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More Narrative Busting

In horse racing we read over and over again (mainly from insiders) that the big problem with ADW wagering is that purses don't get enough of a share; that it's an upside down business model. In some quarters companies who take bets are considered 'pirates'.  You've heard it all before. It's a narrative that has lived on for many years, and is probably believed more now than ever.

Yesterday on the twitter machine we saw this tweet:
Most don't know that ADWs make next to nothing in Cali. If u live there and bet a PENN super bulk of 32% takeout goes to TOC NOT the ADW. — Ian Meyers (@ihmeyers) June 21, 2017 He's absolutely correct. California racing's pricing is steep. A bigger share of wagering than anywhere else in the nation from ADW goes directly to California purses. It's why you see such small rebates from the state (and, rebating is almost totally prohibited in-state). It's why in-state players play (and get ground down) by massive…

The Gambling Little Things

After being immersed in the gambling world for too long to mention, the differences between what goes on with the private companies who try and earn your business versus North American racing never ceases to amaze me.

I like to scan for carryovers now and again. If work is a little slow during the week or I am sitting around in the evening and have a bit of time to handicap, I figure why not look for an edge and invest a few dollars.

Today, DeRosa posted there's a pick 5 carryover at Fort Erie, so I decide to have a look. Carryovers are value, attract money, and are some of the best things this sport offers gamblers. In fact, it's one of the very few edges this sport has in the gambling world. 

I log into the Canadian ADW to research and I see this:

That tells me just about nothing.

I don't know what race the carryover starts on, if it's a jackpot or not. It's relatively meaningless to me.

Since DeRosa is not an idiot, I kind of figure he's not betting into a …

The Unbearable Lightness of Being There

This past weekend the North America Cup charged $10 for entry, for the first time in a long, long time.  As most know, with slots tracks, the doors were thrown open for anyone to enter, big day or small, and this is simply the way the (harness sport) works. The full story, with some thoughts, was penned here.

Most people like the idea of not charging admission to the races, because of one simple premise: If you don't let people in free you are limiting the audience, and racing needs an audience. Further, this audience - if only one person out of 1,000 loves the races and comes back - is positive for growth.

I never really get this line of thinking.

Google is google, not because of flying cars, or Motorola buys and sales, Google Glass, Google Home, or Android operating systems. Google is google because when people visit their search engine they are prequalified to do something, and google gets them where they want to be for a fee. Out of $100B in revenue for Google, about 90% comes…

Fooled By Randomness

We as horseplayers, industry watchers, and well, humans, immediately want to look for reasons for something when it happens. As someone much smarter than I wrote, we look for causality in just about everything. The problem with that is, much of the time there is none.

Today it was reported that Belmont viewership was down over 15%.

That was because, of course, there wasn't a Derby runner in the field, that the field wasn't deep enough, the card wasn't as good, and maybe people didn't really like Andy Grammer. 

Maybe one of those are correct, or (more likely) none of them are.

The fact is, this is a one-off horse race, with little long term data to compare it to that makes any sense. The result could be completely and utterly random.

This is a characteristic of small data, and we fall for it often. If a trainer is 8 for 11 over three years with a move, we should bet him each and every time thereafter. What often happens, is the trainer then goes 0 for 14 and we lose ou…

UK Rake Hikes - Tote Betting Has Its Place, But It Can't Be King

It was announced this week that (again) the UK tote has raised takeout on UK punters:

"From June 29 the win pool deduction is set to increase to 19.25 per cent from 16.5 per cent, while the place pool deduction is to increase by two percentage points to 20 per cent."

Although that might be a shockingly high increase to many of you, the UK tote - set up in the 1920's by Churchill to combat corruption in the betting pools - only represents 3% of the betting market (as of 2015). 

The reasons for the hike are probably pretty obvious. In the unregulated, mature UK gambling market, products like fixed odds wagering and exchange wagering generate the most net worth to the punter. Customers flock to those high volume low takeout (overround) products -  $3 of every $4 are spent with fixed odds bookies and exchanges. Betfred (who runs the tote), appears to have decided in the sunset of their deal with racing, that the only strategy they have left is squeezing the lemon.

