Why Do Rebates Work?

I remember back in my mid-twenties, an associate and I had a good idea (well, more accurately we thought it was a good idea) during the dot com phase. We brought this amazing idea to a finance person at a brokerage where we learned pretty quickly we lacked a big, big part of this good idea being good - scale. It just could not scale. We naturally (and rightly) didn't get any money.

Most big businesses, certainly national ones, need scale. It enables the small to grow, the medium to grow large, and the largest to stay on top. 

If you consider you and your betting a side business, it needs it too. 

I sent over a few of my wagering numbers to a betting friend recently. The stats showed high volume, less than 1.00 ROI, but a total profit after rebate. He replied, "you should cash more tickets." 

That's really not bad advice at all, on the surface at least, right? In fact, it's advice many businesses use with those kinds of numbers. When the margin gets thin you trim the fat to grow. You spend less on marketing, labor costs and business investment. You descale. 

Similarly, how does one cash more tickets? By being more selective; by reducing your track array; by plucking low hanging fruit; by studying and handicapping more; by betting less. 

Rebates - and let's just call it what it is, lower takeout on your wagers - work because they allow us to bet more. They allow us to scale. They enable us to look at that small harness track we'd never play; to wager on the Santa Anita pick 5, expand our menu, get better at our craft. This is why when they were first implemented, handle exploded. 

Racing demands we -  almost daily with rebates less available to average Joes and Janes and things like the Woodbine Winners Tax - do the opposite nowadays. They demand we bet less; that we descale. 

What we're left with are players who are being selective, trying to pluck ROI like finding an elusive prize, along with a general public playing on weekends or bigger days, while being lured with sports betting and other pursuits. 

Rebates and lower takeout are not a panacea, a fix for everything, some pot of gold at the end of a rainbow. But they do allow players to scale, and when players are scaling they're betting more; they're more engaged. And that's vital to every national business, which racing is. 

Have a nice Wednesday everyone. 

Sports Betting's Investment Trajectory (and How it Hasn't Looked Like Racing's)

 Legal Sports Report detailed the $3 billion betting month in October, highlighting state by state growth. As more distribution is added - just like a retail chain building new storefronts - handle follows. 

Of particular note in the article was the state of Colorado, which began in earnest in October. In its first month of operation, $211M was taken in, with a hold of about 8%. The resulting revenue was eye opening for one big reported reason: the Promo spend. 

Colorado is allowed to deduct promotional and marketing spending from revenue, and that promotional spend totaled $7.2M or 41% of total revenue. 

So, they added new distribution, and they allowed the businesses who bring the end product to the user to spend (at their discretion) almost half of total revenue to capturing new customers. 

As we wrote about recently, this has not and is not the experience with ADW companies, or  the sport of racing itself. In it, the distributors are often asked to pay more to purses, as their margins shrink, and they have been since day one. I won't even mention how with sports betting, increased "stores" as points of sale are welcomed, whereas in horse racing they pretty much aren't. 

Sports betting has done quite a bit right since being approved. They've priced the product well, (mostly) avoiding the pitfalls of -130 lines or other such nonsense; they've opened "stores" and governments have allowed the market to thrive through free enterprise; the sports betting entities themselves are sinking as much as half of their revenues back in the business, to attract customers. 

It should be no surprise that even at this nascent stage they're jamming through $3B a month. 

On the flip side, despite a granted monopoly on online wagering since about 2006 (along with billions of slot revenues), racing never invested with the customer in mind in the same way. 41% of of revenues into growing the top line customer base.... this sport it's likely less than 1/20th that number. When you don't invest in the customer, one day you wake up and find you don't have any. 

Election Betting's Wild Ride & Notes

 Another year and another election is (almost) in the books. Like the previous two, I'll jot down a few of my thoughts for those interested (which this year seems more than usual).  As is custom, a disclaimer this is my opinion, and as we see with percentages changing two days later, opinion is all we have. 

I wrote in 2016 how confusing things are in modern U.S. election betting, and 2020 (as we'd expect 2020 to be) was even more so. It's vital for us - who are using the same data as a decision desk - to be able to portend what we're seeing in real time. That is, what happens in Viggo County IN or Jessamine KY, will likely tell us a lot, and we can extrapolate and model as other results come in. That, this year, was almost impossible; there were clues Trump was going to do better than estimated but they were just clues that were difficult to act on. You simply could not use this like you could in 2016. 

The Florida Domino

The big tell of the evening, that likely cost a lot of people a lot of money, was Florida. It's the first state that really doesn't have its head up its ass in reporting results. And those results were good for Trump. If we knew on Monday that Trump was going to run ahead of 2016 in Florida, we'd portend Georgia would be a 5 point or more win (and hammer at -180), we'd surmise he should be chalk, and we'd bet accordingly. That's exactly what the market did and it acted perfectly rationally. 

When the numbers that followed in the midwest - Ohio looking near exactly the same as 2016 (if you lost money on the fake-out with early results showing a 10 point Biden lead you surely will remember for next time), and Iowa looking +9 - the markets in Michigan and Pennsylvania followed. Again, as perfectly expected. When Wisconsin, which counts fast, showed the same results as last time, it was another arrow in the -400 Trump quiver. 

This election was looking like 2016, and because of recency bias, the markets probably overreacted, but to say they were 'wrong' is missing the big picture on what we do each election. 

Perhaps we can point to softer vote in Arizona as a big red flag, but think about it, if NV came in faster than AZ, Trump would've been even lower. Georgia, which *looked* softer than Florida, maybe was another caution point. I was losing confidence in some of the county data in the midwest (it was softer where Trump won razor thin margins) and acted accordingly (a good move), but it was not a big position. 

This year, Florida along with knowing what happened last time, drove the bus. 

The Case of no 100%'s

The phenomenon of this election was the case of no 100%'s. Early voting (that comes in late in some states, with the results in others, or early in others) generally assured we'd get no 100% reported counties and that was pretty deadly. Even decision desks and needles, which can be no help at all but built real time models with a team for many months, had trouble with modeling turnout, and what's left in said county from where. I was checking Indianapolis and area at 9:30 for clues to bet MI and WI and PA, but it wasn't even 70% in. 100's are our best friends, and with mail-in voting and otherwise, we were toast. 

Biden Value

For everything presented above, the value this time was with Biden, no question. Not because we were sure he'd win but because in 2016 the markets were anchored to the polls and this time they were anchored to Florida (and to a lesser extent Ohio and later Wisconsin, where Trump in the RCP average was down 7%, and it looked even). This, truth be told, was again pretty difficult to act on. Gennessee County in MI showed Trump overperformance with most of the vote in. Kenosha in WI similar. You'd want to pull the trigger, but you'd get close to 100% data that threw you for a loop. 

In PA, where I tweeted out Trump felt softer, again it was tough, but with Trump at -250 your value was with Biden, in my view. It was the only bet you could make. But if you want to bet 4 figures on that, you have a stronger stomach than I. Good on ya, you made a nice bet. 

Notes:

Polling

I read a bunch of books on the 2016 election. In each of them I was struck by how damn smart Jared Kushner was - with data, with fundraising via the web and with his polling. I think I tweeted it out once and got dive-bombed by the left wing luftwaffe, but it doesn't make it less of a fact. I had read a week or so ago that whispers about internal polling from him and his team showed Iowa Trump plus 9 and Ohio Trump plus 8. I didn't act on it as much as I should. But with those numbers, we could forsee a Trump win, so maybe it's good I didn't. 

I like most of you, relied on the polls from the smart people (OH Biden plus 2, Iowa about tied), and those smart people in many places did not do well. This was my anchor at times and because I bet 50X more as the vote comes in than in positions before the vote, it might've been much ado about nothing. But I can't believe I had a blind spot. I'm sitting here giving more weight to Quinnipiac who had been dreadful since forever with Trump, and don't give weight to a guy I know is smart with this stuff, who co-created Cadre at like age 27. 

More money was perhaps to be made in the Senate and House markets (Collins RCP average minus 7, she won by 4, for example), but anchoring to the polls this time, like last, was deadly for your brain, and bankroll. 

With a normal candidate with less of a broad coalition the polls will be better no doubt, but wow, in some areas they were complete trash. 

My other blind spot this election was the size of the city vote, and just how big Biden's lead was with mail-in. It was difficult to model, but there were clues early this would be bigger than usual. How do I not up positions in MI, or PA on that? I simply missed it. 

Is there Meat Left on the Bone?

What struck me most perhaps on this election, is the normalcy of US sports betting and the number of people betting the election this time, rather than last time. When I was posting thoughts in 2012 I think most people blocked me because they weren't betting and I was going on about some obscure county that looked good for Obama. This time, like everyone was betting, and they are some really, really smart people. I'm glad these people weren't around in 2004 or 08 or 12, because the chances for profit would be a lot smaller. 

