Messing Up a Monopoly

I have heard from dozens inside racing for a lot of years that "we wish we were like racing in France." Everything is sunshine and lollipops in France, apparently.

France, of course, has a monopoly on pari-mutuel betting, which probably makes an argument about how we wish we were them a fairy tale.

But, even with a monopoly, racing is racing, whether it's in France or anywhere else.  And, when some simple laws are applied, it's no different than any other business: When there are product substitutes, and the monopoly does not use its edge to take advantage of its position, it's sub-optimal, and it can break down.

Breaking down is what we've seen for some time now in the land of sunshine and lollipops. The PMU has been losing revenue and market share, as talked about in "Where Does France Go From Here", in today's Thoroughbred Commentary.

The 'solutions' listed in the article seem fine, but they miss one main point, and it's the elephant in the room.

The PMU, last season, took 26.3 cents out of every dollar of betting pools. In the free world, this is the lowest payout rate in any major racing jurisdiction.

Ironically, the article states that they took over the German tote to try and fix that country's racing problems. The German tote, once one of the better places to bet in Europe, now takes 30.3 cents out of every dollar of wagering. No wonder they needed help.

Interestingly enough, even quasi-monopolies, or duopolies around the racing world take a different appraoch. Hong Kong's hold on wagers last year was 16.1%, Australia's came in at 10.4% (Intl Federation of Racing, 2015 Fact Book). Both of these jurisdictions are growing, even in the face of new competition; Australia's turnover from about AUS$12B in 2000 to AUS$28B in 2015, Hong Kong's handle has about doubled since 2007.

Monopolies are wonderful things (certainly if you are one), but sooner or later $2 per minute long distances charges sees the proverbial chickens come home to roost, and if your business is not demand-led, you're in serious trouble. For racing, and the PMU, you can't take that red box in the graph and not deliver along side of it a competitive gambling product and succeed. The world is too big, too connected, and there are too many other things for people to do, and spend their discretionary income on.

Have a nice Friday everyone.


Purses n' Purses and Wednesday Notes

Good day everyone!

I took a glance at the chatter regarding Yonkers adding two $250,000 invites to their International Trot card in October, on twitter, facebook and elsewhere. One point made by many, had to do with $ generated per $1 of purse spend.

Yonkers, as you know, has soft handle (about $420,000 on Monday), so some were questioning using $250,000 for a race like that, where the handle drawn from it will not be very high.

Rob Key, the man who had to argue vociferously for that very $250,000 number for his digital marketing and promo campaign for a whole year, responded on Facebook.


You can sense the frustration in Rob's words.

No matter how you feel about promoting harness racing, seeing $250,000 of purse money doled out like it is, versus how hard it is to get $250,000 for other things, certainly doesn't sit well with most. $250,000 out of the $420 million in purses is 0.05% of revenue. Companies can spend upwards of 10% of revenue for such things.

Coincidentally, I received an email this morning from Bob Marks, which showed the following stats for a Yonkers card in 1964.

That's a handle of $2.56 million, which in today's dollars is over $19 million.

On that same 1964 card, an invite was $8,000. In today's dollars that's about $60,000.

Yonkers opens go for about $40,000, or 67% of what they went for (standardized then).

Yonkers draws about $420,000 in handle today, or about 2% of what it did then.

Purses have not suffered much, but handle sure has.

That's the disconnect people complain about, and they have a point. Purses (the input factor of supply) have barely changed in real terms, while handle (the output factor measuring demand) has been absolutely decimated. This is the purses up, handle down phenomenon everyone speaks of, on crystal meth.

Notes:

Tonight the Big M turf meet starts with 15% across the board takeout. Emily and John at Optix have offered out free analysis for the card.

For those betting the election, this feels like a pivotal week to me. After the debate on Monday ("the worst debate I've ever seen" according to one on my texter machine right after it happened), where, by most counts HC killed the Donald, we would expect a stout bump in the polls for her - maybe up to 5% or 6% in the next 7 days. In my view, if that happens, we might be at a Gladwell tipping point moment where 1.35 is solid value for Mrs. Clinton. If it doesn't happen and we see her leading by 2% or 3%, she is, I think, in deep trouble, and fading her at 1.35 is a gift. I will be watching this and likely taking a position this week, or early next. I currently have no long position on either candidate, but have traded it since May.

I saw the Parx card this weekend had some nice numbers (about $9.6M, which is good for Parx) with the presence of Derby winner Nyquist and Songbird. It made me think once again, however, just how popular Chrome is, and was. The handle for his PA Derby, with a short field was over $10M. A Derby winner, the most popular filly in racing, along with minus pools, could not touch the big horse. Chrome solidified himself as a generationally popular horse that day at Parx, in my mind, and he's done nothing since then to make me change that view. He drives handle. He's special.

