Takeout Moves, On Selected Bets & Game Theory

There was a little news this week about takeout, and most of it is welcomed for casual horseplayers.

Hawthorne (which has a mandatory pick 5 payout tomorrow) has lowered pick 4 juice to 15% from 25%. 

This 15% has also been applied to the pick 4 for the new harness meet, which starts this spring.

Also, the Meadows has dropped trifecta takeout to 20% from 27%, making that pool a little more playable for casual players. 

Both of these moves are not earth shattering by any means, but do show some good will towards customers. As well, the Pick 4 for harness at Hawthorne was needed. Players have embraced the Balmoral Park pick 4, making it a staple and seeing 400-500% handle increases, on average, since the takeout had been reduced on its pool from 25% to 15% back in late 2009. Hiking it ten points, while unsuspecting customers think they're still paying 15%, is not good business from an ethical standpoint.

Overall, these small changes in one pool do not mean much for a couple of reasons. One, rebated action will see little difference in takeouts and they are the most price sensitive, and two, beggar thy neighbor in the sport.

Both of those items are the more maddening in trying to price the sport optimally, allowing it to grow.

A pick 4 reduction from 25% to 15% for a track that charges a 4% signal fee, with 90% of handle off track, lets the bet taker take the hit. Why we don't see more tracks who charge 4% or 5% signal fees lower takeout is one of this sports' great mysteries. With 5% margin regardless the retail price, it doesn't cost the Meadows a dime to lower takeout, even if handle stays exactly the same. In the end, with rebated customers not having a price change, handle bumps tend to be harder to come by with one-pool reductions.

The incentive for tracks still lies -  through beggar thy neighbor  - to offer higher takeout bets. The Meadows may lower juice from 27% to 20%, increasing payouts to customers, but in the open market, the money rebet could go into a 25% pick 5 at Woodbine, so they get the benefit. This is why branded bets, like the 15% takeout pick 5, incentivizes 'cheating' like we saw earlier this year with Woodbine. Charging 25% for a bet everyone thinks is 15%, is shady, but lucrative.

In the end we have a prisoner's dilemma. All tracks - and the industry - will be worse off if the savings from track A's takeout reduction are scooped up by track B through Z.  But they do it anyway. 

All of the above is completely moot if the Meadows and Hawthorne are "your tracks". If you play those, and no others, you will be going home with more money each day, unless you're shut out. And that is a good thing, because a couple of points at the end of the year can be the difference between being a winner and a loser.

The Use of the Numbers in Horse Racing; Those with Substance

Horse racing has more opinions than races, and that's a good thing, since we're handicappers. But without a central office which lays out business cases, we see and hear a great deal of opinion that's based on conjecture, feel, or the qualitative.

Fortunately in some quarters we have evidence that forms an opinion, rather than using an opinion as evidence.

Today on @o_crunk's twitter feed he shared some data.

• 2015 will be the first year with fewer than 40,000 Thoroughbred races in the US since sometime in the 1960's.

• Today, almost half the races raced, have field sizes of 7 or less.

• "In NA in 1960, there were 29,773 distinct horses in 37,661 races run, avg field size of 8.95.

• "In 2015, it will take 49,579 distinct horses to run around 38,700 races for an avg field size of 7.8."

That, of course, flies (partially) in the face of the foal crop argument. The simple fact is, horses are racing fewer and fewer times. The business could spend millions, could completely alter the economics of owning, increase purses rapidly and increase foal sizes by 50%, and it still would not support 50,000 races per year from a customer demand perspective.

Flipping over to harness racing, Balmoral Park closed up shop this past weekend. The Illinois track has struggled without alternative gaming and other factors, but make no mistake, this little track was big from the betting side and important for the harness racing demand ecosystem. The track also supplies industry decision makers with a much-needed lesson.

Here are some numbers from the last several years:

With falling foal crops, fewer horses in inventory and a 49% reduction in purses, Balmoral Park's handle increased from $984,000 to $1,347,100 since 2012. $29 of handle was generated from purses in 2015, versus $13 in 2012. Their average handle beats Parx (last time I checked) and Parx can run one ten claimer for near the purses of an entire evening at Balmoral.

The lesson in this all, in my view, is that numbers are numbers and a lot of them in racing are completely meaningless, but numbers with substance are important.

