Horse Racing's Value Prop

Hello people. I hope you're all managing your lives and loved ones in this crazy time we're living in.

With more time at home, it means more blogging, which six or seven of you probably care about, so here goes.

I read a book by Jonah Berger, a marketing professor, recently called The Catalyst. If you're interested in business, marketing or perhaps politics, it's a pretty decent read. (Warning - if you're right of center you might not like some of the analogy, but the principles can be politically flipped and they're strong arguments either way.)

I caught a podcast of his, and he talked about one part of his book - primarily a problem many have in the gig or creative economy: If you are doing great work and providing value, won't you eventually get noticed; noticed because people (i.e. the market) are always attracted to value?

He, as an academic, learned he could produce great work with tons of value, but that work would get lost in a sea of other academic work. It was never broadcast.

His examples on the other end of the sphere talked about fake news. Was it great to learn (wrongly) DJT's famous words that the coffers are brimming with Chinese money because tariffs are "tremendous"? That a reporter told you the MLK bust was removed from the White House? Nope, the value people get from it is through bias, and trying to strengthen their arguments (right or wrong) but certainly not providing value. This lack of value has not stopped fake news being broadcast, each and every day on our twitter feeds.

What's interesting to me is that with just about anything - a start up, a music release, a new self-published book, art or photography, he's totally right. It's an uphill struggle no matter how valuable you are. We, if we're a writer or new business, have to have a great product that provides great value, but it's more than that. It needs a push, through marketing and otherwise.

That may fly in the face of what you read on the blog here about many of our views of wagering on horse racing. We often type or twitter - provide value to bettors and racing will grow.

Are we all wet? He's the marketing prof and I'm a nobody after all.

I think we're talking about two different things, because wagering is a different beast.

If we provide betting value to customers - deep fields, attractive bets, great takeout - it's pretty much all we need to do, because value is the giving away of money to smart people who are searching for it. What they seek, they will eventually find. Every bettor, in any game, is searching for a chance at profit. It's their 100% focus.

There's some value left in online poker (not much, but with more "fish" during the COVID outbreak some) and that has suddenly attracted more volume.

There's some value in DFS, and League of Legends is attracting a $300k tournament this weekend. Our old pal Multiracewagers sent me a note that he was diving into learning League of Legends to play these tournaments. Seriously.

Horse racing possesses a value mechanism already. It's called the betting pools.

If racing makes the wagering better, more affordable, easy to use and lower cost, we won't need multi-million dollar marketing plans; Triple Crown winners, hit movies or to be on cereal boxes; fake news or real news or news from Mars. Unlike so many other businesses, we just need to turn the value machine on, and people will come.

Questions Questions

The past couple of months have been pretty tough. I hope y'all are working through this, and that you and yours are staying safe, and doing your civic duty the best you can.

I've been chatting a lot about the changes we're seeing - more long term, not short, mainly in the business world. One area most interesting to me (leaving aside the gloom and doom which is very real), is that people are currently doing new things in new ways, because the old ways aren't available to us.

I've had someone tell me they ordered online groceries, who would not order online if you gave her a $1,000 free food coupon. She loved it and she said she can't wait to use it again.

I had to call an ISP today, and with the help center shut down, the call was routed to someone's home. He provided excellent tech support, and I wondered, if you owned this business would you want to pay overhead for a center after it's all done? ZOOM, DOCU and ADBE stocks are all up because of home work, but do they have to come down if business strategy changes?

Dining out is huge and has been growing massively in the service economy for years, and people are proxying with home delivery services. Dining in is not quite as huge, but home food delivery services like Hello Fresh allow you to cook fresh food at home.  From what I hear these services are in high demand.

Online doctor visits, deregulating occupational licensing across provincial and state lines are happening as we speak. I know many people over the age of 60 who would never think of something like an online doctor consult, and now they appear to be.

There are some fascinating things happening, right before our eyes, in my opinion. Some of them will be cost effective, they could move society forward in a good way. There is, or will be, some optimism in some businesses.


