Pennsylvania Horse Racing Needs To Rebuild Their Brand

“Good to Great: Why Some Companies Make the Leap... and Others Don't” is a pretty good business book, written by Jim Collins. He and his team of 21 researchers sifted through 6,000 articles, generated more than 2,000 pages of interview transcripts and created 384 megabytes of computer data in a five-year project to try and find a common thread to a successful company.

Collins found there were a number of characteristics that successful companies possessed, but one element stuck out to me. By determining the goal of your business and implementing incremental policies with a passion that forwards that goal, they become additive and they help your business in a big way in the aggregate.

I thought about this while looking at horse racing the past week.

Tracks like the Meadowlands have been more customer friendly than others, and they’ve been passionate and additive about it. Back in 2001 if you wanted to bet the Big M at an offshore shop you could; in fact they were one of the few tracks available. If you had an ADW account you’d find the Big M because they wanted their signal exported (at a fair price so bettors could get something back). If you wanted full fields and competitive harness racing, you found it at the Big M. If you wanted a low takeout pick 4 the Big M was the only track to embrace it.  In fact, every track in harness racing that cards a Pick 4 now to bigger handles should thank the Meadowlands for branding that bet in our sport.

Even when the Meadowlands started to have field size issues in 2007 and carding 6 and 7 horse betting events, the bettors still tried to stick with them, because the brand was what it was. Only after a few years of stagnation, the short fields and a lack of willingness to change began to be too much for even the most loyal of customers. 

At that time the brand was hurt. But it didn’t go away.

This season bettors seem to be giving them a chance again. Handle has been good and the new team led by Jason Settlemoir seems back to doing the “little things” they always have.  They are protecting and rebuilding their brand. You can feel the fan and customer base pulling for them to succeed. 

Across the border in Pennsylvania, we see almost the exact opposite. Go to any chat board, or talk to almost any bettor out there. The bulk of them will have something unflattering to say about Pennsylvania racing.

“30% plus takeouts with all that slot money, are you kidding me?”

“They card races for horsemen, not us” 

“Cash bonuses for winning a couple of trot stakes, how does that help me?”

Pennsylvania racing’s branding from a customer perspective is almost all negative.

This is illustrated, in part, with statistics from the USTA’s Strategic Wagering initiative, which as you all know, guarantees pool size at several racetracks. 

Chester has some of the highest purses, the best drivers and trainers, a great spot on the dial in all of harness racing. The Open goes for upwards of $50,000, middle conditioned races are in the high teens purse-wise. Meanwhile, Balmoral and Cal Expo have virtually none of those ‘positive’ characteristics.  There are no $50,000 Opens, Tim Tetrick is not hanging around the drivers room, and their purses are well under $100,000 for an entire 12 race card.

When you dive into the numbers, they tell a story.

Balmoral and Cal Expo have $20,000 to $25,000 pick 4 guarantees almost each night. Each time in December these guarantees were broken, sometimes by more than $10,000. The pick 4 averaged over $30,000 at those small tracks.

What about powerhouse Harrah’s Chester? Their guarantee is only $5,000, or 1/5^th Balmoral’s. Even with that low pool target, the pick 4 barely breaks the guarantee. One week in December the pool only drew $3,381, not hitting the guarantee by over 32%.

This should not make sense to anyone, but it’s right there in black and white. 

If you ask any player if they’re playing the Balmoral Pick 4 you’ll probably hear a “yes”. If you ask them about a Pennsylvania track they’ll say something like “I don’t play Pennsylvania tracks, isn’t the pick 4 takeout 35% or something?”

No, the pick 4 takeout at Chester is not 35%, it’s 15%, exactly what it is at Balmoral or Cal-Expo.

That fact doesn’t really matter because of the brand. Pennsylvania harness tracks are well known for having some of the highest rakes in all of North American racing. Even the Massachusetts state lottery has a lower takeout than a Chester superfecta. It’s been that way for years. One pick 4 at a low takeout that’s barely promoted cannot trump that branding.  

It’s not a harness racing only phenomenon. Out of the 69 thoroughbred tracks rated by the Horseplayers Association of North America, Penn National ranked 45^th, Presque Isle 50th with Parx coming in at 61^st.  The full list is here

This week the New York Racing Association Fan Council met and recommended that New York tracks should take some of the slot windfall and lower takeout. This was recommended to not only help churn (and as a result handle) but to also give something back to players as a marketing angle. 

Pennsylvania, I believe, immediately needs to do the same.  It doesn’t matter if the bean counters tell them they shouldn’t, because bean counters don’t need to brand build, nor do they have to foresee what happened in Ontario happening in Harrisburg.  It’s not like their purse structure depends on their small handles anyway. Most of the purse money comes from slot machines. 

After lowering takeout across the board to signal to customers that they are passionate about having them play Pennsylvania racing, incremental customer-friendly changes need to be explored. 

If they want to create a new bonus on a trotting stake, add a customer element to it with a guaranteed pool. Have some appreciation days for bettors, seed some pools. When issuing a press release, don’t tell everyone who won the Open (remember they don’t play your track so why would gamblers even care?), tell them that your $20k superfecta guarantee was hit and it paid $600 for a dime. Do the little things to change the betting brand. Tell them Pennsylvania tracks are open for business and ask customers for theirs.

Mark Hughes in “Buzzmarketing” wrote that it takes 6 years and $60 million to change a brand via Madison Avenue. For places like Pennsylvania it may take six years, but it certainly won’t take $60 million dollars. If the little things are done right to target customers, they can become additive, and they may set the table to allow Pennsylvania racing to go from not-so-Good to Great.

This article originally appeared in Harness Racing Update

Wintertime Tracks Like the Big A Should Be Different

Bill Finley wrote what I thought was a pretty common sense piece at ESPN yesterday.

• Somehow, though, that simplest of philosophies [decent races, ok takeouts, larger fields] has been forgotten at so many racetracks. Small fields, unplayable races, too many racing dates and high takeouts have become the norm.

He was speaking about the sweeping changes at the Meadowlands, where races are carded not for horse owners, or to give a trainer a layup or two, but for customers. Handle is up about 33% compared to last season.

Example, when there weren't enough entries to a stakes series:

•  The racing secretary's office also deserves an A-plus. It has consistently filled the races with 10 or more horses. When it looks as if a race is going to fall short of a full field, in many cases it isn't held. With 11 nominees to the Overbid Series of stakes races, the racing office took no chances on winding up with a six-horse field. The race was scrapped. 

A lot of tracks can learn from the Meadowlands, in my opinion. The obvious example is California tracks, where since it seems about 2000, fields have been short, and there has been no effort to fix them. That brand, despite still being a destination for simulcasters everywhere, has certainly suffered.

