Customers Lose in Illinois

Live harness racing in Illinois has been scrapped at Balmoral Park and Maywood Park. The dates have shifted to Hawthorne, a Thoroughbred venue. Harness Racing Update has the full story.

I am the first to admit that - other than what you and I read in that piece as well as others - I know little about the machinations of the decisions, the politics and the bedfellows. But I do know a little about being a customer of the racing product, and in my view, this is really going to hurt.

Balmoral Park has built a betting brand, much due to the work of Michael Antoniades, and this brand is very strong. It is not uncommon to see million dollar handles at the venue, with less than $70,000 purses given out in an evening. The pick 4 has been branded well. When they dropped takeout from 25% to 15% they went to work promoting the bet, and its average pools increased from around $7,000 to $30,000 during that time. If you are a harness fan and you want to make a bet in a decent sized pool, Balmoral was a staple.

Now it's no more.

Harness racing - and racing in general - has been fighting the tape for a long time. As recent as ten years ago there were solid betting pools at several venues, and these pools drove more and more handle. Lower favorite hit rates, an underappreciated driver of betting dollars, were prevalent at many tracks and you, me, and everyone else who bets daily, had a place to play. It's not like that any longer, and to fill the gap, new kids on the block have entered the picture, places like Chester for harness racing, but these tracks do not have a solid brand like the ones they have replaced. In addition, many of these venues are funded through slot machines, and draw entries from tracks people did bet, or wanted to bet. $35,000 purses at Parx for a $7,500 claimer, or $45,000 Opens at Yonkers are prime examples.

Harness racing has a lot of racetracks, but the ones that drive most of the betting revenue in the sport are few - The Meadowlands, Woodbine, Northfield and Balmoral. Not protecting those strong brands, or over-zealous track execs taxing horseplayers into oblivion, can hurt the harness racing betting ecosystem.  With Balmoral gone, harness racing, and its customers, are a little less rich today than they were yesterday.

Tuesday Notes

Good day everyone.

Mohawk's closing night of the meet is tonight and they're discontinuing the jackpot pick 6, with a mandatory payout. That bet, more or less, flopped. Replacing it is a 15% takeout pick 5 from races one through five, beginning October 1st, when the meet flips over to Woodbine. The Woodbine standardbred menu for non-rebated players is poor, so this bet is welcomed for those looking for a higher payout than the 25% pick 4 offers.

They are not having a mandatory payout for the Super High Five tonight, so beware of that. Amazingly, the Super High Five, with shorter fields and little hope to hold a single ticket chugs along when the pool reaches $200,000. I understand the want for a big payout, I get the fact that rebated players can play this with some sort of contrarian skill, I get that some lottery players throw a few dollars in, but the pool generating $40,000 an evening is still a little confusing.

I often wonder what would happen if bets were protected by trademark, where they can only be offered at the track that creates them. It would be interesting to see the Beulah Fortune 6 in numbers the Gulfstream Pick 6 does. I suspect there would be quite a bit of betting innovation going on from tracks.

Something that's not very confusing: Churchill Downs lost handle again this meet, down 6.6%.

We all know the betting pools are fairly efficient. There's not a ton of meat on the bone. However, for the life of me I can not understand the steam Bayern took in his last two starts. It just felt like a massive overbet, and it turned out to be, but there folks were, hammering this horse, hoping or thinking he regains last year's form. It doesn't happen often (people tend to think it does because of confirmation bias when they're right, and discount the times they're wrong), but when you can toss a horse who is garnering 30% of the pool from the top couple of spots, you're beating the juice.

I think one of the toughest things for horseplayers to do is toss a horse they like, or they've been waiting all card to bet, because the odds are too low. Nowadays we see a lot of horses taking major steam off a bad trip, for example. In harness racing, this is especially noticed with horses who were hopelessly boxed. They will be 8-5, and because the trip is fresh in the mind they are worth 8-5. A lot are not, and players need to pivot and pitch the horse. This is difficult.

Handle should be up decent in September. Del Mar and Saratoga had days this September, and last September was one of the worst this business has seen YOY in some time. First person who says it's because of lingering American Pharoah coattails gets lashed with a wet noodle.

Why is it that every time a decent three year old in harness racing shows up, in some quarters he is suddenly "as good as Somebeachsomewhere"? It's uncanny and, well so far, wrong.