While the t…

Why Horseplayer Advocates (& Horseplayers) Give Up the Fight

As most know by now, the $891,000 pick 6 jackpot was hit last week at Santa Anita, but as the DRF reports, it was not without controversy

The controversy arose a half-hour before the race when Horse Identifier Jennifer Paige discovered Fly to Mars was a gelding, even though he was listed as a colt in the track program and past performances.

Paige immediately phoned the stewards, who said they were alerted as the horses were loading the gate for race 10. Stewards quickly investigated and learned the Peter Miller-trained Fly to Mars had in fact been gelded since his most recent start in June 2016.

He was a “first-time gelding,” a piece of information that most bettors consider to be a potentially significant handicapping factor.

The problem Saturday is that no one knew Fly to Mars was a “first-time G” until after race 10 had been run.

At the present time there are insiders, horseplayers and others calling for changes to the "first time gelding" reporting rules, because t…

Racing & Change? Not Kodak Daunting, But Daunting

We've spoken about the harvesting business strategy here before. This involves straddling a middle line of the status quo and only making small tweaks, rather than big change. Although many of us - fans, bettors and even those working in the business - find this frustrating, at times there is a reason for reluctance to change.

One such case from the business world involves Kodak.

In 1975, some may not know, Kodak invented the initial plans that would end up being the digital camera. The inventors were allowed to keep working on it, to make it marketable, and in 1989 a near-prototype was created. It looked and acted the same as the digital cameras of today.

When it was brought to the leaders and the marketing department of Kodak, the project was immediately shelved. It was deemed too big a change, because Kodak owned the many steps of photography production - the camera, the film, and the development of pictures at mall kiosks everywhere. Change might mean billions in new sales in…

Optimal Purses Are Finally Being Openly Discussed

I read with interest the Tim Ritvo interview yesterday in the LA Times. One section was of particular eyebrow raising interest:

[You could put the money into purses], but purses … and horsemen will go crazy when they hear this, are not indicative of success. [New York Racing Assn.] has all the purse money in the world and their field size has not improved; $100,000 maiden special weights struggle every day. I do not believe that people who are going to sales and buying million-dollar horses care if maiden special weights are $60,000 or $100,000 when they spend a million dollars for a horse. What they are looking for is the development of a horse to win graded races.

The everyday guy, of course, that extra $40,000 helps, keeps him in the business a little bit longer and helps pay the bills. I don’t think solutions are taking money and throwing them into purses. I think we’ve seen that in slot-filled jurisdictions. They’ve taken a lot of slot money and thrown it in purses, but…

Tim Ritvo Has His Work Cut Out for Him - California Horses Don't Seem to Race Much

In a sport apparently in need of millennials, California has been attracting them this week. Unfortunately, twenty-something-twitter-memes involving gifs of burning dumpsters is not exactly  positive.

Although I don't believe that a cancelled Thursday card signifies the death of the sport on the left coast, I do certainly think California racing isn't hunky dory.

Racing, in a state that would be the eighth largest country (in terms of GDP) in the world, struggles, and it has continually confounded us.

Sure, we can point to the fact that studies completed as far back as 1989 have told them to lower the juice and be more customer-friendly (while they have arguably done the opposite).

We can point to a 12 Monkey's, X-Files CHRB meeting moment where everyone applauded a takeout increase (seriously, could you see any board of directors applauding a price hike..... "Reuters reported the Ford BOD applauded that their cars just got more expensive"). There are seemingly o…

Nope, Modern Persuasion Ain't My Thing

If there's something I've learned over the years - right or wrong - is that most of life has to do with sales. And to be a good salesman, or saleswoman, you need to have mastered the art of persuasion.

Donald Trump is a good salesman. He's also a very good persuader.

#Fakenews is persuasion, and Trump has mastered its art. He's picked a group of people who have approval ratings below 20% and he's used them to his advantage. Everything they write that he doesn't like is labelled fake, and his minions (which there are many) rally to him, on social media and elsewhere, because, well, with a big enough audience who hates the media, they are plentiful.

