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.

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.

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:

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.



Before Long I Expect They'll Be Begging for Horses to Race, Perhaps More than Ever

I have a lot of fun with my pal Greg on the twitter, when, with his team up by an insurmountable lead late in the 4th quarter, he'll tweet "oh my, we're going to blow this", after a second down run for no gain. His twitter-sports team pessimism is the stuff of legend; so much so he even added it to his twitter bio.

But, doom and gloom isn't always a bug, it can be a feature. And it appears we have that about now with the economy, don't we? Jobless rates are skying, and leaving aside the altitudinous equity markets, forward looking bond markets are not complying.

We're learning that 'switching off' some things that are not meant to be shut down, and can't restart the way some seem to think they can (some blue checks on twitter surely need to take a course), is wreaking some havoc. When we add aggregate demand to the equation, it's even worse. It's not pretty out there.

As this next narrative takes hold, the question is moving from searching every nick and cranny of an economy to shut it down, to begging to find areas that can safely open up. And, increasingly this is a tough question. You can shut a steel plant off, but turning it on is difficult. The same goes for a hundred other industries. Even service industries like restaurants - because of demand - are not suited for it, as we are becoming painfully aware.

My theory is, governments will be faced with a question - what businesses are turn-key? What can we allow to happen with minimal risk, that will immediately jolt a vertical? What can we place X into, that quickly returns X+? What business is easiest to get going?

That, I think, fits the racing business to a "t".

Horse racing is turn-key. You can probably race your horse next week, at a track near you. With this agri-sector doing business, tens of thousands are back at work almost immediately. The hay is delivered, the farriers are earning paychecks, the trucks are fuelled for shipping. This is, after all, a labor intensive sport. And there is built in demand for the product.

I understand completely the loss of slots, and cash-strapped governments, and what handle gives to purses. But I think that may be overblown, the more and more I look at these other verticals and industries. Governments north and south of the border are begging for an industry like this, and have already been focusing on the agri-business (Lib's in Canada announced a massive new subsidy; Trump is sending a pile to farmers in the US). "Turning horse racing on" seems like a complete no-brainer to me. It's easy, relatively safe, and from an economics multiplier perspective, valuable to the economy.

The future is messy and difficult to predict. But I believe as governments grapple with economic loss they will be seeking low hanging fruit. I think horse racing is positioned perfectly to take advantage of it.

Have a nice Friday everyone.

The Sport of Racing is More Like a Factory Than We Think

There's been a lot of talk lately about getting things in the economy rolling. Most of the focus has been on service industries - restaurants, bars, salons, etc - but in the same vein, this is spoken about for heavier, more labour intensive industries, as well.

I read some who talk about opening a factory in stages, or a letting a pulp and paper plant operate at three quarters capacity. That not, as most of you know, how it works. There's no Mrs. Factory hitting a switch, controlling production. Economies of scale provide pass/fail decisions on operations, and if production is cut from X, something has to give. Mainly, with a plant not being operated at capacity it should not open, or it would alternatively have to raise prices bigly; and doing that, when others are not, is a profit and loss statement death sentence.

It strikes me that this lower supply strategy is something most-preferred for horse racing in some cohorts.

We want tracks to open - just not those tracks. If those tracks weren't open the industry would be better off.

We really need horses to race without lasix. If we kill off the drug there's a good chance that those horses won't race at those tracks. It's a big win.

Where do horses go to race who can't race at the elite tracks? Where do the horses go who need lasix? Where does the money go from slots, in places like West Virginia, where those tracks are. The casino money is as green there as it is in New York.

Where do all the mom and pop horsepeople go to ply their trade? Race Chad Brown horses in the Acorn?

I get the wish to shrink and make this game "better". But to me it really is just a wish.

Horse racing is an ecosystem with revenues that come from all over, through traditional (handle) and non-traditional means (subsidy). It's the small trainer in the backwoods in overalls, and Chad Brown or Todd Pletcher in $100 ties. And they are much more dependent on each other than people think.

Horse racing is a pretty unique business, but it's still a business. Without it operating at a high capacity, it'll be, in my view, a lot smaller than the C suite thinks. Sometimes I wonder if they think about the larger picture, when asking the sport to shrink.

Have a nice Wednesday everyone.

The Elusive Scheduling of Post Times, Not So Elusive?

On April 22 Brian DiDonato wrote an article published in the TDN about Oaklawn and Gulfstream post times overlapping, "With Just Two Tracks Running Post Times Still Collide". It shared a emblematic picture that angers so many, so often.