Wakazaschi Hanover beat Freaky Feet Pete on Saturday night. That's the same horse who beat Wiggle It with the same trip in the North America Cup. He's a quality horse, but I think Freaky Feet Pete was a little flat, frankly. I could be wrong, of course. On October 10th Wiggle It and Freaky Feet Pete are supposed to meet at Hoosier and I think I will take a swing on Pete if the odds cooperate.

Anyhoo, hope everyone is having a nice week. Have a great day!


Millennial Gamblers, Hats, Clubs, "Action" ..... or Value?

Jeff Hwang at the Motley Fool (h/t to @derbyologist) analyzed gamblers in his demographic in a lengthy piece anyone interested in the topic (read-horse racing) should give a go.

We often hear young people won't bet the races, attend racetracks. They don't have the attention span, you see. They also don't want to bet slots. They're a different breed that wants different things. Vegas, racetracks and others have tried parties, lots of interesting action betting, hats, and concerts. Although some of that might work to get them in the house, they are still not gambling.
  • The problem is, virtually all of the discussion regarding millennials has centered on abstract explanations seeking abstract solutions, when the biggest problem is likely far more fundamental than that. Few if anybody discussing the millennial problem have discussed it in the context of the declining economics of gambling itself.
What he speaks of is what we've spoken about here often enough - metaporically, the squeezing of the lemon.

Slot house advantage, over the last twenty years, has moved up appreciably: From below 6% in 1996 to almost 8% today. "In short, the player is losing money faster than ever before", he writes. Slot handle is down about $60 billion since '06.



Blackjack tables are disappearing as they combat card counting and raised the juice, paying 6:5 for blackjack.

His view: Young people are so educated and so aware of the deleterious affect of worse and worse payouts over the last 20 years, they are moving away from casino-type gambling. No value, no bet, we'll go hang at the pool, or as the author alludes, play Daily Fantasy Sports, or sports bet.

He suggests the following, to try and get these young, educated people to bet:
  • In our discussion on blackjack and table games earlier this year, we introduced a concept I call the skill-free rate, which essentially is the lowest house advantage of a comparable game requiring no skill. The implication is two-fold:
    1. That a game requiring skill should have a lower house advantage under optimal play than a comparable game requiring no skill.
    2. The more skill a game requires, the lower the house advantage needs to be to both compensate the player for acquiring the necessary skills, while avoiding over-penalizing lesser-skilled players.
The above is very salient for horse racing. In effect, you need to be able to send home winners, because the demographic which is predicated to play a skill game needs to know they have a chance to win. Rakes should be lower for these games, not higher.

We often hear horse racing is about getting "young people in the building" so they "get the bug". This is completely, unequivocally wrong. To get the bug, today's younger demographic needs a game they perceive can be beaten. If they don't find it, in Vegas, or at the track, they will find it somewhere else.

Right now, that's exactly what they've been doing, and it's perfectly rational gambling behavior.

Moving the Wagering Needle

Yesterday Kentucky Downs had a nice day of handle.


Kentucky Downs, despite bad weather, card cancellations, moved cards and spots of bad luck, set an all time meet handle record in 2015. Almost inexplicably, California only allowed races 4 through 12 to be shown and bettors could not take advantage of low takeout, carryover pools, so that certainly hurt the bet too.

Meanwhile:

At around $5.8 million for the biggest card of the year in Pennsylvania (with millions in purses), it barely beat the Franklin, KY all turf track.

It's neat that the power of Chrome is what it is. I made a crack months ago, only half joking, that in terms of moving handle I think Chrome is more powerful than this year's Triple Crown winner. I think a case can still be made he might.

Regardless, one track is dependent on carding good races, with deep fields at lower than average takeout rates to grow, slowly and with purpose. The other needs a Kentucky Derby winner on their biggest day to move the needle. For the sport to incrementally gain market share, we need more Kentucky Downs' and fewer Philly Park's.

Marketing Spend Delivers If....

Hey, have you seen the Draft Kings commercials?

Unless you are stranded on a desert island, with a neatly pressed red sweater and cap, you probably have.

These DFS companies have turned it up to 11 - Draft Kings most of the summer, FanDuel only a couple of weeks ago (likely in response to Draft Kings' number one spend).  Right now, it's working.

FanDuel won the word of mouth battle last year. Draft Kings has taken over this season, with this aggressive marketing push.

Just last week, the $21.8 million spent by Draft Kings to advertise to new players (and to remind old ones) resulted in 1 million new signups.  Overall marketing spend is signalling a cost per acquisition of below $30.