It doesn't matter if the news is real and not #fake, or how ridiculous a narrative may be. When persuasion works, facts don't matter.

I won't let the other side off the hook. Barack Obama was a master persuader and good salesman, too. The republican congress's approval ratings were low and they were su…

So, I Bought Big Mac Sauce at the Grocery Store Yesterday

I walked into a friendly neighborhood grocery store yesterday, and much to my surprise I saw a display.

In nice bottles, with McDonald's logos, stood Big Mac sauce, Filet-o-Fish sauce and McChicken sauce. I found out later these sauces went on sale in Canada-only earlier this spring.

This was, on the surface, kind of a curious decision. McDonald's selling their sauces (through a licensing deal with Kraft) is an affront to their core product (restaurant sales), right? If people can buy the taste of McDonald's on the grocery isle it would seem so.

It's also a potential detriment to franchisees, who they have to keep happy.  A McDonald's franchisee pays big money to own a McD's and works on a high volume low margin business model. For example, a front-line employee who makes $20,000/year has to bring in $200,000 of revenue, or the franchise resale cost will go down. It's why they fight margins, and squeeze suppliers so hard.

Offering a product "off book&…

So What's the Big Churchill Downs News Today?

This was tweeted last evening:
Churchill Downs CEO, Gov. Matt Bevin to make announcement Tuesday: https://t.co/KmCwwCf23wpic.twitter.com/CyNo5fJsqb — WDRB News (@WDRBNews) May 30, 2017 Twitter was abuzz. What could this big news be?

No one seems to know, but there have been many, many rumors. Bigly rumors. I'll share a few that I've seen on the social media machine here. I should caution, despite many of these rumors sounding perfectly plausible, they are not news. Some might even turn out to be fake news.

Tax Deal Announced. "Kentucky Derby" to Stay the "Kentucky Derby" -  No, the Kentucky Derby will not be renamed the "Big Fish Jackpot Stakes brought you by Big Fish Games" as proposed by the gaming giant. The Governor gave in to demands for a 0.1% tax rate on all CDI revenue until the year 2055, and a special "Louisville Hardship Development Grant" for the iconic racetrack. Commonwealth crisis averted.

Churchill: Jackpot Pick 6 Last Le…

Solvalla Shocks and Superstitions

Yesterday the best trotter in the world - and it's not really close - delivered an awe inspiring performance in Sweden at the Elitloppet, thrilling the fans in a way we will rarely see. Bold Eagle, the six year old Ready Cash horse, raced first up and grinded down a very nice filly in Delicious, on way to a stunningly easy win. The time - about 1:50 - and the ease in which he did it, were equally jaw-dropping.

We all waited with breathless anticipation to see the 1-20 shot win the final easily, stamping himself (yet again) as an all time great.

Then it happened. Clunker city. The horse who could trot a hole in the wind, suddenly could not even spring off perfect cover and hook a horse he had beaten a dozen times with ease. He was 12 to 15 lengths slower. He didn't hit the board.

When have you seen an elimination winner so far ahead of his foes bounce in a second heat before? It's not only uncommon to see a horse win his elimination so easily, with such command, with no ur…

"If Only Those Gamblers Were Just Like Me"

Racing has interesting subsets of customers. Of course there's the gambler, looking for a score. There's the participant, who earns money from the sport. And there's a fan, who may bet a little, but he or she mainly watches racing, because he or she loves racing.

In many sports, these three subsets of customers happily mix, and almost all the time their interests overlap. In the NFL, for example, a gambler might want better injury information. But so does the fan, and so does the opposing coach. A player might want lower ticket prices because they want to play in front of a packed house and this is what the fan wants, too. It's all simpatico.

In racing it's not like this at all. The gambler - who might want higher field size and lower takeout - is completely at odds with many participants and fans, who seem to want to work against them. It's almost like it's a challenge of some sort, like a grand boxing match of yore.