Almost every decision the sport makes with regards to new fees, taxes, takeout hikes and all the rest, are to prop up purses, to prop up falling foal crops (the braintrust physically broke out into applause for a takeout increase in California to 'fix things' remember?). In reality, handle can be gained, and revenue from that handle increased, by making races and the game a better bet. In terms of foal crops, they are what they are, and increasing the foal crop number - although important for suppliers -  will in no way save racetracks. In fact, from the supply side, it's barely a ripple when we consider the way the modern sport is run.

Cub Reporter's Christmas Eve Party Report

This year's horse racing party theme was "Celebrating the one percent handle gain in in 2015", and Cub Reporter was there. Yes, folks, we have the details.

The party was sponsored by Frank Stronach and was held in New York City. Admission was free, but in a slightly odd twist, if you worked for the DRF you were charged 50 cents to use the bathroom.

Don't let this person in

Owing most of the handle gain, if not all, to American Pharoah, he was invited as the guest of honor. "Thanks AP" signs, distributed by the Zayat's, were everywhere. Spurred by this surge in handle, needless to say, happy faces were sure to be in the hall. Security was tight, however, and several folks were not allowed to enter the party, and I.D.'s were checked.

The first people I saw were Joe Drape and Sid Fernando; Sid with a craft beer of some sort and Joe with punch. Drape was reading a brand new New York Times editorial.

"It looks like we want to ban the iPad in New York State," said Joe. "We have evidence that some people are still fielding fantasy teams using the iPad and we must stop it before civilization crumbles."

Sid became ashen. The thought of having to buy a Microsoft Surface would make him want to move to Ohio, where there are few Turkish restaurants and no Park Slope.

I saw PETA's Kathy Guillermo chatting with Clark Brewster, but I think they had no idea who each other was. Ray Paulick was seen begging Equilottery's Brad Cummings to come back, "I'll right this wrong and call it the Cummings Report", was overheard. Steve Byk was seen agreeing with various people. CDI executives were seen leaving cheap tips. Stronach was telling stories about when he was a boy in lederhosen. A kerfuffle was heard at the door. It was Inside the Pylons being tossed out for "not complying".  The ABR Live team took selfies with him.

Then he walked in and the crowd cheered louder than a Tuesday night crowd at Mountaineer (hey, it was early). American Pharoah.

"Two hundred thousand dollar dong", said horse sex expert Sid Fernando, prompting Barry Irwin to tell anyone in earshot his Animal Kingdom Ascot story.

"You wuz robbed", yelled someone wearing a button with SI's Tim Layden's face crossed out. 

After everyone was settled, the first speaker of the night was NYRA's CEO Chris Kay. Chris took the crowd through slides.

"This year at NYRA we made some changes, like charging for picnic tables, increasing fees, upping our signal price, increasing the price of food, beverages, seat covers, beer, programs, parking, TV rights, admission and hidden taxes on secret things I can not divulge." Kay noted."We did that for our guests and they responded. I am happy to report that over 1 billion people went through the turnstiles this year at NYRA racetracks. "

Bloodhorse reporter Tom LaMarra raised his hand and asked "Chris, that's one in seven people on earth, are you sure about that number?"

"Pretty sure", Kay responded.

Next up was Frank Stronach's right hand man Scott Daruty. He thanked people for coming on behalf of his supreme leader and then he made news. He announced he was now running - in addition to Magna betting stuff - Equibase.

Before his first slide he asked for a plate to be passed around and everyone who contributes $1 will get to see the slide. Everyone, curious, did. They were surprised when the slide was simply a past performance of American Pharoah. He announced the money raised on the plate will go to a good cause - The Jockey Club.

Next he detailed a new bet at Magna tracks, the Jackpot Win Bet ®. "If more than one person bets on a winning horse, 98% of the pool is carried over. We think it's innovative and will help get the millenials interested in horse betting" he noted.

Then he left the stage. And this is when the fireworks started.

Daruty made a beeline for American Pharoah, grabbing his lead and making a run for the exits. He was stealing the Triple Crown Grand Slam Winner.

"Stop him", yelled someone who looked like the guy who played Kegasus.

In an instant, Scott Daruty who was stealing American Pharoah was being tackled by Scott Daruty.

"Oh God, there are two of them," fretted Horseplayers Association of North America President Jeff Platt.

The second Daruty had the first Daruty pinned and Frank Stronach reached down to the first Daruty.