One track I believe who may learn something from the Meadowlands is Aqueduct.

The Big A is a wintertime destination for many punters, and the New York racing brand is the tops in the nation. They do a very good job promoting their races and they have done a great job branding them as well with their simulcast show and paddock reports. It's a winter place to be.

One would suspect they could race $5,000 claimers on a Thursday with 5 horse fields in each, and still draw $7 million in handle. It's a powerful brand. 

But it doesn't mean you have to rest on it.

This winter the Big A has had to cut a day of racing a week, and can't seem to find itself. The third and eighth races, reserved for state bred stakes, or allowance races, are terribly boring, with fields that are very short. The rest of the cards have not exactly been barnburners either.

I'd say about a dozen times this year I have looked to take a pick 4, but saw "chalk-chalk-second chalk- chalk" type sequences. I kept my money in my wallet. Chalk this meet has won at 38.2%. Morning line favorites are clicking through at 35.8%, returning 79 cents on the dollar. There's not a lot of fruit on the tree.

Rather than blowing up the condition sheet like the Meadowlands has, maybe something could be done, like a 50 cent 15% rake pick 5, just for this meet. The payoffs will be larger, and it could help, even if it does only a little bit. A stale pick 4 in short fields can be made a playable sequence by adding one more race. And for 50 cents, it's hittability is not off the reservation. If it works, it could be a staple of the winter branding of New York racing.

Changing a successful track by adding or deleting bets is nothing new. Gulfstream went through massive changes the last several years. They tried to be an eastern pick 6 destination, but that was scrapped for the Rainbow Six. Their pick 4 pools were huge, but that didn't stop them from carding a pick 5. Gulfstream's handle is up since 2009, while horse racing's handle has fallen.

The Meadowlands, of course, was the NYRA of harness racing. They rested on their laurels for a long, long time, but after dripping handle each meet, with shorter fields it finally took its toll. They were forced to change their brand. They made changes too late, and like Finley's column alludes, these changes have worked. If they made them five years ago they probably would not have had to make them.

The way I look at it, is that even when handle is good the question "how can we make it better" should always be asked. I think this question should be asked at the Big A. Sure our handle is the bomb, but how can we be even better?

Jack Welch, the former GE CEO, once said that he does not want managers or executives who fear change. He wants managers and executives that fear what will happen if you don't change. Wintertime tracks need to stand out, and they have to change with the times.The status-quo doesn't last forever. Just ask the Meadowlands.

Pletcher Talk

There were a couple of articles published recently about Todd Pletcher's Derby record. One was rather, well, odd, and another from Ed DeRosa focused on some statistics.

Skipping the first one and just looking at DeRosa's, he does make a decent case on expected winners, versus actual winners from the Pletcher stable. As Crunk pointed out on twitter, we can have a little bit of a discussion on Ed's numbers regarding expected winners via pre and post-takeout odds, but on a whole I thought he made a proper case.

Not looking at numbers, but spying the landscape from a birds-eye view, I think Pletcher's 1 for 31 record in the Derby is probably at the very least disappointing, though. When you are a top trainer and you are given such supreme stock, you pretty much have to deliver.

This is not unlike a coach drafting Tom Brady and Adrian Peterson and being given carte blanche to sign six top defensive free agents and delivering one Super Bowl in a decade. The media would scorch him, no matter the circumstances. With horse's like Eskendreya, Uncle Mo and several others like this year's Violence, he has those top players. The fact that his record is criticized by many (like the commentors on the article when linked to the Paulick Report) should surprise no one. It would be more surprising if he was not criticized.

A strong case can be made that the current numbers mean little. I can be the world's most profitable horse handicapper over 50,000 bets, but look at me in a subset of 50 bets and I can go 1 or 2 for 50, and it's perfectly fine to call me the dumbest bettor alive. With the thoroughbred - fragile, high strung, where a million things can go wrong - looking at a small subset is mind boggling. Add to the fact that one thoroughbred, out of thousands bred, has to be great at 10f on a given day, while getting supreme racing luck in a field of twenty, we're talking some serious statistical noise.

Conversely, a good trainer tends to have his horses ready for the Derby: Not ready to perform at level "X", but ready to perform at "X plus". The connections want the horse to run a top. Pletcher seems to have had some trouble achieving that. A number of his horses have raced very, very poorly in the Derby. People who use that as ammo, do make a strong point too. Considering that Pletchers only Derby win was with a horse who was not on schedule (Super Saver did not begin his prep sked until mid-March because of issues), it might add some credence to that critique.

The bottom line for me is that no matter how many people deride Pletcher as a guy who can't train a poodle to pee on the first Saturday in May, or how many people call those people "haters", they might both be terribly wrong. With a tiny sample, the massive error variables that go into having a horse win one race on one day at one track in May, and the skeletal make up of the modern thoroughbred, arguing that man does or does not create global warming seems easier to be sure about.

Zero Minutes to Post For Dummies

If you're like me, you play quite a few racetracks. Some tracks - a lot of them lately it seems - stretch out zero minutes to post to an eternity. This helps their handle because the longer it takes between races, the more money is bet.

Tracks that do not play the game are at a disadvantage, because, well, 0 minutes to post means zero minutes to post at these strange tracks. Because we're getting conditioned that zero minutes to post is not really zero minutes to post, we think zero minutes to post at some tracks does not mean zero minutes to post and that we have plenty of time to wager. We don't and we get shut out. Those tracks get fewer dollars in handle.

Now that that's perfectly clear, here is what I do at some tracks when I hear zero minutes to post.  I hope this is a helpful guide.

The Meadowlands - At zero minutes to post I like to have a shower. If you want to catch the race you cannot take a long shower, but a shower can be taken. As soon as I see the "0" on screen and hear Sam McKee start into an obscure story about John Campbell and a trip to Denny's, or where he eats when he's at the Jug, I'm off to the shower.

Tampa Bay Downs - Last Thursday at zero minutes to post for the third race I read a John Grisham novel and still caught the break. This might be the King of all zero minutes to post tracks.

Gulfstream Park - Warning: You should not look at any clock at Gulfstream, whether it be the teletimer or the "off" clock.  First quarters go in 25, second quarters go in 21 and the 0 minutes to post clock is glacial.  A few weeks ago I caught up on an episode of Dexter at zero minutes to post and only just missed the break.

Penn National - I think Penn National lives in some sort of Xfiles, 12 Monkey's alternate universe. I swear I've seen the gates spring before zero minutes to post, which is surely some breach of the space time continuum. Because Penn National has takeout rates almost as high as the racetracks in Turkey do, missing post time is not necessarily a bad thing; for me anyway.

