When a 'new' idea comes about in horse racing, it always seems to be an old idea that's repackaged. Today on the Paulick Report, Fred Pope talked about NYRA raising their signal fees to get more from the people who show their races. So, in effect, Woodbine or Beulah would have to pay more to show the NYRA races, as would Twinspires, Keeneland and others.
Racing usually ends up talking about splits, like somehow giving team A more cash from team B will make team A and B richer. I never quite understood it, but each month, or quarter there it is. It pops up about as frequently as a Kardashian on a cover of a magazine in a grocery store check-out line.
Reading comments, or hearing racing's bigwigs talk back and forth, it usually makes me wonder: Does anyone who makes these decisions even bet?
It started with the dismantling of offshore internet wagering (and before then at Woodbine, where getting "rid of offshore pirates" was the big policy of the day). Racing was after them (rightfully so I might add) but had this strange idea that eliminating them would get all these customers back to the track, and we'd be tripping over $100 bills on the way to the shedrow. Players said it was not going to happen like that, but that was the prevailing thought.
You knew why you were playing offshore. You were there because after twenty years of not being able to come close to beating or enjoying the game with super-high takeouts, you found somewhere that helped you. You played more, you bet more and you at least had a shot. Going back to high takeout and getting your head kicked in was never even a remote option. Some of you tried, but it got old quickly, and you left.
I think the UIGEA was passed in 2008, when handle was $15 billion dollars. It'll be about $10.5 billion this year.
Customers are not crazy, or out there, or greedy. They are perfectly rational. But racing never has never been able to understand them.
I guess that's why split changes make so much sense; somehow the customer is "not involved", they say. Shuffling the money can work, they tell you. How? No one knows, because they don't understand you, the customer.
Increasing a signal fee by 5% from NYRA to Woodbine sounds like a great idea I guess. But when the signal fee goes up, Woodbine's revenue starts going down. The horsemen split the home NYRA handle 50/50, so their share for purses goes down as well. Rebates are the first thing to be eliminated, followed indubitably by cuts to the innovation of the HPI betting platform and other customer growth and centric mechanisms. Then, horsemen groups feel that cutting off a high priced signal is better to 'force customers to bet into the high margin live pools' so that gets discussed. Some tracks may even drop the signal; California today only allows a certain number of out of state races, so don't think it can't happen.
That of course sends customers away in a slow burn. It gets them to bet offshore if they can, where
they can bet a signal they like at a decent price. Or they try and bet
the home signal, don't like it and stop coming to the track as much.
What's worse, then the obvious happens: If it's good for NYRA, it's good for Keeneland and Gulfstream and Santa Anita. It snowballs and there is a tit for tat signal squeeze, and that will benefit no one.
Taking a bigger (or different) slice of a shrinking market is bandied about constantly in horse racing. I recently was reading an article by a Harvard Business professor titled "Five Self Defeating Behaviors to Ruin Your Business" and number one, with a bullet is "Demanding a Bigger Share of a Shrinking Pie". Tweaking something to shift money from one hand to another has been tried in a lot of businesses. Usually the customer is the one holding the bag and it never works.
Shuffling the deck chairs cannot save a ship from sinking. Horse racing has a customer problem. More customers will mean more money. There's no way around that.
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