Oh No Ontario

Here's where we juxtapose.

"The one point that I want to discuss is your future and what it depends on," Buchanan said. "It is more than about the money, it is about the customer. And today we had some serious horseplayers in the audience… they are your customers, they are your future… your future depends on how many people are coming to the track and how many people are coming to the track and betting… The government is going to support you based on how many customers you have and how much money they [wager], so that's your future… Everyone, collectively, has to think about how you attract bettors and customers to the track and regain interest in the industry."

Buchanan went on, adding, "I said this yesterday: two years ago if we had one of these (industry consultation sessions) I don't think we would have heard 'customer' or 'horseplayer' mentioned. It would have just been about how much money there was and how we were going to divide it up.

Horse racing Ontario commission chair in 2013.

Yesterday......



HANA presser here. 

Enjoy your Friday Breeders' Cup day everyone. Well, except in Canada where, of course, the "focus is on the customer".


Big Things in the Works for TVG2

There were a couple of announcements in TV land today, one insignificant and small - AMC's Breaking bad is back for season six - the other huge - HRTV is being rebranded as TVG2.

You can read the TVG press release, but not much is elaborated upon. Fortunately I have the inside scoop from Cub Reporter regarding what's in store with everyone's new favorite racing channel - TVG2.

Look, no one reads this blog so disclaimers are not needed, but if one of you is reading this and would like to share it, please do it on the dark web or something. Both Cub Reporter and the big wigs at TVG2 don't want anyone to know these details.

Here's what I got.

The new tagline for the network was hashed out. "We felt it was appropriate to call the new network "the second TVG, that was once HRTV", said an unnamed executive. "We don't want to confuse fans, and ever since Philadelphia Park changed its name to Parx their handle has been getting killed. We ain't going catchy with deuce or deux or dos." she added.

TimeformUS ® figures will be highlighted in each show. "We need to pump the TimeformUS brand" said a source."Hunter jumpers, animal husbandry shows, features on beach racing will all have speed figures," she noted.

Todd Schrupp at Remington Park
Todd Schrupp will be replaced with Ed Helms. "This is purely a cost saving measure. No one will know the difference. " said our source.

New tracks will be featured on the deuce second TVG that was once HRTV. Right now these tracks are to be determined. "Quite frankly, whatever track gives us most of their takeout, plus a prescribed TV fee, we'll run." said our source. "Ed Helms will probably have to learn quite a bit about choosing pick 6 tickets at an Argentinian harness track", the executive quipped.

Fans can expect to see more racing, and less chatter. "This is wholly dependent on how many tracks want to give us all the takeout and TV fees. If there's enough of them it'll be wall to wall racing. If not, well, we have animal husbandry shows with the new TimeformUS ® figures."

It appears, in terms of racing commentary, the second TVG that was once HRTV will be going big tent with new guests. "We want to be interesting and informative. One show we have planned - sponsored by the Thoroughbred Owners of California - will be a set of seminars about how much it costs rich people to buy yearlings and why horseplayers need to pay more for purses through higher takeouts.", said my source.

Rapper
Expect a change to music programming. "We have to be newer and fresh" said the executive. "For example, Delta Downs played Jefferson Starship and Boston last week between races. This has to stop. We're overlaying the Delta music with new, hip and relevant songs to attack some new demo's. Expect some rap, like Run DMC, or that new rap-country, that's all the rage". she added.

Other than the above, we hear the programming and excellence we expect from TVG1 to be ported over to TVG2. "We might be a bit edgier, like a show we have planned where TimeformUS ® Chief Figure Maker ® Craig Milkowski makes fun of Brisnet figures, but really we'll be the TVG you know and love," said our source.

That's the scoop folks. I, like you, am really looking forward to it.

DRF Survey, Something New, Something Borrowed, Something Blue

I enjoyed taking the DRF survey - which was mainly about drug use and lasix - a few weeks ago, and the results were released today. The results pretty much echo similar surveys released over the years on similar issues.

Tonko Bill, Something Borrowed - The bill that has been pushed by the Jockey Club which would allow the USADA to control testing, and provide some federal oversight for the sport, received solid support in the DRF survey. The numbers are near the HANA survey of its membership for such federal oversight, and also near the poll the Jockey Club commissioned themselves. Those numbers are old hat.

What's most interesting in this, in my view, is the frustration from fans and players. The DRF survey showed that even if signals are pulled, people want something done. Like it or not, the Jockey Club, and whomever else is pushing this, have a strong mandate to act. There is no denying it, and opponents, again in my view, better come up with an alternative rather than the power of "no" because they're going to get left in the starting gate.

The Sausage Versus Making the Sausage, Something New - Lasix use is a different story and I liked the DRF parsed this question. The bill above is said to back door the removal of lasix and when we add that to the mix, the results are not nearly as clear. When you ask bettors about lasix, as the DRF did, you notice that we, as a group, are much more agnostic. A plurality of bigger bettors would rather have lasix, so they know what's being given to each horse, rather than in Europe where none of us know. I think this is a strong lesson from the machinations we've seen with these bills - if lasix is removed from them, they skate through in this industry. Owners leaning slightly towards lasix bans surprised me a little, but really, they are as frustrated as bettors are about this industry.

The Big Issues for Betting Revenue, Something Very Blue - Once again, the people who bet over $25,000 a year, which is akin to a $20 win bettor, weekend warrior to an every day grinder, want something done on three issues - lower takeout, field size, withholding. All three provide a customer with value; lower juice is a higher payoff, withholding is a rake reduction and field size is a value metric.