Have a nice Wednesday everyone.

Horseplayers Haven't Lost Touch, Horse Racing Has

Back in the early 1960's there was a big battle in the National Football League.

Some owners - in large cities, where attendance drove big gate revenues - felt television would hurt their revenues because people would stay home and watch, rather than go to games themselves. In the end, of course, the NFL embraced television (it was made for it, really) and the rest - including multiple billion dollar TV deals - is history.

In Steve Haskin's blog yesterday, he touched on the fact that maybe folks who stay at home have lost "touch with the horse."
  • But what of that special, cathartic connection with the horses themselves? It used to be where the bettors would actually make it a point to see these horses close up in the paddock, post parade, and galloping to the post, and make their final determinations. They would line the walking ring 10-deep to get an intimate look at the horses, even if just to bet on the pretty one. The horses were flesh and blood creatures who they got to know on a weekly or bi-weekly basis. No one is insinuating that racing technology is a bad thing. It is actually pretty remarkable. But why rely only on that and give up the true essence of Thoroughbred racing and what it was meant to be? 
If the TV deal went bad in the NFL, I think much the same would be written.

"But what of the bond with the players themselves? Sitting on the sidelines, water vapor breath in cold Green Bay temperatures, the sound of the hitting, helmet to helmet, the roar of the crowd, binoculars hanging from a neck with a beer and a hot dog in hand, body firmly pressed on steel seating ....... "

We all have bonds with the players - they are on our TV screens, handhelds, tablets and desktops, and in 24 hour cycles on a football network. We hear the sounds, the roar of the crowd on 52 inch TV's with sound systems; systems purchased for the price of what a 14 inch black and white tube was in 1969. We eat hot dogs and wings at home in a recliner.

What we also do is....... go through stats, for free and play fantasy football, lay a few wagers, participate in office pools, use our Xbox to plug in teams and have them updated in real time, participate in online contests, bet in-running, download free apps on our phone with everything we need at the touch of a button. And about a hundred other things.

The NFL has married technology with football, and they win.

Racing, on the other hand, has had a remarkable, glorious, wonderful carve out - the only real "legal" game to gamble on over the net. But they've done little with it.

You need data, and past performances and accounts. You aren't watching on an Xbox, you aren't backing and laying on an exchange (unless you live in NJ). Online contests? Well, the horse racing lobbyists decided in more than one place this is not an asset, but something that should be banned, or even sued.

And despite that, when you decide you want to play, you have to into pools with egregious rakes.

It's fun to talk about the majesty of the horse and the greatness of live racing. No argument here. But to say "horseplayers have lost touch with the horse", I believe is wrong. We have never lost touch with the horse, horse racing has lost touch with us.

If the sport ever gets horseplayers back, there will be no need to even have these conversations, because there will be more people at the track, more people buying horses, and the sport will be in better shape.

When things are good there's less need to grumble, or wish for the way things used to be. When the future is bright we look forward and wonder what we could be, we don't look backward and remember what once was.

The Reality of Regulation in Our Sport, Through Others

Yesterday we looked at the excellent interview from ITP on Dink's radio show. He and Dink examined some of the issues for customers, and bettors in horse racing. It was great, but I thought taking a look at the environment they were talking about was probably a decent idea.

In some states and cities it's pretty tough to be an interior designer. In Louisiana, for example, it's more difficult to be one, than to become an EMT. It can take years and thousands of dollars in "fees".

Now, to probably you, me and most everyone else, this sounds silly - if someone is a bad interior designer, he or she will go out of business; this is what Yelp is for - but the way things are working nowadays, this is the new normal.

What happens, is an industry group who wants to create a form of monopoly lobbies (sometimes with wild assumptions) to those in power wanting regulation. This regulation acts as a barrier to entry, and the said group (who are likely grandfathered from any regulation, or have some sort of edge, because they helped write it) benefits. Governments do well, because the licensing fees go to them.

Now, I realize this is a hyper-political world where some people tend to look at what letter is before something before they agree or disagree, but this issue is not like that. President Obama's committee to study such issues has come out against this new regulatory environment, asking for "cost-benefit" analysis to be the overriding factor (to ensure consumers are protected). Some red states have it, some blue states do. The middle of the road Economist has been harping on this for years. It's non-partisan reality.

Recently, when the DFS brouhaha was going on - there were issues with security, employees entering teams etc - I feared that regulation would go along this route. I bantered back and forth with a few who made it a mission to "fix" the industry, because common sense said regulation was not going to protect consumers, it was going to increase prices and stifle choice. Just like it has with interior designers, or a hundred (thousand?) other industries, where regulatory capture takes hold.

The results thus far, of this "consumer protection" regulation?

Fees as high as $500,000 (in NY, natch) for existing providers (this stifles choice and as the article notes helps create a "duopoly").