Now, onto our beloved sport, horse racing.

When I look at a path forward, unlike above, I am not finding any good vibes with the questions I have.

Will some of the smaller tracks who have closed even come back with meets?

Will slot money, with super-cash strapped governments, return just like it always has, filling the coffers for purses?

Will people like Stephanie ever work in racing again?

It's been 1 week since TuP shut down. The silence is deafening, horses are leaving the backside in droves, & some trainers are selling everything they have. The small barns are going to suffer from this. It's so sad. I'm still heart broken💔

— Stephanie Herb (@stephanie_herb) March 21, 2020

With the stock market tanked, and maybe not seeing a recovery for some time, does the foal crop get crushed so bad it can't recover for many years?

I realize these are tough times for everyone, and perhaps horse racing should take a back seat. But this is a horse racing blog, and those questions all worry me. Do we bounce back, or like so many other businesses or sectors, is business as usual over forever?

The Racing Hiatus

It's Friday - the weekend! - where the tracks are ready to fire-up some serious betting entertainment.

As we know, that's primarily not the case, and just last evening Woodbine announced they're closing up shop for the time being. They've been a staple, and as much as I am critical of their betting policy towards customers, I praise their corporate governance in keeping the track open so many people can keep the lights on.

I am not one to be critical of politicians and policy makers when there are so many unknown variables in the beginning of a crisis not of their making. And that goes for politicians I - like some of you - am not overly fond of in North America right now. Everyone's a genius looking backwards, especially in the banality of a twitter mob. So, looking forward, I think the current question being asked, "how can we close things", will need to be replaced with "how can we keep things open".  That, I believe, is inevitable critical thinking.

Racetracks are something - under current federal guidelines in Canada and the US - which can safely be open, if not now, most likely very soon. Let's hope it can be accomplished sooner rather than later, because how can we stay closed is yesterday's question, not tomorrow's.

Cangamble started the morning off with a funny today.

When horse racing comes back, takeout should be 15% max on exotics, 10% on WPS. This pause is an opportunity to take a step back, reflect, and reinvent yourself.

— Cangamble (@Cangamble) March 20, 2020

If ITP was here he'd do the Tony Soprano Bingo Gif. We know that during the hiatus this won't happen. This is priority 2,540, like it always has been. And I think we all know that racing will come back under the exact same policy before this all happened. But I love his optimism wishful thinking.

What are you doing as tracks die down, and a good lot of you horse racing gamblers are home?

I heard from one friend who is working up his database for DFS. Another - an old friend who professionally gambles that can't right now but still knows a thing or two about horse racing - is playing the races (at the tracks we have left). I am planning - if work slows - to database some of the trainer results since "Servis-Navarro Gate" to see if someone's horses are being raced cold. I'm also looking at my (so far not very good) ROI numbers for 2020. What am I screwing up?

This sure was all pretty unexpected. A few months ago in the US there were 7 million jobs offered, and 5 million unemployed. My professional gambing friends were gambling, my professional horse racing betting friends (all two of you) were betting the horses. People were hotwalking and jogging, training and entering. A few, after the indictments, were looking forward to a level playing field, at least for a little while. Boy, how fast things can change.

Have a great weekend everyone.

Fleeting Racing Wagering Opportunities

I was having a quick chat with an ADW dude on the twitter today. We were speaking about the lack of advertising of ADW's, and horse betting in general. I'm too lazy to check, but I am sure there are a hundred blog posts here on that topic. It's certainly real - it's difficult to advertise horse wagering in a number of places.

However, despite these roadblocks (and lobbying to break down the regulation should have been done), the fact remains - for racing and its online wagering, the critical mass is just not there, advertising or not.

The graph above shows (click it to enlarge) total searches for betting horse racing, month by month. Other than the Derby month, the number of people wanting to learn about betting horse racing online is a very small pool. In some months there are barely a thousand searches for "horse racing betting" and associated matches (if you look at exact, bet horse racing, the numbers are much smaller).

For a comparison, here's a snapshot of one game (daily fantasy) and one sport (the NBA).

