WEG's Jim Lawson Interview Shows Where the Customer Stands

In Dave Briggs' piece on TRC today, Seven reasons Woodbine might have a bright future were examined, through an interview with WEG's head honcho Jim Lawson.

Almost three years ago now Woodbine and racing in Ontario was given an ultimatum: Bring in more customers, or else. From the Chair who was running Horse Racing Ontario at the time:

"Everyone, collectively, has to think about how you attract bettors and customers to the track and regain interest in the industry. 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."

So, at least some of these seven reasons were likely customer related, right?

Here is the only snippet in Dave's piece where the customer was mentioned.

"Higher commissions imposed by the Breeders’ Cup forced Woodbine to increase its takeout rates for the day, which, despite being well-publicized, rankled some of Woodbine's customers."We were faced with some tough decisions. Do we not carry the Breeders’ Cup, which our customers would not have appreciated? Do we go ahead and take a loss? To me there’s something terribly wrong about operating a business of this size and having a Breeders' Cup weekend where we’re going into it knowing we’re going to take a loss on the wagers, or, thirdly, do we try and increase, at least for the day, our pari-mutuel commission takeout? That is the route we took and had to take in order to avoid a loss on those pools."

There you have it. The only time the customer was mentioned was when Woodbine increased the takeout rate on them.

Four years ago many people in the province held some hope for the sport, from the customer demand side. That hope has been replaced by the same malaise and frustration that has plagued the customer base for decades. The simple fact is that nothing has changed. In fact, if you are a customer of the sport in Canada, it might very well likely be the worst it has ever been. No exchange rate driven handle increases can gloss over that.

Derby Wars, Exchanges & the Fight For Lost Customers

Today we saw some news from New Jersey, where it appears (finally, unless something happens) exchange wagering will be offered to residents of that state, sometime in 2016.

Meanwhile, back at the ranch, Derby Wars (and others) were looked at in an excellent piece by T.D. Thornton in the TDN.

There's a lot of chatter about both betting systems; cannibalization, cheating, not giving anything back. Pick one, or a few of many. It is what it is.

The first rule, since we can remember (I think it started in North America with beaver pelt sales), is that when you lose a customer, you find out why. Did they not like your product, your hours, your store, your staff? From those answers you can likely improve your sales.

When it comes to horse racing, not nearly enough has been done in this vein, but from what people speak about, and using a little logic, we can make an educated guess. Lost customers were tired of losing, the product was not a good enough gambling product, pricing was too high, the delivery systems were lacking (four ADW's to bet all tracks due to protected signals), etc.

Derby Wars and Exchanges are two avenues that can help get them back. Derby Wars through offering a casual game on a Monday (interestingly enough I played the new harness game on Monday and bet a few races in the pools because of it; I never play Monday), can entice some to play. It's a completely different experience when compared to making a pick 4 ticket.  Betfair offers lower juice and a new way to play the win pools. Losing too much on jackpot, single ticket, pick 30's at 57.5% juice? Ready to give up? Here's something for you to try instead.

Horse racing insiders often complain there is not enough marketing money being spent. That's probably true. As everyone knows, Draftkings and FanDuel have spent the GDP of a small country on marketing recently. That marketing is about the pro sport in question; it markets for the NHL, NFL, NBA and MLB, and does not cost those leagues a dime. That's why major league sports like the avenues so much, and even with the silly press recently, are reticent to cut the bait.

Places like Betfair and Derby Wars do that, as well. As Mark Midland alluded to in the T.D. Thornton piece, they are operating at break even and sinking money into marketing. Betfair spends oodles on marketing - they will likely operate at a loss in Jersey for some time -  and that only can help Monmouth, for example.

What alphabets can you name that are currently operating at a loss for the sport?

Betfair, Derby Wars and others like them are speaking directly to lost customers in a way in which the tracks are not, and can't, and are using hard dollars to forward that discussion.

Betfair came to North American racing long ago - about 12 years or so - and was rebuffed at every turn. Derby Wars, as we saw at last month's CHRB meeting, drew the ire of old time racing. It's time to embrace some new avenues, because when it comes to lost customers, it is innovative and fresh delivery systems like these which can speak to the lost markets.

In business parlance the partnership with resellers acts like an accretive acquisition. That's a good thing and it's something that racing cannot do alone.

It's More Than Just Being an Immature Market

Some of you might have been following the lack of effort drive in last week's TVG prep at the Meadowlands. The New Jersey judges responded by giving driver Brian Sears a 15 day holiday.

Meanwhile back at the ranch, if you look at the entries for Saturday night at the Big M - 7 days later - there's Brian Sears driving Bee a Magician in the TVG Final.

I'm not sure why he is driving. Maybe President Obama knows.

Conversely, let's look at Aussie racing. I could give you a litany of "lack of effort" fines and suspensions, customer and bettor protection decisions, etc. But it's much easier than that.

Here's a stewards report from a few days ago. Just an average day at the races.

All trainers with multiple engagements in any one particular race were questioned in regard to their tactics.