 Prices, you guessed it, have gone up.

Notice the prices went up on who? The small guy or gal playing "under $25" tournaments, who were, ironically, the players the New York Times, New York AG and others were screaming to "help". If a 50% price increase is help, I'd hate to see what happens if they really, really want to help.

Folks who foresaw the above coming did not have some sort of crystal ball. They aren't the Long Island Medium lady. They didn't even need to look at President Obama committee's, or interior designers for insight.

They had racing. Lots of years of racing.

They saw a CHRB - a "regulator" of sorts - increase prices on consumers and applaud about it, with little discussion from a "cost-benefit" analysis. Look who makes up the CHRB.

They see wildly successful Kentucky Downs wanting more dates - to you, me, owners, trainers and consumers of the racing and betting product absolute common sense - and apply for such in Kentucky, only to be thwarted by a commission that is captured by large entities.

They see slots legislation written where revenue goes 50% to purses and 50% to the company who owns the slots, when the people lobbying for the deal were, you guessed it, horsemen and racetrack operators (almost mirroring the duopoly in DFS we are seeing now).

Those are three examples. I am sure you can come up with a hundred and three.

So, ITP and Dink had a great discussion. It was informative, much more right than wrong, and a lot of it had wonderful, sometimes lost, common sense. I happen to agree with ITP -- this sport, in North America, should be capable of doing $50 billion in handle.

But, because of an environment that strays away from increasing handle, and worries more about putting revenue in the proper boxes from those who bend the regulator and commission's ear, it's one tough row to hoe. The chances of it ever changing are probably close to zero.

Have a great Thursday everyone.



A Constructive, Instructive Industry and Gambling Interview

Inside the Pylons, at home in Vegas (artist rendering)
Last evening Dink had "Inside the Pylons" as a guest on his radio show - Eye on Gaming.

The full interview is here.

This is a pretty good discussion, not just for gamblers, but for everyone in the industry to listen to. For no other reason, perhaps, because you simply don't hear interviews from people like this very often.

One part of the interview was particularly insightful, in my opinion.

From the betting side, you heard what you will hear sometimes (from this blog and elsewhere), but at times it's hard to get your head around - the game is not about picking winners.

It's worth hearing that, in person, from someone who lives it, who has never had a job to support the family, other than wagering. And as a bettor, it is a powerful message that is all-too-often discounted as some sort of strange betting voodoo.

I remember getting that message delivered years ago, with regards to my numbers betting superfectas. Superfectas were $1 minimum, and early on they were a huge edge for people who don't worry about cashing tickets, but worry about cashing good tickets. While a good deal of folks in the pools focused on boxing three chalk with a bomb, or using chalk with all's underneath in the 4th spot, hoping to catch a 40-1 shot in 4th, it was optimal to completely fade that strategy.

At times you could it a super for $8,000 with a tri paying $500. There were pool shots that should've never been pool shots. It was the salad days for those who took chances, weren't afraid to invest $112, or $256 or $324 into tickets with a low hit rate, or structured super tickets like few others were.

That's generally my playing style, so after playing supers for a few years, my ROI was superb, and it was really a go-to bet.

Then, along came the switch to 10 cent mins, at most tracks. After about nine months playing supers in a similar fashion into these strange fractionals, I checked my ROI, because I felt I was not doing as well with them. In my mind I was at, perhaps, an ROI of 0.92 or 0.95, which was well down from previous years.

My ROI was 0.77. Yep, it's like I was picking numbers. I was a dart throwing monkey.

Although my results were lower that year overall, I did not forget how to handicap. I didn't turn into a dart thrower who lost the juice. It's not like I switched to betting Australian dog racing. I simply was not sharp enough to notice the environment changed, and I was not structuring tickets right with that change. It wasn't about picking a winner, it was about ticket making gone very bad.

ITP is correct, in my view. Horse racing, instead of shoving ridiculous jackpot bet tickets down newbies throats, they need to teach them how to make tickets; how to bet the horses. Teach people what's important, like board and ticket value. Y'know, the whole teach a person to fish thing.

If the industry gets out of people's way, it's simply an amazing game.There are a hundred ways to win, or to be close to winning. If the industry ever got it together enough to sell this game in a value driven, gambling driven way, I am still convinced the sky is the limit.

Enjoy your Wednesday everyone. And yes, again, if you are a bettor or industry exec, give the interview a listen. You will learn something.




Canterbury Park Meet Analysis

The Canterbury Park meet just closed for the season, after the first year (hopefully) of them trying to attract more betting dollars to their smaller venue. One of the toughest - if not the toughest - job in racing is getting people to notice your small track. Canterbury Park sure gave that a college try.

Handle was up 5% for the year, and about 10% on a per horse basis. For a small track these numbers are good, considering neighbor tracks were down double digits this season, and small tracks are getting eaten alive by the bigger signals in 2016.