Why did this convert so well; this old-school TV marketing, that isn't supposed to work any longer? The ads deliver on their promise. They tell you it's easy to sign up, easy to fund, and easy to play. In fact, you can be playing in minutes. Contrast this with racing and ADW's and you see the clear difference.

Now comes the hard part, earning back that revenue through lifetime value of those 1 million new customers. According to my timeline research, it will be a challenge, but there is a lot of hope.

DFS has low minimums and low takeout, where up to 95% of the money is given back to punters to rebet.

And no, what ITP alludes to won't happen anytime soon.

Spending all that money to build a gambling business and breaking your customers as quickly as possible is a no-no (outside horse racing, anyway).

Where does the future of this gambling game game lie? There's legal risk, there's a risk of top-heavy winners, there's an initial buzz and the resulting lull that is sure to happen. No one probably knows. What no one can deny is that right now they are clearly doing a lot right.

Marketing spend delivers if you deliver on a promise. DFS's marketing is resulting in people entering a funnel with expectations of a seamless signup mechanism, a solid UI, a decent rake structure where winning is not impossible, and having some fun. So far this no hoodwink message has resonated.


Hoodwink

"What's the biggest superfecta you've hit in your playing days PTP?"

"I hit one at Keeneland that paid $195,847." is my answer.

Although, in racing, what you hit it for versus what it's reported as is often pure folly. There wasn't $195,847 in the pool at Keeneland. But there it was, reported as such.
I don't blame Bob for his article at ABR. It takes a calculator to figure out what something really pays, versus what it's reported as. In horse racing, reporting life-changing scores that aren't really life-changing scores is something that just happens.

Like most things like this in racing - will pays, probables, etc - everything should be by the book and uniform. In fact, if a casino reported a $2 million dollar slots payoff, or a lottery reported a $22 million dollar winner, when those numbers were fantasy, someone would probably fix it pretty quickly. But we just trudge on, reporting things to customers and potential customers that never happened, with impunity.

Fascinating Parallels

Horse racing, cycling, track, football and other sports are in a very unique position. They are all forms of "clubs" where if you own, train or participate, you are handled in a different way, than say, a worker in a factory, or a white collar Wall Street type.

These "clubs" depend not on a rule of law, but on a rule of the club. Without this, the clubs are unable to function. It costs a lot of money to catch and penalize a track athlete, or horse trainer, or cycling team, so things like moral suasion, peer pressure from within, and other tactics are used, and have been for generations.

Examples of this in horse racing might be a trainer who starts magically winning at huge rates. You, me and the fencepost know what's up, but they are uncatchable. The authorities are handcuffed, so this trainer might be told "we see the cloudy tests, we see each horse at 35.5 mmol's, we hear the whispers, we saw the hippiron bill, we know you are pushing the envelope. You have to stop doing what you are doing." Oftentimes this works and the trainer backs off. If it doesn't work, only then do we see the authorities go guns ablazing against someone - trying to catch them on technicalities, on not keeping proper records, on whatever they can get their hands on: In other words, going Al Capone on their ass.

Lately, this has not worked as well as it did in the past. And with judges like this, why wouldn't someone fight it? They'll have their media minions carrying water as well.

Today I was reading the ESPN piece on the Pats, and the associated USA Today story. In meticulous detail it showed how the NFL did exactly the same thing. For Spygate in 2007, they uncovered massive cheating well beyond taping of signals. There were the stolen play sheets which were so brazen and well-known, opposing teams started leaving fake ones in their locker room. There were other teams setting up the Pats, accompanied by NFL officials, showing the jamming of signals in real time. There was much, much more.

"Proving" this in a court of law was futile, just like with a cloudy test or a hemocrit level of 50 or more. So, the NFL and its owners backdoored, and asked the Pats to stop, to stop everything. Apparently the Pats owner said it would. Close the door, we're done.

They didn't, and this is the reason why the NFL went Al Capone on their ass. And this is why Roger Goodell has not been canned after all these years. The old way of protecting a club was being used, with the full backing of everyone else.

We saw this exemplified at Woodbine with trainer Bill Robinson. Woodbine wanted everyone who raced there to sign a waiver for testing, and the like, which was a response to Robinson and his ilk. The horsemen group went crazy, using congress-like legal arguments, and they forced a strike. A couple of months later the horsemen group was disbanded. The rank and file were fine with giving up some rights to do away with someone who they thought was snubbing their nose at the game, and in the long run, costing the "club" money. They weren't mad at WEG, they were mad at the horsemen group and their lawyers.