Aqueduct - NYRA might have trouble pulling the "lower takeout now or it's breaking the law" lever on time, but holy moly their clock is pretty darn efficient. If you think you have time, think again and get your bets down.

Woodbine - Woodbine has a really strange innovation for bettors - a clock that counts down the seconds to post. Other tracks might one day adopt this new technology to help bettors plan their bets.

Northfield Park - A friend of mine lives in Akron. He told me he once left his house at zero minutes to post and made it to Northfield Park in Cleveland to catch the race live. I believe him.

Santa Anita  - I'm really not sure. I haven't played them since they raised the juice. Someone told me that they and Gulfstream go off at near the same time. If so, some company should buy both tracks and stagger post times to maximize handle.

Yonkers - You used to be able to scarf down a pizza and two 16 ounce sugary drinks at zero minutes to post and still get a bet down. Now I think that's not allowed by law, but if you try to drink carrot juice and munch on some alfalfa while doing a little yoga at zero minutes to post, you'll be out of luck. Yonkers is now pretty timely.

Keeneland - Keenland is very punctual. Some kids at the track who stop at the Liquor Barn before the races might get messed up and miss post time, but for the rest of us we're in fairly good shape.

Mountaineer - Zero minutes to post at Mountaineer means zero minutes to post. If you are playing live just make sure you walk carefully to the windows there because the track is not in the posh casino. I swear I almost stepped on a nail that was sticking through a pile of two by fours on the apron trying to get a bet down when I was there last time. It was a few years ago, so I hope they got those renovations done.

That's my guide to zero minutes to post. Please, as always, be sure to pay attention what time means at your favorite track. Don't get shut out!

OLG's Gambling Expansion Looked At

SC ran a link to a story on Sun News about the Ontario Lottery and Gaming Corp's gaming expansion plan today.  In the piece the outline of the Liberal Party's plan was noted:

- Create 29 gaming zones bundled for private operators to bid and build a casino in each zone. Some zones, such as London and the Waterloo Region, call for both slots and table games. OLG would oversee and regulate the industry
- Move some facilities to more densely populated areas
- Have private operator build new casino resort in the GTA, preferably downtown Toronto
- Launch online gaming site — playolg.ca — in the fall, allowing Ontarians to play the lottery or gamble online
- Cut the horse-racing industry’s $345 million take from slot revenue at racetracks as of March 31. Horse racing would continue at some of the 14 tracks but others would close

This plan is in response to the massive deficit and revenue shortfall the government has created. They are forced to look for more revenue to bridge that gap, and gambling is an area they think can help.

As dispassionate as I can be, being a horse racing guy,  there is some sound logic in the plan:

Creating 29 gaming zones expands gambling, and moving gambling to densely populated areas is textbook. Using economic geography is not new. Burger King, Wendy's, Wal Mart and thousands of franchises do it each day. I have no question that gambling will be expanded with a location and population based plan.

Build a Toronto Casino. Again, of course this will make money.

Now we get silly, in my opinion.

Launch an online gambling site called "Playolg.ca". First, whomever thought up that name is about as creative as I am. Second, an online gambling site where someone can play roulette or slots (you know that will probably happen) is, again, in my opinion, certifiable.

Betting racing online is a passion and a skill game. With some work and skill, you can make a bit of a go of it. The deck is stacked against you with high rake, but it is possible to win. It's gambletainment, as my friend Eric would say.

Playing online poker is too a skill. With low takeout and some passion, you can play online and make a go of it. With a $200 deposit, playing on low 25 cent, 50 cent tables, you can play for months and have some fun. It's gambletainment too.

Betting racing online and playing poker online is not much different than buying stocks and options online. It can be regulated, an enjoyable experience and it is not always a losing proposition.

Slots and roulette online is not gambletainment, it is taking $10 and lighting it on fire from the comfort of your living room. It, in my opinion, does a disservice to everyone in the Province. It can ruin lives and cause tremendous hardship and not to mention we know who will play these games more than others- low income folks.

I'm pretty live and let live; nanny state policies rarely sit well with me. But this is something that even a hardened libertarian would have some issue with.

What doesn't sit well with some is that Ontario is a province, which led by the Liberals, has a lot of nanny state in it. It's a place where you and I line up like cattle to buy a bottle of wine, at a heavily regulated, union shop, at ridiculously high prices, called an LCBO. Christmas time buying beer, well you might as well bring a book to pass the time standing in line at the Beer Store.

When beer in corner stores was broached (for about the 50th time, because consumers want it) a spokesman for Ontario Finance Minster Dwight Duncan said this:

"The current system balances access for both customers and suppliers with social responsibility.... we believe the current system of selling liquor is an effective way to guard the public interest.”

So, the same people who want to "guard the public interest" by not allowing someone to buy a six pack of light beer at a corner store, are now promoting gambling on a slot machine as long as you have an internet hook up and a mouse?

There already is a place to play slots that is regulated, disparate and seems to do a good job protecting the "public interest". It's called a racetrack.

If it walks like a duck and quack's like a duck, it's a duck. This is a very poor policy. And I'd have that opinion whether I have a bias towards horse racing or not.

Have a nice Tuesday everyone.

Monday Notes

Here are a few things I caught up on and decided to share, if interested.

Jason Settlemoir is the GM of the Meadowlands, and he has been working tirelessly to bring the Meadowlands back to where it once was. A lot of the things he is doing are working. The handle has been good, and there is a renewed optimism at the swamp of late.

I first saw Jason at a wagering conference in Jersey in 2009 where I was presenting on a panel about the future of wagering. He was helping Gural at Tioga and Vernon at the time, fairly fresh in the business. I noticed him one day in the hotel lobby with a couple of other people chatting racing. The chat wasn't about legalities about a deal, managing the ticket sellers, working with horsemen groups, or the mundane things that every track manager has to go through each day. He was talking about things we all talk about as fans and bettors on twitter or chat boards - changing racing for the better, why don't we try this, and on and on. You could tell he loved racing, and this was infectious.

Racetrack managers can't change the world. They are hamstrung in so many ways. But people like Jason can change the world one customer at a time, and he practices what he preaches.

In HRU (pdf alert) this weekend Bill Finley wrote a snippet in a broad story about the M that is much more than actually just a snippet.

• Settlemoir is so concerned that every on-track patron has a good experience that he took the time earlier this month to personally call a customer about the soup being served. It seems the person wanted more variety on the menu. The great soup fiasco has been fixed.

Everyone knows you can't fix everything; you can't call every customer. In fact, some customers are more trouble than they're worth.  But the simple fact that he would do what he did tells you about his passion to fix the joint. That passion filters right down to everyone in the business. That's leadership. If the Meadowlands roars back like it has, he will have a lot to do with it.