The story contained quite a few quotes about how difficult it is, even for these two tracks, to schedule off times. Tractors on the track, horses getting loose, Equibase, and each other were all blamed. The problem seemed overwhelming.

Fast-forwarding a couple of weeks, Michael Antoniades sent me an email about Arkansas Derby Day noting the off times:





GP - Gulfstream Park
OP - Oaklawn Park

Saturday post times May 2 ET

GP1. 12:52
OP1. 1:05
GP2. 1:22
OP2. 1:36
GP3. 1:52
OP3. 2:07
GP4. 2:21
OP4. 2:42
GP5. 2:53
OP5. 3:13
GP6. 3:23
OP6. 3:46
GP7. 3:58
OP7. 4:20
GP8. 4:30
OP8. 4:53
GP9. 5:06
OP9. 5:25
GP10. 5:37
OP10. 5:59
GP11. 6:09
OP11. 6:36. Derby
GP12. 6:46
OP12. 7:11. Handicap
OP13. 7:52. Derby
OP14. 8:34

When confronted with a problem the sport seems to so often anti-Harry Truman it; with bucks stopping everywhere but where intended. However, when it comes right down to it, in practice perhaps some of the problems are not as insurmountable as we think.

Thanks for the email Mike. Good job Gulfstream and Oaklawn. And have a nice rest of the day everyone.

Arkansas Derby - Off With Their Pirate Heads!

Yesterday's Arkansas Derby (ies) is in the books and Shades won both splits rather handsomely. If you have a Derby type colt, or last year's Derby colt, or any horse really, Baffert is your man. The superlatives are in plain sight this morning, so no need waxing poetic on those performances. They were good.

We'll talk about this:

Yep, that was a $42 million handle.

For last year's Arkansas Derby card, total handle was $11.8 million, with an estimated attendance of 45,000, who bet $2.33 million, or about $5 per person. Yes, this year's handle was quadruple!

Yesterday's card happened during the COVID crisis, of course, but looking at just the demand side, here are some COVID barriers to this year's handle:
  • There weren't 45,000 fans, there were zero. 
  • There weren't a hundred tracks running, where people could bet the card from. 
  • OTB's - thousands points of sale - were all shut down.
About $41 million was bet over the internet or phone, at distribution outlets (ADW's) only.

This was allowed to happen because these distribution outlets make margin. With the margin, they have invested in carriage fees and TV networks (that showed the race yesterday on NBCSN), call centers, wagering platforms, and marketing and investing in the customer through rebates.

Racing, as so often is the case, gets stuck on something - usually an anachronistic point, or a wish - rather than dealing with the reality of a situation, or the practical.We see it almost every single day with distribution outlets, or partnerships that need to be used to sell racing's product. "The splits are horrible, these ADW's are pirates, off with their heads!"..... you can recite them by heart.

In my view these have been impractical points all along. People delivering your product - into people's homes, on their phones or tablets - in new and exciting ways was never done by the sport itself. And you can't turn back time.

Racing gets stuck, year after year, with the same silly questions. After the 2019 Arkansas Derby the sport asked, "yes, but what slice of that $11 million do I get?". After this year's it's, "yes, but what slice of the $41 million do I get".

The question that needs to be asked, and has needed to be asked since forever, in my view, is: "How do we turn that $41 million into a hundred million"? It's the only way to ensure everyone makes more money.

Have a great Sunday everyone.

Price Controls for Racing - 15% Across the Board Takeout Anyone?

In this COVID world where up is down so often, we've been reading quite a bit about price controls - i.e., governments, not the market setting prices.

In one such instance, San Francisco recently capped what food delivery companies can charge restaurants in commission at about 15% (below the regular charges of 20-30%) hoping to "help restaurants".

Uber Eats and Door Dash, as you may know, charge a delivery fee as well as a commission to restaurants for their gross profit (about $8 on a $60 order). The consumer gets hot food at their door, via an app where we can follow progress, and which also allows us to pay seamlessly. The restaurants don't have to pay drivers, insurance and worry about load.

This is a relatively nascent business with both delivery companies losing money, and the ecosystem finding its feet.

Now, like with most price controls you may ask yourself - why would the Mayor of San Francisco get involved at all?

Uber, to increase demand, has been waiving delivery fees already. This means you and I can order from restaurants and get our food cheaper.

But what about the restaurants? They are paying Uber mostly the same rates (eating into the restaurants margins), but because it's not  monopoly we have someone else to fill that void. Door Dash, rather than having the consumer pay, sensed a growth opportunity giving half their margin back to restaurants, delivering $100M back to their 150,000 partners. They sliced their commission rates to less than 15%, done before any price control.

