Frankel Data & Racings Business Strategy of Hope

"A sold-out crowd of 32,500 people watched Frankel win Champions Day at Ascot in October" says CNN in a story yesterday.

32,500 people. That's quite a number. The Hamilton Tiger Cats would like that crowd. So would the Toronto Blue Jays.  That's a larger crowd than any NHL game. 

If 32,500 people show up at whereever in NA - which for arguments sake would be about 30,000 more than usual - each would play maybe $40 into the betting pools. On-track, takeout breeds much more revenue for the home track than off-track, so again for argument's sake, lets set the rake rate at 20%.

30,000 bettors each betting $40 is $1.2 million of handle. 20% of $1.2 million is $240,000. It can be argued that a horse like Frankel brought in a quarter million of revenue for the racetrack (from only betting).

If you add another $40 for parking, program and concessions, we have another $1.2M in revenues. So, off a back of a napkin, let's say the wonderhorse brought in about $1.5M that otherwise would not be brought in.

That sounds like a lot. But is it? I think it is.

The NFL, for example, has about $100 in per capita spend at each game. That includes plenty of cash from merchandising. People buy Adrian Peterson shirts, they don't buy Frankel jerseys. Still, the "FCI" (fan cost index) of $100 for the NFL is equal to some studies, like the one in California, that showed an FCI of $100 for racing at Santa Anita.

Ignoring television revenue one would think the two "sports" would be more on par with each other, but really they aren't. A football fan is a repeat customer. I know very few people who have watched, or attended one football game. I bet you or I can name a thousand people we know who have gone to one horse race.

Because we have so few horses that have star power, like a Frankel or Zenyatta, and there are only so many Kentucky Derby's each year, we don't have real television revenues, and our repeat customers are tiny. 

It's why - and we've gone over this many times - racing must concentrate on increasing handle as a growth strategy. Getting someone who bets $100 a weekend to bet $200 a weekend and then $500 a week, because they bet a little on Wednesday and Thursday now, is a goal that's attainable. That pays the bills: Turning the casual fan into a weekend warrior into an every day bettor.

Customers of anything - cable TV, coffee drinkers, Norm at Cheers, whatever -  have a lifetime value. It's a common metric. Football fans are fans for years. They watch a Sunday ticket, go to a game or games, have a super bowl party and buy a shirt or a hat. They buy their kid Madden 2013, and 2014 and 2015. Getting a horseplayer to play more and form racing as a habit is our Madden.

The problem with that is winning and losing. Winning something - anything no matter how little - breeds excitement and loyalty. Losing sucks. In horse racing, beating a 25% takeout is not easy. It's virtually impossible. And high takeout is here to stay, just look at the headlines.

This is one major reason, I believe, racing focuses on hope as their business strategy. We see it almost every day. The hope that a Frankel or a Zenyatta comes along each year and brings people to the track. The hope that a Secretariat film will jolt the energy back into racing. The hope that "all we need is a Triple Crown winner". The hope that an HBO series will help. The hope that somehow, somewhere, something will happen to get people flock to racecourses again and spend their $100 per capita like they do at a Raiders game.

Unfortunately that hasn't happened and won't happen. Hope isn't a business strategy, it's what rudderless ships lost in a storm cling to. Racing needs to lose the hope, and develop some change instead.