This makes us very blue, because those same exact issues have been asked for since Pittsurgh Phil's nephew told a New York paper in 1947 that his uncle would not even have entertained betting the sport then, because the payoffs had gotten so bad. Rake in 1947 was somewhere around 10 points.

As is shown today, with the announcement of a rake reduction on a jackpot bet of all things (which means absolutely nothing to the folks who answered this question), the industry shows just how unwilling it is to act on these real issues, 70 years hence.

I barely scratched the surface regarding the DRF survey - there are plenty of interesting gems and hard numbers at the link above - so give it a read if you are interested.

Have a nice Monday friends.

Make Things Harder, Not Easier to Handicap & Good Things Can Happen

This fall's Keeneland meet had handle drop once again. This meet, favorites won at an almost unprecedented 43%.

I thought I would print this article written for the TDN earlier this year. I think the thesis is sound, and the sport should always look at making things more interesting for the handicapper. When the art of handicapping is deeper, with more angles, with more chaos, it makes the game easier to beat, not harder to beat, and that attracts betting dollars.




No Easy Money, A Gamblers’ Diary, written by UK horseplayer Dave Nevison is a dandy read. For those of us here in the New World it provided us with an interesting, eye-opening glimpse into the day in and day out machinations of a UK horseplayer. The book followed Dave’s quest from the 2008 Cheltenham Festival right through to the last flat race of the year, the St Leger at Doncaster, and detailed his day to day bets, his ups, his downs, and the method to his madness in trying to beat the races.

What struck me most about Dave’s exploits was what he bet and how he bet. In the US, exotic betting is the rage – Rainbow Six anyone –while in the UK, Dave persevered through betting win only, taking advantage of good prices, through either bookmakers, or the betting exchange. He’d often write of his “tissue”, which was simply a list of two or three horses he liked for the day, sniffed out through his intricate research. Dave was not taking stands on a low takeout spread pick 5 at Keeneland for $1,944, hoping to shoot for a $10,000 score, he was betting £3,000 or £4,000 on horses he’d been following. The way UK racing was presented at that time, allowed him to do so, and it allowed him to profit.

Dave and other UK punters saw tremendous value in 14 or 15 or 17 horse fields the BHA was carding. These races could have 8-1 favorites, and twelve of the fifteen entries were competitive. This created a glorious unpredictability that provided value (before even factoring in the lower win takeouts). Why would Dave and others need gimmicks to get them to hit the road and bet? They had the greatest gambling game in the world in front of them, served like a dinner plate of bangers and mash. UK handle (turnover) from early in the 2000’s to the mid aughts, with people like Dave boarding trains from meet to meet betting win only, was doing fairly well.

About six or eight years ago, that all seemed to change. The edge that big fields provided customers in the UK – the gambling game they were used to - began to erode.


Slide courtesy Jennifer Owen, Aspire Wealth Management Pty Ltd.

In 2000, field size for races in Great Britain was over 12 per race; in 2005, just over 11. In 2013, that number plunged to below 9 per race. In the UK there was a push for more races, and more races beget fewer bettable ones. That big of a drop in field size for a customer base conditioned to bet big fields was felt mercilessly in the betting pools. Per race handle was crushed; in fact, the losses in betting per race in Great Britain are higher than anywhere else in the world since 2006. Those like the Dave Nevison’s of the world – those used to giving the game a real go betting win in the huge fields – increasingly found something else to do.



Slide courtesy Jennifer Owen, Aspire Wealth Management Pty Ltd. 

I think this is a tale that is not only steeped in Great Britain industry lore. It’s a tale – sometimes in real time, in others cautionary - that can be told to any jurisdiction that puts on a horse race.

On my betting blog this week an American bettor left the following comment: “The industry proceeds on a false premise. They truly believe the public wants predictable racing. From a betting standpoint, nothing could be farther from the truth. A six horse field is more predictable than a twelve horse field of similar horses. The betting public knows this and bets the twelve horse field much stronger. A four horse field is extremely predictable but very few will bet on it, knowing that the effective takeout escalates as field size decreases. There are different surfaces, there are different distances; which is exactly what the game needs to flourish as a gambling industry.”

I think he is 100% unequivocally right.

 It’s not just in the UK that this phenomenon is seen, nor is this only found in horse racing; it, quite frankly, is an immutable law of gambling in any game of the pari-mutuel variety. Less chaos and more predictable races – making the game “easier” as we hear needs to happen so often here in the US – does not grow handle. It erodes value, and destroys handle. Despite scores of industry insiders predicting the opposite, last fall at Keeneland all-source handle declined 12%; yes, even though they made the races easier to handicap. I don't think this should have surprised anyone.




Comment posted from customer at Keeneland tailgate before last fall’s meet, courtesy @mtbvixen twitter 

In the US, let’s take a look at some US dirt field sizes in 2014, courtesy of the Horseplayers Association of North America’s sortable stats web page.

Saratoga: 7.29, Belmont: 7.02, Santa Anita: 7.64, Gulfstream: 7.97.

Those are some of the biggest and best dirt meets traditional US racing has to offer. Those are horse racing’s TV commercial to every day gamblers. If UK handle per race was hurt as much as it was going from an average of 11 per race to 9 per race, what does a 7.4 average field size do to US racing on traditional dirt with gamblers of all stripes? When you add that the takeout rates are higher here in the US, it exacerbates the loss of value even more.

High takeout, small fields, no chaos, and predictable outcomes equal little or no value. There’s just no way around that.

Because the industry, for various reasons, seems unwilling to provide more value to new potential customers through lower takeout, it appears something should be at least done with field size, and we do hear often that field size increases are something that’s being paid attention to. However, is a marginal increase the industry speaks about anywhere near enough?