 Stewards questioned trainer R Veivers in regards to the performance of EMPTY ENVELOPE. He said that he had adjusted the gelding’s training regime in recent times and felt that this was a contributing factor for the improved performance.  Stewards noted Mr. Vievers explanation and outlined they expected the horse to race in a consistent manner.

Connections were advised that MAJOR LEXUS would be placed on its last chance to race truly and trainer M Butler was advised to take corrective measures.

There are many more examples, testing procedures, vet reports, etc. This is protecting the public and the game from monkey business, it's about giving bettors ample information about the health of a horse, intent, and making sure the participants follow rules.

Here, I have no idea why Brian Sears is driving tomorrow. I see chat boards about "it's none of anyone's business how a horse is raced." I hear "bettors need to stop whining." and "if you want to drive a horse go buy one." No insider seems to want to talk about it.

Overseas especially - Australia, the UK - this is taken seriously and there was no government decree making it so, no AG's, no lawyers. It was just considered proper business in a business that had to compete from day one, or die.

In Australia, telling a customer about the intent or health of a horse is a part of the game. Here it's a nuisance. Pricing a bet - here done by a formula that would make Karl Marx pause - was never done like that overseas. They had to compete, so pricing was done with those wacky supply and demand curves. It's why there are no "TOC's" leading the pricing changes, no states taking a percentage of the cut, no price floors. "Will people bet more football instead of racing if we do this", yes, OK then we won't.

People like to wax on about differences abroad, and at times it borders on the silly, but it means so much, fundamentally. You are seeing a crowd on Melbourne Cup day, you are seeing $15B Aussie dollars bet in a country with a smaller GDP of Los Angeles, you are seeing some handle growth in places like this, because it's a market that's had a lot of practice being a market. In a lot of places two or three centuries worth.  It's not about TV commercials or food trucks. It never was.

It's probably a whole lot more than a business being allowed to be a business, however.

What we see here in North American horse racing is something that is thrown some slot cash or government protection and tolerated. It's a business for each state to play footsie with, to use as it chooses, and to disregard as it chooses as well (likely soon in more slots states).

It's not only racing, of course. Penal regulations are being talked about in each state for "daily fantasy sports" as we speak too, which will cause it a good deal of harm, and might very well end up killing its business model. The states, one by one overregulating that internet business, are doing just what they did to racing and customers of it 100 years ago. The issues we all see today like signal caps, taking cash out of margins, ADW taxes, Internet betting bans in Texas and Arizona and Michigan, stopping places like Twinspires from advertising, were all borne from zoot suit politicians in a different time.

The bottom line is, those who want action regarding reversals of form, drivers or jockeys not trying, vet reports, and all other things so many around the world do as a matter of course, are left forever wanting. The gambling market in North America, whether it about fielding a team or making a superfecta bet, is not about us as a customer. It's never been about us as customers. That's not changing anytime soon.

Getting Things Done the Right Way Is Difficult

Satire works when there is a grain of truth to it.

Today I read something satirical that made me laugh. A petition to the Attorney General of New York to stop bingo in the state.

This petition has the formula down.

Introduce something that people are doing down the block, show how said activity is a "gateway" to something more sinister (without evidence, of course), add a little horror like "theft and murder", and voila, you now have a full-blown crisis.

This is a New York Times editorial waiting to happen. Get Drape on the case.

This represents so much more, though. And in horse racing it's taken to the nth degree because horse racing has little leadership, or structure to get to brass tacks. It's a New York hyperbolic DFS debate on satirical steroids.

Lasix articles abound and they are filled with so many of the same tactics, it's astonishing. Field size is down, because of lasix use. Starts are down, because of lasix use. Breakdowns are up, because of lasix use. If you sign this, we can ban lasix and these things will be fixed.

This weeks "issue" is computer wagering. I have read this week that these computers are betting at the half. They are responsible for late odds drops (but conveniently not late odds rises). They are probably being run by Matthew Broderick and if he is not stopped, a superfecta algo is soon to bomb Togo.

If 'computer robots' are betting at the half with an ADW feed, they are probably doing a hell of a lot worse than someone by hand with an ADW feed (there are hundreds of them) punching $2,000 by hand on that nice lone speed at Finger Lakes with the easy lead.

Considering the ADW and off-track betting dump is about 80% of wagering at the bell, and CRW is at most 20% of it, we're all the other 50%; maybe we're the smart ones.

As for lasix, well if banning it can cure all of racing's horse ills, falling foal crops and starts per year and more, holy moly, Europe's field size must be growing and massive! Pop the champagne, let's have some crumpets.

Yes, once a little old lady slashed the tires of someone who beat her at bingo. But she might've done the same thing if she was beaten at checkers. Yes there are issues in horse racing too, with tires being slashed everywhere in some form, but it doesn't mean the crisis du jour is the culprit.

