Why Isn't Racing Lobbying Against Online Sports Wagering?

A headline this morning screamed: "While Hollywood movies grossed just under $26 billion worldwide in 2011, the South American online gambling and betting market by itself generated over $124 billion in revenue that same year."

This is an industry that is technically "banned" in many locales. And it appears to be only the tip of the iceberg. Facebook and Zynga are talking more and more about social gaming. There are rumblings in Vegas about it, New Jersey and California are talking about it. The list grows longer each day. And with only 1% of current gaming happening via mobile, that is sure to explode too, as Cantor Gaming announced today.

Right now in North America, racing has as close to a monopoly on online wagering as we can imagine.

When we hear racing talking about online poker, or gaming, it is generally about getting a slice, not worrying about its threat to their pari-mutuel wagering monopoly, and the reduced flow of money to purses and profits it will cause, over time.

As ITP on twitter pointed out yesterday:
I think that's true.

It is interesting to see "Bet $50 get $50", cash back schemes, rewards points and all the rest in ADW's for racing now. It started maybe in 2005. As far back as I remember, private online wagering providers have been doing that and much, much more. That's how you grow in the Internet gambling world: By working on low margins, promotions and lifetime value of customers.  They've left racing in the dust.

Our strategy in racing is not a strategy, but a narrative: If you can't beat them, try and get a slice of their profits. That's been the slots thought since they were implemented, and it continues to be.

The problem with that, of course, is when you hang your revenue hat on someone else's business, that someone can squish you like a bug. If you cost too much and don't pull your weight, you are more than likely gone. Read: Ontario.

As well, it sounds nice to say "Hmmm, a $124B market, if we get 1% of that as a royalty, we'll make a billion or so for purses and profits". However, no one seems to take into account that you kill your core business in the process, because a competitor that offers a better value proposition in gambling always wins. This has plagued the industry for years. "If only we take 1% more in takeout..." they'd say, not accounting for a drop in handle, from the loss in value to the customer.

Online gambling has exploded because they cater to customers. Horse racing gambling has fallen back because they don't cater to customers, and they invite competition into their home, as a matter of course.

Inviting a business to compete with you that has better pricing, better customer service, better rewards, and better retention rates is not a business model, it's a recipe for disaster.

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