Crunk has an eye-opening and very heady analysis here (give it a read, he did a much better job than I can here between meetings), so there's no need to delve much more into it. But a few of his points are worth repeating and analyzing.

They had some terrible luck, with almost one full card consisting of four and three horse fields. This season 138 races (about 15 or so cards worth) had six or fewer horses. Last season that number was about 30% lower.

Turf cards were washed out, some on their best night, Thursday. 43 turf races were off turf, versus 17 last season.

Using a little betting math, a 7% reduction in field size, apples to apples, year over year, handle should be down about 4%. When cards are washed out, more like 7% or 8% is probably a better estimate.

With neighbor tracks down about 15% or more, there's that to add to the equation.

With so much bet on track, bad weather is more important, too.

The 'Shakopee Bridgejumper' stayed home this year, which is good for the track, but bad for handle.

Doing nothing, standardized, one may expect a 10-15% decrease in handle, at a bare minimum. So, 5%, or 10% per entry up certainly (as O_Crunk concludes) was pretty good.

Folks asked me early on what I thought might happen this year and I honestly did not know. It's a small track, lowering takeout to a fair level (but not out of this world). If a gun was held to my head I answered that I thought 15% would be a nice gain. Considering the characteristics in Crunk's post, I am pretty happy with that estimate. I think that was probably in the ball park.

Where does the little track go from here? Who knows, but like I did this year, they will see some of my dollars at these takeout rates. I had a fun meet, and enjoyed the racing, when the sun was shining and the box was full.

I would like to make a note before I rush back off to work, on Canterbury itself:

A meet where people have fun; where the simulcast feed is filled with families on my screen watching horse racing, eating hot dogs and soaking it up; a place that has alternative gaming money and wants to use it to make the place fun and exciting and bettable; a place that seems to be doing everything they can to grow, to say "hey have a look at us"; is what horse racing is supposed to be. It's what we ask all tracks to do to promote this sport.

Hats off to them for trying. Canterbury should be very proud of their efforts and I wish this sport had a hundred tracks like them.

Have a nice Tuesday everyone.

Releasing the Racing Hook that Hooks Ya

I read, like a lot of you, Lenny's post about giving up his passion as a horseplayer. If you have not read it, give it a look. It's informative.

Although Lenny touches on a lot of personal issues, his overarching theme regarding the handicapping and betting genre is pretty eye-opening and interesting. I don't think anyone can argue with him: This is one tough, expensive, frustrating, time-consuming game.

And sooner or later (for whatever the reason, but clearly it's related to utility maximization) a lot of people finally say "no more".

Back in about 2007, Bobby Chang who was (might still be, I don't know) the vice-president of wagering for the Hong Kong Jockey Club was presenting at the Asian Gaming conference. Hong Kong was going through handle losses (or stagnation) and Chang looked into what was going on. He concluded some long-time, dedicated players (not unlike Lenny) were leaving; some for other gambling avenues in Macau, some just leaving for the sake of leaving.

Mr. Chang said (paraphrasing), 'Once people leave a betting game that hooks you like horse racing, they are hard to get back. So we had to do something'.

Mr. Chang decided one reason for the losses was that some of these players were not making enough money to keep them doing what Lenny does - watching races, making speed figures; being customers. So, he offered out a pretty stout rebate on tickets of about US$1,000 or more. Wagering in Hong Kong was about US$7.8B and falling at that time, now it's US$14B and rising.

There were other factors at play for the turn around - there always are - but what's more relevant in this instance was the actions of Mr. Chang and the HKJC. This was an executive that noticed:

i) Some customers were not having their utility maximized

ii) Competitors were offering something they liked

iii) Time was of the essence, because when these customers are lost, they don't come back.

Notice a trend, analyze the trend, make a plan to offset the trend, then quickly (within one meet) make sure said policy is implemented, because the lifetime revenue of the sport is at risk, and no immediate action is not an option.

That, of course, doesn't happen here very often. As Lenny's letter above notes, the things he complained about are never addressed. Not only are they not addressed, sometimes gasoline is poured on the fire, making them even worse.

Worse, for example, like a game that needs churn to keep customers happy doing the exact opposite with 57% takeout jackpot bets; jackpot bets that are erroneously and disingenuously advertised on industry websites as "carryovers"; jackpot bets that if some poor, ground-down chap actually has a chance to win one to change his life forever, sees a last leg callously cancelled, like the track was shutting down a hot dog stand because it ran out of buns.

I picked one example off the top of my head (since Lenny mentioned it), but you or I could've come up with dozens of them.

Lenny's issues are personal. Whether the sports' issues are fixed or not will likely not affect him personally, or alter his decision. What is relevant is that too many people have left horse racing, to spend time with their family, to play other gambling games, to watch sports, bet DFS, or a hundred other things. It's shocking that the industry here, unlike in Hong Kong, treats these things with absolutely no urgency.