Daily fantasy basketball has only existed for a brief time, and brand searches are higher than many broad match horse racing betting queries.

I believe this is a pox on racing's house. While initiatives like America's Best Racing have been funded for lifestyle dynamics (and this was recent), horse racing and their monopoly on online wagering didn't do the work. The monopolist's mindset (and general average cost equals price inefficiency) has ruled the day, in my view.

Why do the work when you're technically the only game in town? You do the work because you want people searching for what you're offering to increase over time. We do the work to increase pull demand with push demand. The sport never really embraced that, and even in times like this where marketing should increase to capture new markets, it does so in a bit of a vacuum.

Have a great Thursday everyone.

Flipping a Switch and Betting the Horses, Other Notes

Last weekend we saw a lot of tweets and posts from those promoting racing, hopeful that with no sports and little other gambling competition, new signups would occur and handle would see a bump. As Crunk points out, the data is noisy year over year, so conclusions are difficult.

But, regardless, should we ever expect such a thing?

We've spoken about racing's funnel, or lead capture to final customer process, before. And it's not exactly conducive to such things. Each step of the funnel, from signing up, to funding, to getting a past performance and learning a new UI (not to mention learning how to wager) is cumbersome and daunting.There's one way to consume this sport. It is what it is.

Meanwhile, over at Draftkings, where there is virtually nothing to bet, interest in MMA - almost the only game in town - was up bigly. On Sunday, they got creative with a Democratic Debate game which drew 60,000 for a free $10,000 top prize. They're trying Turkish soccer of all things, and their funnel is sound.

These folks can be nimble. If there's a game, they can try and exploit it, make a few headlines and try and grow the customer base. 

“We’re really forcing ourselves to think outside the box,’’ Robins said. “Our customers like to interact with their content. They don’t want to passively consume it.They want to have some kind of prediction or skin in the game and that can be sports, that can be politics, anything that they’re consuming that involves any kind of prediction.’’

Pivoting quickly in a super fast world is kind of important.

With racing's funnel not fine, it's incumbent to be even more aggressive with planning, in my view.

If racing wanted to be nimble we might see cross promotion of Derby Wars games, or a seeded pool tournaments with free signups, or a marketing plan of some sort, perhaps involving seeding betting pools. Even using existing jackpot money sounds like a possible marketing edge - each day one pool at one track is a mandatory. But it's just not the way the sport seems to operate.  

If you live in the US or Canada and your name is Trudeau or Trump you're getting taken out behind the woodshed as a response to your response. Warranted or not, criticism comes with the territory. But this whole COVID thing is a Black Swan event.

Like with politicians, it's easy to be critical of racing's structure and intransigence. But, capturing customers is not a Black Swan event, it is a part of daily business. Racing's response to try and capture new markets has always focused on hope, and hope is not a strategy.

Notes/Ramblings:

It appears racing will be going on for the immediate future, and from a common sense and cost benefit analysis, I think that's probably just fine. The horses need to be fed, and exercised and vetted and shod, and jogged or galloped, and backstretch workers can use a paycheck, even if the world turns into a scene from the Walking Dead. Adding a few racing officials, gate crew and judges to the venue doesn't seem to be sub-optimal. With that, we'll get to see some statistics regarding handle and interest. Maybe the worm will turn in the short-term.

In Canada, Race Night on the Score was a televised show on a Canadian sports network, run each Monday. Woodbine ponied up the dough from the slots cash, and although the ratings weren't great, it was on (until the slots cash went away, and the show went poof with it). With a dearth of sports content on all these major networks, is there an opportunity to restart it for awhile?

The dominoes have fallen in the sport, and the trainers indicted will have their day in court. On his twitter feed Sid Fernando shares a possible outcome - no jail time for some or all who have been charged with the 5 year maximums. If that does happen I am sure twitter will lose their minds, but if their cooperation helps clean up the game, and they're never allowed to touch a horse again (if this is a plea deal admitting guilt) is that such a bad result?