Last week’s Wood Memorial card had a late pick 4 guaranteed at $500,000. Considering the quality of fields in the pick 4 and the massive eyeballs on a Derby prep one might expect customers to blow that guarantee away. But that did not happen. Just over $600,000 was bet, and with one minute to post I saw more than one person comment, “will they even meet the guarantee?” The Wood Memorial pick 4 sequence was just too rudimentary to drive handle. The fields were fairly short, the favorites obvious. It was, on paper, too easy. I don’t for a minute think that adding one or two horses per race would fix that pick 4. I don’t think tinkering can get the job done.

I believe (and there is some academic study to back this up) a field size of well over ten per race is optimal. This isn’t a 7.25 to 7.75 fix it field size issue. It’s bigger than that.

In the US we do see some glimmers of hope. Kentucky Downs, run through a “value” algorithm by the Horseplayers Association of North America just this past week, was ranked the highest value track of 62 North American racetracks. Their lower takeout menu, along with field size of 10.18 horses per race is much closer to the pre-2006 UK ideal than any other track in North America. Bettors have been responding, and now pump over $3,000,000 per card through the windows (this is up from below a million a few years ago). Big turf fields at Belmont or Keeneland can still get the job done and we hear rumblings of circuit racing in Maryland. But in my view I don’t think that’s enough to propel handles to where they need to be.

With mandated racedates, slot money, and alphabets pulling the sport in a hundred different directions, getting field size up to value levels to attract many the sport has lost – that is, say, half the races on a card of 11 or 12 or more horses per race - will not be easy. Figuring out how to get to that point if everyone ever does put the oars in the water is certainly well above my pay grade. But academically, and from a fundamental gambling perspective, I think it’s a vital goal for the sport.

The Wholistic Racing Experience

The "racing experience" and its importance to cultivate and satisfy customers is often spoken about. The ABR Live Bus, the bands, the bars and night club construction, filling up time between races with games or contests, are all things that tend to be universally praised. I don't think there's much wrong with this view, because you are trying your best, in a live setting, to get people to enjoy themselves, tell their friends and come back to the track at a later date.

On-track marketing and customer service is looked at 'wholistically'.

Meanwhile, over on the Internet, it's not embraced in nearly the same fashion.

One thing I like about DraftKings and FanDuel is that when you log in, you are taken to a world of fantasy sports betting. There are easy to use rosters, yes, but there are links in and about the site to news, real time stats, line-up help, proprietary statistics, and a way to socially engage. When you're in, there's really no reason to pop your head out. This top to bottom, A to Z, experience is paramount. It's one of the reasons FanDuel recently purchased sports analytics firm Numberfire.

In our sport there are some doing well in the Internet space, who have created some decent technology (Twinspires comes to mind), but it's nothing like DFS, or other websites that need to hold and engage users.

As O_Crunk noted on twitter, the "contest space" is getting hammered by some, but it's missing the big point. A seamless customer experience for horse racing on the web involves information, and conduits to enjoy a sport that fit with today's society. Betting horses on the web can be so much more.

Picture an interface with pari-mutuel on one side, an exchange with the same race on the other, and a contest screen with the same race in another box. Add a few more bells and whistles if you like - like DRF Live, or twitter, or figures, or Timeform - if data was more open, think of the angles that you could pop up in a live-stream.

With that type of vision, and 'wholistic' customer experience, if you don't like the third race, you can play your contest. If you don't like the 3-5 chalk, but hate everyone else - and it being a short field see no real exacta value - you can lay the chalk on the exchange. You can take the race off if you want, and peruse the real time news feeds and commentary.

That's the bettors food truck. That's the bettors band, ABR Live bus, or wiener dog race. That's what keeps people at their computer for ten hours on a Saturday watching racing. It's what keeps them downloading PP's. It keeps them engaged in your sport. It keeps them paying for purses. 

Unfortunately you're saying "Pocket, that's pie in the sky". It probably is, because racing does not have this vision, but for crying out loud, it's not 22nd century 12 Monkey's stuff. Exchange wagering is doable - it's been going on for twelve years and Betfair themselves have come to this sport with this vision in some form. Derby Wars is doable - hell, it exists already. Go to TwinspiresTV; their programmers aren't dumb by any stretch, so that's not an excuse.

Things like this could've been done ten or more years ago, but "racing" doesn't think like FanDuel, or DraftKings, or many other web-driven gambling enterprises.  Licensing and incorporating an exchange? No, we don't own every penny of it, so it must be destroyed. Licensing and incorporating Derby Wars? Of course not, we just saw a CHRB meeting where the braintrust wants it destroyed, too.

When you don't evolve, the customer base who uses technology (today, that's your average millennial and your 70 year old with an iPad) gets engaged with something else and they leave. It's not because they don't like horse racing, it's because they found something else that satisfies their needs and keeps them interested.


Cannibals & Control

The CHRB meeting yesterday yielded the usual gems. This time about "fantasy horse racing".
  • "I view fantasy horse racing as a very significant threat to our existing business model," Daruty said.
This is horse racing codespeak for "I view something we can't control as a threat." It's what horse racing does, or runs to, over and over again. Considering the existing business model - falling handle, falling revenue and a reliance on slots or government help - is no great shakes one wonders what one is protecting, but that's neither here nor there. It's simply the codespeak.

Racing has always lived with a mix of entitlement (we were here first as a monopoly, so gamblers are ours), fear (anything new is something we need a piece of because it will destroy us), and stagnation (anything fresh offered in the space needs to be looked at as "cannibalization" and should be immediately stopped).