"Look, he's wearing a mask!" said one of the kids from the ABR bus.

A gasp came over the room when the mask was removed. It was Jonathan Pippen!

"This man has been posing as me for months," said the real Daruty. "All of those things, all that talk, like suing Derby Wars, higher signal fees, jackpot quadruple quarefectas, some of our other strange ideas, they were all him." he continued.

"I can assure everyone here, now that I'm back, things will change. Things will get better, things will improve, so horse racing becomes the greatest game the world has ever seen."

The room erupted. Steve Byk asked the real Daruty to be on his show. Frank Stronach hugged him.  Those who knew the words to 'he's a jolly good fellow' sang them.The Zayat's promised Scott two free breedings for saving their horse.

On this Christmas Eve all was right in the horse racing world. American Pharoah was safe, people were smiling and happy. Friends were friends, not enemies. Old foes buried the hatchet. The PETA lady was arm in arm with Brewster, but I still think neither of them knew who each other was. The CDI executives even offered to buy everyone a round of domestic beer. 

What started as a celebration of the "one percent gain" ended with horse racing believing it could work together and take over the world. In 2016, the message was clear: It's onward and upward.

_____________________________________

To those who celebrate, a hearty Merry Christmas from my family to yours.

#ABRLive vs #ABWLive

I wonder if he turned into an every day bettor

Our pal @sidfernando was speaking a little social media today on the social media box. He was even throwing in some posts and thoughts from what feels like a lifetime ago.

Sid was generally focused on the tweet storm from Hong Kong recently, where local social media types were promoting Sha Tin's (maybe Happy Valley's, I get them mixed up) big day two Sunday's ago. "America's Best Racing" is never not a hot topic.

When you ask someone about promoting racing via social media, in the current form that #Americasbestracing does, you will get a cacophony of opinion. Some of the harsh words are likely warranted, some likely not.

I'm in the middle, and on my demographic horse, so to speak. 

There is nothing - absolutely nothing - wrong with promoting the sport via social media, with bands, food trucks, booze, celebrities and floppy hats. This is simply PR, like Pepsi doing event marketing with a celebrity, or the NFL working with the United Way. People seeing live horse racing in a fun, light, happy way, is not in any way detrimental.

What I think many miss, as well, is that the process is more than that. Governments hold the purse strings to racing in many ways, namely slot machines. Keeping the sport in the nation's consciousness is important; some would say vital.

I received an email from someone a few weeks ago that alluded to just that. He noted a government official he knew went "gaa gaa" over hearing about a food truck day. Seriously. Drop the juice two points and it doesn't have the same effect. In fact, the official would likely wonder why horse racing would want to lose money, because his or her understanding of gambling probably borders on their understanding of ancient Tibetan agricultural tools. But food trucks, hats, Mr. Cougar (or Miss, or Mrs, I get that mixed up, too), cool.

Government officials seeing a horse trend on twitter, seeing Richie Sambora playing a national anthem at a race, seeing a race on TV, seeing tweetstorms about a floppy hat does something. It's easier to kill something with legislation, if you never hear about it.

What's obviously missing from this strategy is what's always missing from these strategies: Increasing wagering. And that's what I think has most anti-ABR people scratching their heads.

Like them, in my view an #ABWLive - America's Best Wagering - is needed and as a stand alone entity. Promoting the game of wagering with one voice with resources, with verve, with a proper strategy (no small task) to speak to the market who bets, is something that's never been tried before. 'Go Baby Go" and "Who do you like today" were slogans, not strategies.

But the barriers to a global betting initiative like this are fierce, and it is emblematic of a wagering business that continues to struggle with an identity crisis.

While #ABRLive hums along with little interference, add wagering to the mix with an #ABWLive and we get a lot of interference. Magna and Twinspires (who would probably help fund such an initiative) and TVG would be promoting each others businesses. Horsemen, who would be asked to kick in a little slots money, would not be liking those internet platforms gaining customers because, well, "they don't pay enough to put on the show." Throw in the fact the powers in charge would want to promote wagers like a quardruple, quadrefecta jackpot to new players (or even worse, a Parx trifecta), killing them off before they even start to get interested, our can of corn turns into a can of worms.