During this uncertain time, let me again wish your and your family my best. And I appreciate you taking the time, all these years, to read the blog and interact with me on the twitter. Have a great Tuesday.

Betting Horses & Rolling with the Punches

I listened to a pretty good betting podcast with ITP last night, linked here.

As many of you know, ITP has been betting horses for his supper for many years. And during those years there have been many betting shocks - rebates, no rebates, exchanges, high signal fees, higher takeouts, larger fields, and shorter fields. 

It probably won't surprise you that each of those shocks changes betting behaviour, which ITP lists in the pod.

• Higher rebates made him bet more, in massively large multiples. This is like marginal cost equals price point in business - produce as much as you can until profit approaches zero. 
• Exchanges were the string cheese of the betting market - a new way to consume a product, and when these are offered (at a fair price) total betting volume increases (as it did with him). 
• Higher signal fees are borne by the player.  He bets less now. 
• Shorter fields = less variance. Less variance means fewer possible outcomes, which means lower handle for him. 

If you don't roll with all of those punches, and you bet professionally, you have to adapt to stay in the game. But if you listen to the podcast, you'll hear how hard that is for many to do. In fact, at one point ITP noted that succinctly, when he said you go where there is some edge, and if things are too hard, you do something else.

When those of us who do gamble talk about (incessantly sometimes, I know) much of the above, it's because it works exactly as prescribed. When we read in the Bloodhorse that increases in signal fees are great for racing, we cringe. When we see a CHRB meeting where a takeout increase is applauded, we're confused. When we see racing step on some form of new way to bet, we wonder what in the hell they're doing. Do they want us to bet less?

ITP's pod touched on several other issues that might be interesting to players, so if you have the time (and we might with more and more isolation being asked for) I found it a pretty good listen.

Have a good Monday folks!

Sure, Clean it Up With Triple Cherries

If you want to learn something during the nascent stages of the #racingvirus, who better to turn to than POTUS.

After massive subsidies and allowing those that were obvious alchemists to thrive for years, if they can’t “afford it”, tough shit. https://t.co/qv2XLe0p3p

— Potu$ Capper (@POTUSCapper) March 11, 2020

Racing subsidies, under fire in places like Pennsylvania, are formidable in this sport totalling - last I checked - hundreds of millions of dollars. And that's recurring, not one-time revenue. There's certainly no need to go cap in hand if you're looking for revenue to "better the sport" is there?

These funds are under contract, but it doesn't mean the money can't be shuffled around. And, talk about putting governments on defence when you frame the argument to change the agreements about protecting animals.

For 25 years the sport has clung to slot money like a two year old to a teddy bear. Do you want to use some for marketing? For takeout reductions? For television exposure? No, we need it for purses is always the answer.

Well, here's another good way to use some of that triple cherry cash. It might actually work.

Have a great Wednesday everyone.

"This is Going to Get Ugly"

Day two of the big racing news is upon us, and we have some reporting from the DRF's Matt Hegarty to consume. I thought it was a really good piece that I encourage you to read, if you're interested.

Matt interviewed an unnamed racing insider, who said:

"This is going to get ugly, it really will"

This is in reference to the inference that the investigation is ongoing, and plea bargain agreements are yet to come. In other words, according to this insider, there are probably a whole lot of people not sleeping very well.

Anyone who has been around the game may know the term "brown bottle medications", which are exactly what you'd think - meds that are sold cheaply on backstretches, that are unlabelled or mislabelled. If - this is conjecture on my part - there are records (or testimony) from some who are indicted, the chances of finding out the who's and when's (according to the insider) could be upon us soon. This might end up being very far reaching.

If my speculation is correct, and the mislabelled and unlabelled gets cleared up and the users purged, it could represent a pretty huge culture change for the sport. There's been somewhat, I feel, of a wink-wink-nudge-nudge aura to the brown bottle stuff, and this changes everything. Potentially being thrown into a jail cell tends to do that.