Racing, in my view, will move forward with reform when the reform makes sense, and has some sort of logical, fundamental business evidence behind it. Takeout studies done by smart people say what might be tried, there is likely truth to the fact that horses are on lasix who don't need to be, synthetic tracks (we had to get rid of them because people like betting dirt, and handle was falling, you know?) and other items, too, show some empirical, logical merit.

Good policy comes from good research and good decisions, not from scaring people and whipping them into a frenzy to support your pet project. Maybe one day, not soon, but one day, things can get better.

Horse Racing Business Fundamentals

Whenever something goes wrong two things invariably happen:

i) The masses want someone to blame for it, even when force majeure is the culprit

ii) Some antithesis of growth policy gains steam

Horse racing, because handle is losing more and more volume most years this century (when inflation is factored in, almost all years), has had their fair share of some major anti-growth policies.

Horse racing handles are down, so it must be Derby Wars!

Horse racing handle is down, so we should stop accepting bets from computer wagering!

Horse racing handle is down, so we need to eliminate rebates!

Horse racing handle is down, so we need to increase margins!

Fundamentally none of those things make any sense whatsoever.

The NFL, NBA, NHL, Nascar, PGA Golf and MMA all love the Derby Wars type platform. Studies have been released showing how they engage customers to watch the sport more and more.

Computer assisted wagering - conditional wagering, looking at overlays etc and batch betting and dutching - adds money to the pools from people who will not sit at their computer all day betting. It attacks the tech demo.

Horse racing takeouts are too high to attract many, and a large gambling demographic with a proclivity to gamble will not touch the sport. Offering lower takeout to them, and me and you (through ADW's that offer them), helps increase handles, not lower them.

Joe opens up a Flapjack Shop on Main. For outreach he decides he is going to sell some of his delicious flapjacks on Saturday morning at the Farmers Market outside of town. He makes little on the excursion, but he hopes people come into town and think about brunch at his restaurant.

Joe's flapjack shop has customers who come in for lunch from local businesses. He only offers cash as payment, and because these people are working on expense accounts, they keep asking for Visa. He decides to implement an Interac and credit card payment system.

Joe sees McDonald's coupons in the mail. He decides to offer coupons, too. 10% off if you come in on Tuesdays and some buy one get one free offers. He looks at his margins and decides that he can lower the price of each flapjack by ten cents, too.

Joe sees his business rise, because the things he did aren't rocket science, they're proper business fundamentals to growing his business.

If Joe does not see his business rise after all that work, he won't stop doing them and expect things to get better (and he sure as heck ain't going to raise prices and put barriers in front of his store to welcome fewer customers). At that point he will look deeper at his pricing, his product, how courteous his wait staff is and his location.

Horse racing does not want to look at their pricing and product; they're offerings, systems, or how they fundamentally do business. That's too hard.

They want to look for scapegoats for the problems. And when the scapegoat they want to kill, or inhibit, is a fundamental business truth, they're only making things worse.

Skill v. Luck is Difficult to Illustrate, Because Professional Gambling Is Boring

The peeps were chatting about "skill vs luck" in pari-mutuel games today, in this case daily fantasy sports.

This, as we've seen, with statements from the press and others during this debacle (in my view, that's exactly what this is), is often misunderstood.

Winning long term at a game that involves skill versus luck is not sexy. It's not something you can "show" on a short youtube video. It's not something you can show on a TV commercial.

It's a grind, and it's really boring.

Picking a player that will likely do well, with some confidence, is not difficult. Todd Gurley should have a good game against the Vikings. Tom Brady should be able to score some fantasy points against Washington. Anyone should score some points against the Saints.

In horse racing, we can all pick winners. In fact, the odds board picks the top two places about 6 or 7 of ten times.

Look at any graph at odds levels with low variance choices and expectation. It's a pretty smooth curve with the takeout your loss level.

So it's all luck right, or fraud, like early on some newspapers led you to believe?

No. The skill in any game lies solely on the margins.

It's what you do with your choice - ticket construction, sound betting philosophy - that tends to matter. It's the one of twelve times you successfully fade Todd Gurley or the chalk in a race that tends to matter. It's the 1% ROI you receive on these bets over a year that tends to matter.

You can't follow that with a camera and a big plastic check. It's completely boring.

The skill to win at racing, or DFS is Warren Buffet. After a short period of time some of his investments look silly, and he doesn't have the flash of a fly-by-nighter that just scored a check because she wrote naked puts on cocoa before an unexpected tropical storm. But when the cameras are off, this boring, ugly grind wins.

Managing the boring, sticking with a plan, not getting caught up in the day to day trying to look like a winner, is the definition of winning at a skill game.

Marketing?

Perhaps you've seen a commercial recently with "Brad".

Out of the thousands of players who play and have fun with DFS partake in unregulated gambling that everyone with law degrees seem so upset about, Brad, with "$349" in winning teams was chosen as a poster boy.

Awful Announcing found Brad and asked him a few questions. It turns out Brad is really a regular guy who plays some tournaments with friends for fun, and just happens to have won a couple of dollars.