Back in 2008 I was playing the Missouri Primary at Betfair between Hillary and Barack Obama. I had precinct level data via the Missouri gov website in some sort of ASCI format. The vote came in and it was massive for Clinton - but it was virtually all suburbs and rural, where we knew she was super strong. Some networks were assuming it a win for her with these big numbers. 

But St. Louis had not come in. With some back of the napkin calculations, it appeared to me Obama was at the very least a coin flip. Betfair had Clinton trading at 1.01, yes, people just unloading positions. I took all I could - which was pretty sizeable at that time. About an hour later Obama had won, by a not insignificant 12,000 votes. 

In 2020 - that never happens of course. People are smart, they're engaged, and like in any game of skill, the implied probability will be near actual, not farther away. 

Having said that, if this was your first big betting election, I can stress - it's not usually this hard. One would expect states to be more like Florida in their vote (much of what we see with flash-quick results in Canada), and we won't have COVID issues changing just about everything that comes in. I am fairly sure the data holes will be plugged, which will make it easier to pick a winner, but maybe with no change in lesser value. 

Thanks for reading everyone, and have a nice Thursday. 

Summary of my bets (probably on my twitter feed, but since I am not selling anything, it's not like I am searching for them):

Trump (pre-COVID) long, January and February -105 average (for too much freaking money, but seeing the results this was one of the better bets I probably have ever made)

Iowa Trump -250 and later in the night -300. 

Biden +180 in October in GA (looked like a loss, but maybe not)

Biden -800 election night NH after some city results reported

Biden WI small as results came in

Trump Arizona, fairly large at I think -150, when the FL hispanic numbers came in. 

Biden 26-27 states at I think +375 or something

There are probably a couple others, but I have not gone through them all yet. I'll wait until it's over. 

About those ADW Splits ...

There was a discussion - and yes, I realize this is like a Christopher Nolan movie - about ADW splits on the twitter yesterday. It was spawned by the venerable Pat Cummings tweeting the following:

In today's TDN and other places soon - a quick look at the troubling trends between purses, handle, how we got here and where it could be going, and the need for horsemen to get a fairer share to keep the racing viable.. pic.twitter.com/LWzlN7uMwY

— Pat Cummings (@PatCummingsTIF) October 26, 2020

 "More of a share" has been the mantra for fiefdoms in this sport since about forever, so this is nothing new. But one thing that bothers me (and I know most of you, too) is that when you're not building wealth, or growing, taking more of a share can end up degrading wealth creation and growth, and no analysis in this sport ever seems to take account of that. 

If an ADW makes $50,000, this analysis contends that if you take $40,000 of that $50,000 for purses, nothing will change. We're applying single variable conclusions to a multi-variate problem and it can be very maddening. 

In the ADW world, gross margin is made from the takeout minus the host fee (along with several other fees). For simplicity, let's say net margin for the Acme ADW is 5%; that means if $1M is bet, the ADW takes home $50,000 for their business. Of that $50,000, $30,000 might go back to you, the customer, to encourage you to play more and stay a customer of horse racing; a portion may go into marketing for customer outreach; a portion to promos. 

That money is reinvested to grow wagering. The $30,000 alone, with a modest churn rate of 7 means $210,000 of added handle to the sport (of which a fixed percentage is returned). As well, marketers and businessmen and women will often talk about Lifetime Value of a customer, and the LTV goes up when perks like this are added to the mix, when they are taken away, the LTV goes down. LTV is simply future revenues. 

This is not static. In our example, sure at this distinct point in time a set of purses have gone up by say $20,000, but a month or a year from now that $20,000 might not exist because the players' LTV has gone down by X times and they are not contributing near as much through handle. 

At a Capital One or Discover card meeting you won't hear about the elimination of 3% cash back, front of the line concert tickets, discounts on gift cards, or whatever to increase general revenues, with impunity. In racing - in some quarters, not all; certainly not CDI analysts or the O'Rorke's at NYRA of the world - this seems to make perfect sense. I haven't got it since it was brought up 20 years ago, and I don't get it now. 

Until the sport rows the boat and doesn't worry about what each paddle is doing I can't see handle increasing. I just can't see the sport growing. It's a pox on the sport, and in my view, it makes seeing a positive way forward very difficult. 

Have a nice Wednesday everyone. 

Note - I hope the post above wasn't read to be about Pat's article, rather than the simple fact racing tends to focus on the small items like this, rather than larger ones. Pat and the TIF, I believe, have always centered on growing pies not splitting them; trying to find the unbelievably elusive common ground that is (at times) unfortunately needed in a sport devoid of leadership. They have a difficult job and I don't want to add to the chorus. I support them, their hard work and their vision and wish them nothing but good luck. 

People Love Jackpot Bets, Maybe.

One of life's many mysteries on gambling twitter is the Jackpot Bet. 

Oftentimes people like @shottakingtime, echoed by others, will post a jackpot bet pool (not a mandatory) where $15,000 or $20,000 was bet into it. The resulting discussion revolves around the statement, "who the hell are these people."

I don't know, and I wonder if 'racing' knows who they are either. The data is sporadic, there are computer teams who are probably trying to game it with some sort of contrarian ticket, huge rebatees; or it could be Russian bots, many of whom frequent this website. 

If they don't know, and don't seem to care, shouldn't it worry everyone?

Back in the 1870's Thomas Edison created Menlo Park to do what he called, "the invention business". He assembled 200 scientists and craftspeople to, according to Matt Ridley, "find out what the world needed and work relentlessly to meet that need, not the other way around,"

It worked. In only four years the team had over 400 actionable patents, some stemming, like the Nickel-Iron battery, from 50,000 or more trail and error tests. 

An idea is broached that a market demands, the idea is studied, implemented, then data is analyzed and married to market concerns. Sounds so simple, right?

When it comes to jackpot bets, racing makes the same mistakes that many businesses and entities make even today. They weren't Edison. They created something for them, not for you. 

They have not created something you demanded; they have not analyzed what these bets do to customers' bankrolls, frequency of reups; they have not determined how detrimental they are to lifetime value; they have not tweaked them, or changed them, or completed "50,000" experiments to make them better. Hell, they don't even seem to want to tell us when a jackpot is a jackpot carryover or a real carryover on ADW websites. Revenue by hoodwink.

Do people love Jackpot bets like Bucky likes to opine on twitter? Do they help the game, hurt the game or something in between? Is this a bet something players want or wager on them only because they are offered?

Your guess is as good as mine on those questions, but the worst part: Racing is right there with us.

Have a good Tuesday everyone. 

It was an Odd North America Cup Night

Hi Everyone. Last evening's North America Cup card is in the books, so please allow me to share a few thoughts. 

Handle came in pretty solid, although it's hard to compare historically because of the number of races and a super high five mandatory; the latter in what I hope is another indication shows this is a gambling game, as new money for the carryover was more than was bet on the North America Cup. To those of us who gamble, this makes sense, but really, it was about the only thing that did most of the night. 

We saw massive form reversals like American History at even money in the open, horses stopping, numerous breakers including Atlanta who seemingly never breaks, the best pacing filly in the country who looked like she should've stayed home; we had horses racing off the course for no reason. 

And it in the Cup itself, well we had some head scratchers. 

$1 million on the line, glory, biggest pacing race in the world and everyone but one horse tucks? 

Most of us made serious light of Bob McClure choosing to drive a longer shot rather than an elimination winner, and that was not the case as his choice was inexplicably lower odds than the elimination winner. I say inexplicably on paper. Captain Kirk, who is two and ohh against Papi Rob Hanover and almost beat Tall Dark Stranger in his pace elimination, raced exactly like the dead on the board horse he was. Jody was ducking faster than a solider on the Maginot Line in summer of 1940. Maybe Bob knew the horse would be no good; I have no idea. We peons are usually in the dark about such things. 

Why so few other horses came to race - this is still the richest pacing race in the world - is something maybe more than one or two of the local drivers would like a do-over with. That no one other than Bob tried to get placed near the front is bizarre. Kudos to Drury with Moneyman Hill. A recent purchase for a reported $80k US, the horse fell into third, sat third and came third, pocketing $120 large.

Something surely a lot feel haoppy about as do I, is for Gingras. The dude moved to Canada, quarantined and did so primarily because he wanted to win this race. 

The race was a total snoozer, but the best horse and driver won. 

Overall, and bigger picture, I'm happy for all involved, as they got this race into the books. Still, I can't help but think of next year with better horses, better drivers and a deeper undercard. It should be back to its old self.  

Have a nice Sunday everyone. 

#theyknew Hold it Who Knew?