Well done Jason.

Also in HRU this weekend(pdf), Gural's policing ideas were looked at, paralleled with the moves made in cycling. I found it fascinating how the riders changed behavior when the EPO tests was introduced - they didn't stop cheating, they just moved onto other forms of cheating. "Where there's a will, there's a way" comes to mind.

Frequent commentor "Tinky" appears to have joined twitter. Not sure he'll say much, and I'm not sure you'll agree all the time, but he is a very smart horse racing person. I followed. You can here, if you so choose.

Do you ever have one of those "what the hell" betting sequences? I had one Saturday at Gulfstream, although in reality, it was probably all my fault. I disliked Orb in the Fountain of Youth because (although I expected a hot pace) he was (my exact words) "too slow". I liked the three in last (even tweeted it before the race), who was 20-1 morning line. I took two pick 4 tickets for the festivities. On one ticket I used Orb, and on one ticket I didn't. For some reason (I assume it was a mistake) on the ticket I used Orb, I did not use the horse I liked in the last. Strange.

Then to add insult to injury, I took supers with the 10 horse in the last as my swing and in a blanket finish, the ten came 4th. The super paid $61,000. I always use my swing horse in the two, three and four positions, but this time I did not; leaving him out of the four slot Why? I have no idea.  Anyway, long story short - after the race I expect to cash a super and a pick 4. Instead I don't (at least I made a win bet on the winner). Betting is frustrating, but never boring.

I did not watch the Oscars last night. I have not watched it in, oh, I don't know, since I was a kid maybe.  It's not that I don't like movies, or the people who make them: In fact, it's the opposite. I also don't for a second begrudge the billion or so people who watch the Awards. I think it's just that the whole rich and famous thing never really did much for me. I thought about the people I most admire, and they are not rich, nor famous, like the Catholic Priest in my hometown who the members of the Church bought a new truck to replace his old clunker, so he could have an easier time delivering food to those in need. He turned around, traded in the truck and bought more food.  In racing, you can follow a twitter account from a big name, and hope that he or she is what they appear to be on TV, but others are there who already are what they are. Caroline Betts who works all day at her paying job, but then works some more (and more, and more) for her horse rescue, asking for absolutely nothing in return, walks a red carpet on my feed. John Popovich who might never win a Triple Crown race, but treats his horses like each of them are Triple Crown winners, does too. They won't be on an awards show in a fancy dress or tux anytime soon, and they won't have tens of thousands of followers, but they make the sport go and I'm happy to chat with them on a daily basis.

For the record, while the Oscars was on I was playing the races, just like I usually do. All was right in my world.

Enjoy your day everyone.

An Interesting Evening on Twitter

Yesterday was an interesting one. We had the speed-laden Fountain of Youth, the Big M had a huge handle night, and I got nosed out of a huge super. Well, two out of three things were interesting.

I have contact with some heavy hitters on twitter - for example, the world renowned @o_crunk tweeted me pictures of his turntable, not once but twice - but I checked my timeline and saw this one. It was a little bit curious.

Bob Baffert, who follows three people, and never speaks to anyone that I've seen on twitter (I don't know for sure, I do not follow him), decides he wants to chat. About me having or not having kids?

I wonder if I said something bad about his horse, or his collection of sunglasses, but I find nothing in my timeline. It's a mystery.

Later I check his timeline and see his wife, Jill, tweeted this:

It appears that Jill has noticed a twitter account that is run by someone posing as their child. 99% of parents would likely be upset at such, so her tweet makes sense. However, putting two and two together (I'm smart like that), this must mean world famous horse trainer Bob Baffert believes Pull the Pocket is posing as his child on twitter. Go figure.

Bob is obviously a guy who can get a horse to the races, but he should stick to what he does best, because his detective skills clearly need some work.

Second up in the theater of the twitter, I notice there was quite the brouhaha from Gary Stevens last night. Adam Hickman didn't much like a ride, so he told him so.

That might be dumbest ride of @hrtvgary's comeback.
— Adam Hickman (@ahickman2) February 23, 2013

To which Gary replied:

@ahickman2 I got balls and guts #douch. You don't deserve a response but I wanted to. Go to bed and think about that.
— Gary Stevens (@HRTVGary) February 24, 2013

And later:

@ahickman2 @gatetowire your blocked #Douche. Happy? I spelled it rite.
— Gary Stevens (@HRTVGary) February 24, 2013

It doesn't much matter where you fall in this - whether you are an Adam fan because you thought the ride was stupid, hate seeing Monday morning critiques, or a sycophant who usually pops up in these discussions.  There is always one common thread when these things occur. If you are the person being critiqued and you are in the public eye, the onus is on you. What you decides ends, or extends a discussion like this.

If Gary said, "thanks for the advice", or "we tried something new" or nothing. It ends it.

In my opinion, if you are going to derive your salary from bettors, or fans in the stands like an NBA or NHL player does, this stuff comes with the territory.  How you respond is a responsibility. I respectfully suggest that Gary failed himself; not with his ride, but how he responded to it.

Enjoy your Sunday everyone.

Update: Detective Fernando has reported on the status of the twitter account in question.

Friday Fireworks

The news today, oh boy.

Are the horsemen in California looking to up takeout again? As the Bloodhorse reports, it looks like the horsemen want to raise the juice on the Pick 5 from 14% to 23%, a 64% increase. Ironically, I did a piece on the last takeout hike yesterday.

One figures that the TOC braintrust sees a lower rake bet that's taking away from the pick 6 must be stopped because it's costing them money. This is short term thinking, and probably extremely flawed. Low takeout, low base-ticket pick 5's have been branded as a bet in racing, and this brand has grown all of them. If California changes the rake, they make make a few more dollars in the short term, but it will not revive a pick 6. California, and other players, will simply look to play other pick 5's around the country, not shift their wagering into a $2 base bet, that's virtually unhittable for them.

Back in 2008 at a wagering conference I had a long chat with a fellow panelist about low denomination wagers. He, from New Zealand, spoke highly about "fractional wagering" where a customer can bring $24 up to a window and get as many combo's as he or she wants for a dime, or a nickel, or even a penny per wager. They'd been doing it for sometime, and it took off. Smaller fish want to play into a pool with sharks, and this allowed them to. This is not unlike a Rainbow Six at ten cents. Over the past several years we've seen North America look towards New Zealand and start to jump on the fractional wagering bus, although we're not there yet.

Regardless, decreasing payouts to customers on a fractional pick 5 will not grow California racing. It will not revive a pick 6. It will likely just annoy the customers they have left.