That’s one of the main reasons my winnings were $349. To be completely honest, last season was my first season in fantasy period. I had a lot of fun and kind of got bit by the fantasy bug. Then I started playing DFS with FanDuel primarily. So probably just a little bit over a year ago. I don’t play $25 buy ins to win a million bucks. Mainly just these fun games between me and my buddies just to make the season more interesting.  Or I’ll play some buddies in a 1 on 1 heads up $1 game, because if I lost it in the week before in a season long game I can play then for getting back at them, or maybe I’ll lose again. It’s that kind of thing as opposed to using it trying to make money. A lot of people on those commercials, yeah you won $2 million bucks, you are gonna be sitting there every week putting in 900 lineups and researching these stats and doing that. I’ve got a real job and a real life outside of playing games on the internet. It’s just a lot more fun for me.

How's old Brad doing now?

 Those commercials were from back in April and that $349 was real, and I can tell you that as of a few days ago the actual number is $650. Like I said, I’m not blowing chunks of wads, I’m still the regular guy.

That's real marketing.

A newbie with a few buddies play a game. The game is fun and with a little work you can win a few dollars.

We read a lot about today's gambler and most of it is true. You have to work hard, study often and dive into a game to succeed. However, for the masses, they mostly just want to have a little fun and have a chance to make money.

FanDuel, DraftKings and other games like this offer that, and they're not blowing smoke. They don't scrape everything out of a pot. They don't nickel and dime at every turn. They don't make the betting experience painful (although AG's and some states are wanting to do just that). That's a big reason why they've succeeded thus far.

Horse racing, on the other hand, is an older game fighting an old tagline: "You can beat a race but you can't beat the races." "Bradley C" knows that and marketing this same way to people like him is a non-starter.

Changing that stigma, that tagline, will take reform and a major cultural shift for the sport of horse racing. Thus far that has been elusive.

In Harness, Culture Changes Are Hard

As most of you who follow the blog know, we've spoken about lack of efforts by harness drivers with odds-on horses since its inception. For Thoroughbred friends, this is an issue because harness horses do not have running styles; try or no try is in the hands of the driver.

It's a real issue for a few reasons:

i) A billion or so dollars is bet each year on the sport, and bettors need to know they are given a fair shake.

ii) The judges have been reticent to do anything to participants when it occurs

iii) It makes the sport look insider based, and insiders feel they can do whatever they want, with impunity.

Yesterday's drive on Bee a Magician at the Meadowlands finally resulted in some action. Driver Brian Sears was given a 15 day penalty. This is not 15 days of course, he is not a regular. What it is, is a suspension for next week's stakes card.

Already, insiders have begun griping about it. That's what happens when a culture change begins - denial, anger..... "this is our game, how dare they!" Some are so dumbfounded they think it must be some sort of joke.

It's not "their" game, of course, it's the public's game - through their betting dollars and slot machines.

There's a simple lesson to be learned from all this: If you have an odds on horse, you have to make an effort for the public. Hundreds and hundreds of thousands of dollars are bet on a race and those dollars are bet based on form. That form must be raced to.

It will take time, because like with whipping, or kicking, or late for lasix, you are asking people to do something different. As well, the judges have to be consistent and levy fines when warranted. But when you think about it, it's really not very complicated. It should've been addressed long ago, and that the only person to address it is a man with a racetrack - not judges or commissions - shows just how far gone this sport really is.

Reactions Sure Are Different When Things are Popular

Harness racing was popular at one time, not really that long ago.

That popularity helped push forth some interesting vibes from time to time, like the night when the crowd went crazy and rioted at old Roosevelt Raceway when a race was made official that should not have been. There have been many "riots" in some form in racing over the years. Attention-seeking politicians, every day folks, newspapers, all paid attention.

Now, it's just ho hum.

Last night there was an elimination race for the TVG Trot at the Big M. As most know, elimination races can yield some wacky results because the drivers don't drive - even though they are supposed to - for the betting public but for the trainer. Not all drivers, but some.

This one was arguably one for the ages, with heavy favorite Bee a Magician heading to the back of the bus in soft fractions.

There was no riot, nothing more than griping on social media, a ten or twelve page thread on a chat board. This is old hat now, and the masses know nothing will be done about it. Shut up and bet; or in recent history, shut up and don't bet.

Flipping the popularity switch, with people picking a few players for a football team and throwing in $3 to see how they do in a tournament, it is the exact opposite. 

"Evidently conflating banning DFS with saving the world, AG Eric Schneiderman’s statement concluded in a blaze of self-importance: ‘Today we have sent a clear message: not in New York, and not on my watch’. The hubris was laid on so thick, you could almost taste it."

Since the companies in question are fighting it, and didn't cower in the presence of the words of the all mighty Schneiderman, he upped the ante and is going after the banks. 

DFS popular, racing not popular. DFS political hay, harness racing political nothing.

Someone going to the back with a heavy chalk with hundreds of thousands of dollars bet on the outcome is no big deal. It's buyer beware. It's 'part of the game'. Go tell it to a fencepost. Meanwhile, the world is ending because people are playing a game they've played for 50 years, but it's now done in one spot over the internet.  It's like this because very few people are watching one of those things, and are engaged in the other.