 The Theyknews are the talk of the town on the twitter very often. And also very often they're pretty good, especially in smaller pool tracks where it's easy for the connections to be on something that you aren't. But, last card at Mohawk, there was a theyknew where I have no idea who the they were. 

In the second we opened the PP's to a two horse race. Free Flying Ticket had beaten better and was going for three in a row as the 2-1 morning line chalk, and favorite in the doubles. The five was a close second choice in multis, and had a nice win last time. 

The betting started off weird, and especially because I thought the five had a shot to beat the chalk, I was dismayed (intervals below). Then I checked the perfecta payoffs and saw a decent edge with like a $10 and $12 payouts (two was still chalk in ex's) and I told a friend, "I can't believe I am thinking of boxing these two, it can't come any other way can it? Is something up here, they are too high?"

The two came out on the track, looked perfect, the five looked good as well. It felt like a green light, but something also felt very, very odd and it got odder at the gate: The five horse went to 1-2 and the two horse went from 7-5 to 2-1. 

You're probably saying that you've seen this before and it was the typical #theyknew. But here's where it gets interesting. When we see a theyknew, the rider or driver is usually in the know - they know the horse isn't great; she felt off, the connections told her she was sick last week; whatever. And they underdrive or underride the horse. Not this time. Paul Mac pulled at exactly the right time, was aggressive, and at the half looked like a 1-9 shot. He drove her to win. 

 

 And pffftt, the filly crumbled. So, if Paul didn't know, and if by deduction, the connections didn't know, who the hell knew?

I have no idea. 

Have a nice Thursday everyone. 

Horse Racing Trade Media Disconnects

It's a pretty common occurrence to see analysis of the media - any media really - nowadays that contains a whole lot of grains of truth regarding a strong disconnect; a disconnect with statistics - like handle and TV coverage - or something seemingly as tangible as what's happening on the ground right in front of our eyes. 

Last night, this was the headline from a trade paper about a performance of a driver. Big night; one for the ages!

As his #MapleLeafs were starting to collapse during their #NHL qualifying round game before the #StanleyCup playoffs against Columbus on Thursday, Jody Jamieson was rising to the occasion at Woodbine Mohawk Park with a five-win performance » https://t.co/7Fptuqx4It #harnessracing pic.twitter.com/mraQ8xzP8N

— Trot Insider (@trotinsider) August 7, 2020

When you scroll the article, youtube videos are linked, including to the second race, which was not won by the driver in the headline.

 

 Jody was driving the 1-5 shot and if you watch the video, there was something for the ages and it was something. He sat behind a leaver, and never pulled, only getting out at the end. It's one of those drives that in Hong Kong would get you shipped onto the next plane to Northern Tibet Raceway. It was one of those drives where in North America, bettors scream "fix!" and head to the poker tables. It's the drive customers were were talking about on twitter. 

If you read the headline of the trade paper, you'd never know it even existed. "Local Driver Has Great Night", time to move on. 

Now, I don't point out that drive to suggest something sinister happened. Not only do I not believe it did, suggesting it (without fact or knowledge) I'd be as bad as the media we criticize so often. The filly could've felt like she had zero go, she could've felt lame; a hundred things where a chalk might sit in. 

But the fact remains - what you at home were talking about was not reflected in a trade media story. 

Horse racing media - and I think this is true with most media - lives in a vacuum. Sometimes this is by necessity (advertisers, don't rock the boat) and sometimes it's by an unwillingness to listen and understand what's happening around it. For whatever reason it's been here since what seems the beginning of time. And it doesn't appear to be getting fixed anytime soon. 

As for Jody's drive, well, that's a pox on horse racing's house. As I note, I have no idea why he drove the filly like that and neither do you. And that's the problem. 

Information needs to be disseminated in this sport; things can't just be buried. When upwards of $200,000 is bet in multis and in-race wagers on a race like that, the people giving you their hard earned money deserve more than silence and a story in a trade paper about what great a night the guy had. 

It leaves you scratching your head and it leaves me scratching mine too. It's no way to run a gambling sport. 

Have a wonderful Travers and Hambo weekend everyone. 

Horse Ownership and the Health of the Game

I saw this tweet this morning:

This is not breaking news to anyone, but it certainly strikes a chord, doesn't it? And to me it shows just how unhealthy the game has gotten.

For systems to thrive (and price things correctly) there is an immutable truth - the volume of buyers and sellers is the KPI. Whether we are buying a stock on the Nasdaq, bartering at the farmer's market, or visiting our local proprietor selling every day goods, we want lots of buyers and lots of sellers. It's how a healthy system rolls.

In horse racing we used to have that.

Leaving aside the big dogs in the runners, as Crunk details above, I was thinking about harness racing in this vein recently. 25 years ago when I was hanging around the track, watching baby races or qualifiers, chatting with bettors and owners, the conversation in the late spring and early summer went a little like this -

"Burns has a nice two year old for Shipp"

"Fritz has three good ones that should take a beating in the sires stakes"

"Kopas has a bunch of New York breds that are all good"

Doug Arthur...... Ben Wallace..... on and on have a some stock  ....."

There were dozens of trainers and dozens of owners who were all active at the sales, looking for a good one.

Last night - and again, this is not unlike any MSW in Thoroughbred racing now - we saw the Dream Maker for two year olds, and we sure as hell didn't see this. We saw two barns, with a half dozen now two year olds with yearling prices ranging from $120,000 to $340,000, and then everyone else. The everyone else was racing for fourth.

Flip open the program to the Meadows, the Meadowlands, Yonkers, Tioga. It's all the same. It's concentrated power.

As with most of this blog since forever, it's observational, and most of these issues are well above my pay grade; I'd offer, perhaps, many don't even have a solution. But, the declining breadth of ownership and the lack of interest in people wanting to take a shot at glory in this business surely is troubling.

Have a nice Wednesday everyone.

The Horse Racing Immaculate (and Perhaps Surprising) Success Story

I read a story this morning about a whack of members of the Florida Marlins baseball team testing positive for COVID-19. Baseball season just started, and boom just like that we see a story placing it in peril.

This is nothing new, and no, we should not be surprised if baseball continues for their "season". I made a beef stew last week after months of meat packing plants being COVID-19 hotbeds; the stew was filled with delicious veggies from places like Florida, where one run of recent tests for farm workers produced positive rates of 40%. Our system is built to bring products and services to market and it tends to overcome the hiccups, eventually.

While most businesses have had a tough time navigating these virus inflicted waters, one business that has had relatively smooth sailing is this one - horse racing. Yes, this twenty-seven headed fiefdom, raise juice, 900 rules for 900 jurisdiction, protectionist, tend-to-do-the-wrong-thing-all-the-time horse racing.

When New Orleans coach Sean Payton tested positive for COVID in March at Oaklawn the doomers were in full force. But the meet was not doomed. It carried on, and was (by almost all counts) successful.

Not long ago, the Big A was planned to be used for tent hospitals; instead NYRA - in New York no less - has driven handle, a Saratoga meet, and delivered the shortened Belmont Stakes.

As for harness racing, last evening I played Grass Roots trotters from Rideau, glanced at Georgian; last week watched a thrilling Meadowlands Pace, and this coming fortnight will watch the Hambo, with gates open at 25% capacity.

Sure we've seen hiccups like a rider or driver testing positive (as is probably obvious with a highly infectious disease), but it didn't burn down the industry; it didn't stop moving forward. For me and you as stay at home horseplayers - if we're being completely frank - I bet we barely even notice a difference from July of last year.

Compare that to casinos, where for example Vegas is in trouble. There's a hell of a lot more incentive to get those slots and table games churning and being fed Benjamins, but alas, they can't seem to pull it off.

We all complain vociferously about the sport, and most of the time it gives us a lot of material to work with. But this time, all hail the Sport of Kings. Whether through serendipity, happenstance, shit luck, or precise planning, it has pulled off a real beauty.

Have a nice Monday.

Using Data & "Free" to Engage Players

Think With Google has been sharing some excellent case studies recently via their partnership with MIT's Sloan. One that caught my eye was Electronic Arts, the video game maker. 

EA, which makes FIFA World Cup Soccer, earns some major hay when the World Cup comes around. They drop a new game with updated stats and players, and sell it to the masses.  This past World Cup, though, they took a different approach - they updated the previous version for free right into the 2018 game..

This might sound silly, but there was a method to their madness - deep customer insights. They learned, through player metrics, that there is such thing as a recency effect. Those who play the game late cycle convert to the new product. They learned, however, veterans of the game who had not played in more than two months needed a push to engage again. Hence, the free product. 

"Our free update succeeded in bringing those players back and, given the Recency Effect, increased their likelihood to convert to FIFA 19."

The results of this test should not be overly surprising to us, the horseplayer. Back around 2006, with handle flailing, the Hong Kong Jockey Club used the same type of metric to bring their lost horseplayers back. In that case it was a rebate. 