Some I have spoken to who would like the game to be cleaner are wary that the sport will look at the top-line (the two main trainers in question) as some sort of final fix, and that it will be business as usual next week or next month.  From what we read from Matt, we might reasonably conclude that's not the case. Perhaps this is the beginning of something much larger; something most in the business would say is long overdue.

Have a nice Tuesday everyone.

Notes:

Pat Cummings transcribed Andy Beyer's thoughts on this matter today. As a horseplayer who too models and bets these incredible form reversals, it's nice to read. We're often discounted, and years later when some of these people get nabbed there's a "who could've known" vibe. Well, serious horseplayers know, that's who.

Jessica, as per usual, has a neat round-up of the news and opinion on this story via her pinboard. If you want to keep up to date, it's a good place to be.

Allow me a quick vent. Because harness racing connections are implicated, we see the Thoroughbred-Standardbred shuffle in some of the racing press ("those dirty harness guys!"). It maddens me to no end (as mad as I get, which is not very) because of two simple facts: Horses of each breed share the same DNA, and the money in both sports is green.

Racing's Coronavirus

No doubt you've heard the big news.

We'll leave aside much of the smaller picture of this development for people above my pay grade, but for the big picture, I'll take a cut at the ball.

Bucky knew a TB trainer that grinded for like 20 years at like 3% & always did right by his animals then went broke doing so. This Navarro/Servis “breaking” news that bettors knew for years hits home with barns like that because it took needed money directly out of their pocket

— Buck Swope (@ShotTakingTime) March 9, 2020

What Buck describes is the most under-reported part of this, in my view.

Trainers who cheat cause ripples throughout the entire business.

They take horses from these small time trainers - in it for the love of the horse, to scrape by a make a buck; to try and get that one home run horse - and they improve them rapidly and almost overnight.

This acts just like slander does - it tells everyone that the previous trainer was a dummy, that he or she didn't know what they were doing. It's a big red flag, signalling anyone with investment capital that they should not give horses to that man or woman's business.

It's like the public being told a restaurant owner serves arsenic in his meatballs; this certain builder cuts corners... when in fact the meatballs are made with the finest ingredients and the builder builds to code. 

What happens is these men and women - those doing it the right way - lose owners and leave. And the ones doing it the wrong way get more horses. It's completely perverse.

Cheating as alleged in the story linked above is like a virus. It starts as someone cashing a bet with "the juice" and spreads throughout the entire business - chasing away good people, investment capital, and endangering horses and the overall business.

Enjoy your day everyone.

The Horse Racing Profit Motive

I was flipping through an Ontario standardbred program recently and noticed a horse had been claimed five times in a row, with all races in the same class. This is nothing too new - for years claiming a horse and not moving it up in class was the norm, but back about a decade ago things changed.

At that time, the powers that be made a an owner move up a horse when claimed. This was done for the protection of the health and welfare of the horse, and the associations were clear on that. Expelling the "rent a horse" phenomenon was viewed as a step forward, and the powers were proud of it.

Then it all changed. Horsepeople groups and others complained - not being able to jam a horse hurt the profit of the claiming game, for the claiming trainer, so they said. Because slots were nixed, and making money was harder than it was, the regulators caved and changed back the rule.

This type of policy is something we've seen at times - maybe too often - in racing. Do something, or propose something that may help, then see it reversed, or shelved.

Keeneland trumpeted a new surface to help the health and welfare of the horse; sang the positive results....... then Keeneland changed the surface to a less-safe one, because of profit concerns. Horse retirement is talked about often and whimsically, until the bill comes.

I, like most of you, are not anti-profit, because in the real world the profit motive is pretty damn impressive. When it first took hold around 1800, its effects were mind-boggling. Economic historians will talk about it for thousands of years.

And this system has floated the boats of even the most vulnerable in equally impressive ways - 90% (standardized measures) of the world lived in poverty in 1800; in 2020, less than 10% do.

In horse racing, this motive surely works as it is designed in my stable or yours, but for the most vulnerable - the horses - maybe not so much. For them, the profit motive enabled by weak-kneed regulators and participants with little foresight doesn't seem to be working well at all.

Have a nice day everyone.