#ABRLive exists because it can exist. It's easier to pass a food truck day than it is to pass a takeout reduction. It's easy to pass a few bucks to promote a guitar playing rocker and a floppy hat than it is to promote a contest site (that someone is suing). It's easier to hand out a free drink coupon than a free past performance, because the drink coupon is not owned by Bacardi-base.

#ABRLive serves its purpose, and it was (and is) in many ways a very strong idea. For those who don't like the strategy, I would point to #ABWLive for your fix, but that doesn't exist and won't exist. Considering horse racing is a business that runs on wagering, that's a particularly damning statement, of course. But it is what it is.

DFS, Jackpot Wagers and Riding the Market's Coattails

We noted last week an interesting betting trend in DFS: Tournament play has been falling at a pretty decent rate.

This is to be expected on a number of fronts, but primarily, and simply, it's that people have expectations regarding a wager (any wager) and when the bet, or payoffs, do not meet expectation you can have a serious drop in play, quickly. DFS - especially tournaments - is very hard and when one realizes it's too hard for them, they stop, or pivot their play. This has been exacerbated by the number of newbies who joined this year, after millions in ad spend.

Today we saw more evidence of this, when Superlobby showed some stats on NBA DFS play. Yes, shockingly, NBA play is growing, up to the point it is "indistinguishable" to the NFL. That's just nuts and something no one was predicting a year ago.

Again, it's the market moving away from big tournaments, and looking for a soft spot to land. Perfectly rational, and reason number 35,321 this whole New York Times-AG's-Politicos-regulation-banning-whatever else, was totally overblown. The market tends to work just fine and this business will not be anywhere near what some politicians have been led to believe, as some sort of tax cash cow.

Strikingly, the NBA's success - however way you want to look at it - exposes the value of a wager, or team, for the sports involved, proving DFS is more than worthwhile:

If you are going to floor teams each night, you better have a place to watch them right? Again, the market working exactly as it is supposed to work.

Flipping over to racing, we have our GPP's - jackpot wagers - that work similarly to DFS, and although they look to be slowing in popularity as more and more lose their shirts betting into them, they generally trudge along. The main difference is the expectation variable. "You can beat a race but not the races" is well known, and people, unlike those who watch a TV commercial about DFS, expect to lose. It takes time for them to figure out how much, at what rate. When they do, they slow down or stop (this is why takeout increases take time to kill customers).

If horse racing is hanging its hat on these bets being more than a tangential one, they're going to be sadly disappointed.

Racing has yet to see the forest for the trees in much of this, and that's clearly been frustrating to many who want to see the business break away from protectionist small ball.

Derby Wars is an avenue that can be used as a tool in a similar way DFS has above: If you are fed up with racing and losing, $5 tournaments can keep you watching and interested in the game of racing. Like with an NBA game pass, you keep your ADW active with a few bets here and there to keep your live video. You might watch the races for a tournament or game, and keep a watchlist and bet the watchlist. It keeps you engaged.

That's something to partner with, not sue.

Betfair is another long held example of something the industry finds really, really bad. For goodness sakes, is anyone in the sport finally going to realize they plug funnel leaks, they don't create them?

DFS is marching on, despite being disrupted by politicians and others, and its customers are acting rationally. It's why the sports leagues want to be a part of it, and when all is said and done, no matter what, there will be core play, partnered with sports leagues. Racing needs to let the market lead it, not try to lead the market. Racing can be a better game when you listen to a market instead of some alphabet group, or vested interest.

The 'Issues' Discussions

I watched the DRF podcast this morning up on the Youtube (embedded below if interested). I know the "issues" when it comes to (primarily) betting are not for everyone, but this discussion - although I might disagree in several fronts - was really quite good.

One of the parts I did enjoy was about New Jersey's foray into exchange wagering, which is supposed to go live this March. The DRF discussion was level two, not one, which is very refreshing. There was no Al Queda is using it to launder money, jockeys will be jumping off horses, the world is going to end. It was much more mature, and that's welcomed.

New Jersey's main issue with the exchange, is like all exchange issues in other jurisdictions - watering down its main selling points by i) charging too much ii) not having proper liquidity iii) not linking NJ and UK pools; short-changing the exchange, if you will.

I fear that will be its biggest challenge and I do see little way around it. The business thinks like it does, and its been doing it this way for a hundred years. Not having bots on the exchange is another short-sighted policy. Bots make mistakes which can draw people to watch, and they add to the market, which will likely be thin.