A rebate works in similar fashion. Poorly engaged veteran players are having trouble staying afloat, so they're given a push. This push gets them back into the habit of playing, with a higher probability of winning money.  When referencing the results of their change in policy, the HKJC remarked how the habitual nature of horse racing customers is an important metric, and this seized the day.

Over here across the pond we're not doing Electronic Arts, or the Hong Kong Jockey Club. We're not using internal player metrics as they should be; we're not creating any dynamic policy of "free" to increase engagement, and grow lifetime value. In the quasi-oligopoly (or in Canada, HPI's pretty much monopoly) there seems to be little incentive to. But, as that happens, make no mistake, horse racing is falling behind.

Have a great Thursday everyone.

Joe

On Monday, via trainer Paul Kelley, we learned harness racing's defacto Chief Historian Joe Fitzgerald passed away.

@Jaf3Joe RIP..

Sad news. Joe was a great historian not only to harness racing but of sports and the world. I know our lives intertwined through both sports and music in the Boston area. I will, like all here will miss his daily posts immensely. God speed Joe!

— Paul Kelley (@PKtrotters1) June 22, 2020

To say this was unexpected - and to the the many of us who chatted with Joe over the years, shocking and sad - was an understatement.

Joe was a very private guy, but that didn't stop him from talking to just about anyone who liked or watched the sport of harness racing. His tweets were a tour de force, and if this sport was as watched  as the big ones he'd probably be a (reluctant) popular figure. He absolutely loved the sport, and his knowledge of it was as vast as his prodigious vocabulary.

I'll definitely miss him for that, but I'll mostly miss just chatting with him, and his good nature overall.

Joe was a wonderful writer. A wordsmith. And his articles on various websites are testament to that.  But for a guy who could write like that, he sure didn't flaunt it. Sometimes with me - not a wordsmith, obviously - he'd gently reference a line that wasn't quite right, or an incorrect word. I'd look at it and realize how stupid I was, but he never did it to make me feel stupid. That wasn't him. That was the antithesis of him.

I don't know what Joe did for a living (and I am sorry I never asked) but I think he'd be at home on a shop floor because his good natured needling and humour would take him far. I remember when Donald Trump won the Massachusetts primary, and me knowing Joe's disdain for him, tweeted something about "You Massachusetts types love the Donald, Joe!" He replied in jocular fashion, playing along, just like he always has since. He'd fire back to me something about Trudeau at times that was laugh out loud funny, giving it back to me.

Joe appeared to be an amateur hobbyist type person in Astrology. Me, being, well not that, again would ask silly questions like, "Joe, if Mars and Mercury are retrograding, does that mean I will hit a pick 4 tonight?" What I'd get back was pure Joe.

I am pretty sure if I lived in Boston I'd want to hang with Joe, because he was Joe. And if you loved harness racing, you were automatically a friend. You were in the club. Joe's club.

I remember years ago speaking to someone in the sport who had a title of some sort. I told him that harness racing history is not really documented; we can't find what we're looking for (especially with even historical horse lines behind paywalls). I asked about the sport creating a harness racing wiki - a funded project with hands on deck to document the sport; to live on the web forever.

Today I think about this even more because we lost Joe. He - unpaid of course - was doing that for us, almost each day. Now he's gone. And others will surely follow, leaving us to pick up the slack, when few of us are capable. I don't know why I should - I am just a fan with a blog - but I find that troubling.

I'll miss your tweets Joe. But I'll miss you as a person even more. You were a fantastic guy. God Speed.

Harness - Track Size or Track Culture, The Differences in Driver Strategy Are Real

Harness racing is a unique bird when it comes to driving styles and driving colonies. Whereas in Thoroughbred racing, a jock does not race a turf horse too much differently in various states, in harness racing we see drivers do just that. It's something that's been talked about since forever, really.

At Yonkers - a half mile track - we'll see drivers wait until the half almost each race before pulling. Often they wait for cover so long, the leader has stolen a 57.3 and hasn't even started to race yet. It is antithesis to the colony to park on two turns.

Over at Northfield (another half miler), which many of us have watched lately, it's antithesis not to park on two turns. In about half the races, horses are starting to move just past the quarter, looking for cover at the 3/8's pole - directly on the turn.

On five-eighths like Scioto Downs and Dover we see similar. The flow is stacked on the clubhouse turn, almost each race. Greenwood, oh beloved Greenwood, in the 1990's raced like this as well.

Over at Mohawk, where the driving colony has long been labelled passive, sometimes the shoe fits. How many races have you seen in Campbellville with 30 second 2nd and 3rd quarters? Oftentimes we'll see drivers not want to park on a half of a turn, near the three quarters, where they wait, hoping to find a seam. At times the race is already over by then.

This style of racing also rears its head at Hoosier - where inexplicably, in my view, they have a passing lane.

At Mohawk - a larger track - the drivers don't attack for position.

At Yonkers -  a smaller track - the drivers don't attack for position.

At Scioto and Dover - smaller tracks - the drivers attack for position.

At Northfield - a super-small track - the drivers attack for position.

What's the main difference?

I think it's two part, but it has to deal with Prospect Theory - not wanting to give up what we have, even though we could get more EV with more risk. It's the case of the NFL coach not wanting to go for two or go for it on 4th down, even though the math say she should, because if he's wrong it sticks out and he can be criticized.

First, it's cultural. The drivers are used to the same style, they race the same style. Holes are given, sit wait and pounce rules the day - 5% is 5% for coming 5th. If a hole doesn't open up, so what. When the U.S. drivers come to Mohawk, they shake things up, and Prospect Theory goes out the window. Yannick or Tim are not sitting fourth with a decent horse in a 30 second 2nd quarter, and we see this regularly.

The second is purse size.  At Yonkers (and Mohawk) in my view we see a "take turns" mentality. When you're sitting fourth at Yonkers for a $24,000 purse, you think fourth place and racing next week, especially with the 4-5 shot on the lead. 8% of $24k is good money, why bother pulling and maybe come 6th?

At Northfield with a $4,500 purse you get a big piece or don't pay shipping. Ditto Scioto in a lot of cases; Harrington, others - go is the word. At these tracks the culture is to hit the board, not be passive, looking for next week. It shows each and every race.

Harness racing has always been an in and out game. Horses take a week off, then they're on go and vice-versa. It's why they instituted a rule in Australia and New Zealand where "tactic changes" have to be given customers beforehand. But it's more than that. Harness racing is regional. Drivers at Mohawk watch Northfield and lose their minds, while drivers at the Meadowlands and Scioto say, "a thirty second second quarter, what in the hell are you guys doing up there?"

Usually information is spread and things change, but in harness racing we seem happy with these regional differences. In a way it makes the game more interesting - prospect theory or not.

Have a nice weekend everyone.
 

Horse Racing's Innovation Blinkers

Innovation and horse racing. Put together, the two of them elicit feverish reaction in this sport. One one side you have the customers, along with some, like for example the Thoroughbred Idea Foundation and people who've made money outside the sport like Mike Repole. Then you have everyone else.

In the history of innovation, the everyone else is a powerful force.

In "How Innovation Works", an epic history of invention and innovation, British author Matt Ridley explains innovation in its glory, along with the forces that oppose it at every turn. It's the latter that struck me when it comes to this sport.

Ridley believes that there are three main characteristics to opposition to innovation: An appeal to safety, a self-interest among the vested, and a paranoia among the powerful.

When margarine was innovated in 1869 (as a cost saving to ever-expensive butter), the American Dairy Council denounced it; New York state banned it; "studies" were financed, one where one rat was given butter, one margarine, and within months, the margarine-fed rat died a horrible death (it was later uncovered that the study was bunk). Bogus bans on margarine were still on the books in 1940.

Cab drivers organized against the innovation of the umbrella; the Horse Association of America fought the introduction of the tractor. In 1707 a Londoner named Papin built a boat with a paddlewheel (the first innovation of the steamboat), demonstrated its efficiency one day at the shipping docks, expecting a marvelous reception. Instead, the oarsmen saw the competition and destroyed his boat.

If this rings a bell it should. This is pretty close to how racing has reacted over the years.

Remember in 2010 when California passed the law that allowed takeout to be increased? I bet you do; it was implemented in days.

Now, remember what was attached to that law? Exchange Wagering. As sports betting is passed in California and that 2-5 shot that you didn't like lost on Saturday at Santa Anita, was it fun betting against it on the exchange? No, because one doesn't exist - through safety (how it's safe to raise takeout is beyond me, but they clearly think so), vested interest and paranoia.

People complain about the lack of innovation using horse racing's data - namely, there is little to none. How can innovation happen through Equibase's vice-grip on it? They don't seem to want to break your boat as much as make it impossible to build.