I don't know if there's the know-how, the passion, or the will inside the sport to fight to keep customers, or get them back. If there is, I haven't seen it, and yes, I've been at this for awhile. 

Best wishes Lenny. You were passionate, loved the sport, and fought for what you believed. There is one fewer of you today, and it's racing's loss.


Saturday's Notes -- Big Cards in the Land of Maple Syrup, Traffic & Eye-Opening Racing Traffic

North of the border there's quite a bit of action this weekend.

Today there's quite the buzz for Tepin at the Woodbine Mile. This mare has been iron-tough, with a dazzling set of speed figures, and is probably the biggest headliner for this event (along with Wise Dan) perhaps ever. If you're a racefan, she's hard not to like. I have not gone through the card, and may not, but I will surely be watching her.

Meanwhile, after the Mile, about a half hour or so across the 401 (two hours with traffic!), Mohawk hosts a sparkling card of racing, with the highlight the Canadian Trotting Classic.

Actually, that's probably not right, the highlight is another mare - Hannelore Hanover - taking on the boys in the Maple Leaf Trot in race seven.

Well, take your pick really, there are five (for Thoroughbred fans) "Grade I" stakes tonight. Lots of highlights.

Here's a free program right here. 

While some of the twitter peeps get up close and personal with Toronto traffic for the first time, I had another light-bulb moment yesterday.

Not long ago, the post I wrote on the shenanigans in the Sword Dancer ended up taking a life of its own. Before much of the racing press was talking and debating about it (it finally started when the appeal was filed) this post absolutely slayed traffic. Not linked on any site, and not retweeted much by old time racing people, it just got passed around. All told, it was the highest trafficked post on this little blog, since 2007, its inception.

Yesterday I was reading Harnessracing.com's Weekend Preview, and noticed a story on last week's Ewart Memorial, and the judges. It wasn't about the stirrup issue, it was, it turns out, about something else that insiders were worried about (that no one else seems to be). The stirrup thing is relegated to harness racing myth, I suppose.

I said,"I wonder what that little post about the Ewart did on my blog" (where I did talk about the foot out of stirrup issue), so I flipped over and checked. Now, harness racing posts do much less traffic as a rule because its a smaller audience, and I did not expect much, maybe about equal to the average.

It was 650% above average. It, when all is said and done, might end up being the highest trafficked harness post on the blog.

I remember working on the street as a lad - Canada's Wall Street. I was sitting at a pub with a few promoters, who were looking for flow-through financing deals (for US friends, this is a type of Series A). These people dealt on the old Vancouver Stock Exchange, which was (in many ways) like the old west, and a couple (not all) were quintessential pump and dumpers.

The exchange was seeing a few people in the press challenge the status-quo and that's where the discussion went, but no one cared, because, you see, they suspected no one cared about the Vancouver Stock Exchange. It's like they were talking to each other in a vacuum. For a kid who was not in the business for long, it was quite eye-opening.

The VSE was folded in the late 1990's, regulated properly, and merged into the now successful Venture Exchange, which enables the capital markets to function on the seed scale (essential to all economies) seemingly pretty well. 

Sometimes I remember those meetings about the old VSE and think of racing. Those two posts are things that people wanted to talk about, and read, and I'm convinced they were because they were "outliers"; discussions you don't see much anywhere else. They were outside the norm. I think harness racing especially, screams for it, because, like the Vancouver Stock Exchange, it seems there are a lot of people who are aware there's a reason no one seems to be watching, and they want to explore the potential reasoning why. It's much more powerful, and easier to learn, when you are not surrounded with confirmation bias.

Regardless, in horse racing it's easy to be a sponge, because you seem to learn something new every day, a lot of the times with pure serendipity. Those two posts did it for me the past couple of weeks.

Have a great Saturday everyone and enjoy the racing!


In 2016, Some Tracks and Institutions are Doing the Unexpected

2016 has been a year that the status quo and the establishment of establishments would probably like to forget. Brexit, and the rise of Trump and Sanders with their respective bases are two examples, but really, there have been others. The world seems to be a whole lot different.

In racing, where the status quo is a warm hay bed of safety, historically we have not seen much of this, despite falling handles for over a decade which seem ready-made for such anti-establishment thinking. Racing kind of keeps trudging along, as is, the same way it always has.

But, there are pockets of change, and in 2016 they continue to be interesting.

Kentucky Downs, a track which could charge 21% blended takeout by law, in 2012 asked for something rarely seen in the sport - to go below law and charge less than allowed. That little track finished their meet yesterday with another record handle
 Already a record after Sunday's card, the final numbers reflect an increase of 33.92 percent over last year's previous record total of $16,831,333. On-track handle totaled $929,409, a 48 percent increase over last year's $628,145 total.
These aren't the 1% gains that are often trumpeted in a sport where a 1% gain is considered good news. This is shattering.