This is nothing new.

Exchange wagering is a good idea, most think. However it is stopped because the margins are not 16% and it will supposedly - despite solid evidence elsewhere proving the opposite - "cannibalize" wagering. It's also a great idea if Monarch runs an exchange, a terrible idea if TVG does; well, from Monarch's perspective, anyhow. Derby Wars seems to be a decent idea for the sport (as Mike points out below) but the margins aren't 30%, and aren't mine (they're "stealing", y'know?). Let's kill em.
Cannibals are ok, I guess, if they're the ones doing the eating. Otherwise, they are a threat to the business model for horse racing. (I bolded that, because it's kind of a tagline for the sport. The insider "Go Baby Go", if you will).

The problem with this whole thing - this is not new, we have been discussing it on the blog for a near a decade -  is pretty apparent. When racing controls something - internet signals, pricing, innovation, ADW - it almost always ends up being worse off. There's little vision, there is no want to recreate systems, create new offerings, innovate products. This is, after all, a sport whose so-called most successful recently introduced bet had to be stolen from a racetrack in Puerto Rico (no offense to my Puerto Rican racetrack friends).

Racing's problem isn't about cannibalization, or that they don't get seven bucks in takeout returned to them for a Saturday Derby Wars game. I think the big wigs know that.  I think they just focus on these small silly issues because they have no idea how to solve the real ones.

Tuesday Notes

Good morning folks!

The Big M, for 2016, will be running dual cards next September. Harness racing and Thoroughbred racing will both take the track.

Politics sullies just about everything we do, or see nowadays, and I expect the state of Indiana and horse racing is not dissimilar.
  • The firing of Gorajec “for focusing too much on regulating the industry, the commission made an unethical decision,” she wrote. “As a lifelong Hoosier who loves Indiana, I find myself, once again, disappointed and angered by the lack of ethics exhibited by too many public officials in our state. We can do better.”
  • “Any ethicist worth his or her salt will tell you good promoters do not make good regulators. Giving the promotion responsibility to the regulator is a bad idea.
That's a fair point from the congresswoman. Horse racing is a hodgepodge of regulation, and unlike other gambling games or sports, has unique opposing supply and demand forces that can run afoul of each other. Because of that, keeping basic things at arm's length from others is paramount. How does being in charge of testing and promotion of a sport conflict? Let me count the ways.

Speaking of that, Draft Kings announced recently (as did FanDuel) that they would be conducting an independent audit of some of the issues asked about recently, namely the question regarding who knows whose lineups internally and when. Although the full gist of the now completed audit is not known, Draftkings did announce that the employee who mistakenly posted lineup information on the web the day of an NFL game had and used no edge in that instance.

Quite frankly, with the knives out, and agendas fully entrenched for the long haul, none of the above really matters. DraftKings and FanDuel could've announced an external audit done by God and the states, the regulators and everyone else with an added incentive to see the game changed would not for a second back off. In a perfect world things would be done for the customer in an unbiased fashion. It's not a perfect world.

There are some parallels in DFS with horse racing policy - new and old - of course. Lasix, exchange wagering, ADW policy, take your pick.


Also in the DFS space, they are pulling out the Uber playbook.
  • DraftKings and FanDuel, the No. 1 and No. 2 daily fantasy sports sites, have teamed up for a decidedly political and grassroots effort opposing any measures to ban online fantasy sports.
    FanDuel emailed a petition over the weekend to Nevada-based customers asking them to sign a “pledge” that opposes any measure that would ban online fantasy sports. DraftKings plans to follow suit this week.
Beholder has spiked a fever. As a horse owner who followed the blood taking, and fevers, and sickness ten days out or so with my horses, this certainly has me worried. The worst part of such things is that the horse seems perfectly fine on race day, but sometimes ends up throwing a huge clunker.

With Nevada out of DFS and some states' players wavering, we would normally see some value in GPP's this weekend. But that won't happen because they will adjust. Horse racing, still the best betting game around if the powers would help make it better, has no such issue. This Saturday night for the Breeders' Crown the $500,000 plus in the super high five pool will be mandatorily paid out.

Have a nice Tuesday everyone.


Always B Miki - Great Horse, Great Story

On Saturday night at Woodbine, a horse you probably know well from following the blog - Always B Miki - wowed them in his Breeders Crown elimination. Although he seemed to have some trouble on the turns, he exploded to victory, making some very nice horses look like 20 10 claimers. You can watch the race below.

This horse has captured the imagination of some - many more now - because not only is he fast, never seems to get tired and wins in a flashy fashion, he has done it with a ton of problems. As most of you know, before the Breeders Crown last year (and I suspect in his elimination race where he only won by a head and was running in), he fractured a bone and was scratched. Then this year, in May, making his comeback, he fractured another pastern while training down again.

An interesting point on the latter break, the new trainer of the horse - Jim Takter - liked him so much training down that he asked to buy a piece of him, at a fairly good sum. The ask from Takter was right before the time he was reinjured, however. In this wild west sport one might think Takter forgot what he promised, or tried his best to get out of the deal (the money had not been delivered yet), but he manned up and paid. That's some faith in the horse, and tells you a little bit about Takter.

Anyway, this Saturday evening Miki tries to win the Crown for older, which will be one of the later races on the card. I am always worried about him and he did run in and out in his elimination, but if he's right and sound, it's a formality. In all my days watching this sport, I have yet to see as fast and rugged of a horse. I hope he kicks some butt and stays good next year, because if he does I think he can rewrite the sports' record books.