An Historical Look at Racing Protests

Since the 60's - probably the 860's - protests have been frequent and ubiquitous; well in the free world anyway.

Some are very socially important and some, well, kind of aren't.

This morning's one might fit into the latter category. Yes, hundreds of 25-44 year olds with incomes over $75,000 per year, had a DAILY FANTASY SPORTS PROTEST in New York.

I doubt much will happen with this protest, because they're fighting the man, plus the newspapers, and Drape, and anti-gambling casinos (I think that's one of those oxymorons), and a church that doesn't like gambling unless it is being done at a bingo in their basement, and some rich people.

Regardless, it's nice to see young people today doing their thing.

It got me to thinking about some of the greatest horse racing protests in this sports' long and detailed history. You probably remember some of these, but let's recap.

The ZENYATTA MUST GO ON DIRT Protest - This, in the height of the polytrack era, was a doozy. Zenyatta, the undefeated mare, was racing on synthetic tracks in California, and this did not sit well with some (especially with people who still think Easy Goer was better than Sunday Silence). They wanted her on dirt, and when pointed out that she was, twice on dirt, at Oaklawn, it wasn't the right dirt and it was not against horses with testicles. When she raced well on dirt in the Breeders Cup against testicle horses, protesters could finally enjoy her first 19 races.

The BAN LASIX Protest - This protest was organized by the Jockey Club and involved many owners of Grade I horses marching the streets writing articles and things about one simple fact: Lasix is dangerous and its use can kill horses. This was different than The WE NEED LASIX Protest. This protest was organized by horsemen groups and involved many trainers of horses writing articles and things about one simple fact: Not using Lasix is dangerous and its non-use can kill horses.

The BRING HOME CHROME Protest - This was real, and at times, frightening. Chrome's owners were not only blamed for shipping him to the UK, but for Justin Bieber's resurgence, ISIS and Glen's fate on the Walking Dead.

The BAN PITTSBURGH PHIL Protest - Very early on Phil won too much and people began to protest it.  The New York AG at the time left it alone, and Phil's career was allowed to flourish. "Some people are just better than others at some things", the AG said.

The LOWER TAKEOUT Protests - These have been going on for years. To clamp down on the vociferous masses, the industry alerts the media to incessantly mention the one-week Laurel takeout experiment. There, over the years, has been talk of using rubber bullets to stop the uprising, but instead the executives have punished customers with more jackpot bets.

The INTERNET FREEDOM Protest - This one too has been ongoing. Several in the industry have looked to create cutting edge offerings to increase wagering in the sport. This has been extinguished by data providers asking for cease and desist, and then once that doesn't work, charging $10k a month for use of a newspaper race chart.

The FREE RICHARD DUTROW Protest - This one, sadly, had no legs.

The GET RID OF THE BREEDERS CUP MARATHON Protest - This one did have legs. No, no more can we bet horses going around and around and around. And around. But it might be a good thing, because nowadays most dirt horses in North America get tired after 5 and a half furlongs.

The KEENELAND GO BACK TO POLY Protests - This baby started off slow, because everyone supposedly loves the glorious dirt. When the field size crumbled and handle tanked, it has picked up steam.

The KENTUCKY DOWNS NEEDS MORE DATES Protest - This baby is in full swing each September, but never really results in too much good happening for Kentucky Downs. After all, a few dates hundreds of miles south of Keeneland hurts their field size and we all know how important field size is when it comes to decision making.

The SARATOGA ATTENDANCE Protests -  There are "attendance truthers" out there, and they are not stopping. Each year they protest the reporting of Saratoga attendance numbers, mainly pointing out that "look around, there's lots of people here" is simply not good enough. Many have been shouted down, and these protests now mainly occur on the dark web.

This sport has a long history of protests. They are alive and well and like most other protests, rather futile.

Keep fighting the good fight people. And have a nice weekend.

Politics Shows the Importance of Testing Under One Roof

As most of you who follow the machinations of gambling and governments know, the New York AG has asked daily fantasy sports companies to cease operations in that state. This is another instance of a state or jurisdiction in a growing list of them - California, Florida, Nevada, Pennsylvania etc - to weigh in on the legality of these games.

New York (although most seem to think this is a big overreach) is an example of too many cooks in the kitchen, acting in a capricious way. The Feds passed a law stating these games are perfectly legal, companies invested capital in creating a form of them to be offered to the market, and the market - in massive numbers - has spoken. Now, the states are trying to find every which way to interpret that law, for whatever motivation (there are literally dozens, in my view) strikes them. It's a mess, with consumers (an estimated 60 million people enjoy fantasy as a hobby) caught in the middle.

Charles Hayward wrote an article today on his site, that I thought made some good points about federal testing and oversight. Reading the New York AG, and all the other states' Keystone Kops routine the last month with DFS, it should hit home.