Most people see things in black and white, and at times this is naive. Horse racing and other sports will never make all rulings that stand up to supreme court legal scrutiny. But most participants in this sport, like the NFL, realize it's the only way a sport can properly function.

Carryover Madness

Yesterday we saw more with the power of carryovers and mandatory payouts. When money is added to a pool, the chance for a higher payoff and the chance to make a serious score increases. That's the big-pools lower takeout formula the sport needs (although the sport doesn't like you to know about the latter half of that equation).

The carryover at Saratoga in the pick 6 attracted $2.7 million, and paid $46,440.

The mandatory payout at Gulfstream attracted $2.0 million and paid $261,743.

The carryover at Del Mar attracted just over $1.0 million and paid $694,742.

In an Andy Beyer interview at the Horseplayer Monthly, he said 'I even play carryovers at Assinboia Downs'. Well they had a small $4,300 carryover in the Super High Five yesterday and handled over $44,000 on the bet.

The good news is a lot of people play these bets. The bad news is that almost 100% of them ended up losing. The money is spread around to very few, and churn doesn't happen.

The exact opposite happened during the Triple Crown season. With American Pharoah winning each leg, there was a lot of money in accounts come Sunday, and people rebet those Sunday's, Monday's and the following week. Today, I would submit there are a lot of bettors with no money in their accounts. Monday was great, but it will probably be a tough week.

Carryovers are nice, but in hard to hit bets, the sport cannot survive on them alone. 

Notes:

I love horse racing press releases. On twitter you'll often see a release tagged with a reference to Baghdad Bob. This Del Mar one did not disappoint:

"Del Mar's Strong Racing Product Fuels Successful Summer Meet"

"Daily average handle at Del Mar finished off at $12,151,518 for the 40 days. Last year’s 36-day stand saw the daily average at $12,295,175, meaning there was a 1.2% decline. On-track attendance for 2015 was off by 12%, averaging 14,558 for the 40 days as opposed to 16,535 for last year’s 36."

Imagine the title of the release if things were actually up.

Have a nice Tuesday everyone. 

Pennsylvania versus Kentucky: Your Betting Pools Are Your Brand

Yesterday was an interesting day. The Del Mar and Saratoga meets were winding down with some decent racing, and together they did well over $30 million in handle. Expected. These are your summertime signals.

Meanwhile, over in Franklin, Kentucky, a newer track (I say newer because it has been making noise for only a few years) was up against those two strong signals: Kentucky Downs.

Many hundred miles away, in Philadelphia, Philly Park Parx had a Saturday card going. It was a part of their "Fall Festival", with juiced purses and plenty of promo.

Kentucky Downs, who was not up against those two strong signals last year, would be expected to see a handle shortfall. One would expect, anyway. They didn't:
Up 36% to over $3.6 million, is well done. Especially when a few short years ago this track averaged less than $900,000 in handle per day. Kentucky Downs is now a strong signal that can stand on its own two feet, Woodward Day at Saratoga or not. And it's capturing hearts and minds each day.
At Parx it was a different story:
The Kentucky Downs brand, like some other smaller tracks is strong, and growing stronger. The Pennsylvania racetrack brand is suffering mightily.

Tracks can offer tons of stakes races, a million dollars in purses, and promote, but still not gain any handle whatsoever, if their brand is tarnished with customers. Pennsylvania has a long way to go, Kentucky Downs is doing a hell of a lot right.




Notes:

$2.8 million was bet on last evening's Canadian Pacing Derby card at Mohawk. Other than ditching the all stakes pick 4 (those are usually chalky in harness), the races were promoted and carded pretty well; there's probably not much more they could've done. The first pick 4, even at high rake and low mins, was fairly bettable. They also ran a 12 horse field in a Simcoe, which was good for bettors trying to make a few dollars at high juice Mohawk.

Liams Map, a total fade for me (I thought he'd bounce like a ball), made me look bad in the Woodward. All you can say is wow.

Saratoga handle for the Woodward card was down about $3 million.

Players and fans do not much like the camera work at Kentucky Downs - it's a huge track with undulations, and the setting sun poses issues - but they improved it this meet. I noticed the difference.