The Whirlwind of Gambling Market Machinations

The whirlwind regarding gambling skill games, oh, I think we can call it gambling again, has been eye-opening of late. It certainly has been frustrating for those who wish to see pursuits like horse racing wagering, fantasy, or sports betting gain more of a foothold in the North American market.

In reality, it's an uphill battle and the Daily Fantasy discussion illustrates this perfectly.

In the beginning - and it would always get to this point - it was about "regulation". The activists in newspapers, the folks who do not lean libertarian in pursuits like this, and the well-meaning who want to see the environment improved for customers, pushed this narrative and wished it as a goal. There's really nothing wrong with that wish. Calling for ADW's, DFS, anything that does business on the web moving money or with a game involved (e.g. Ebay), to have some basic rules is not remotely radical.

Even for those of us who generally prescribe to Adam Smith's, "Virtue is more to be feared than vice, because its excesses are not subject to the regulation of conscience," you could still get behind sensible regulation.

This narrative, however, in my view, was naive. It was never about that.

In the previous few weeks we've seen rumblings of states pulling out of DFS - obviously at the behest of well-capitalized bricks and mortars who never met a competitor they can't lobby away. We've seen politicians in Pennsylvania say that DFS might be fine in the future, but only if their state-run casino's host games on the web. We've seen regulation talk, yes, along with 70% tax rates.

We've seen a state like Nevada call it "gambling" - which it is. But nuanced, there's much more to that word (and yes, the powers in government and casino lobbying know this). By taking the lead and calling it "gambling", other states can or will follow, and DFS moves from being something protected by the UIGEA, to be governed by the Professional Amateur Sports Protection Act of 1992. That act - another obsolete act like the one that protects Interstate Wagering in horse racing before the internet was invented - is the one that stops sports betting.

It's not hard to connect the dots. If you can get Nevada to move to call it gambling, other states always follow Nevada. When, or if, those states call DFS gambling, DFS could run afoul of the 45 states governed by PASPA. In an ideal world for the casino companies and state-run casinos, you have no more DFS in 45 states, and a watered down version in a few others.

The 50 plus million who enjoy fantasy in some form on the web? No one cares about them, don't kid yourself. Maybe they'll play slots instead.

I like Adam's Smith's quote above. But even he probably didn't foresee something like this because the world is different today. What on paper sounds good, and what sounds well meaning from well meaning people - 'regulation of DFS' - is gullible. This, to me, is about money, power and the quashing of competitors. It was never about anything else.

Horse racing has gone through this before - racing is allowed in fewer states than DFS is, despite being totally "legal" and accepted - and lives with it today. If you were an ADW, or someone who wants to see horse racing grow by expanding offerings like exchange wagering, fixed odds, or expanding reach through new advertising avenues, you are "sol" as the kidz say. The gambling market is moving forward from the demand side like it always has, yes, and the entrepreneurs willing to serve that market are doing just that, but those who want to control the market through the supply side are more powerful than ever.


Lottery "Integration", Things are Better Off in the Backwoods & Friday Notes

I don't blame you for reading this press release from the Ontario Lottery and Gaming Corp and shrugging your shoulders.

"The horse racing industry in Ontario is being asked to provide input on a long-term financial model with respect to the ongoing integration and modernization of gaming in Ontario.

Rigby's letter notes that OLG is "developing a co-branding marketing strategy" that involves the launch of "horse-themed products through our Lottery and Internet business channels." He went on to state that the next area of focus for horse racing's integration within the province's gaming strategy is developing "a financial model to provide a long-term funding framework," exploring options and avenues "that help create economic confidence in a transparent and accountable way, beyond 2019."

Rigby noted that he has discussed this focus with Cal Bricker, OLG's Senior Vice President of Horse Racing, and has asked him to lead "a collaborative discussion on this subject with [OHRIA's] help, and members of the industry."

The integration between horse racing and the provincial lottery has been spoken about for years now. The government is now funding horse racing, as you know, so they (more or less) control the discussion, and like with most things of this ilk, it can move at a snail's pace.

The idea in itself is not bad, in my view, if done with some sort of understanding who the different customers are.

A lottery based on the V75 is a good idea (similar to the Equilottery concept) that should be tried for that end of the market - big pools attract dollars world wide, as we see with the Scoop Six or Super High Five mandatory payouts. Meanwhile, the ADW market and takeout rates for everyday bettors is, well, terrible. Small tracks with 24% win takeouts, an ADW monopoly run by a big behemoth, well, ouch, that's a non-starter that no one seems to want to talk about. The OLG will have little control over that, so that black mark is owned by horse racing.

In the US there is a push for outside groups, in this case an NGO like USADA, to take the reins of testing. In principle the idea is good, and uniform rules and regulations will occur faster and with more power than without USADA. However, as we see in Ontario, there will likely be many bumps in the road, and nothing will change overnight.

Things are better in the backwoods.....

Nevada "outlawed" DFS yesterday because they say (duh) it's gambling. That statement is funny at its core, when you think about it. Regardless, people in Nevada can go bet a game this weekend, but they can't field a team on their iPhones.

You and I have been playing "DFS" for a long time. Me, since about 1991. We field a team each week, play others in our league, and whomever has the best week wins a weekly prize from our stakes. When it was brought out into the open, over the internet through a loophole in the UIGEA, everything was fine, for awhile. Now, it's not fine.

Everything to do with participatory sports, from office pools, NCAA brackets filled out by commander in chief's on TV,  fantasy sports, e-sports, and everything else, is gambling. It always will be and always has been.  When someone uses a loophole that tells them it isn't gambling, and invests millions to innovate and create a market for it, that's okay too - until it gets popular.  Then government folks seem to say "nice innovation and nice investment, nice job building a customer base, nice success story, but we want a do over. We were just kidding, it's gambling."