Ron Burke, the leading money winning trainer in North America since my dog was a puppy, fired off in Harness Racing Update about drugs, and he being called a cheater. It was a no holds barred interview. Well worth the read.  (pdf)

Dan Needham, one of the more thoughtful writers in all of racing, wrote a dandy article about what he does best - model. He proposes a national database project that is predictive in nature about breakdowns, which can hopefully lead to real, hard, data driven policy to help curb them. I was thinking about that the other day (though obviously not as deeply as Dan) when I was playing the races. I noticed a horse was off three months, had only one work and was off a vet scratch (that I surmised as lameness issues) only a week earlier. The horse broke slow, and was pulled up. I am fairly certain there are "x" factor correlations that can predict the likelihood of a breakdown, and I hope the NTRA and the Jockey Club look into this.

Last up, I picked up my Blackberry Z 10 (at the risk of being shunned by everyone under the age of 30, along with Sid Fernando, who apparently doesn't even eat oranges). It's a really nice phone, but my twitter app seems a little wonky.

I get avatars of someone, posting as another, and vice versa the odd time. This morning I took a look at my twitter feed on the phone and saw this:

Ray Paulick is the new HANA President? Bacon has really lost his way.

Have a great Friday everyone.

A Look Back at the Los Al Takeout Increase

In the spring of 2010, Los Alamitos decided to try and increase revenues for purses by raising the takeout. Their horse population was not stout and they didn't much want to drop a day a week to get purses and field size up (the easiest way to increase a purse, or handle 'per race' is drop a day, but it doesn't grow the pie, generally). This was a last ditch attempt to get that done.

It was passed as a "temporary measure", where if handle or revenue looked to be hurting, they would review the policy and revert back to the old takeout rate that fall. It was also a test case for raising takeout at all thoroughbred tracks in the State.

As the following graph, prepared by USC economist Caroline Betts, showed back in 2010, it was probable the takeout increase was having an affect:

It appeared the initial news about the takeout increase filtered the horseplayer information channels like Paceadvantage.com, HANA and elsewhere. There was a decrease rather quickly. However, the data is noisy, especially when we factor in they ended up dropping a day a week anyway. Instead of racing 4 days a week they were racing three.

This noise was relayed to the CHRB during the review. The "average handle per race" angle was talked about. As well, the initial decrease was blamed on other things (yes, I know this sounds silly) like the Vancouver Olympics. Horseplayers argued at the meeting that the plan looked like it was doing more harm than good. In the end they voted to keep the price hike, and continued to decrease payouts to customers who cashed tickets. Later in 2010, they voted to expand this policy to the thoroughbred tracks in the state.

I've always believed a takeout increase is not felt immediately. Sure there's the negative buzz and bad PR, and that does decrease some handle, but horseplayers are creatures of habit. Some will happily keep playing.  I believe here is where the effect is felt: Over time they have less money back to bet, this causes them to have more betting low's than high's, and it is deleterious.

It's not unlike the opposite of a slot machine. Casino's know that they have to give back a lot of money, because sitting at a machine that eats all your money in ten minutes is not much fun. They give back enough to keep the users brain happy, thinking they are winning when they aren't. In horse racing, dripping bankrolls act the same, and if the faucet drips more, the player has less money and less fun. Some end up leaving the game forever.

I went through some handle charts yesterday to see if any of this took place. Although it is hard to say for sure, I think there is ample evidence that says it has.

Before the rake hike, handle per week (4 cards) was about $4.4 million, or somewhere around $1.1 million per card. Immediately after the rake hike (still in 2010), handle per week (3 cards) was about $3.8 million or about $1.25 million per card. This makes sense because when you cut a day a week, field size goes up, and horseplayers (mainly fixed) bankrolls are spread across fewer races. One horse more per race equals somewhere around a 5% handle bump.

Fast forwarding to today almost three years later, I looked at a few snapshots (this is not scientific, just a few race days). For three days at the median in January, the results are:

Gross handle for the week: $3.18 million
Handle per card: $1.06 million

This is well down from 2009/2010, for both the pre and post takeout hike periods. Horse racing mostly uses the economy when handle goes south, but that is problematic here. The economy is still bad yes, but it's better than 2010, and with the rate of inflation alone, handle should be up, not down.

The other interesting thing I noticed is average on track handle. On track handle pays full boat, and over time this should fall with a rake increase. At Los Al this may have happened.

As shown in Ms. Betts' chart above, before the takeout increase, on track handle was about $500,000 per week, or $125,000 per card.

In the three day snapshot I looked at, on track handle was $266,062 for the week or $88,267 per card. That's about a 30% reduction per raceday.

I am the first to admit that these numbers are not the be all and end all via the takeout increase. They are also only a small snapshot. There are many things that go into handle increases, and growing or reducing the pie. There have been many changes in racing since 2010, of course, including rebating (which lowers takeout and grows handle. Perhaps ironic they made that change in California, where they raised rakes to grow).

We can argue numbers until we're blue in the face - maybe these aren't "CHRIMS" numbers, or maybe there was bad weather in January, or maybe the return of the NHL played a part. But down to its simplest terms: Los Al raised rakes in 2010 to grow the horse population, stay racing four days a week, and as a corollary, hike handle with better field size and a better product. That was their mission with the takeout hike and it's why it passed the CHRB.

Three years later, that has failed to occur.

They are racing three days a week, not four, and handle per week has fallen by a good amount. On track handle, which the track and purses get the most money from, is down precipitously. I believe this should act as a cautionary message to any track or horsemen group who believes they can raise prices on their customer base and prosper.

Small Ball

There was a lot of chatter about Paulick's article which talked about corporate responsibility and some recent racing decisions yesterday. Even (it appears) former NYRA CEO Charles Hayward got into the discussion, which spurred even more chatter.

In the article, Baconater used Maker's Mark bourbon as an example, and it is a good one, in my opinion. Maker's Mark was having supply issues so they played small ball - they talked about changing the alcohol content of their product with the hopes of keeping sales just as they were. It was a seeming 'tinker', but that tinker snowballed. They backed off.

What happens in horse racing is similar. The 'tinkers' affect the brand, and turn into a real issue. If a faucet keeps dripping it can turn into a gush.

The problem I have with small ball in horse racing, is that not only do the tinkers rarely help change the industry, they deflect from the industry looking at their real issues.

New York is perhaps the best example of pure small ball. Let's raise takeout, which never works, to pay for OTB's that weren't working. This sounds like a George Costanza initiative at Vandelay Industries. If this policy didn't blow up it would've been shocking.

California was not dissimilar. The goal of increasing a purse, say from $30,000 to $32,000 is deemed the holy grail; like it somehow is going to shake the foundations of owner behavior and the sport itself. It was deemed worthy of annoying fans, and bettors when they passed the rake hike.