Great issue put together by @gregreinhart of the Horseplayer Monthly magazine. It's free. Some dude even wrote a harness piece for it you might like. Download it and save here. It's 23 pages.

Enjoy your long weekend everyone.


All About the Cash

In this social media age sometimes Adam Smith seems like an anachronism. Greece, bailouts, 16 ounce soda bans, so much muddies the airwaves. But in the end, its always about the free market.

I have been speaking about golf recently, and how those players and that game lives in a culture where the rules are the rules. Just yesterday when the Tom Brady news came out, Jordan Spieth was giving his news conference for this week's Tournament.

He told a story about when he was a kid playing in Texas at a junior tourney. He got upset and threw his putter to the ground. It bent, but he played the last several holes with the putter, and made a few birdies, to win. He told his dad the story on the way home and his dad knew the rule - you can't play with a bent or broken club. They went in the next morning, told the tourney director what happened and young Jordan disqualified himself.

Compared to the news we see in sports in general of late, Brady clearly deflating a football and running to a lawyer, cyclists taking every advantage until getting a Travis Tygart smackdown, a steroid-filled baseball player running to their favorite labor lawyer to let them "earn a living", a horse trainer getting caught with a buzzer and a trunk full of tubes and professing it was planted, it seems like a good, and opposite parallel. Golf's culture 1, everything else zero.

But, I think we need to go back to Adam Smith. It's all about the money.

Golfers like Phil Mickelson make upwards of $50 million a year. Part of that is endorsement money, where integrity for the game means just about everything. In golf, if you cheat, it follows you forever and can cost you millions. Just ask Vijay Singh, who to this day has the specter of cheating following him with whatever he does, due to an incident 30 years ago. In golf, cheating means something.

It used to be like this in football. In the 1970's if you got caught "sullying the game" and you didn't come clean, you'd be blackballed and might not get a job. Pete Rozelle used to simply say "you cheated and you have to admit it because the game is not bigger than you" and the player would admit what he did. Simple. Money.

Today, at times, this integrity rears its head. Steelers coach Mike Tomlin took his medicine for an on-field infraction just two years ago.  We might argue that's about money too (his bosses think it made the organization look bad).  Regardless, for the most part, it's now about running to the lawyers, because players know i) I can "get off" and ii) I won't be blackballed, i.e. it won't cost me any money. 

In horse racing this is not dissimilar. "Ruining the integrity of the game" is a line we hear often as a charge. What a load. Any lawyer in this litigious society can crunch an accuser on that one. And in horse racing, when a guy like that comes back from that charge, he gets a barn full of horses. If you aren't cheating you aren't trying. It's all about money.

It'd be nice if the culture of sports were about what sports is supposed to be about - integrity, the spirit of competition, beating or losing to one another on a level paying field. I guess golf is the closest of all the sports. But, sports really is not about that. In the end doing the right thing means how will doing the right thing affect my barn earnings, my paycheck, my endorsements, TV deals, and the like. Although Adam Smith has taken a backseat in the news of late, his spirit lives on, and will probably live forever.

 

The Bet is Sleepy

Crunk noted August's handle on his twitter feed yesterday. Races were down by about 450 races, and handle was about flat (up 0.5%). There was one fewer weekend day. This has pretty much been the story this year.

What makes August's handle a bit blech, is that Saratoga, Del Mar and Gulfstream make up a bigger percentage of racedates than in the past; and that's where the handle is. As well, Saratoga has had a perfect storm of good fortune this summer - few days off the turf, perfect weather, and a Triple Crown champ on national TV for the Travers (in fact, Pharoah raced two times in August to much fanfare). Del Mar, who had an atrocious meet last year has also been blessed with no turf or main track issues.

I was one of those folks who believed fewer racedates, done correctly, could increase handles overall. This was the case when Ontario got rid of slots a few years ago. The poorer meets were culled, and handle was up over 20%, with a simultaneous racedate reduction of 20%. This just has not occurred.

Last September was terrible, with handle down over 10%. It was surmised at that time that bigger players were leaving the pools, because of signal fee issues. We'd hope to see a nice bump this September, because those players seem to be back. Even if that happens, handle has been remarkably poor this year. This in a year when racedates were being optimized in some form, and, of course, the sport has had thousands of free column inches (and the like) with a Triple Crown champion.

No One Knows What Sports Betting is Going to Look Like, But it Ain't Going Anywhere

I was digging through some old electronics recently and came across my  Slingbox . For those who don't know, a Slingbox attached to your...

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