Lowering the use of the whip to make racing more visually appealing in a world where the animal is considered so differently compared to our agrarian roots? You'd think we were talking about implementing margarine.

The sport - and as above this is not unique to only this sport - can't possibly leave a favorite off their pick 5 ticket, hoping to score. It's considered dangerous and unsafe to.

The innovation we do see is meaningful, but most-often its the proverbial deck chair. The Rainbow Six came from the Fortune 6 at Beulah, which came before it from a track in Puerto Rico. Now everyone has or wants one.

Post drags are fun. If they work at one track to steal money from another track it's great. The problem is that when all tracks do it, we're in some sort of Gene Roddenberry-12 Monkeys-Doctor Who hyperloop of post drag hell.

Both those "innovations", probably, in the long term, drive customers away from horse racing. I'm not an expert, but that seems sub-optimal.

Horse racing lacks the innovation bug because it's not built for it. But for those of you out there fighting the good fight, please keep fighting. This sport - and I don't think this is going out on a limb - needs an innovative sea-change.

Have a great Monday everyone.

Playing to Different Audiences

Last evening Woodbine cards - both Thoroughbred and harness - were televised on Canada's largest sports network, TSN. From inside the sport, the show got rave reviews.  And from what little of what I saw (I was working on the Scioto pick 5 carryover), I agree. It was a bang up job.

The giddiness of insiders regarding this foray is palpable, and they're certainly one audience. The other audience is no doubt governments who support the sport: Over the last half century, as governments regulate, or are a part of an industry, the industry itself must spend money to stay relevant; not relevant to outsiders, but to governments and those who hold purse strings.

What I fear however - and rarely don't fear with ventures like this - is that they disqualify working on what matters for the rest of us: Growing the betting audience. I realize it's one evening, and there are other issues at play, like lack of qualifiers in Ontario, but the first race pick 5 on national television garnered a handle of $86,000. The two previous Thursday's before shut down were $124,000 and $128,000 pools, respectively. The $86,000 pool, from what I see, was the lowest since the restart.

I don't think I was the only one looking for value in the pick 5, not at Mohawk, but at Scioto.

I don't want to be a downer, and I appreciate televising the sport - mainly for the reasons I outlined above. But I do want to stress - this is not for a bettor, this is for you.

Bettors have made it loud and clear what they want from Woodbine: Don't take extra takeout from your (monopoly) ADW, leaving Canadian players at a disadvantage. Don't take 26% or 27% out of pools; and don't allow horses to race at your track without a recent line.

That's your handle audience; that's what they ask for.

Putting races on TV might make everyone feel good - and there is merit as a corporate initiative. But please never forget - this won't raise handles. Giving customers what they want and need can only do that.

Notes:

I finally got a hold of a friend at an ADW recently, after calling the general line for like three days to no avail - I stayed on hold longer than calling the tax department. Why? Because they've been swamped dealing with new signups. Will this translate to handle? The jury is still out.

There's a pick 6 carryover at the Meadowlands tonight starting in race 4. It's a non-jackpot bet. It looks fairly formful, but if you want to take a swing there's some free money involved.

From a branding perspective have we seen a better job done by Ohio harness racing? Those drivers are out and going and each race is a pretty cool puzzle. I bet it's been a real eye-opener to people who have not watched their signals much.

Note to tracks - Tape and upload your qualifiers! For the many players who want to do the work they're vital to handicapping. I asked a friend last week if he was playing the Meadowlands opening weekend and he said, "it's tough without being able to see Gaitway qualifiers". He sat it out.

Have a nice weekend everyone.

Just Pick Winners!

Yesterday we wrote about some (many?) inside the business who don't quite understand what we bettors do each day to try and scratch some profit. Thanks to the 44 of you (and 212 Russian bots..... Privet!) who read it.

That post spawned some discussion, so I figured I'd jot another few thoughts down for you and my Moscow friends, if you'd like to read more of my drivel.

I can't tell you how many times over the years I've spoken to people inside the business who tell me I just need to pick winners. It's like picking winners is the magic elixir to gambling success; to keep us in the game, forever.

On the surface to someone who has never gambled before, this sounds pretty basic. If we never lose, we'll win!

If this game was about picking winning tickets we'd bet 1-9 shots to show all day; we'd build fancy machines to datamine favorites to build subsets that vault them over a $1.00 ROI; DeRosa would make "Grids" on twitter with all "A" chalk; TVG pick 3 tip tickets would not exist, because the hosts wouldn't be hosting, they'd be having breakfast on their own personal islands. (Pro Tip: None of these work).

I was reminded of this again a week or so ago, chatting with an insider about the lack of qualifiers in Ontario. He told me, well, you should just bet top trainers and not bet others and you'd be fine; that I should follow the board money. I'd pick winners!

I tried to tell him what we all know - this game is not about betting what everyone else is, it's about betting what others are not betting. The former is a path to gambling ruin, the latter about what all of us try and do each and every day.

That concept - the concept that playing a game of coin flip with 22% of the pot being removed and it can be beaten by "following the board money" - is just so completely obtuse I can't believe people still talk about it. Even at the signing of the Magna Carta half the people in the room didn't believe the sun revolved around the earth.

It's amazing how this narrative permeates the business in almost every nick and cranny. I was told last night by an insider that a horse that recently won at Mohawk  - a horse with no recent lines (there's no qualifier to watch to check recent form of course) - whose last set of lines were three races beaten 44 lengths could've been a bet because he won money last year. That's advice about as bad as betting a colt in his 19th start because he's a half to Dialed In (don't laugh, this is actually fairly common).

This might not seem like a problem. Who cares, right? And we're a bunch of whiny bettors anyway. But it, in my view, is just so damn important. And others do not act like this.

If you flip onto a DraftKings pod about the PGA this weekend, insiders - the people hired by DraftKings, as well as their management - will talk about the concepts I highlighted above without even having to explain them. They'll talk about ownership numbers of Rory in GPP's versus cash games. They'll talk about hidden positives, models, and not having a lineup with more than 70% ownership.

They are educating their users so they can win more money, stay in the game longer, and their business can grow.

It's bad news that our sport does not (to be fair, some iconoclasts in the business do, so well done) do that. What really ticks most of us off is that when you try and explain these basic things, they tell you you're dumb and block you on Twitter. They even block warm and cuddly Inside the Pylons.

In the end, likely nothing will change. We'll keep trying to grind profit and they'll keep telling us to pick winners. But, on this slow Wednesday thank you to you the blog reader as well as all my Russian friends, for allowing me to vent it out one more time.

Have a super day everyone.

 

An Education Into Doing What Bettors Do

Back in the early 80's a team of scientists were conducting an experiment to help eradicate the current scourge of malaria in Africa, transmitted by mosquitoes. They and their volunteers created nets, treated with a substance, and slept each night for five months tracking results. Experiments such as these were done before, and it showed nets worked, but people in large numbers were still getting bit, and malaria was in full force.

These nets were different, though - they had holes in them, because most nets in Africa had holes. The results, after trail and error with different substances treating the holy nets, were astonishing. It took some time, but today it's estimated this innovation accounts for 70% of 6 million lives saved from malaria each year.

This theoretical idea was modified to mimic the reality, because theory often does not work in practice.

I think about this story in terms of us bettors and customers. We can pick and choose fifty different things those in the business do not understand about us (and those who are long gone from the game), but last night I found a couple nuanced examples that I think are pretty illustrative.

In race two at Mohawk a "theyknew" horse crushed by 6 and was hammered down to 2-1, while being driven like a 2 to 5 shot. The colt was 9-1 in the doubles after a 12-1 morning line, with a mediocre qualifier.

How could we know, right? Well, we kind of could if we dug and handicapped. If you watched the qualifier it was a bury job, the horse trotted beautifully, is a big strong horse and hails from a barn that sends horses ready. We might've not 2-1 "knew" but we could sniff it out, using in a pick 5 or double as an edge.

I'm in now way saying a track that cares should not examine a race like that and fire a shot across that barns' bow, but really, we could come up with him if we work hard at the game.

Flipping to race four there was a different kind of win. A horse off months with past lines well below par for the class, with 30 plus second last quarters, was shipped into a 2 for 32 barn. The horse went first up like a well meant champ and won in 151 with a 27.3 kicker.

How can you get this one? Can you watch his qualifier to see if he had pace (there were none)? Can you use obscure barn stats or something? No, this is not handicapping, this is knowing something. Some people did, and they took down a ton of public money last night (when we include horizontals there were hundreds of thousands bet with this race tied up). This is money the public had absolutely no shot to share in.

This is probably the time an old time player or track executive would chuckle, saying "it's part of the game" or something equally platitudinous. I'd counter with - the world has changed Dinosaur, and capital is fleeting; moving to games that aren't yours for reasons exactly like this. Wake the hell up.