What really does a $2,000, or $4,000 bump in a purse do? Not much. For large stables it may turn their ROI up from 0.52 to 0.54. For mom and pops, the product itself, reinvestment in yearlings or people moving from other states the benefits are negligible. Is it worth hurting your brand?

NYRA had a nice bump in purses this year with slots. Is Aqueduct the holy grail? Was last year's Saratoga meet that much different than others? Did you hear anyone say "I don't want to race at Toga for a $70,000 maiden special weight, but at $75,000, count me in!"

I don't want to belittle slots in New York, because it is a major development, but as a rule, marginal increases in a purse will not set the industry free. It will help of course, but it's small ball.

Conversely there are big items that actually can help turn the industry on its head and nothing ever seems to get done.

In Canada, John Craig, a horse owner and lawyer petitioned the Supreme Court recently to allow more deductions on income for horse ownership as "farming income". He won. Perhaps sometime the $8,750 cap will be done away with, and if so, horse ownership could increase massively as an investment vehicle. This is "big ball" not small ball, yet one man, taking it upon himself did this work.

In the US, if the horseplayer tax that was implemented in the 1960's was done away with, handle might head north tomorrow by $4 or $5 billion. At 7% for purses, that's about a $350 million dollar yearly purse increase for horse racing. $350 million is about what slots in every jurisdiction in the US supplies purses with each year. This is big stuff.

Instead of the Flock of Seagulls at Hollywood Park, why didn't we invite Willie Nelson? Decreasing a tax that can help farming like the horseplayer tax reduction can with increased purses could've been part of it, no? More purses equals more feed, and help, and bedding. and paddocks, and barns, and pasture lands. It's what the whole Farm Aid thing was about.

Where was the industry the past 25 years on these huge items that can change the sport in a positive fashion forever for us as horse owners and horseplayers? It's seems they were focused on small ball, and small ball rarely changes a thing. In some cases it does more harm than good.

It's Not the Stray Cats Fault

Hollywood Park is cancelling their Friday night cards and the rock concert that accompanied them.

According to Holly Park Prez Jack Liebau, "We had a lot of people that seemed to come just for the concerts. We’re not in the concert business.”

This might make it more difficult to compete with the "Dodgers and the Giants" but nevertheless, it's the right thing to do. Hollywood Park is in the betting business, not the concert business.

Mountaineer Park in 1998 had $30,000 handles from their live crowd. They then decided they were in the betting business. They distributed their signals to everyone (even those "evil" rebaters) and pushed the bet with Mark and Nancy on a nightly basis in a neat time slot. Despite non-winners of a race since Bob Dole was majority leader for 5 claimer conditions and trainers named "Scooter", their handle was $1M a night.

Gulfstream Park is in the betting business. The Rainbow Six is a bet, not a stakes race, or a new band. It's a bet. What's garnered more buzz this meet, how many Pletcher horses with nice pedigree's win, the return of Animal Kingdom, or the Rainbow Six?

Balmoral Park is a race track that allows betting. A couple of Saturday's ago they gave away $98,000 in purses and had $1 million in handle. Meanwhile, other tracks with three and four times that purse level can barely break $400,000. Low rake, a few decent pools and a track who knows that its customers want to bet, not watch a band, can do some handle.

We're not competing with a baseball team. We shouldn't expect some dude who wants to dance to an 80's band after having nine beer compile his own pace figures for the night so he can come back tomorrow. This is not going to a Copperfield show and coming back half cut and dropping $400 at a roulette wheel. Handicapping is a brain game.

Horse racing is in the betting business. We just need to act more like it.

The Future of Derby Futures

Steve Crist wrote about Derby Futures the other day and a lot of what he offers - deeper fields, lower takeout etc - are worthy. But, what about going outside the parimutuel pools? With Churchill looking at Exchange wagering, this might not be that far off. That's where, in my opinion, Derby Futures can really take off.

Futures wagers, as we all know, are interesting for fans, because they are pre-qualified already to play futures. Your average sports fan makes a trip to Vegas and can bet the winner of the NCAA's, or the Stanley Cup. It is a part of our culture as sports bettors. And it surely ups viewership of these events.

Right now I commend Churchill with their Derby pool. They have promoted it and made it something fun. Technically it should be treated as a loss leader, because it markets your event for you.

Is this good enough? I think in ten years, this wager will be much different than today, and I think it will help racing because big events drive casual fans, and giving casual fans more ways and better ways to participate and share their experiences, is what we're after.

There are a few problems with the Future Pool. All horses are not represented, the odds lack a true real time feel, and you can not change your bets after they are made. This is something that the "World Sports Exchange" tackled as far back as 1997, and it changed the market forever.

What can a "Derby Exchange" for betting do? Quite a bit.

First, it can allow you to trade your position. If you have an eye for horses, or pedigree, and you find a nice horse off of a bad line, the sky is the limit. Let's look at the Grand National at Betfair for an example:

There is about $700k traded already in this market and it is a tight one. Let's look at the trading on the current chalk.

You could have bet this horse at over 45-1 earlier in the season. You could be trading the horse out right now at a profit. This ups volume as a rule. If you could bet a horse like this, knowing you could trade him out later, you might bet $20 instead of $2, or $500 instead of $50. There is less risk when you can trade positions and with less risk, you bet more money. The goal each year for many, would be to have a "green book" where you walk into the Derby card knowing you are a winner before the race starts, and after the race is finished.

The second thing it might do is glue the casual observer to the news. If you owned Uncle Mo a couple of years ago at 10-1 and he was 4-1 a month before the Derby, would you not be paying attention to what the news is? If you heard a good work report on a longshot would you not pay attention? With a huge market and a chance to make some money and have some fun, people will pay attention. There is a 45 year old mom in Ohio who has a real time ticker on her iPhone for $AAPL news, because she is wondering if she should sell her position, or buy another share or two. It is not a stretch to imagine a sports bettor having real-time Derby news on her iPhone.

The third thing it clearly does is attract a new participant in our sport. Peter Webb never played a horse race in his life before wanting to "trade" such positions. There are people writing naked puts, buying corn futures, or using Black-Scholes like we use Formulator who may be interested.

Fourth, forget cannibalization, and think growth. If thousands of people are paying attention and trading positions, think of what Derby Day can do. If you are that in tune with the horses, you better believe you are going to take a poke at an ex, super, or pick three.

Last but not least we have the existing fan base. Twitter and Facebook and Grandstand chatter about "who is going to win" is infectious. If we have more people talking about the Derby betting market, rather than "I put $5 on whomever" it's buzzworthy.

The Grand National will have well over $15 million bet on it via this trading medium. I think in ten years, if legal in the US, run by whomever, $15M can be chump change. The Derby, the social media explosion and the ability to attract tons of new folks to trade this market is a match made perfectly for horse racing.