The Bluegrass state, long dominated by Churchill and Keenelend, has a new player, and they're working some mojo, to the tune of $4 million racecards. Five years ago, they could not muster a million a card.

This little meet then changes some minds.

Canterbury Park is finishing their meet, and they, unlike Kentucky Downs, had some terrible luck this year (like most midwest tracks). "Off turf" seemed to be synonymous with Canterbury, and short fields populated the landscape. Despite that, they will be up, not down, like their regional counterparts.

Canterbury (as with Kentucky Downs) has alternate revenue, and chose to shake things up a bit by changing their betting menu; something simply not seen in other states with copious slot dollars.

These changes did not go unnoticed, and just this week the Meadowlands climbed aboard the change train. For their turf meet, they've gone to 15% across the board takeout. With decent sized fields, this could be a boon for them this season. Perhaps with 20% or more handle increases.

Meanwhile on the institutional side, New Jersey has allowed exchange wagering for customers within the state. Although this is new, there are numerous roadblocks with geo-location, more tracks need to come aboard, and it's off to a slow start, etc, there is change.

In 2016, regulators in New Jersey are less concerned about jockeys falling off a horse in a $100,000 race to lay $150 on their mount on an exchange. There are no old-time racing entities with a toehold to block the new way to bet, simply because they don't own the new way to bet, and someone else does.

These tracks and assorted alphabets are choosing to differentiate themselves and experiment, despite the potential loss of short-term revenue.

"Field tests" and "new mediums to deliver a product to new audiences" are not a phrases used by others, they're being used more and more in racing.

Don't kid yourself. Racing's status quo is still dominant and fully in control (if you think it has an iron-grip in Thoroughbreds, study harness for awhile for a real eye-opener). But there are others in the sport ready, willing and able to try new things; to think beyond the here and now, to do things that challenge industry groupthink.

In 2016, we probably should've expected it.


Harness Racing's Sad Trifecta

Harness racing sure is an odd duck.

On Saturday, after one of the best races you'll ever see, someone on social media brought up the fact that the driver of the winner kicked dropped his left foot repeatedly out of the stirrups down the lane. Upon review, yep, that's as plain as day. According to the harness racing rule book, anyway.

What happens in the sport at times like this - i.e. when an outsider points out an insider did something wrong - there's a circle the wagons thing that goes on, that, in better circumstances would be pretty magical.

"That wasn't kicking feet out of stirrups! You're blind". That's what I like to call the Trump defense; he says something that's on video, then denies saying it the next day hour.

"C'mon there are bigger problems than that, like cobalt!" That's what I like to call the single mom with two kids can deal with 77 problems in a 24 hour period, but harness racing as a billion dollar business can apparently only handle one problem at a time theory.

And my personal favorite, "No one watches the sport, so no one noticed it." I'm one of those people who constantly get coincidence and irony mixed up, but I think that's irony.

It's not like this didn't happen at a stakes race (or two) just last month to the same person, so it's not a stretch for someone to comment on it, and a topic people are going to chat about. It's a public sport after all, and you don't have to be Matlock to figure it out.

Meanwhile, across the pond on Saturday, a big trainer was caught with high cobalt levels in some of his stars. The test was done in Norway, comes up positive, then France, Italy and Sweden all follow suit and don't accept entries. Horses are immediately moved from the barn, and off we go. That's about 180 degrees different than it's handled here.

That's a big thing, though right? They must only handle those there and let others go.

Not really.

Overseas something like "indiscriminate use of a whip, or foot" is a rule, not a suggestion, or something to argue about on Facebook. So it's called like a rule should; as, um, a rule. This is why when it happens, a Swedish driver is given a fine equal to 40 days salary (what would be about $40 or $50k for a top driver in North America.

This is universally accepted as bad, and it's called like it. That's a little thing, though, but it has spawned cooperation, a culture, a structure and an ability to deal with the big things.

Back in North America, despite myriad evidence this way is the right way to handle most any sport, many people will complete, and continue to forward a very troubling trifecta:

Who cares about that thing > We have big things to worry about > No one watches the sport to see the little things anyway.

Many think that each of those items is mutually exclusive; that they're not inexorably linked.

In my view, it's a fatal flaw in harness racing, and with the circle the wagons, insular nature of the sport here, where most everyone talks to themselves in an echo chamber, I don't think many even realize how terrible of a trifecta that is.

 

Running Racing is Difficult, but it isn't Hard

Dick Downey posted the Kentucky Downs 2016 handle numbers yesterday on twitter.


That's a pretty good meet. With one day left.