".......the existing system is broken, seriously flawed, getting worse and is directly contributing to the decline in the Thoroughbred racing industry. Rules vary widely, state by state and are inconsistent. Drug testing is woefully inadequate with little differentiation between overages of legal therapeutic drugs and true performance enhancing drugs with penalties not consistent with the severity of the infraction. The individual states simply do not have the funding, the personnel or the motivation to do a competent job.
 

Anyone who has worked in U.S. racing and had contact with state racing regulators knows that generally these organizations are politically motivated and truly not interested in solving the serious problems that racing faces."

We read a lot about federal oversight, and USADA, and there are strong points on both sides, for and against. However, the system - with states sticking their noses in with "opinions", with appeals and lawyers, and lawyers and opinions, and different rules, and labs, and penalties - is broken. Badly broken.

Moving this under one roof, with one set of protocols and one set of penalties, and one set of appeals, and one set of ...... just about anything....... is much preferred.

If overzealous politicians or commissions aren't on board, or try to act in the arbitrary way in disparate states like they are with "DFS", well then wield the hammer -  the Interstate Horse Racing Act.

If this 'federal' legislation passes (an obvious longshot) there will be a lot of fighting and plenty of growing pains. There will be mistakes. USADA is not perfect. But wow, when I look at New York AG's and Pennsylvania politicians with DFS, I can't help but conclude it's badly needed. Removing these cooks from the kitchen can't help but make for a better broth.

Notes:

I expected American Pharoah to run away with the Sportsperson of the Year vote for SI. He's a horse and he stands out, and in a long human list that's a  built in edge. However the Royals - an interesting nominee seeing they're a team - are winning. You can do your part if you are so inclined.

The Big M begins tomorrow. I have to hand it to them, at least they try hard.

@TheMeadowlands Midtown Manhattan at 46th Street and 7th Avenue as well as 49th Street and 7th Avenue. pic.twitter.com/E0NhWogV2m

— Jason Settlemoir (@settles4) November 12, 2015

Horse Racing's Dangerous Margin Game

The margin for a product or service is a funny thing. It's a fine line between profit and loss, growth and stagnation, or success and failure. It's the building block, the foundation, for any real business, and it's something that's fought through each day.

In horse racing it tends to be none of those things, though. It tends to be a number that those in charge use not as a sextant or rudder guided by markets that tells you which way you're headed, but something they want to steer. 

Last weekend, Woodbine increased the takeout on Breeders' Cup wagers in Canada; some pools as high as a whopping 27%, which in real terms is 42% higher than what all other ADW's charged their customers. This was a function of the dangerous margin game.

Deals written between tracks and horsemen groups can take many flavors, but in Canada, for some time now, they've been written differently. Instead of giving 50/50 on simulcast wagering revenue, 4% for tris and 2% for exacta wagering went directly to purses. This is a monumental difference, because the funding came from not revenue, but margin.

Hypothetically, if a signal fee is 12% and a host track has, say, a 15% takeout on exactas, along with, say, a 1% tax to the government, there is no money left over for the receiving track to take the bet. They make nothing. It's a system built to fail.

This was needed to be changed recently in Ontario, because of the discontinuation of the slots at racetracks program. Good, right? They could expunge that strange system and replace it with a better one.

Nope. They ostensibly kept the same system. Now, 3% of margin from all wagers go to the "Horse Improvement Fund".

That my friends is how you get to a track charging 27% takeout for an event where everyone else gets 19%. It's also why takeout can really never be lowered. With margin the weapon of choice for racetracks and horsemen, it's a squeeze game, not a profit game.

And that's not good for horse racing wagering, well, if you want to see it increase, that is. As Vinod Kosla, one of the founders of Sun Microsystems once said, "Business is a strategy tradeoff; the lower the margin you take, the faster you grow." It works both ways.

Horse racing's dangerous margin game is so entrenched in the system that it cannot break free to grow. The effects are virtually endless.

Dunkin Donuts recently -  like other coffee shops - has started selling K Cups. They're cheaper for customers than buying a coffee in a store, so why would they do it? Well, they make profit on each K Cup sold and by increasing distribution points it means more profit, they get brand loyalty and they grow their in-store business, they allow a customer to have a Dunkin's at 7PM after dinner, without driving to a store, instead of having a Nescafe instant. If they used margin as their decision maker, like horse racing does, this never happens. The margin is too low for the slice or alphabet du jour.

Higher margin at the source, begets lower margin at the distribution point, which means fewer distribution points, which means higher prices and less choice for customers. For the horse racing industry, that means lower betting volume.

Horse racing needs to focus on maximizing profit, not their specific slices' margin. As Woodbine proved last week, this much-needed shift in strategy is no closer to being accomplished than it was a hundred years ago.

Have a nice Monday folks.

Friday's Juxtaposition

Here we go......

Enjoy your weekend everyone.