These two companies are - like Amazon 25 years ago - marketing through margin and price (not advertising), with two different tactics. One to the end user, one to the supplier. Prices have come down during the COVID crisis and delivery can be expanded, not curtailed, which (theoretically at least, this is a new market mechanism) is good for the consumer and restaurant. And it didn't take a politician to make it so.

Meanwhile, let's shift to horse racing.

What if, say congress, through this Jockey Club sponsored legislation on lasix and a hundred other things, passed price controls on takeout. No track could charge 15% or more on any bet.

Don't laugh, it's been done, in free market Australia, where the rate cap was 16%. Remember the 0% takeout Fat Quaddies? That was to give the excess (charged over 16%) takeout back to the customer. 

First off it'd be good, right? 15% is less than the blended 22% we currently pay (top line, leaving aside rebates for this example) so the consumer wins.

Would supply, like with Uber Eats stopping delivery to some areas in San Francisco with this decree,  fall? Would tracks show fewer races? Likely not.

Would demand fall? No, the prices are lower. Demand would rise.

Would tracks do this on their own, i.e. like how Uber and Door Dash pricing mechanisms changed through good old-fashioned competition? No, they would not. Tracks have had literally 50 years to do this themselves and they've moved takeout up, not down. They don't compete on price, they follow each other around setting prices, like a Standard Oil monopoly.

Should we as players support a price control for racing?

I can't do it, because I hold out hope. Hope for expanded rebates; hope for a better pricing; hope for dynamic price by bet, like lower takeout for win place and show. I hope for optimal pricing.

But, this business, running their psuedo-monopoly-average-cost-pricing model is completely unlike the nascent food delivery business. And I must admit, it's a hell of a lot better of a candidate for government intervention through price ceilings. I'm sure - frustrated like many of you are at this business - there are more than a handful of you ready to dust off the Socialist Party ID's. Who can blame you.

Have a nice Thursday everyone. 

Takeout! And More Stats; A Deeper Look at Paulick Column

The wonderful and cuddly ITP said something on the twitter yesterday about takeout:

This is in reference to the Paulick Report article where, to lower the juice strategically for customer engagement, industry-wide 5% daily rebates were proposed.

ITP's tweet can be a bit of a mind-bender for some, so a quick explanation.

These tracks charge somewhere around 4% of takeout to the ADW's which are carrying them (their signal fee). The other, say 15%, of takeout is earned by distributors.

The tracks themselves earn every penny of on-track takeout (and have similar deals with other tracks - earning the bulk of takeout - from what on-track patrons spend on out of state tracks). But, of course there is no on-track betting volume with no fans.

ITP's math rightly says: Lower takeout to 12%, Xpressbet gets 8% instead of 15%, our track gets 4% just like we always do, so we're net equal. And because there are so few tracks going, and higher payouts (lower takeout) increases churn (the churn rate on 12% juice is about 8.3), it increases total handle. Which means more money to WRD.

Because there are so few tracks going, the small tracks do have some pricing power, and Xpressbet would conclude (in a perfect world, in horse racing they might just not take their signal) 8 percent is better than no percent. 

It's a simple concept but it's not the way things are done. Nothing is very simple in horse racing, which is why proposing a rebate to reduce takeout is more realistic and effective than an across the board takeout reduction.

Notes:

The Paulick Report article regarding some statistics on marketing and customer retention was published yesterdy. I thought I'd share a few other thoughts and stats from some research.

First, some stats on why racing should be having a boost in signups, and viewership (without doing anything but racing), via the Acquisio report. 
  • OTT video streaming was up in March alone, 24%
  • 56% spent more time playing online games; Stream saw a record 20 million users on lock down day in the Northeast. 
  • March saw 35 million downloads of fitness apps; revenue from March was a record from these apps. You're at home, and it appears you want to work out (not me, but you).
  • Netflix saw 16 million new account signups. 
  • The new Call of Duty game had 30 million downloads in ten days, a record. 
We don't have April's numbers yet, but you know they're up even higher than that.

The nimbleness of some of the companies selling you things in COVID, with lead gen, demand gen, or pure e-commerce is displayed by an increase in "addressable geo-fencing" spend. Normally advertisers try and target you when you are near shops, or downtown (geo-fencing), now they're targeting you in your neighbourhood (this sounds creepy, perhaps it is, but people sign up for things like this).

Horse racing, like these companies have been attacking you in your house too - the TVG/NBCSN coverage comes into your home each weekend.

Via AgilityPR, millennials (not shocking) are the most likely to change spending habits via COVID (54%) while 49% of gen Xers follow closely. The least likely are boomers at 33%.  This, sadly or greatly, depending on your perspective, is probably good for horse racing. It's likely younger people will find something to do, while older people fall back on habits. A habit is betting on horse racing again.