We see this in racing (anti-bleeder tactics like keeping water away, Kentucky Red etc are fine, if no one sees them...... add lasix then things aren't fine), too. We see this with exchange wagering (still waiting to be approved after like a dozen years).

Things for fantasy enthusiasts are probably better in the backwoods - despite the obvious flaws - because regulators, the media, right wing types and everyone else with an axe to grind or a budget to fill, have nothing to gain when it is. 

Notes:

The Breeders' Crown eliminations are off and pacing and trotting on Saturday evening at Woodbine.  Here's a free program. The Breeders' Crown is the poor cousin to the Cup, but it is one of those events that are well-worth watching. As well, there will be a $500k or so mandatory super high five payout next weekend during the final crown card.

Freaky Feet Pete continues to try his hand at respect, by entering the Crown. He's a fantastic horse and I hope he does well.

Woodbine's 15% pick 5 keeps paying out well. If you can snag a horse or two that's not obvious it can pay. With a 20 cent minimum, pick 4's are a mugs game, pick 5's are much better (for harness favorite hit rates, certainly.)

The Breeders Cup seems to be ratcheting up the buzz. Everyone hopes it does well at Keeneland, because like you, I agree this thing can be fun when it moves around.

Have a nice weekend everyone.

Gambling Innovation: Killing Something Before it Begins

Back in the 1860's a new invention was starting to be marketed to the UK public - the steam car. The steam car allowed for obvious benefits over the horse-drawn carriage, and was beginning to catch on. A shift was occurring in a mass market.

Stagecoach owners - powerful, big businesses with big businessmen - were none too pleased. Failing to see the market was innovating and shifting, they lobbied hard, and clung to what they knew - doing things the way they had always done them.

Friends in the media and in the government began writing dire stories and preaching warnings about these new machines: They scared the horses, they were dangerous, they were job killers. In response, the government began regulating these new machines out of existence. The "Red Flag Law" was passed in 1865 which mandated a top speed of four miles per hour, that two people had to be present to operate the vehicle, and that a third man or woman had to march forward to any intersection with a red flag to warn anyone the vehicle was coming.

Not surprisingly, the program that was noticed by Henry Ford and others - what would end up being a "car" - was ended. The US, in its infancy, had little use for such laws, and in the end, it flourished, spawning the combustion engine, engineering production line innovations, and massive economic growth.

Today I am reading headlines about innovation in the fantasy sports space. The industry, which upwards of 60 million people in North America enjoy, has been growing, and has a stout market. The daily fantasy sports space is new and vibrant and innovative. Fantasy sports is now being called "dark", authorities, from AG's to the FBI have intervened at the behest of the headlines and special interests. A few folks have their hand out, and the lawyers are doing what lawyers do.



All for a business that is not even making any money.

Now, we all want things to work smoothly, we all want games on the up and up; just like everyone should've wanted steam cars to work a little less loud, a little faster and little more reliably. But shutting them down before they are allowed to change - through penal regulation, added fees or worse - is no way to go about it. Think horse racing for a primer on what overzealous and tax hungry politicos can do to kill a business.

Daily Fantasy Sports is a US-led baby. It is currently being exported to other nations, like the UK, where gambling is met with little resistance. It's an American technology, fueled by American investors, with American sports, that are being exported world wide as an industry leader. It's changing the way the world consumes live sports. The barriers to entry have reached a point where some of the biggest gambling companies in the world can not compete with it, so this US innovation will likely be around for many years.

It's like a steam car. It's like an iPhone. Because it's gambling, I suppose, it's something that should not be encouraged; rather it needs to be shut down.

Business and politics is never uninteresting, whether it is 1865 or 2015.


More Optics For Racing Talk. I Think it Means Just About Everything

I was posting this link to an article a little bit ago (pdf, p4):

Draft Kings and others like them have brought a lot of these issues on themselves. Despite them knowing many were waiting in the weeds to pounce, their structure, their lack of controls, their desire to grow at breakneck speed and their inexperience still made them gloss over what’s most important: Transparency, the integrity of a gambling game, and how such is perceived. That’s something that never gets old and they’re getting a lesson in that truism. 

[Meanwhile] racing depends in large part on public money, and government support, and make no mistake, like with Fantasy Sports, there are many in the weeds waiting to pounce. That is all the more reason to be hyper-vigilant with these issues. If any rule change looks bad – no matter how well intentioned - it must be scrapped, because optics mean everything. 

 Just after linking it, I saw the sad news about BC Sprint contender Rock Fall.

The past week we've been speaking of the all-important issues with the framework of a gambling game. Racing is a gambling game and has the same issues the above article explores, however, this morning's news is a stark reminder there is so much more to it. When your sport involves animals and gambling in 2015, it's on an even shorter leash. Optics mean more for racing than they do for casino's, fantasy sports, almost every other one of racing's competitors combined. Sometimes I wonder if we realize that, or we're so caught up in the day to day it, like the DFS issues, are glossed over.

Skill Games

I was chatting recently with a racetrack insider type. I say that with reverence - this fellow, although now in breeding and racing, has done just about everything in the game, including gamble on it. He told me that within the business he can talk to others in power about virtually anything, but , "Trying to have a rational discussion about racing as a gambling enterprise and what it needs to do is like pulling your hair out."

Add gambling to almost any conversation, and at times, it's like you are speaking Swahili.