ADW's A Good Teacher & Caviar Quotes

Advance deposit wagering causes much consternation in racing, but what they do, and the gap they fill as a reseller is not unlike what any reseller does in business.  What racing is currently learning from ADW's is looked at in HRU today, page 4, PDF.

Caviar Trading

Another learning experience has to be the lady in the US who bet over $1 Billion at casino's and lost $13 million over years. That's a 1.3% takeout. If she played horse racing at a track, with 20% rake, and nabbed a 0.78 ROI like most people do, she would've bet $59 million dollars, not $1 billion dollars before going broke. When people say "lower the take and people will bet more" they aren't blowing smoke, they're just doing math. 

I stayed up and watched Black Caviar win last night. When I saw here trading at 1.14 at Betfair I must say I was a little surprised. Harvey Pack is famous for relaying that we should not bet a horse doing something for the first time because you likely won't get proper odds. A horse coming off an injury, with a monster layoff is probably one of those times you should spectate. We saw it. She raced like she was fresh as a daisy and sound as a dollar bill. What an amazing athlete.

Australia is famous for their beautiful cities, being a good friend to nation's like ours, general good cheer and making us do the god awful Locamotion at weddings in the 1980's. They also posses some funky accents. Paulick and others tweeted this last night after the race:

I'm hoping someone will translate Black Caviar jockey Luke Nolan's post-race quotes into "proper" American English.
— Ray Paulick (@raypaulick) February 16, 2013

I'm pretty good at translating Australian. What Nolan said was (paraphrasing):

"She's a great mare. Crikey we took it to em like a croc eating a chicken. I'd like to thank Pull the Pocket. Without him this mare would not be who she is. I'm tipping a Fosters to you mate"

That might not be a perfect translation, but it's close. Right back at you Luke.

Have a great Saturday everyone.

Hang Em High, Don't Hang Em

There were two big suspensions handed down this week. One in Ontario involved a trainer using EPO. Another in Nebraska involved a trainer using frog juice. EPO is dangerous for horses and also takes money away from hard working honest people racing their horses. Frog Juice is dangerous for horses, is dangerous for participants, and takes money away from hard working honest people racing their horses. Both are considered Class I drugs.

In Ontario the ORC handed down a 14 year suspension and a $60,000 fine.

In Nebraska the commission doled out a 2 year suspension and a $1,000 fine.

I realize there are circumstances and all the rest with suspensions, but that divergence doesn't pass the smell test. This is why today, and for years, participants, fans and bettors have wanted uniform rules and regulations. State houses, commissions and horsemen groups have failed the horses and honest trainers and owners miserably, in my opinion.

Notes:

Woodbine has cancelled Bet Night Live. Bet Night Live was shown Monday's for harness racing, and Wednesday's for the runners on the Score Network, which I think is beamed into 10 million or so homes. This is a response to the loss of slot money. It costs a lot of money to buy airtime; money that is no longer there.

The Montana station that got hacked with a Zombie Alert is kind of funny. It makes me wonder if the maker of the pancake thing is behind it. That looks like a really good pancake maker, and it has over 326,000 views on Youtube.

Interesting study by Pew Research: If you ever wondered why twitter seems like it's made up of a whole lot of kids who live in their parents basement learning about life and politics from Michael Moore and Bill Mahar, it's because, well, there are a whole lot of kids in their parents basement learning about life and politics from Michael Moore and Bill Mahar on twitter. Like most of us, they'll probably change when they have to pay their own hydro bill.

I can't for the life of me understand why Gulfstream race video's cannot be embedded.

There's a nice pick 5 carry at the Big M tonight. Free program pages are available. For those of you who've often said "the chances of me hitting a pick 5 carryover are about equal to a meteor shower causing havoc on Earth" it might be your day.

The Racing Beard is back running for you harness heads.

I paid some stakes payments a couple of days ago. Stakes payments are like buying a penny stock which promises that this new product will take over the world and you'll be rich. What invariably happens is that six months later the stock is in bankruptcy protection.

Have a great Friday everyone!

Rejected ABR Brand Ambassadors

America's Best Racing recently announced their horse racing brand ambassador program. Six people will be hopping on a bus, touring the nation promoting horse racing. It's kind of like the Partridge Family without the musical instruments, bell bottoms, or Danny Bonduce.

Out of the six chosen for this task, there were many others who applied and were rejected. I scoured my contacts at the NTRA and got my hands on some resumes.

The proper thing to do would be to send them back to their rightful owners.

I post them for you here on the blog.

Joe Drape sent in a cover letter:

"Hi my name is Joe. I would like to travel on a bus and share stories about horse racing. In my spare time I will take pictures of vets and trainers on the backstretch doing what they do. I will post these pictures and write about them on the New York Times my facebook page. It will promote my paper horse racing, and we'll all have a great time."

Richard Dutrow tried, but it appears he was rejected:

"Hi my name is Richard. I would like to be a horse racing ambassador. I am good with the media, and know horses. I could give seminars to people from our bus like: How to train a Derby winner, lameness treatments that work, and how racing's rules are merely suggestions. I will be very loyal, because I have a small gap in my schedule"

Cool, but not cool enough

Sid Fernando wanted to be an Ambassador. No dice:

"Hi I'm Sid, the most interesting man in horse racing ™ and the world famous pedigree expert. I think I bring a unique idea to get young people into racing. I would like to start a program from the bus where we give teenagers lessons on the birds and the bees with live horse matings. I'd also keep young people mesmerized advising them about black type, obscure Belgian broodmares, and my love of Friendly's. I'd also tweet my exploits to my millions of twitter followers from my myriad of Apple products. Imagine a game of twister on the bus. Now imagine that same game of twister tweeted to millions. You don't have to just imagine."

Andymays tried, but unfortunately failed:

"I'd like to be a brand ambassador and bring a lot to the table. I send nice emails out to thousands each day, so that's a big plus. When my twitter account is not suspended I am on twitter too. I like betting, dirt, and eating at Wendy's, Burger King, In and Out - anywhere except McDonald's really. If you get back feedback from Keith Brackpool about me, he's full of goo"

Notthetoddster tried, but he too was unsuccessful:

"I want the job. I'm the most successful trainer ever, or at least since the dude that trained Hidalgo. Count me in. Putting up with six smarmy kids on a bus for six months is easier than dealing with a half a Repole. "

Richard Grunder, the Tampa announcer took a stab:

"I got my cover letter in on time, and my resume is rationed along perfectly under Angel Serpa. I've loved horses since I first saw Secretary. The Easy Rider Monday Silence battles in the 1980's turned me into a huge fan. Let's not be heads apart here. Please consider me for the job."