I've believed for some time now that wishing for younger demos to play horse racing might be misguided, or at the very least, not optimal. There is serious pent-up demand from players who left racing for other pursuits, and from older demographics who are predisposed to play racing but do not anymore for the multitude of reasons we speak of every day.

I hope you have a great Wednesday everyone.

Packaging the Product & Saturday's Blog Piece

I could not think of a title of this piece so I settled on the above. I am quite creative. Anyhow, because I am totally bored on this Saturday morning, here's my Saturday Blog Piece.

The Virtual Kentucky Derby is next week, in place of the Real Kentucky Derby. Thinking out loud on the twitter I surmised (with national TV coverage) why they could not come up with something better to grow the sport, and/or increase revenues (or signups etc). Peter Rotondo of the Breeders' Cup (who knows a thing or two about these television deals) set me straight.

That makes sense. However, I will double down.

Rather than TVG showing haphazard races on NBC Sports on a Saturday, why not Racing Day in America, where we focus on betting. If the tracks could take a moment to work together on off times, maybe six races in an hour - with seeded pools - at three tracks for a National Pick 6 (at $2 naturally). Maybe - if Scott Daruty is on lockdown - a Draftkings or Fanduel game for an hour.

If you've got an hour or 90 minutes when absolutely zero other sports are on, and where people are craving a gamble, why doesn't racing do something to deliver it to them? We've got the NFL Draft tripling gambling revenue, we've got a gambling game and we can't do that?
Moving on in another but similar vein, PEI - Canada's smallest province with just over 100,000 people - reported no COVID positives for the eighth straight day. 26 people have had COVID on the island since February with 24 recovered. None have been community spread and there have been no deaths.

With people craving harness racing and with a COVID matrix like that, why hasn't Charlottetown Driving Park been up and running? If they sold their signal at 5% they'd likely get it (ADW's are craving content) and with no harness racing going on anywhere, they'd be making some money. Anyhow, I have a blog, so WDIK, but if we can't race in that kind of environment, we should probably never open to race again.

Notes:

With the Elitloppet in Sweden an apparent go over the third week of May (and no harness racing to bet here) I wonder what kind of volume their pick 6 would generate if offered here in North America. Carryovers in the past have allowed pools to reach US$35 million. As you may know, Sweden allows corner stores and lottery outlets to sell this bet to their citizens.

So a good friend emails me yesterday. He and his wife have two boys, aged 17 and 19.  Locked down and having nothing to do, the boys are kind of bored, so mom and dad told them (politely) to stop whining and go get a job. They listened and walked down the street to the grocery store where they immediately got hired to stock shelves; 25 hours a week at a premium of $15 an hour (lots of these places are crying for people).

The next day Trudeau came out with his subsidy to post-secondary students; $1,250 a month, but you can't have over $1,000 in income a month. So, the oldest boy has figured out he could quit his job paying $1,500 a month and get $1,250 for doing nothing, or better yet (I know the kid, he's in math so he's gonna game it) he could take fewer shifts, make $980 a month, and get the $1,250 on top of it. 

Now, me and mean ITP and a bunch of others like Mattress Mack talk about lower juice, rebates, and making racing a better betting value quite often.We talk about this not being marketing related, or hats or free beer. This is why.

People - smart, thinking people of any age, but especially millennials who are a lot smarter than us Gen X'ers were - are drawn to value. They're drawn to money. If you give them a good bet they will play. If you give them a bad bet they will not play. Sometimes, like working for $1,500 or getting $1,250 for doing nothing, the decision is easy.

Have a really good Saturday and weekend everyone.



Games Without Fans, Horses Without Numbers, Better Judging?

In the WSJ today, it was hypothesized that when sports do come back without fans, officials will be less biased and the calls they make or don't make, will be more true. This point of view is based on the work of economists written about in Scorecasting, along with studies in soccer matches:

"Their performances before empty stands in 2007 delivered the key finding of the Swedish economists’ study: Referee bias, the biggest factor in home-field advantage, all but disappeared in games behind closed doors."

There are numerous other instances where the "home field" effect was seen - balls and strikes calls in late innings, 4th quarter or third period calls, etc. There were even noticeable differences based on how close fans were to the field.

In horse racing we horseplayers are pretty conspiratorial minded. Who can blame us. With hundreds of things that can happen in a race oftentimes happening to kill our tickets, we have plenty of "woe is me". And that certainly doesn't change with the calls judges make.