The DFS headlines have abound of late, and for those of us who love the pursuit of skill game gambling - racing, DFS, fixed odds wagering etc - it's been like pulling your hair out on what seems like an hourly basis. The misinformation, the lack of (if you will) skill in reporting about gambling in the media - much of the media with their knives out regarding these pursuits - is astonishing.

One of the most insufferable narratives about the skill game market is that it's "broken" because people who play it a lot and who are best at it win, and the vast majority loses. As an article, h/t to O_Crunk notes today, this is the exact definition of any skill game market.

Here’s the thing: while these numbers make for a great click-bait headline, in actuality it’s a non-issue. Why? Because betting markets fundamentally demand winners and losers.

One could make the claim that in a fairer world, the winners would win less and the losers would lose less. But let’s unpack that: for starters, the headlines are deeply skewing the numbers. While it’s true that the “Big fish” are losing 44x more than the “Minnows,” they are also playing stakes 66x higher. Keeping in mind that Fanduel spreads daily games with $1,035 buyins, the idea that affluent bettors regularly playing $300-$1k buyin lose $1,000 over the course of “half an MLB season” is not that surprising. If anything, based on my experience, it appears light.

Let’s also not forget that for the “minnows” who lose a full 50% of the money they deposit – $25 of $49 deposited – that wagering on DFS is entertainment. 

This does not fit well in today's world I suppose, but it's irrelevant. The above, in itself, is what a skill game market with negative EV (money is taken out of a pool, i.e. takeout) is.

For racing, that means that Joe who spends $4 million a year, 100 hours a week, $15,000 per annum on tools etc, will likely do so because he is making a couple of points. Jane, who is a great spot player, might play three times a week, risking $50 per bet. She might make 9 points on low volume. Most of the rest, well, they play a couple of times a week, and lose 25% or 35% (the rake plus a bit).

DFS's advantages regarding where they are on the curve are real and apparent (as the author notes). It's moving like a business like this should in terms of growth. The next stage of their life cycle will be to create a vibrant customer base that every skill game needs: One that works together, so that the entertainment value for losers provides them with enough utility (while they win enough), others who are near or at break even are encouraged to spend more time, money and effort to get better, and those who spend the most money betting either grind away at 1% ROI, are replaced, or move on to something else.

Racing's curve is not different, just older and nowhere near optimal. Most of us who are fighting for the customer want to create an environment that is much closer to DFS, or what they hope to do over time (unless it is regulated all to hell like racing has been):
  • Create a vibrant skill game market ecosystem that encourages top-line, and long-term customer growth.
Right now that's impossible. As my breeder friend above notes, the system, and those in charge, are either not on the same page, or handcuffed by well intended, but poorly thought out regulation that discourages growth, investment and innovation. One day, I hope the page is turned to a new chapter based on gambling logic, and principles. If that happens, I am convinced racing - which in my view is the greatest of all skill gambling games - can grow.


Shameful

"A different kind of political massacre is unfolding in horse racing at the local level, though it will have ripple effects throughout the country. Shockingly, Joe Gorajec, who for nearly 25 years has been executive director of the Indiana Horse Racing Commission, has gotten word he is being fired this Saturday by his politically appointed superiors."

If horse racing wasn't a rudderless ghost ship, governed in an anachronistic regulatory morass, Joe would probably getting yearly awards, not fired. But it is. And it's shameful.

Great piece by Paulick. Please give it a read if you're interested. 

The DFS & Racing Brouhaha's & My Pal Joe Drape

It's been a fun time to be a fan of the machinations of old versus new, new versus old, horse racing and the new kid on the block, Daily Fantasy Sports.

Seriously, when we get twitter memes from tweets like these about Joe Drape, it's a pretty exciting time.

What would we talk about without Joe around? We'd probably just get mad at Richard Dutrow, and he hasn't been around since Nicolas Cage's last good role.

This DFS "scandal" which involved an employee posting ownership values too early on the interweb (in this case twitter), has Joe fired up. Maybe there is more to this story, who knows, but he's fired up. However, getting all excited about this doesn't really fit when it comes to horse racing land, and consistency.

Back in the early 2000's, racing had the "Fix Six" scandal. This involved changing tickets after the races had been run - pure fraud - to take money from others in a game. This DFS thing, at the present time, is nothing compared to it. In fact, we do not even know if the employee in question had what percentage was owned by who before 1PM when he could use it for an ROI edge (Draftkings is reporting he had the data after 1PM). Apples to antelopes.

Regardless, what happened after the "Fix Six" scandal is a lesson that should not be lost. There was pure fraud and an absolute hole in the system. Was there a call for new rules and regs and third party oversight, for congress to make new rules on betting? No, the industry, led by the NTRA and Alex Waldrop, fixed it themselves. Racing had good people in charge of one slice of it (in this case, Amtote and the betting systems), with the power to get things done, just like any other regular business who has a similar internal problem. There have been no problems since.

Unlike Joe (I really do like Joe, he is a good writer and a pleasure to converse with), unless we get evidence of massive fraud, I think the Feds need nothing to do with this DFS internal data issue as it stands. Like racing, they can fix it themselves. I think this view is consistent.

When it comes to third parties in racing in the drug and horse safety area, I am for it (like Joe), and some might think that inconsistent. I don't believe it is. Regulation or third party oversight is needed in industries that have had much time to fix something, but the tools and systems are not in place to get the job done. Racing's myriad horsemen group fiefdoms are not overly worried about consumer protections, so they ceded power to someone who is - in the fix six case the NTRA - and when they did, the alphabet was free to succeed. When it comes to drugs, rules, and all the rest, they're a complete and utter mess. The inmates, in my opinion, do need a warden; the only way they've proven they will cede power is if it's forced.

