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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 Napster.

Let Marco, a Napster user, explain in his article way back in 2004:

From that time in late 1999 to present day in summer 2001, my MP3 collection has grown from 500 to over 2200 songs, and Napster was largely responsible. The record companies accused Napster of irreparably harming CD sales. My collection contains hundreds of artists, but this is the key point that most record companies don’t understand: A pirated MP3 does not equal a lost CD sale. 

I have songs from over 300 artists. Assuming each artist has only one CD that I’d buy, and each CD costs the RIAA’s bend-over-a-bit-more price of $16, that’s $4800 in “lost sales” from me. But I would not have bought all 300 CDs!

 As my collection started to really expand with Napster, I discovered many new bands and expanded my collections from others. In the last year, I’ve bought more CDs than I did in the previous three years (ironically, Metallica’s S&M is among them), and I’ve bought more concert tickets than the previous 19 years. I’m more likely to give new bands a chance, since I can pirate some of their songs and see if I really like them before buying the CD. And I’m much more likely to go to concerts when bands come to town, because now I know 300 bands.

Napster expanded my musical taste and has greatly INCREASED the number of CDs and concert tickets I’ve bought in the last year.

No, an MP3 does not equal a lost CD sale. Nor does a contest play mean the $12 would've been spent on a Rainbow Six. Just because the market is doing something, it doesn't mean it wants your something.

What Marco describes is the way modern web ecosystems have been working (and helping the underlying business thrive), as told by Jarvis, Anderson, and most recently, Kelley. It's not about substitutes, or widgets, or what a customer would've done in 1984 that they aren't doing now.

Knee-jerk reactions in racing - to be honest, sometimes I wonder if there are any other - tend to lean on the side of what entity is getting what share of what. It's like clockwork. It devolves into a shouting match about slices of the present landscape, when the land has shifted right under their feet and there is no present landscape anymore. It's now about engagement, exposure, and building a modern ecosystem to feed the high funnel, while at the same time taking care of the low.

18 years ago the music industry learned that going full-blown Napster didn't solve their problems. It just shrunk a market, annoyed customers, and delayed the inevitable. It's taken them (literally) 20 years to dig out.

Why racing - a game beautifully made for the internet, for mass betting, for a captured online audience - is doing things entities were doing in 1999 is completely mind-boggling to me.



Comments

Anonymous said…
The "Protectionist" business model of the CHRB/TOC is destroying the industry in California. As an Oaklawn Park Racing fan living in So. Ca, I can not go to the races live at SA (Stronach) from Jan to Apr, because the morons in charge block wagers on Oaklawn Park when you are at the track. They should be making decisions based on increasing the handle and attendance, but no, they just keep doing the opposite.