfied customers like it?” Of course, this is a silly question, because satisfied customers already like what you’ve got. The question you ought to ask first is, “Will people dissatisfied with what they are doing now embrace this, and, even better, will they tell the large number of unsatisfied people to go get it right away?”(1)
That was the major reason I have not paid close attention to this process: We asked our existing industry what they thought about our industry, and it was reported. Although the recommendations regarding some/most of the inside baseball items are good, none of them should be considered new, fresh, or something that can lead us to major change.

To find that road, they need to ask directions from a new audience.

3 comments:

Horse trainer said...

It is sad that the JC has no clue about its product or customers.

Anonymous said...

As others have stated- This blog and others (and the NTRA report years ago) have been saying a lot of the same.

Anonymous said...

""".....fewer than 2% of most fans know about takeout. Thus, the report makes no recommendations on an issue that has boiled over this year, particularly in California."""

... aaaaaaaaand another bullet right to the temple of those HANA nitwits

Most amusing, though, is that the statement speaks only of those who "know" about takeout. The numbers who care about takeout are but a similarly tiny fraction of those.

When racing begins to identify HANA-minded individuals as being more of the problems and not anything near to the solutions, only then can it find the path toward thriving once again.

Any idiot knows that the biggest sports in the world thrive most in times of greatest parity. HANA is comprised of the narrow-minded who have stepped out of the shadows and into the spotlight in order to let racing's organizers more easily identify themselves as racing's biggest problems.

Amid your average group of 2000 racegoers, per the survey, roughly 40 might "know" about takeout. Of those 40, maaaaaaaaaaybe 10 care about takeout. Curiously, that .5% closely parallels the insider/smart money which is depriving horse racing of its sought-after parity in the mutuel pools.

This really is a simple concept, but the scores of selfish individuals up and down the racing spectrum just won't step out from behind their own immediate needs and wants to make racing better for the 98% who vastly outnumber those who are effectively ruining horse racing all over.