I am stoked about having harness racing on that exchange, from most likely the Big M and Freehold. Yes, cheating is always a concern, but one of the best parts of the exchange is that it acts like the bait car and shows who is cheating, or be willing to. This is where racing can not handle it with kid gloves. If a trainer or driver is willing to blatantly cheat on an exchange, they are likely the ones using that cobalt-frog juice-synthetic go faster juice, too. Boot them out. For a long time. The business will thank you.

DRF's Matt Hegarty made a strong point about the Derby Wars (which appears the DRF folks can't say by name, or they'll get zapped by someone in charge) lawsuit, which I think most of the masses miss. This revenue stream is not large and will not bring in revenue like anyone thinks it will. This is McDonald's offering a 40 cent soft drink for a limited time if you buy french fries. It's a tailgate party before an NFL game. It's Direct TV offering an app.

We play fantasy racing every day, by betting. The industry - track by track, one by one if need be - should just be partnering with these companies, and getting them to promote for them. The return on ad spend, at this point and probably for the next decade if it's so lucky, is larger than any revenue one would receive from a usurious tax of some sort.

Do I think that will happen? No. I said the exact same thing about exchange wagering to racetracks in about 2003. It's been 13 years and the business is only slowly coming around. Like I said, they don't think like that.

Notes:

American Pharoah won some sort of performance of the year award from Sports Illustrated yesterday. I will take them at their word that it was planned, but it sure sounds like a "holy smokes, they're mad let's give them something because, you know, the Triple Crown thing is kind of hard and deserves something" decision.

Dan Patch winners were announced.

HPI (Woodbine's ADW arm) has been taking it on the chin on the Harnessdriver chat board of late, for takeout hikes and a new interface, that bettors seem to dislike. Many south of the border who clamor for a "national ADW" are generally insiders, because all bettors know ADW monopolies are not going to turn out well for them. Canada needs an open market if they are serious about increasing wagering on horses (I don't think they are, so the point is moot).

There are more kicking fines up on SC, including driver Doug Mcair being referred to the  commission. 

Here's the DRF Podcast. Have a nice day everyone.

The Horse Racing Politboro

What a morning in horse racing land!

First, we have the Sports Illustrated Fan Vote for Sportsman or Sportswoman of the year that was announced today. Horse, American Pharoah, who is the first Grand Slam winner in eternity was the runaway winner of the fan vote with 280,000 of them, but he was snubbed for a tennis player who only received 6,000 votes.

Twitter blew up; worse than it blew up for lots of other things it blew up for.

Deadspin got into the act with a headline with a damning article (not on the vote, on the reaction to it). Cross promotion on my timeline had football guys who know nothing about horse racing chatting about it and linking Horse Racing Nation articles. Neither of the above are flattering, but so be it.

Leaving aside the fact that votes have never meant much for horse racing - "lower takeout" wins most bettor votes and "hey, which one of you voted for increases in picnic table prices, anyway?" happens - it shows this fan base to be passionate. But to me, to the point of being uncomfortably passionate. Some of these things turn us into "Bring Chrome Home" usenet groups.

Also this morning we have an article on Thoroughbred Commentary about another gambling game, daily fantasy sports.

And, if that happens, horse racing needs to have its lobbyists jump in and seek compensation from the government due to this new form of competition. After all, while DFS sites might have millions of customers, the workforce is miniscule. The horse racing industry, on the other hand, employs hundreds of thousands of people and deserves a cut in pari-mutuel taxes and other benefits and protections to help stay afloat and preserve all those jobs that help drive the economy.

Under that scenario, with so much new revenue pouring into the government’s coffers thanks to DFS games, there’s no reason why horse racing should not receive a break to help it maintain its share of the gambling pie.

Horse racing, which is populated by captains of industry and rugged individualists, which abhors anyone telling them who to do with "their horse", who buys horse for sometimes millions off a sheet of pedigree paper with pure risk, who wants to be left alone, who wants no federal oversight, who votes down taking a percentage of slot money for the common good, who won't ever elect anyone with any power because they might lose some, suddenly becomes a disciple Hugo Chavez.

I get that free money is good if you're the one getting the free money, but it's so far out of the mainstream of what most in this business believe, it's a head-scratcher.