Kentucky Downs has had good weather in the Nashville region, and they had a carryover, so the fundamentals have been solid, but with, say, a $4M handle on Thursday, they will break $22 million this year. In 2011 they did $4.5M for the whole meet. That's big.

They've clearly had some good fortune with gaming money and the like (and using it smartly) but a lot of tracks have gaming money and good fortune. It's been more than that and some of the things would be considered pretty minor to the movers and shakers in the business. 

Remember the Churchill Downs "storm" back in June? A fellow had a chance at scoring $750,000 in a pick 6, but after the storm was set to begin, they quickly scrapped the card? The same thing happened at Kentucky Downs on Saturday. However, in this case  they waited out the storm, saw it passed, saw no lightning in the area and asked the jocks to test the track to see if it was safe. It was, and off they went.

That might be considered a "little thing" to some, but to people who had a nice $18 winner to start the pick 5 carryover, that little thing was big. Even if the races were not run and there was a refund, Kentucky Downs' betting customers felt they were important.

Kentucky Downs, with a weird turf course, European style turf racing, hand timed races, and a shaky camera because of the ups and downs, is somehow attracting some serious dollars, and really, they should not be doing so well. In part, they've grown from the little things -- things they can control and improve upon in a "Good to Great" way - because these little things aren't looked at as a barrier to do nothing, but an opportunity to grow.

Racing often has trouble walking and chewing gum at the same time. It's a maddening business. Kentucky Downs proves that there are people out there who believe you can incrementally improve things year over year - to try and fix the fixable, no matter how big or how small, with the goal of increasing handle, and reach - and, for them, it's paying off.

They no doubt consider these issues difficult, they just don't consider them too hard.

Have a nice Monday everyone.



Innovation/Change

At a recent panel, a professor of International Business discussed the topic of the "Innovators Curse." He spoke of several businesses which innovated, and in some cases discovered something new,  who now are gone, or relegated to just surviving - assembly lines, personal computers are two prime examples.

Why this happened, he believes, is that they innovated, but failed to be open to change, as new technologies were coming into the mix.

For Canadian business aficionados this might remind you of Blackberry, the company who created the world's first push email - an incredible edge; but an edge lost over (very short) time. 

Another presenter agreed with this sentiment and is cognizant of it. In response, his company is structured quite differently.
At his company, they use change to keep themselves dynamic, looking beyond their own industry to find new technologies and business models that will shake up how they operate. “We are changing every day and that makes us innovate,” says Koo.
For horse racing, this is clearly a problem. Changing the industry was once described by former Woodbine (and now Western Fair) exec Hugh Mitchell as "turning around a 747 on a tennis court."

How can you innovate if you can't change the core dynamics of your business fluidly, quickly and with self-determination? According to the above panelists, you can't.

Kentucky Downs' Niche and the Modern Gambler

The Kentucky Downs meet continues today after a very good opener on Saturday.

This suburban Nashville track (don't hate, Kentuckians, we know it's in Kentucky!) has seen handle grow precipitously the last several years - from about $900,000 per day to well over $3 million. It truly is a little success story.

Although the reasons are obvious -- a nice use of gaming purses attracting decent stock, deep fields and lower takeout - the overarching reason is simple, in my view. This track, this set of races each day, hit the modern gambler right between the eyes.

For value seekers in the sport, there are really few tracks to play. North American (primarily) dirt racing is short fields with a 2-1 shot, and two 5-2 shots. It's parimutuel checkers. It's improbable to win at the end of the year betting an odds board that is most likely fair, at 20% boat, with upwards of 45% chalk.

Although it's fun to grab winners in fields like that, and on any given day we can make money betting those fields with solid handicapping, at the end of the year the modern gambler will have great trouble coming out ahead.

In past years, tracks like Keeneland provided us with some value; some chance to make scores and come out ahead using our wits. Now that the old Keeneland has been replaced, there are simply no tracks delivering this type of gambling experience - race by race, raceday by raceday - to a mature gambling customer.

Except Kentucky Downs. The Dueling Grounds is filling a major-league handicapping void.

For players like Ed Bain - who revolutionized trainer, horse and jockey stats and made money with them for years, until the data was common - he (and you) can still ply your trade at Kentucky Downs. Handicapper Lenny Moon used them wisely just this week on twitter, and cashed a couple of decent priced horses with them.

For players who like and need the all button to achieve success in superfectas or other deep exotics, that button can be used at Kentucky Downs.

There is enough chaos, and 50-1's can and do hit the board, juicing up exotic prices.

For serial bet players, $20,000+ pick 4 will pays can and do occur, just like we saw last Saturday in the late pick 4, a sequence that we can describe as not overly difficult.