The venerable author Bob Marks - who toiled many years as a public handicapper before running a breeding operation - has written that on condition of hire, a racetrack executive should head to the grandstand nightly for a month and wager like we do for his or her paycheck. Bob believes it would go a long way to understanding customers - both the ones you have and the ones you'd like to have - because of incidents exactly like this. If you're not living them, you can't possibly understand them.

Last night that executive would have a pretty good education on how this game is played; not in the theoretical C-Suite world, or judges room, or in placating trade papers, but in our world of mosquito nets with holes in them.

After last night, I'd hope he or or she'd watch qualifiers and the betting board more closely, and I hope they'd sure as hell be carding qualifiers so if a 3 month layoff is going to crush hundreds of thousands of dollars of people's hard earned money, at least they have a something to go on.

Have a nice Tuesday everyone.

The Curious Case of Harness Racing Handles

The pandemic and resulting discombobulation has certainly thrown things out of whack in horse racing, and some narratives are being turned on their ear. But one thing we have noticed - almost without fail - is that when a big, popular signal comes back, we'll get some huge handles.

Belmont's opening day on Wednesday set a handle record, Sunday was up 81% year over year, and that followed a whopping $23 million handle on Saturday. It's not like this track (and Churchill before them) had zero competition either (Gulfstream and several other venues have been running.)

Over in harness racing we're noticing a bit of that, but in what's full-blown Benjamin Button: it's in an opposite direction.

Scioto was the first track to begin racing (and credit to them - they did put some money into their signal) and handles curiously have exploded. After averaging around $220k per card last year, most handles since the return have eclipsed $1M, and they set a single day handle record in the process.

Northfield followed, and they too have had great handles with one card beating $2M.

When Mohawk and the Meadowlands came back, things didn't quite pan out the way we've seen in Thoroughbred racing. This was not the return of Belmont and Churchill. Not even close.

Mohawk handled about $2.1M on the previous Fridays to this past Friday, which was their opener. They couldn't break $1.9M (Canadian). Pick 5 pools of $115k and $142k those previous Fridays were good; this one had to be dragged to hit the guarantee.

I guess this should not be surprising. Ontario racing - a jurisdiction we could never consider having the finger on the pulse of the customer -  allowed racing without qualifiers. If you were betting a pick 5 you either had some inside knowledge, or you like beating your head against a wall.

Things got no better on Saturday.  Their (completely curious) mandatory payout of the Super High Five decision wasn't even rewarded. These events generally bring in 3X the volume of the carry, but they didn't even hit that.They even had a hard time giving away free money.

I’d like to congratulate Melissa Lamoureaux on not jogging or training in the last three months. Exactly the example of why AGCO has put it down the bettors throats. Holy fuck what a poor training job

— Ryan Willis (@RyanWillis1) June 7, 2020

Over at the Meadowlands things were better, but the house wasn't exactly on fire. They handled $2.8 million on Friday, about what they always do.

Maybe we could chalk this up to more tracks being raced? I don't think so.

Scioto - with the Meadowands and Woodbine racing - still did surprisingly good handles, topping $1M on Friday. Tioga Downs opened up Sunday to a record handle.

And, in one of the more surprising developments, Hawthorne Harness had their opener on Sunday:

$1.5 mil handle night @ClubHawthorne as we thank all who tuned in. We thank our horsemen @illinoisharness for following all of the protocols in place to get us back racing as well.

— Jim Miller (@HawthorneJim) June 8, 2020

Hawthorne has never been considered a big signal and does not partake in stakes racing or high purses. They drove - when accounting for exchange rates - more than Woodbine-Mohawk did this weekend. That's - no offence at all to the hard-working Jim Miller and crew intended - pretty shocking.

When it comes to handle, harness racing is different than Thoroughbred racing - stakes handle is smaller for one. But I don't think for a minute anyone who watches the sport could've called this. In Ontario racing's case we have a reason to see depressed handles via their anti-customer and bettor decisions; the Big M is with Monarch, not an open distribution system like Hawthorne. But it's still pretty shocking to see handle records at these smaller tracks and a blah reopening at the bigger ones.

I assume things will change, but right now, a hearty well done to smaller tracks like Scioto, Hawthorne and Northfield. You clearly pushed the right buttons and customers came back, excited to play your product.

Have a nice Monday everyone.

Sunday Post - Ways to Play the Handicapping Puzzle

Hooray for Bobby Sacs!

Bobby, a newer player who enjoys the game, took a shot at the Belmont pick 5 carryover Friday and scored a $2 hit for 92 large. That's a memorable one.

Bobby's ticket construction was pretty good, I thought (even without the results bias of him hitting it!) -

Lone speed key
Spread
Spread (including a bomb "A")
Lone speed key
Spread

Since loan speeds can be conditional, and not worrying about "just hitting a ticket" and spreading like peanut butter, he shot and scored.

Me on the other hand, not so nice, but it shows how much, in my view, the game can be looked at with different perspectives.

I am a lone speed key lover, but I watched a few of the dirt races and didn't see a speed track. So, I pitched the two lone speeds.

I generally went: Pitch Instagrand, lean on spread closers like the two and six, key of the 11 in leg two, spread including Bobby's bomb, obvious mid-pack, added closers, and a lean on the Clement FTS who won the last. I hit four of six, missing the two obvious lone speeds to go deep on closers.

Bobby made some nice, pretty simple tickets. We get paid when we're right, but you have to have a ticket set up with conditions to be right. So, hooray for Bobby Sacs*. 

Schnittker! Hooray for Ray, I suppose.

Last evening at the Big M, trainer Ray Schnittker - the guy who wants no qualifiers, just racing - had a night.

In the second, a horse he (was made to, by the rules of racing) qualified at Goshen and appeared to look pretty good doing it, took a boatload of early cash, drifted up to 9-5 and absolutely crushed in 50.

Then in the third, another of his charges opened up with $4,000 on his nose; another qualifier from Goshen (but this one probably not as good). This colt crushed more than the previous one, in 49 and change! These two followed up a season's debut on Friday where the horse was mediocre, coming 5th.

Now, what do you do with that puzzle? Just bet the signal of early money with first timers? We know that's a ticket to the poorhouse. The ten in the first race - similar class, young horse coming back off a good qualifier - opened up low and was 10th at the quarter.

Just bet Ray first timers if they take money? I suppose so, but if everyone bets them they'll eventually be no value.

All I do know is - thank goodness there were qualifying lines to look at. The last thing the sport needs are horses winning nw2's in 149 with no running lines. The betting public think they're up against it enough without that kind of reminder.

Have a nice Sunday and rest of the weekend everyone.

* I heard from Bobby Sacs after his score. He asked me a name of a horse rescue he could donate to. Like I said, I'm happy for Bobby Sacs.

Same Store Sales Redux

If you're a stock player or CNBC or Fox Business watcher, you'll have heard the term "Same Store Sales" referenced often. This is a metric to analyze retailing, whereby sales between stores open one year or more are compared to see how management (and growth) of the chain or business has been going. If sales are only increasing because more stores are opening, it can be a red flag.

Here's something else you've probably heard before - the racing business is not much like the retail business, or perhaps any business. And Crunk's threads of late are both important, and evidence of that.

 

The 'wow' number in that string is the fact that (standardized) handle fell 5.6% in May, with 2,150 fewer stores (if we can say a store is a race). Although - and Crunk rightfully mentions this - NYRA has not yet begun and this paradigm will again change, I don't think you'd find a ton of people who'd have predicted this outcome; an outcome where so few races could be offered, with handle down so little. 

This has been firing on the demand side in harness racing as well, where Scioto has had $1M or more in handle each of their race days, after averaging around $200,000 normally. 

What this suggests - and we already know this - is the marginal cost of putting on the vast majority of races in the sport is super-high, and not economically feasible on its own. It's why so many tracks depend on slots. Without them, and without fail, the sport shrinks as same stores are shuttered; but, unlike in the real world, if that happens, gross sales might not fall very much, if at all. 

If you're interested in this analysis, give Crunk a follow and we can continue to learn what makes this crazy industry go. 

Have a nice Monday everyone. 

Positive Test Blues

The big story in racing this week is, as reported by racing's favorite Joe Drape among others, is about Derby contender Charlatan's alleged positive test for lidocaine (or an adjunct of it).

Even though we're not 100% sure of the accuracy of the reports, as Steve Crist once said when speaking of positives in the sport, the reaction tends to be, "hang 'em high, then hang 'em higher". To say a large faction of the sport is tired of them is an understatement.

To a lot of frustrated people in the sport, due process is meaningless, circumstance and intent is meaningless. Hanging 'em high and higher is like a populist wave, with a category 5 hurricane pushing it.