Putting away our tin-foil hats for a second, though, what about our judging in this Scorecasting, Swedish study vein?

If our stewards were blind (no jokes please), meaning they judge a race without an odds board, without knowing what trainer or jockey was who; without knowledge of a carryover; the size of the purse or Grade of the race, would they show the same inclinations as sports' referees?

I suspect they would. It's just human nature.

Maybe that's why Pat "Category One Rules" Cummings is on to something. Take the decisions out of their hands more often, leaving it to the horses. Our equine athletes race without bias.

Have a nice Thursday everyone.



The Long Awaited PTP Derby Top Five

I was tweeting last night with Carly Kay on the twitter and was lamenting how much I miss Derby Top Ten Lists.

I know I am not the only one who feels this way, so I thought I'd create one, to help us all pull through the lack of a Derby list funk.

I am the first to admit I have not really paid attention to this year's preps, but I did a little research into them this morning using google, and came up with my list. Comments welcome!

PTP's Derby Top Five List

 1. Tiz the Law - Unless you've been living under a rock, the Derby Prep season has been three words, Tiz, the and law. The racy looking Constitution colt is winning everything under the sun and is number one on this list with a bullet. 



2. Temporary Hospital - I had not heard of this horse but after doing my due diligence for the Top Five List, this colt was making some headline noise. Although I did not see it, he must have romped in the Wood Memorial with a good Beyer. I suspect he's trained by Chad Brown, although when I check Chad's twitter page, all I see is him making fun of Jorge Navarro with gifs. That makes me more intrigued - he seems to want to keep this colt's hype on the down-low, maybe to get a price. 

3. Postponed - I have not seen this colt run either, but he won both the Bluegrass and Sunland Derby. I know what you're saying, "PTP, colts who win those races rarely win the Kentucky Derby", and I agree. That's why I have him only ranked third. 

4. The Baffert Horse Who Wins the Santa Anita Derby - This one is TBD, but it's surely going to be a good wager for the first or second or third Saturday in whenever.  This big strong colt will romp at 1-9 against a stout three horse field in a fast time. It'll be 33 lengths back to third. Frank will be ecstatic. Because I like to be early and not follow you lemmings, I am on this colt now. 


5. I don't have any others. I ran out of ideas. 

I hope the above helped you get through the lack of Derby Top Ten lists. I know it helped me just to write it. Have a great Saturday everyone. 


Horse Racing & Diversification

"First we have no purse money left", said the Oaklawn President on why the meet can not be extended. Projecting  little of what we spoke about a few days ago, i.e. "With no slot money, where will purse money come from."

As Crunk ably notes here, "we're going to find out how much it cost racing to decouple handle from purses."

He's probably - barring something unforeseen with reopenings - correct. We're in a very troubled time in terms of long term funding for purses.

Switching gears away from the sports' dependence on slots and missed opportunities related to this money, I've been thinking about diversification.

As you probably know, diversification is a business strategy where a company lowers business risk by having several revenue streams rather than just one. If one goes poof, you have something else to lean on.

When Sharp - who made radios - switched to CRT's televisions and screens (and invested million to pivot) it was a success, but that was in the 1960's. Canon, who saw some writing on the wall with their camera business, produced copiers using their tech, and thrived as Xerox was only in the lease market to big business.

Over the last thirty or forty years, though, where the economies and business changed to comparative advantage on just about everything (companies lower costs and offer products cheaply by being super-good at one thing) this has been less talked about.

But racing is in a highly regulated market. They're not selling copiers and they are likely (or more accurately were) in a better position to meet the rules of diversification for expansion. They have an edge.

Here are a couple that come to mind - 
  • Racing has tens of thousands of customers on account. Like DFS companies, on account monies have value. 
  • Racing has a tote system in place. While people are betting sports via fixed odds, and some users can't get bets down over $50 if they're any good, parimutuel takes care of it. Trifectas for the Masters? Try that sportsbooks.
  • Racing still has first mover status on exchange wagering.
  • Contests, Derby Wars, tournament play. 
  • Racing has its own television network (through TVG). 
There's been a lot of talk of late about what government was prepared for what, when, as related to the virus. We can probably safely say most, if not all, were under-prepared for a pandemic. And not preparing for something with limited budgets and so much happening daily is not uncommon.

For horse racing it isn't uncommon either. We worry more about a $30,000 purse being cut to $28,000 tomorrow, rather than what it will be five years from now. However, when we see slots go (potentially) poof this year and decoupling causing so many issues, isn't it time to prepare? Isn't it time to build more diverse revenue streams with everything the sport has been afforded?

Have a nice Wednesday everyone.

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