Racing's Short-Term Post-Drag Thinking, is Long-Term Deadly

Horse racing as a whole - and this isn't a surprise to anyone - possesses some short-term thinking when it comes to business strategy. We've seen it countless times, whether it be a short-term bump with takeout hikes chosen over the longer term gain of market share, slot deals written where almost all the revenue is transferred to track owners and purses, where a short-term bump in asset prices rules the day. It's just the way the industry thinks, and has for some time. This isn't anything new.

Unfortunately, the thinking permeates much deeper than that.

When businesses (in this case, tracks, especially smaller ones) are in a state of decline, desperation plays a role.

Harvard Business Review:

"Perhaps the worst kind of waning-industry environment occurs when one or more weakened companies ...... with significant corporate resources are committed to stay in the business. Their weakness forces them to use desperate actions........ their staying power forces other companies to respond likewise."

Strategies are tried that weaken the industry as a whole, exacerbating everyone's decline.

There are many examples of the above in the macro that occurs in racing, but let's look at one little slice of the micro for an example: Post dragging.

Post dragging occurs because a track, somewhere, someplace, realized that flashing a "0" on their screens hoodwinked people to think that time is running out to bet, so get your bet down now. The longer you flash the zero, the more eyeballs see the zero and the more people run to the windows. It's silly, yes, but it works. A track that flashes that zero for a half hour will have, on balance, more handle than a track who flashes zero for five minutes.

The problem with the above, as the Harvard Business Review article notes, is that these desperate tracks "force others to respond likewise". Soon, several tracks all flash zeroes in a strange competition of 'fool your customer'. The pitfalls of this strategy are obvious:

i) You are simply rearranging the deck chairs. There is no value driven from this strategy because it does not grow the pie. Bettors bankrolls are not going up, urging them to bet more, they are just betting your track at X plus and another at X, or X minus. Handle doesn't go up and neither does revenue. With 90% of money bet off track, the host venue doesn't care what track you're betting, for the most part.

ii) It eliminates the possibility of scheduled post times. One of the biggest bettor and industry complaints has always been tracks running on top of each other. With draggers, it's almost impossible to even know when they are going to post (Hawthorne's Jim Miller - someone who tries his hardest not to run on top of other signals -  shows his frustration with this on twitter often).

iii) It eliminates promotion of the signal. We have TVG who wants to show live racing at regular intervals to maximize total reach - according to Thalheimer, the number of races have an elasticity of -0.6 and are important to racing as a whole - and they can't. We have people wanting to create a live racing harness racing channel to make racing seamless at three or four tracks in an evening as a brand builder. We have NHC contests and Derby Wars, all trying to schedule proper games at proper intervals. This inhibits the whole ecosystem.

iv) Negative branding. Post drags inconvenience customers. I'll type it again, post drags inconvenience customers. It makes giving tracks your money an exercise in frustration.

v) Things reach a tipping point. NFL games can gain more revenue tomorrow by making games five hours long. It would work for awhile, and then comes the tipping point. People get frustrated with the product, leave, find something else to do, and long-term revenue is hurt. Bettors are even worse. When a horse gambler leaves, he or she gets out of the habit and are increasingly hard to get back as customers.

Last, and most importantly, it does almost nothing positive, even for your track. The money gained on a post drag is priced at 3% or 4% for most very small tracks. A $5,000 handle bump at a small track for a flashing zero for five minutes gains tiny revenue. The sad part is that some of these tracks have millions for purses and profits from slot machines. This revenue is a drop in the bucket.

Racing as a whole needs to look deeply into this issue, because when it allows tracks (especially smaller ones) to exacerbate industry wide problems as an act of desperation, the entire business - in the long term - will lose. This business has been on the losing end too much this past decade married to short-sighted, short-term policy. There's no need to make it worse.