Andy Serling was a surprise late entrant, but he didn't cut the mustard:

"Ambassador? This has to be the stupidest thing I've seen posted on twitter today, and with my followers, that's saying something. Regardless, count me in. With a shorter raceweek this NYRA gig is getting stale. "

Jerry Jamgotchian tried:

"IF YOU HIRE ANDY HIRE ME TOO. I"M JERRY JAM"

Dustin Hoffman made an attempt, but maybe they saw something suspect in his cover letter:

"Hi I'm Dustin. I played in Tootsie and a few other movies. My best friend is Ray Paulick. Ray is the bestest BFF ever and we have dinner together lots. He runs the best horse racing site in the history of the internet, or maybe even before that. In fact I think he invented the internet, because he is smart like that. Please visit the Paulick Report and buy advertising. Thanks, Dustin."

I'll see if I can dig a few more up from my contacts, but I found some of those pretty interesting. I hope you did too.

There's An App For That

When we think of horse racing lotteries it begins and ends with the V75 in Sweden. The V75 is a pick 7 which runs each Saturday, with a ten cent minimum play. The bets are sold in convenience stores, online, or at racetracks. When carried-over, the pools can be greater than $30 million.

What Sweden possesses to get this type of wagering implemented is an organization that mends pari-mutuel horse wagering and the gambling system. All forms of betting fall under the authority of the government's Lotteri Inspektionen. Under this is AB Trav och Galopp (ATG) which manages Sweden's horse racing industry and is responsible for the Swedish Horse Racing Totalisator, along with Svenska Spel which has control of all other sports gambling.

What's interesting about this structure is that it runs fairly smoothly, when it comes to promotion. I was on Google Play last night looking for Android racing apps, and came across the app for the V75. 

The app contains video replays, analysis of the V75, driver and trainer and horse profiles and a bunch more. It also introduces newbies to Swedish Harness Racing. In Android the app shows "over 10,000 downloads" since November of 2012. That doesn't include the iPad app downloads, I believe. This in a country smaller than Metro Toronto.

In North America there are a couple of good horse racing apps. Ken McPeek's "Horse Racing Now" is a nice piece of work. Equibase's app is really, really good, too. But where the Swedish app has everything under one umbrella, because of their structure as the horse racing "commissioner" in that country, the North American apps do not.

The Equibase app has a disclaimer at the bottom of their app description:

"Purchase is required for replays and handicapping products"

Ken McPeek's introduction at google play says:

"Streaming live video from participating racetracks"

It's not that those apps are bad - they're not, they're excellent. It's not that I begrudge anyone making money on something either. I've never been known as Pocket Marx. It's just that everytime we turn around, there seems to be customer limitations or caveats on something racing offers.

A horse racing lottery is probably a long way off in North America. But even if the legislation passed, it makes me wonder. Unlike Sweden where the goal is to promote racing and make the V75 bet work, would TVG be fighting HRTV to show the lottery races? Would Magna have their own app for their four races of the lottery sequence, and Churchill for the other four, just to mess up customers? Would Equibase's lottery app allow for free past performances, replays and video for the lottery races, or send people to a website to pay for them? Would the races be placed behind a paywall on youtube, or scraped off for copyright infringement?

I don't know. Maybe I need an app for that.

McDonalds-Q-Base

In 1963 there was an interesting meeting between some entrepreneurs and the owner of the brand new McDonalds. I - your cub reporter - got my hands on the minutes, and I found them eye-opening.

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Present: Ray K, and Tim and John with a business idea for him
Date: May 9, 1963
San Diego, California
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

"Good afternoon Mr. Kroc. We'd like to present you with "Menubase", a new idea to gain revenue from your 15 McDonald's restaurants. Menubase is a system where we handle all of the menu's in your restaurants. It works like this: You pay us to add the information of what you sell to a menu. We then take a a tarp, and cover your menus so your customers can not see them. When your patrons give you money, the tarp is raised and they get to look at your menu." started Tim.

"Is this some kind of joke? Where's Allan Funt?" asked Mr. Kroc, "How will my customers decide what to order without a menu? And they pay good money to buy my hamburgers and fries. Why in the world would I ask them to pay to make a menu choice?"

"This is an ingenious idea we got from horse racing. They charge their customers to look at the running lines of the horses, and they happily pay to make a bet. People come to the races in droves. In the 1950's horse racing became the largest spectator sport in North America. Bettors pay to make a bet, then they pay again. It's a brilliant scheme!" said Tim.

"Horse racing has a monopoly on gambling" said Mr. Kroc. "If I was the only restaurant selling food I could probably do that - scratch that, it's still a stupid idea - but I am not. I have to compete for my customers. I have to make the best food, at a fair price, and I have to respect them, or they will not patronize my restaurants. I want to make McDonald's a big restaurant chain. I am not in this for the short term."

"Burgers come and go" said Tim, "but you'll always be able to use our tarp-covering-patented material to charge for menus. It doesn't matter what you sell - burgers, steak, or those new Taco things. Menu's cost money to make and you should be getting something for tabulating the information on them. In 50 years, say in 2013, horse racing will still be thriving because they clearly know what they're doing. They get revenue from everything - parking, programs, $2 beer when it's only 75 cents for a glass at the pub, big high takeout rates, and more and more. McDonald's need to look towards horse racing for ideas."

"I respectfully submit that horse racing will not be as popular if people are able to gamble in other places. To survive they will have to act like me, by offering great prices, delivering superb service; certainly not charging their bettors to make a bet", noted Mr. Kroc. "I want McDonald's in every corner of the World by the turn of the century, and I will not be able to do that if I anger, or try to nickel and dime my customers. They won't be able to either"

"I guess you don't want to hear how we are going to install a different menu in each of your restaurants then?" said Jim.

"What? No! I don't want to hear about that. Is that another racing idea?" said Mr. Kroc.

"Yes. Things are different at some tracks so we have to be on our toes. We've even been assured first time geldings will be in the past performances for the opening of the 1964 Saratoga meet, so maybe the price of a menu will go up. You have to be ready because horse racing moves at lightening speed. It's pure genius!" said Tim.

"Well fellas,  I think I'll leave all these big ideas to you and horse racing. I'll just humbly work trying to grow my little restaurant chain" said Mr. Kroc.

"Okay. Thanks for your time Mr. Kroc. We'll be on our way now" said John.

"Let's go sell Mattel on charging for their Pogo Stick instructions Tim." said John.

"Right on John. Pogo sticks are going to be the rage for 1,000 years. This McDonald's thing is small potatoes.

The meeting ended at 1:35PM. To this day McDonald's has never charged customers to look at their menu. According to their corporate filings, there are no plans to.