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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, as well as pony up a lot of stock and cash) is pretty clear. Since they are a gaming company, well versed, and well positioned both with regulators and with economies of scale, this investment can be ROI positive long term.

Amazon, way back when, was considered by everyone an "online bookstore". Betfair was considered to be an exchange company; its parent, an old-school bookmaker. Both have used cash, risk and their edge to create wealth (and sometimes lose it, nothing is assured) in businesses outside their sphere.

Racing on the other hand does very little of this.

Exchanges are built for racing; especially for races like the Kentucky Derby. A vibrant exchange market, worldwide, with hundreds of millions of dollars being traded on horses should've been accomplished long ago. It's a marketers dream. 

If Paddy Power/Betfair can spend $48M on a fantasy site (certainly using their regulatory edge) to try and create wealth, where is the push for racing fantasy sites from some of the big guns?

Both of the above are stopped before they are even started. Before they're discussed.

Churchill "owns" the Derby. They'd much rather have Derby futures at 15% or 22% juice than have a vibrant exchange. Plus, Churchill wants nothing to do with Betfair, or exchanges, and in racing such things are looked at as cannibilzation, anyway.

Similarly, a fantasy game for, say, the Derby is sacrilege for this very same reason. It doesn't matter this could grow; could act as a high funnel pipeline for new customers.

In the real world everything is on the table. Companies use their built-in edge each and every day. Heck, Churchill buying Big Fish happens right now with racing companies. But just not with racing products.

If racing doesn't use its edge to create wealth, wealth will not be created. And as handle falls, and foal crops recede, wealth is not only not being created, it's being destroyed.


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