This also helps us understand why some tracks have a hard ceiling in handle. You can only squeeze so many dollars out of gamblers for a six horse field of dirt horses. Kentucky Downs, on the other hand, can grow at leaps and bounds, because value in betting mediums attracts hard dollars, quickly and in pretty big numbers. Right now it has no ceiling.

Kentucky Downs has used their niche to their advantage. Although some years the product might stall due to extraneous factors, the betting menu, the hard-to-handicap races, the deep fields, and the potential for large payoffs attracts people who want to gamble. Some of these gamblers are out there, and have been out there for some time, but they've been sitting on their hands. Places like Kentucky Downs are serving up a menu that is making them open their wallets.

For a free OptixEQ analysis of the racing today at Kentucky Downs, please visit here. 

For a free copy of the Horseplayer Monthly, which features Kentucky Downs in this new issue, it's available right here. 

Enjoy your Thursday folks.

One US Track, Once a Week, Ten Races. What's the Handle?

Happy Valley, source HKJC
Pat Cummings is fun to follow and a pretty decent sod on the twitter.

Pat works for the Hong Kong Jockey Club, and often, when they're racing, he will pop up the handle figures for the day. He doesn't do it to stick a knife in we North American racing fans (he's too nice a guy for that nonsense), but he shares the score that he and his fellow employees strive towards.

Last week Pat mentioned that the total amount wagered on the opener was about $160M in US greenbacks, for a pretty solid day. In comparison, Derby Day does around $180M, for the biggest day in racing here. Hong Kong usually does somewhere around $110 million US for an eight race card. Higher for stakes cards. It's surely a behemoth.

This chatter promoted DeRosa to chime in with a question: "What would handle be on a 10 race single card in the US?"


For handle geeks (I wear it proudly!) it's a neat question.

What do ten races - likely a lot of stakes, at a place like Saratoga, only racing once a week - with all eyeballs on them, handle here?

Currently with 30 tracks racing across the US, for example, with 2,200 or so betting interests, and 280 or so races, approximately $70M can be generated on a decent weekend day. Belmont Day, all in this year, all tracks, did about $130M, for comparison of a big day.

It's tempting to say racing would do $70-$130M on a card, similar to what Hong Kong does, but I think that's missing a few big points.

i) Big bettors, especially teams, or those who grind, make up (at the low end) 40% of the handle in the nation. They need lots of races and lots of betting interests to bet that kind of money. On a Saturday they have a menu with 2,000 or 3,000 horses to choose from, at myriad tracks. With only 10 races, their handle falls precipitously.

ii) With 70 tracks racing - more if you add harness tracks - they are distribution points who bring people out to wager. 70 McDonald's brings in more gross customers than one, even if 69 of them aren't profitable.

iii) The pure elasticity of wagering (from studies) for the number of races is 0.6 which is about equal to field size changes. If you increase race dates by 10%, handle should go up 6%. The opposite is true with a race date reduction.

Having noted the above, and thought about it, I still don't think I can give you what I think is a good estimation of a daily handle here. I'd likely be off by the GDP of Chad.

Comparisons from here to Hong Kong are, at times, pretty fruitless. It's a different system, and racing is ingrained in the culture. It's a near monopoly in some ways, like the PMU in France. Although they exist, there are fewer casinos, lotteries, and other mediums to draw gambling money from.

But one thing for sure. for an opener to do well over one billion Hong Kong bucks, with no stakes races, or no Derby, or no racing stars, it's pretty darn compelling.

Good luck to Pat and his cohorts at the Jockey Club. May you all have a great meet. 


Horse Racing Circular References

I've had a fun few days chatting with people about horse racing; some who I have not chatted with in some time.

Although much of the chatter started with the Sword Dancer, it always seemed to end up in the same place - with proclamations about breakdowns and breeding to breakdown.

"The Sword Dancer showed how important it is for the industry to win big races so horses can look good for stud. Happens all the time."

"If horses lose a race, they have to race more, and the sport wants to retire horses as quickly as possible, with as easy a schedule as possible."

"What happens is that horses who may be unsound, with sesamoid issues, bleeding or bad stifles are raced few times (because they can't physically race more at a high level) then retired, bred, and pass it on."

"Their offspring then break down more often, and the sport is in a whole heap of trouble."

And the kicker, which I heard from a few people now, "If we have another breakdown in the Derby, there will be hell to pay."

Now, despite believing in Darwinism like we do, and understanding that horses do pass on good traits and bad traits, there are a number of leaps in logic in there. I am not going to debate the truth or mistruth those statements hold. But I will say, that's a perception in the business in some quarters.

Would breakdowns be fewer and the sport in better shape if horses raced like California Chrome have, before going to stud so they prove not only their talent, but their durability? Perhaps, perhaps not, but there are people who firmly believe that to be true. The Sword Dancer was a race that just reminded them about it, and they ended up in the same place.

Have a nice Tuesday everyone.

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

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

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