"If only those gamblers were just …

Derby-Preakness Coverage Contrasts

Yesterday:
Contrast this coverage w/ CDI and Derby day where horseplayers are scrambling to find live feed of races omitted from live broadcast / ADW. https://t.co/7Dra7giPyI — o_crunk (@o_crunk) May 19, 2017 and
@o_crunk Also note the difference in the Periscope vs. Roberts stream quality — same device, same connection. pic.twitter.com/PqUfVJocRn — Jessica Chapel (@railbird) May 19, 2017 Those tweets are self explanatory. If you are not watching the XBTV, or Pimlico hosted track feed today, you're probably missing out.

For those who want the pomp and pageantry, the NBC feed will have it. For the rest of us, we have a nice option - crisp, clear, smart coverage, while we bet a few dollars into the pools.

Notes:

Who cares who I like in the Preakness (I'm not sure I even know before seeing the odds board), but one horse I will not bet, will be Always Dreaming. Not because I don't think he can win, not because I don't think he can win by a lot. Not because 3-5, or whateve…

Racing Goes Full- Blown Napster

I've been reading some of the interwebs today regarding the Stronach lawsuit against Derby Wars. As most know, Derby Wars - a contest site - has been in business for quite awhile (even partnering with some tracks with a revenue share).
Last year, after the suit was filed, Derby Wars reached an agreement with Hawthorne Racecourse near Chicago giving the track a portion of its entry fees on tournaments using Hawthorne’s races. At the time, Midland said the agreement was part of a larger strategy to work with the racing industry. “We see working with racetracks as important to growing contests,” Midland said. “Partnering with the tracks is a natural way to do that.” Stronach does not want to do that, apparently. Instead they've gone full-blown Napster.

The problem, as I see it, is you should never go full-blown Napster. Full-blown Napster is not considered good business. And you don't even have to possess a fancy business degree to understand why you never go full-blown Nap…

Stronach v Derby Wars - Killing Customers, One at a Time

It was announced today that a federal judge ruled for the Stronach Group and against Derby Wars, citing that the contest site was operating like an OTB or ADW.

"A federal judge has ruled that horse racing tournament website Derby Wars has been operating as an off-track betting business and is subject to the federal Interstate Horseracing Act, which requires consent of racetracks and racing commissions prior to accepting any wagers."

This probably pretty much shuts down the company, as is.

Leaving aside that Derby Wars is probably about as close to an ADW or OTB as a hamburger is to an octopus, this is really, really disturbing. Other sports simply do not act like this.  No, most other leagues or games, looking for reach for its core product have looked to partner with tournament games. This is especially true for small, niche leagues, like the CFL:

“This new fantasy offering will give avid CFL fans and sports fans new to our league an opportunity to deepen their engageme…

Squeezing Those ADWs Out of Business

Some racetracks and horsemen groups search for a lot of bogeymen under their beds at night. The latest, in that long line, are ADW companies. They either don't pay enough, or need to be monitored at every turn, including with geo-targeting.

Now, I am not here to defend a rather strange and sub-optimal betting delivery system, but I will continue to defend one simple point: Squeezing them won't grow horse racing.

Today at TechCrunch, Zack Kanter, the founder of Sedi (a company in the really tough ERP space) wrote a fantastic article about retail, and the various machinations of it. The article is really good, and if you're interested it's worth a read. One part of it, about backward (or forward) linkages caught my eye:
"the increased margins typically evaporate over time. There are great examples of this in the automotive industry, where automakers have gone through alternating periods of supplier acquisitions and subsequent divestitures as component costs skyrock…

Please Powers that Be: "Save Us From the Twinspires Players Pool!"

Crunk's well-written piece about the Twinspires player's pool has been getting some traction on the interwebs. For those who have not read it, Crunkland talks about the brouhaha with the Derby superfecta hit outside the player's pool, and the overall ROI of the player's pool over the last eight months or so (it's poor).

The reaction to this in some quarters (and maybe this should surprise no one in this day and age) is to ban these player pools.

That in my view, is nonsensical overreach.