In this case - again alleged; I am not a lawyer obviously, but I say that because there are not even any positive tests on the docket and it's fair  - shows, to me, just how difficult this is to navigate, populist or not.

Bob Baffert supposedly had a horse test positive for something that can be used to clean a cut, or a scrape - every day horsemanship. It's pretty silly to think he's running around with a big needle of lidocaine for a stakes race, knowing it will test, and I'm sure further testing will nail that down.

So, let's move on, right? The horse's owners lose a pile of money and Derby points, Bob pays a fine.

Well, this is a high profile horse, and it's not Baffert's first scrape with a positive in a similar situation. We all remember Justify. Again that was more of a stable management issue, perhaps with some bad luck thrown in. But it was an issue.

Does strike two become a pattern where we "hang em higher", even if the facts show there was absolutely no intent to do wrong in either case?

We clearly don't want people to lose their livelihoods because of stable error with no intent to harm. But we don't want people making a mockery of the sport either.

In some jurisdictions like Hong Kong - and the populist tsunami gains traction with these arguments - stable errors are considering an affront to the racing and there ain't much debate. Remember ten or so years ago when a horse tested positive for a (legal) med? The trainer supplied video evidence that the horse in question stuck his head out of his stall, and ate out of his stable-neighbour's feed bucket which contained the additive. In Hong Kong they simply said, "we don't care, you're paying for it."

Do we want that type of adjudication in North America?

I guess this is not just a horse racing problem in this day and age. To talk politics on twitter you bring ad hominem and a sledge hammer. And if you talk nuance you're dismissed quicker than a one-legged man in a butt kicking competition. But these things demand some nuance, in my view, even if we don't like the final result.

We all wish positive tests never occurred, but they do. Figuring out what to do with them for the betterment of everyone has been a problem since forever, and probably will be for a long time. 

Have a great Thursday everyone.

Racing in a Post-Slots World

There's been a narrative in the industry of late that you may have been reading: What's going to happen to a sport that is so dependent on subsidy and slot machines if it all goes away, as cash-strapped governments deal with budgetary pain?

The question is probably a little 'Dr. Doom' I suppose, but it isn't without merit.

I'll take a stab at it.

i) The Big Tracks Get Bigger - If you're bigger, I think you're going to be better. If smaller slots-tracks close we'll see bigger fields, better racing, and more handle. In addition, as bigger tracks gain more control, it gives them power to get even bigger.

WalMart and Amazon don't mind minimum wage hikes because they can eat them through agglomeration, supply chain squeezing and increased pricing power, while smaller competitors can't. They love certain regulation because with their power they can help shape it and create costly barriers to entry. The big tracks would have many of the same advantages and should be pretty fine, in my view, despite lost revenue.

ii) Innovation? Maybe, Maybe Not - Recently there was a shortage of swabs that were needed immediately, and no existing manufacturers could figure out how to increase production quickly (it would take a year or more). But, after creating a little innovation incubator by collaborating and sharing information,  CEO's of various companies, led by a smaller one, shared over 200 prototypes and created a plan over a weekend. In one month's time, millions of swabs were ready to ship via 3-D printing.

We often hear invention is created by necessity; Mark Zuckerberg talks about mission critical innovation. To grow with no subsidy, revenues would be a necessity, and it should be mission critical. Would the bigger companies in racing do similar? If we look at history it's doubtful, but it's not without precedent in the real world.

iii) Higher Prices for Players - With the big dogs okay, the smaller ones are not, and that inhibits competition. Signal fees for the CDI's and NYRA's of the world will probably be high and takeout will probably never come down. TVG, not owning a large track, might even have a comeuppance (despite having a broadcast, which is worth something). Look to Canada and HPI's betting monopoly to see how that works for a preview. This might seem counterintuitive, but it's kind of the way the sport is run, isn't it?


There's a narrative that when the going gets tough, companies get scrappy. They scratch and claw for customers, control costs, market better, innovate better and provide better and better product and pricing. For a good deal of them that's true. But for racing, it doesn't feel, to me, that will be the formula. I could, as I often am, be wrong; it just doesn't seem to fit this sports' model.

There are several issues I did not discuss that are obvious - smaller foal crops, fewer tracks, less employment. But for the core business, I think those three are fair-minded ideas of what a drop in subsidy revenue would mean.

With casinos already seemingly packed, and slot machines sure to follow at some point, maybe it's much ado about nothing. Predicting the future over the last few months has been harder to hit than a twin jackpot pick 6 for me.

Have a nice Tuesday everyone.

Monday Notes - Races, Racing & New Normals

Happy Monday everyone. I hope everyone south of the border is enjoying their holiday Monday.

o_crunk has been tracking some neat stats on handle of late. In effect, the number of races offered has not trended handle up appreciably; or at least how many think it should.

This seems counterintuitive - more races does mean more choice, which does mean more handle. But there are clearly diminishing returns and numerous other variables in play. One of the easiest ways to explain one large factor, in my view, is that bankrolls have not grown, and bankroll growth is needed to juice handles.

How do static bankrolls grow? Here's one way, back of the napkin:

$60M bet, offer a 5% rebate, bankrolls grow by $3M.

That $3M is rebet 5 times and, for example, handle on the following day (or days) is theoretically $15M higher.

Leaving aside the revenue and profit questions with that example - handle growth is about new money, or old money spending more money.


Something I have noticed lately (maybe you have as well?), however, are the fields. I mean, these fields, especially at Churchill have been damn good. They're deep, interesting to handicap, and provide some value. We've long complained the races are carded to dole out slot money - short fields, racing for the sake of racing - but the set over the last month or two is anything but.


Sometimes I wonder if I am behind the curve on this blog (please, no jokes), and maybe I am with my previous post about spectators not being allowed back to the track any time soon. When I open the twitter I see more and more things opening here in North America, people are being pretty fast and loose with the rules, and there's been no significant resulting spike in infections from places that opened over a month ago. If things go well - still an "if" with some of the things we see passed around on social media - maybe I'm all wet. Barring a new wave of infections scaring people into their homes again, perhaps we'll be going to the races sooner rather than later?


As an aside, meaningful of nothing perhaps (it was a different time and different circumstance), I am reading a great book called The Splendid and the Vile, about the Battle of Britain and Churchill's leadership, decision making and home and life during it. With thousands of German planes relentlessly dropping thousands of bombs each evening - some many tons which could wipe out a city block - it struck me how Londoners lived their lives. They went to work each day, and a poll taken months after revealed that 71% slept in their own beds.

I suspect much of this came from leadership direction - Churchill was not surrendering and had the citizenry ready for a fight -  but as I read it, that leadership tapped into a free people's human desire to live life. Anyway, an aside like I said, but it's a strong spirit, and going to the track - and being allowed to should trends continue - might not be as far-fetched as I imagined last week. 

One thing I don't think I was behind the curve on was Ontario Racing's curious decision to suspend the rules of racing and not allow qualifiers. Because, well, it's a qualifierpalooza everywhere else in North America. Racing continues at Scioto tonight by the way, in Ohio, where they qualified about 1,200 horses in less than a week.

As the braintrust in the province heads into today's strategy meeting, I hope they glance outside the bubble to see others have figured out this supposedly difficult chinese finger puzzle just fine. What Ontario displayed is, in my view, the opposite of leadership, it was appeasement. If it was 1940 I'm pretty sure we'd be all speaking German.

Have a nice Monday everyone.

"Into the Abyss with Arrogance"

Over the years, here on the blog and elsewhere, we've shared our concerns regarding the moribund state of the sport, particularly on the demand side. And, over the last few days I was again reminded of Multiracewagers' post here at the blog (one of the most popular posts in terms of traffic over the last year) about why he left racing for other pursuits.

"..... the absurdly poor treatment of customers is the reason I want absolutely zero to do with the sport including this twitter handle. At the end of the day, I hope you have enjoyed my unfiltered takes on the industry as it barrels headfirst into the abyss with unfounded arrogance."

Harsh words, but I don't think I'd find too many on this side of the betting terminal who disagrees with that take.

Arrogance.

We've always had a chuckle about the racetrack executive who defends high takeout rates in the guise of walking the grandstand, with the fact that no one he speaks with "seems concerned about it". This, of course, contrary to the proper lens - a sport which has lost so many customers because of high takeout means they aren't in the grandstand anymore.

More recently, I've spoken to many in the business about qualifier rules being shuttered in Ontario, announced yesterday, and talked about in Sturman's column awhile ago. I can summarize most of these discussions as "what are you crying about", with no realization that i) we don't have many bettors left and ii) we don't have many left, precisely because of things like this.

We speak to many inside the hallowed walls of racing who shout "INTEGRITY!", but only when it comes to testing, or racing rules that directly affect participants. When it comes to the "INTEGRITY!" of the gambling portion - like in this case with the lack of a charted line in a past performance - it becomes an aside.