As Baseball Shows, Some Numbers are Just Numbers

There was a look today, from the Fox Sr. VP of sports programming, at the television numbers for the recently concluded World Series:

"As a longtime television partner to Major League Baseball, we at FOX Sports also engage in a decades-long debate about baseball numbers and their meaning, but in our case the numbers are Nielsen television ratings.  Here again, context is key, and differing points of view can paint sharply different pictures of the health of the game, as we see every October when World Series ratings are dissected by industry observers. 

The defining trend of media in our lifetime is fragmentation – the process by which the enormous audiences once generated by a small number of entertainment options have splintered over the years and have been redistributed across hundreds of TV networks and many thousands of digital destinations...... media content has become ever more individualized and on-demand."

Yes, people are not watching the World Series in huge share any longer (e.g the 28.7 share for the Big Red Machine series in '75 versus this year's 8.7), but in this television-polluted, fragmented landscape, it's all relative. Relatively, the World Series share is fine. 

So is the "health of the game".

Baseball revenues, salaries, team value, TV contract value, attendance, are all doing very well (even with a strong "old folks" demographic lean).

 As we in racing read about TV numbers, we have to look at them in context, too. Just like people in 1975 had a choice between a rerun of Laugh In or Cannon (William Conrad rocked, I just thought I'd throw that in) and a World Series game and the game kicked butt, racing had little choice against it in the media when Sea Biscuit raced War Admiral, or when Northern Dancer won a Derby.

That fact that Derby TV ratings are not what they once were, or that meager Breeders' Cup Classic share we read about happened, or that the percentage of people are not watching racing on TV like they once did, is not really worthwhile to be talking about. Like baseball, it's fairly meaningless.

What is meaningful, though, is the fact that unlike baseball that's where the similarity ends.

In horse racing we have our revenue metric to talk about and examine, and that's betting handle. That's the number that drives revenues and is a pretty decent barometer of the health of the game. It's been the most troubling number of course; this sport needs betting handle to increase each year at about the rate of inflation (say 2%) just to hold even, and it ain't happening.

Betting handle has been increasingly been fragmented, due to both the competition and internal strife. And it's those holes, that fragmentation - not TV ratings or social media mentions or twitter trends - that really needs to be filled.

The American Pharoah "Experience" Starts About Now

There was an article this morning at Charles Hayward's site penned by a writer experiencing a strong American racing event for the first time, and what that "means for the health of horse racing".

I expect many around the world would be amazed at what's 'left' of this sport here in North America. But it is not surprising to us. We know 15 million or so watch a Derby, we know 10's of millions watched Zenyatta on 60 Minutes (and many tuned in for her Classic). We know sports' stories in a mad-TV sports and twitter world still exist, and in many cases thrive.

We also know that much of it has little to do with the immediate health of a sport.

This business - for years - has been filled with the knee-jerk. Things need to be fixed yesterday. Field experiments for takeout are a dirty thing, despite being done in some form by virtually every other business: Laurel lowered takeout for a week and lost money, don't you now. Tracks should be ripped up, then ripped up again. It's this business.

The truth of the matter, as I see it, is that nothing is simple. Most policies take time, whether they be the drip, drip of higher takeout, the time lag where people get in and out of the business because they're fed up with drugs, the worth or non-worth of a polytrack, or what have you.

The "American Pharoah experience" - if there is one - will take some time, and I suspect the monitoring begins right now.

The Dow Jones Industrial Average, as the baby boom was in full force in the 1950's, sat at about 500. In the mid-eighties - 30 years later - 1,000 was broken, a pretty nice double. In thirty years since, the Dow has touched 18,000, a whopping 18 multiple. We're not lacking for one-percenter's for this very reason. The thing is, while this wealth has been created for these folks, they are leaving it in the markets, or shifting luxury buys away from the sport of kings, and to other pursuits. Foal crops have been down, while the bloodstock target market gets richer.

In my view, if American Pharoah has coattails, it will lie in what happens this year, and next, and next, with bloodstock purchases. Did enough of the well-to-do who are pre-qualified to love competition see the headlines, see the media buzz, see the fun and excitement from America Pharoah? Will enough of them be touched to own a horse in this sport and try to duplicate the feat? Is it worth selling X shares AAPL at a crazy gain to take a poke on $4 million worth of babies? Did any of them get the metaphorical "bug"?

That, I feel, - not handle, not social media mentions, or hikes in TV ratings - will be the metric this sport needs to look at when evaluating the net worth of the column inches the last year. And I think it will take a lot of time.

Have a nice Wednesday everyone.

Mattress Mack Gets Taken to the Woodshed

There's quite the brouhaha going on, as you all know, I suppose. And right now, ol Mattress Mack is taking the worst of it.

This is the same Mattress Mack, who was described by ESPN in 2004 like this:

As the failures, injuries and losses mounted, McIngvale went through four trainers -- two-time Derby winner Nick Zito; Steve Moyer, a former Zito assistant; Leonard Duncan, a former night watchman at the racetrack, and Laura Wohlers, McIngvale's sister-in-law and a former employee at Gallery Furniture. From Houston, McIngvale would call Wohlers in Lexington, Ky., and tell her which horses should work, and how far. Mattress Mac looked like a buffoon, and racing insiders were amused.