Player's pools have existed for a long time, in many countries, including Australia, where they continue to be quite popular. For a low buy-in, customers can play along, looking for a huge score in a carryover pick 6, or place pot, or what-have-you, in pools that are too expensive for their bankrolls.

They, like you and I who may be playing more money into these pools, get the same thrill cheering along as we get one, or two, or three winners on our tickets. It's worth $20 …

Big Racing Days Are Great, But They're Missing Out on Landing New Fans & Customers

Over the last few years there's been quite a bit of talk about big racing days. As smaller tracks struggle with handles, the large tracks have done fairly well (in racing context well, which is incremental). When a big day is added, a track can do really well.

And, when a track does really well, like Churchill's handle was this weekend, it does spin off.
Non-CD handle did pretty good too yesterday. All non-CD handle up 10.7% ($59.6M vs $53.8M last year), per race up 11.8% on 20 more races too — o_crunk (@o_crunk) May 7, 2017 This is, when we think of it logically, the way things are supposed to happen. It's all good.

Further to the core numbers, as written last week, the Derby brand creates buzz, and this buzz spins off in other ways:

As those graphs show, not only are there more bettors and fans watching these days, there are more people who are newbies who are looking to learn about horse racing.

That's wonderful, right? Sure it is.

Check out the same phenomenon wit…

Horse Racing's Unwillingness to Create Wealth, Destroys It

I saw a couple of stories recently.

Amazon.com has continued to expand their reach, this time with something called the "Amazon Echo Show".  It's, generally, a hub to turn your home into an automated, voice activated, connected system. It's actually pretty remarkable. Tech Crunch reports that this device (and its hardware, the Echo) will have 70% of the voice activated speaker market in 2017. This is while competing against tech giants Google and Samsung.

More close to home, Betfair has purchased a Daily Fantasy Sports company for what could be $48 million.
Scale is the key word with this acquisition and expects that the company will grow from ten people to twenty very quickly, as well as increase its marketing spend by roughly 100x over what was spent last year. The substantial marketing investment will cause DRAFT to incur a $20 million operating loss during this financial year. The edge that betfair sees (and the reason they are willing to incur a $20M loss, a…

The Derby Betting Crowd Isn't Dumb

Handicapper Mark Cramer has a nice section in one of his books about chaos races. In general, he believes that when there are four or five solid contenders in a contentious field you want to land on the chalk. The thinking is pretty simple -- the crowd is smart, and if you can't decipher something, the wisdom of them will do a better job.

At this past weekend's Kentucky Derby, Always Dreaming was one of four main contenders.

Irish War Cry, who had some pretty solid buzz surrounding him, and who came off a smashing win in the Wood.

McCraken, who in training could do no wrong, massively loved Churchill Downs, and was ready to run a big top, with a trainer who points for such things.

Classic Empire, who had a similar profile to McCraken, but who was also the fastest horse on paper in the race. He was the morning line favorite, and I did not see one person, pundit or twitter comment that disagreed with that morning line promise.

As for Always Dreaming, well he was a bucking bronco…

Derby Handle Was Up, For More than the Obvious Reasons

The Derby card handle was up to over $200 million this year. It's a big number, in an industry that (outside big days) doesn't see many big numbers.

There's a rush to judgement on big days like this, namely, it's a one-off, the promotion and red carpets and NBC coverage and well, the Derby, is the reason for this big number alone.

Of course the obvious makes a difference, but, for me, it's much more about Occam's Razor than anything else - attracting betting dollars is a very basic proposition. Cards that we see at the Derby, or Oaks, provide betting value.  

In the Edgewood on Friday, the two logical horses were coupled - the sensational La Coronel and Dream Dancing. These two fillies were 4-5 through most of the betting, but the place pool lagged and lagged the win proposition. On other days, in smaller pools, with less interest, this gap gets filled near post time. It happens almost all the time. But not on this day. The entry ran one-two and paid $4.40 to…

One of the Kentucky Derby's Two Tribes is Taken For Granted

Horse racing, in my view, has always had a problem subsetting their customer base.