When a restaurant owner says "I walk around my place and people love my food" when people, in fact, don't really love his food, there's a consequence. The place of business is 40% full, then 20% full (the internal polling stays great even as sample size falls) then it closes down. As someone who has tried and failed with several ventures and ideas, I can tell you, losing a business breeds humility, not arrogance.

Arrogance happens when you have, well, something like horse racing. If customers leave, as they have, it has government backing (like $200M in Ontario has); it has slots. It's easy to not pay attention to customers when you don't depend on them.

But, in my view, despite that, the callous way you're treated is something that really surprises me. It's beyond arrogance. It's a dismissal. It's like you're not even there. You don't exist.

And the sport has the gall to wonder why you left? Wondering why you're writing guest posts on a gambling blog?

I can't say I am quite as pessimistic as Multiracewagers is, but I'll leave you with his last words.

"I am fortunate to have found my lifeboat to get off the sinking ship. Good luck finding your lifeboat, the time you will need it is quickly approaching."

I don't blame each and every one of you who still read the blog who have left the sport for greener pastures. You've been dismissed and marginalized and ignored, but you've been ahead of the curve.

Have a nice Thursday everyone.

The Ontario Harness Racing Clown Show

For those of you excited to bet a little harness racing, the state of Ohio seems to have your back. Friday night, after a long Coronavirus related hiatus, a full card is set to go at Scioto Downs, with a 14% takeout pick 5 in races 5 through 9.

Glancing at the past performances you'll notice the events are pretty easy to handicap - despite the time off - because the horses have all, of course, qualified. As most know, qualifiers after time off are just about everything for harness horses, because they race so often. Without them the public is betting blind, or even worse - cannon fodder for barns who have a horse ready without anyone knowing about it.

Meanwhile, let's switch to Ontario harness racing. It's only a few miles away from Ohio but in terms of their respect for the betting public, it might as well be a million miles.

The government entity that runs racing in the Province has just this minute announced .... wait for it..... that no qualifiers are needed!

Cue the Clown Show:

• Summary of Changes: An amendment has been made to reduce the number of horses that are required to qualify. Any horse that has a clean charted line between the timeframe of February 1, 2020 through March 19, 2020 will not be required to qualify upon the restart of racing 

Wait (I just realized I just said that, but wait, again), it even gets worse!

• Any horse that was racing and eligible to race during that time will be eligible when racing resumes, provided they enter within 60 clear days starting June 5 (can be entered up to and including August 4). 

Awesome. Enter August 3rd! Try and handicap that you poor saps.

And hold it, I know I know, you're saying, "PTP it can't get worse can it?"

Yes, yes it can!

• While the temporary rule is in effect, the number of days in which a horse must have a clean charted line in order to be entered to race will increase from 45 clear days to 60 clear days.  

So, remember when it was 30 days, now it's 45, and there was a horse off 42 days with no line, that you pitched out of your pick 5 who jogged at 3-1 with half the paddock making out like bandits because they knew?

Now they can do that to you with a horse off 60 days!

This is a classic screw up by a jurisdiction that has taken advantage of you - the horseplayer - since forever. And you know what, they can't even blame a pandemic, because Ohio just ate their lunch.

Enjoy getting taken out behind the woodshed fellow customers. In Ontario at least you're used to it.

Back to the Track

Almost daily we're seeing more and more tracks open, or be given a firm start date. Barring anything too crazy from here on out, you and I will be betting and those who work in the industry will be racing at near normal numbers.

I've seen a few posts or thoughts that maybe, just maybe, we'll also be able to go to the races soon; back to enjoy the racetrack setting and the camaraderie and the sights and smells. Leading with the immutable fact that other than staying at Holiday Inn Express last night I don't know much, this seems problematic.

A WSJ article today talked about "superspreader events" for this virus, and it made for a compelling case. Scientists believe that enclosed events where many people are in close contact for a long period of time - soccer matches, large parties and yes, they specifically mention horse races - are very detrimental to beating the virus.

As time marches on we gain knowledge, and rather than earlier where people were spreading sometimes insane information that was begging to be discounted, things are definitely getting better. And on this point, according again to people who are smart (and not overly political), it just seems right, doesn't it?

If this view is indeed correct, it is highly probable the Breeders' Cup, or the Derby, the Jug, or various racing events that do draw large crowds, might not even have a limited entry attached to them for this year.

From a revenue perspective, fortunately - other than the Derby (where the day is huge in terms of seat sales etc) and to a lesser extent the BC - on-track crowds really don't add a whole lot to the overall bottom line of this sport. It depends more on you and I buying horses and betting them. For that we don't have to be at the track, we can simply watch like most of us always do, from afar.

The sport is set up pretty well from the distribution side where it can be delivered with barely a hiccup and with only a slight increase in cost. In many ways, its distribution is near recession proof and that's a very good thing. 

Regardless, I can't help but think of my trip to Mountaineer several years ago for an evening at the races (it's actually a decent place if you have not been, the hotel is great and it's a mere walk to the track). When I walked in the grandstand I immediately said to myself "where is everyone?". I dodged some construction apparatus and strolled to the tarmac where me, two barn cats and a groom watched the first. It was an odd experience.

To think that same experience might happen this summer at Saratoga, or on Derby and Preakness Day is hard to get my head around. But by the looks of it, it could be a new reality for this year at least.

Have a nice Wednesday everyone.

Tradition

Things can really get messed up during this odd time we're living in. It's just a matter of fact.

But boy, do we in horse racing love tradition. The Belmont Stakes going to 9 furlongs (not a typo, I saw a DRF guy tweet out the news) spurred some of the most-excellent diatribes I've ever seen on my twitter timeline.

We can propose to change the NBA playoffs so they're played in gyms in Las Vegas; we can talk about a quick NHL season where it closes out and four teams make the playoffs. We can talk - even without COVID issues - about whatever it is the baseball playoffs now are, where Mr. October plays in November; we can expand the NFL playoffs system where everyone gets a car!

But a shorter Belmont?!

This characteristic, I find, is pretty unique to this game.

Sometimes this is maddening - I'd love people to not love the tradition of high takeout so much - but in this instance, it's an arrow right to the bullseye, isn't it?

The Belmont is the test, the final leg, the one that has doomed so many horses for so long (unless he's trained by Bob Baffert). It has a certain panache, it's special, it's unique, it's the freaking Belmont.  The Belmont is not the Donn that has been turned into the Pegasus; the Met Mile raced in June; it's not a race where a past winner, looking down from horse heaven, is neighing, "one turn, seriously?".

I get why they're doing this, and I know you do too. But it doesn't mean we have to be happy about it. As my old pal Chip on twitter said when he tweeted the news, "it's gross".

Have a good Tuesday everyone.

Racing's Betting Customer Professionalism

The TDN has a series going about what racing can do to attract more gamblers of all stripes. Yesterday, Brian DiDonato gave his take. It's here and I encourage you to read his ideas. 

Brian's ideas have a common theme, in my view: Business professionalism.

Let's take his idea about "regulating workout information" as an example. If you look at the vital lines of data on workouts there's a good chance you're looking at some fantasy. There are workouts that are charted wrong; timed wrong; wrong horses are tabbed with wrong workouts; in some cases (like in Louisiana) workouts are not even charted.

Here's a MSW with eight FTS's - please give me your money!

Try that kind of thing on Wall Street with information dissemination; you'll end up rooming with Bernie Madoff.

The above statement, however, is simply considered a part of the game.

I had a call a week or two ago from a horse racing regulator (in this case primarily dealing with harness racing, but it was a call about opening things back up in general). One thing discussed was qualifiers - if they need to be allowed, if two months' stale date is acceptable to customers, etc.

It struck me as odd that this question needed to be asked, but it should not have been. As most of you know, the various jurisdictions changed the stale date criteria last year to 45 days - an eternity for harness horses. For those of us who have not yet fallen off the turnip truck this made no sense. And it's confirmed whenever we see a horse off 42 days romp in leg three of a pick 5 at 5-2. The customers are the last to know - hold it not the last to know, they never know - the horse schooled on Tuesday in 1:52. Sometimes I think the industry must think we're all happy to shovel our money to insiders.

Those are two examples of a lack of professionalism when it comes to customers. There are, as we all know, many of them.

In the real world - on twitter of course - there seems to be two tribes on "regulation". One team are right wing lunatics, one team of left wing ones.

But there's only one team in the real-real world - Regulate when something clearly doesn't work, and stay hands-off when it does. Racing proves again and again, in my view, that it needs a heavier hand. It needs someone overseeing it. It just can't - when it comes to customers at least - protect them as other industries do.

Have a nice Monday everyone.