Optics rule the day in any sport, or game. I get that the media is agenda driven, and that anything disruptive is scary to an old guard, and an old guard has power and a will to protect a slice. Sometimes it's fair, sometimes it isn't. But, with something like a fix six scandal, a private market, and private business can usually clean up its own issues; the incentive is obvious - the profit motive. As far as racing goes, it has been proven for years that it can't take care of its drug and penalties and horse safety issues. Others - I am not sure how, or who - need to be in charge. At this point I don't think there is anyway around that.



Gambling is Bad

There's been quite the brouhaha in Daily Fantasy Sports this past week. You see, some employees of the major DFS sites can see large scale big data about what lineups are taken for a given week, and some was "inadvertently published". Employees can not play on a site they work at, of course, but at the present time that doesn't stop them from playing at others. There's no hard evidence anything wrong has been done with this "data leak" (not to mention seeing lineup percentages are not much different than projected) but the optics are bad.

When a site, or a gambling game gets big in the new world, it's PR that they have to worry about. The purse strings for everything related to most things are controlled by politicians, and politicians love to regulate. It's even worse for gambling because gambling - something you and I happily do with our after tax dollars - is constantly attacked from the left and the right. They don't agree on many things, but they - from the nanny staters, to the puritans -  plenty agree gambling is bad.

Draft Kings and FanDuel (who released a joint statement today) have been rolling, and when you're rolling, you bring this attention to yourself. This is not at all unlike folks wondering if a bookmaker in England is piggybacking a winners bets, a betfair employee has built a bot mimicking a winning players bot, if a poker site's CTO's dog groomer can see hole cards, or an ADW or offshore horse racing site's employee is hammering someone's choices in the pools. This is old hat. In gambling, common conceptions like this have been discussed, and been worked on, for generations.

But, in America, with tens of millions of DFS TV spend, billboards everywhere, and everyone talking about it, it's not old hat.

Me, being a gambler, this is just a whole lot of nothing. I don't worry about someone violating a policy and stealing my bet on the third at Keeneland. I trust CDI and Twinspires and whomever else to employ ethics regarding this, because if they don't, or didn't, their businesses would have failed already. I know that's old school economics, and in today's right left world that doesn't garner much support, but it's worked throughout business history in gambling, and will likely work for FanDuel and Draftkings. The Comcast's and NBC's of the world who hold stake in these companies will do what needs to be done, just like dozens of others before them or they won't have a business. And with the Times and Adelson on their tails, they'll probably do it with a little more alacrity.

45% Hit Rates With Chalk? Big Keeneland Opener, Pick 5's, Suffolk Downs

Good morning racing folks.

Earlier this week at the TDN, Younger gamblers - Millennials - and horse racing was examined.  Today, in Harness Racing Update, the phenomenon was explored with a focus on harness racing. It's a long piece, but I hope you read the harness version and let me know what you think.

It did dawn on me that millennials who are smart, educated, like playing games of some sort, are not unlike anyone, any age, who is smart, educated and likes playing games of some sort. Really, if you fix one issue, you fix others.

One of the examples used in the piece was hit rates for favorites driven by a top driver, in this case Brian Sears and Jason Bartlett at Yonkers. Those two win at 45% rates with the chalk at Yonkers, over the last two years. Their ROI's are somewhere around -15%. That's the type of win proposition you are giving people who are smart gamblers, and it's just a non-starter.

Conversely, the industry constantly tries to attack "lotto players" with jackpot bets. Jackpot bets can work and do drive some handle, but we are selling them to existing players, not like they do in Sweden for example, where the V75 is sold to the masses.

For racing handles to improve, to go bigger tent, it needs to attract skill game gamblers with targeting on the low end - win and exacta, for example. The high end needs to be sold to the masses, who might play Keno at a casino.

I remember a conversation I had a few years ago at Keeneland with Mike Maloney. He said something that stuck with me and I agree with when it comes to the younger bettor. "You can't out-casino a casino".  To attract younger bettors you won't get them with free drinks or hats, you will get them - long term - by giving the smart subset of them a good gamble.

Speaking of Keeneland, the opener is today. Lenny has a preview up on HRN here. Dirt chalk has made the track a harder gamble - not unlike the piece linked above talked about - but with the highest juice at 19%, with well bet pick "n" pools, you can still swing some value. Other than Kentucky Downs, there might not be a better track to play for gamblers looking for an edge. The meet should improve on last year's poor numbers Fall meet, because at the end of it is the Breeders Cup. Field size should be a lot better, as long as the weather cooperates.

Woodbine started a Standardbred pick 5 last night, beginning in race one, at 15% juice. That number does not mean a lot to rebated players, but to the smaller player it can make a world of difference. I saw they did $17,000 last night, on a relatively poor handle night. I expect this bet to be a decent one ongoing for punters. Woodbine's betting menu for them is generally pretty poor, so this is a nice addition.

Yonkers is seeding their pick 5 for the International Trot card next Saturday. Take a look.

Tomorrow, Suffolk Downs debuts their "Kentucky Downs playbook" with 15% across the board juice. This is a very small, staggered meet, and the first day of it had higher chalk. It's probably going to be a tough sell, but I wish them luck. I will dabble with it tomorrow, because 15% on tris and supers is a really good bet. It's something you have a shot to beat.

I will also be having a look at the Red Mile today and this weekend. The meet is in full swing.

It shows just how good a game racing can be if done right. I have not, in the 500 words in the above, even mentioned that the Jockey Club Gold Cup is this weekend. Gosh this game, in my opinion, can be huge. It's got so much going for it.

Have a nice Friday everyone.

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