I think I first realized this many years ago at a conference. I talked about some betting stats and threw up some gambling charts on takeout rates and rebates. These showed the obvious - regular players, if given a price break, invest back in the pools without thinking, and it's a good way to reward customers to keep them engaged.

A track person replied, "I went into the grandstand and asked a handful of people. They didn't even know what takeout was."

Oh well, that's that then.

This weekend, the Kentucky Derby nicely illustrated these two tribes. The fans, dressed to the nines, having fun partying, along with the folks who bet Patch because he looked super-cute. On the other side you had folks who were constructing tickets with the precision of a NASA engineer, watching replays over and over; trying to find an elusive Derby day score.

Although there is some overlap of course (ther…

Cub Reporter Visits the Kentucky Derby Trainer Dinner

As everyone knows by now, the hundred and somethingth Annual Kentucky Derby Trainer Dinner happened yesterday at the warm confines of Churchill Downs.

Much of the reporting so far has been from the racing media. And we know they're in the tank, like the New York Times is for the Trumpster. I wanted to know what really happened, and since classy, seasoned newsmen like Bill O'Reilly have been recently canned, I texted my old pal Cub Reporter.

"Cub", I said when I reached him at a pay phone at the track, "You there? Can you get me some quotes for my hundreds of thousands of blog readers?"

"I'm here. I sneaked by security when they were checking Steve Asmussen's hair for weapons. I'm standing right beside a CDI Vice President right now; although he's on an expensive cell phone, and I think he's firing an entire small town as a cost cutting measure. So he's busy," said Cub.

"I'll be back to you," said Cub.

Sure en…

Why Lowering Takeout Increases Handle 100 out of 100 Times

@righthind tweeted out a great link this morning, a research paper titled - "How Do Prior Gains and Losses Affect Subsequent Risk Taking? New Evidence from Individual-Level Horse Race Bets."

One of the conclusions:
 The “house money effect” [shows that] bettors ..... mostly spend the money they have won. This means what it says - when you are making gains, you bet most of what you've won. This behavior is often linked to the "break even effect", which is a way of saying the vast majority of people will bet at a slot machine until their original $20 is gone.

This is, in fact, a big reason why slot machines were taxed, at one time, at 25% juice, but this rate went lower and lower. The people playing to break even were not enjoying themselves at 25% and the casino was not making as much as it should've been.  At 5% you had a whole lot of people on the floor chasing break even. Chasing is maximizing utility.

This theory is relatively simple, and it's not sol…

Racing Has Some Value

This morning:
Time Inc. looked around for a buyer and finding none, declared that the new owner would be "You"! — Jack Shafer (@jackshafer) April 28, 2017 How's that for a kick in the teeth. You have a historically important media brand, and no one wants to buy you.

Racing and Time Magazine should have a lot in common - they've been attacked by new outlets, they're old, etc - but they really don't.

Racing's environment is enhanced because of things like i) Pennsylvania looks at taxing online gaming so it never really has a chance and ii ) since being regulated, DFS, which is being taxed quite hard, is bad - I looked at the $300k MLB game today and the takeout is a massive 17.5%. This is about double what it was in the free market.

If the Huffington Post or Drudge were taxed at a high rate, or told they have to only run in 24 states, or told what advertising they could or could not run, or legislated that they had to be behind a paywall, while Time is le…

McCraken Press Conference - Live Blog

As you all know, the buzz horse for this year's Kentucky Derby is none other than McCraken. His works are "amazing", he cools out "like a good horse should", he looks "shiny like a seal", his baths are "Orb-like". As well, there are numerous rumours surrounding the horse, and his super-human ability. He has captured the imagination of everyone; even curmudgeonly turf writers like Marcus Hersh.

With that, after this morning's jog ("perfect") McCraken met the press for the very first time.  Here's a summary.

"I know y'all have wanted to talk to McCraken, so today McCraken speaks," said McCraken. "Go.... you right there." McCraken motioned his glistening hoof to the DRF's Marty McGee. 

"How are you feeling? You look good, you look strong, you look formidable. Are my eyes deceiving me? Or are you really this good?"

"No Marty, your eyes are the windows to McCraken's soul, and McCr…