"I think if I had it to do over, what I would do differently, I probably wouldn't buy so many horses so fast," McIngvale said. "I think I overbought horses, and I bought a lot of bad ones. And I was tampering with the trainers, saying I want to do this, I want to do that. So, my reputation was probably pretty well deserved, because I tampered a lot and got involved with something I knew nothing about.

"I wasn't as smart as I thought I was. My horsemanship ideas are zero."

The natives are restless.

I don't know a heck of a lot, but I do know a few things.

Training a sprinter isn't rocket science, so I guess a lot of people think they can do it and in the grand scheme it's probably not even noticeable. "He should work in :49 instead of :50, 1:00 instead of 1:01." I mean, that's not going to do much either way.

Keeping a horse sound and happy and caring for both their mental and physical needs is the goal of any horse trainer, because sound and happy horses race well.

From what I saw, this horse was sound and happy, and well-cared for.

What I do half the night. Watch #runhappy on camera! #breederscup #bc15 @breederscup pic.twitter.com/vLEyGCXl9j

— Maria Borell (@IMariaValentine) October 24, 2015

Other than that. I don't know Mattress Mack from a hole in the ground. But he most certainly is feeling some heat today. Whether that's fair or not is anyone's guess (social media string ups rarely are), but from reading back to 2004, I would think the criticism is not entirely out to lunch.

Enjoy your Monday folks!

Breeders' Cup Again Proves Its Worth

Years ago the "end of year" championship was a novel concept that most got behind for a few reasons.

i) Most sports' have a season with a championship of some sort. Championship races for big money were logical.

ii) Thoroughbred racing season - in the public eye - consists of three races, the Triple Crown, and little else. People like to wax poetic about televised Saturday races from Belmont or elsewhere, but they were built for another time and don't work today. The BC provided a fall outlet for the sport to promote itself to the masses.

iii) To try and bring the worlds' owners together to find out who has the best horse, and promote racing globally. As I'm watching the Lions play the Chiefs in London, this in many ways was a forward-thinking concept.

In today's world, with bloodstock sales and foal crops lagging and with politicians as the new audience for the sport, there are other reasons why this series is important.

I think, again, it delivered.

Runhappy was the story of the Cup, for me. You've got a messed up horse in blinkers who was given time to become a seasoned, happy racehorse. He wasn't sent to a factory stable, he was not rushed for some ego-driven try for a Derby, he was not a commodity. That those folks took home the hardware with a horse who sat off the speed like the calm, tractable, easy to ride horse he now is, is exactly what patience and horsewomanship is about. It was awesome to watch. I wish them all the success in the world.

#runhappy says goodnight! Thank you so much everyone!! There are no words! Best day of my life! #bc15 pic.twitter.com/lqFGuvz9hz

— Maria Borell (@IMariaValentine) November 1, 2015

The Classic was (after scratches) on paper, perhaps one of the most boring affairs we've seen of late. It was the ultimate trap race, that bettors abhor - is American Pharoah the Haskell American Pharoah or the Travers American Pharoah? If the former, 3-5 is fine, if the latter 3-5 is horrible. Thankfully, moments after the race we all forgot about the trap race.

American Pharoah delivered, arguably, the best final year race we've seen from a Triple Crown participant in a long, long time. Chewed from a TC season? Chewed from 17 or 70 (not sure of the number) flights across the country? Chewed from staggering home in the Travers? Not even close.

If all horses had this colts' constitution, Joe Drape would never write a 24 horse story. This guy is pure magic. And he's fast, too. I am glad he proved it in the Classic, because as I noted before, without the always wanting and overasked "big Beyer" there's a hole in the horses' PP's for some (this is a sport where Zenyatta was only pronounced good by some when she lost). Game, set, match American Pharoah.

I like that this years Cup delivered sportsmanship, which is what the sport of horse racing is built on. At times, the Euro-love in the press (they do everything right, we suck) borders on the absurd. Frankel going more than a mile was considered heresy for a year or two, Sea the Stars and others who win the Arc pack it in. This year we had a horse who won the Arc make the trip overseas. He was running on ground he did not like and was beaten by a nice horse who raced three times in the last month. I don't know Golden Horn from a french horn, Found from lost, but I do know some nice horses, along with trainers and owners sending them on a plane half way around the world to take a shot.

I get some of the criticisms of this set of races - it waters down other stakes, etc. I get that the "big day" thing is becoming ridiculous in this sport where if something is done and kind of works it's worth overdoing. But the fact is, American Pharoah closing out his career in a Jockey Club Gold Cup does not reach an audience. Runhappy winning at Santa Anita late in the year is ho-hum. When it's done at the Breeders' Cup, those in charge of "coupling" of slots, the masses who through the ballot box control revenues for the sport, and the general fan who tunes in to watch only the Triple Crown sees it. That's not unimportant, and that's why this series - through hard work and planning each year - delivers exactly what it's supposed to.

Have a great day everyone.