I understand the passion for the business. I understand that when handles are going lower and you are being at best snubbed and at worst attacked by some outside forces it brings about even more passion. But passion can quickly turn into zealotry. Zealotry tends to not fix problems, it tends to gloss over them through that protective 'I got your back' shield, and that's not healthy for a business that needs real meaningful change to survive.

And the Winner is...... Tom LaMarra!

Yesterday was kind of an interesting day in horse racing land.

At the RTIP Symposium, the final four entrants for the "Innovation" award (and $15k) presented their ideas and a winner was chosen. Two of the three ideas were kinda of sort of betting, and one was a 3D scan that would quickly help identify lameness (and hopefully help the breakdowns).

The two betting ideas were interesting, in that they were both not really about betting.

First there was a pick 20 in a row quick pick ticket idea based on the MLB game called Beat the Streak. Beat the Streak has not been won in the 14 years since it started. By the looks of it, it might last until Justin Bieber's great great grandson is inaugurated.

The second idea. Swop Stakes, according to Scott over at the PR:

"How the game works: Players purchase “quick-pick” tickets that include runners in a series of races. While the tickets are random, players can then buy, sell or trade tickets with the “bank” or with each other, depending on whether they like what they have or not.

It's been reported that the game has 30% juice. Pennsylvania racing probably likes that part of the idea.

I don't know enough about these ideas (although the pick the twenty in a row thing is pretty easy to understand; I think the odds of hitting it are equal to getting hit by lightning three times, while getting bitten by a shark, within a ten hour window).

But it struck me that horse racing has a really good structure for a gambling game already. That's where I think I will bring in my Pocket Innovation Award Winner ®.

It's Tom LaMarra, yesterday in the Bloodhorse (pdf page 8). 

Tom has an innovative idea:

Pari-mutuel wagering is all about churn, and the largest pools on average are the combined straight bets—win, place, and show—and exactas. They are also the wagers potential fans and players can understand with minimal education. They are ripe for lower takeout rates because they offer the best opportunities for churn. Why spend money on fan development when you're in effect inviting people to partake in a game with a flawed economic model? Why not fix the model first and give people another incentive to become involved?

No, there is no mention of food trucks, the English Beat, a band that only AlanLATG knows, JACKPOT BETS, buses, Miss Cougar's or Mr. Cougar's (not sure about that one). It's about upping churn and making racing more enjoyable to play as a gambling game.

Congratulations Tom. As the first Pocket Innovation Award Winner ® you receive a 1979 Meadowlands program featuring the great Niatross, and guaranteed 2014 program pricing at all NYRA tracks.

Notes:

In the TDN there was a look at the mistake horse racing makes when it holds back on new ways to gamble on the core sport, the release of actionable data and other protectionist policies.

It's interesting to read the Santa Anita exec talk about contest and fantasy horse racing like a normal player, rather than what we've seen talked about from upstairs in that company.

Donald Trump. I have nothing to say here, but I want to type the name out because it might help with traffic from the web crawler thingies.

Jeff Gural has the right stuff. 

I really like the trainer comments addition to the Meadowlands race reviews. Handy, interesting and worth reading.

Going For the Gusto Versus the Grind

There was an interesting graph posted today by a gambling industry analyst. It shows the reduction in play for larger tournaments in DFS.

The big GPP tourney's at FanDuel & DraftKings continue to shrink - I think mostly due to shift in player preferences pic.twitter.com/hWr8I0be5A

— Adam Krejcik (@akrejcik) December 7, 2015

Sure New York and Nevada are no longer taking customers from the start of the year, sure the big marketing push for week one was going to show declines, but like Adam notes, this looks significant. Players in DFS are moving away from harder to hit GPP's (lower hit rate, higher takeout bets) to head to heads and 50/50 play (higher hit rate, lower takeout, more of a grind betting).

This is pretty clear evidence of betting behavior  - winning is important and winning infrequently is not much fun. Moving to pools with a chance of winning more, with a longer term chance at profit, is perfectly rational behavior.

That market is becoming more and more mature.

Interestingly enough, in North America, the exact opposite has been occurring in racing. Harder to hit bets have grown in popularity. However, it's hard to discern anything too concrete from that, really, because the pricing mechanisms in North American racing are so bastardized (high win takeout, exotic takeout heavily rebated etc).

Overseas for horse racing, the grind is horse racing. Pricing via books for win betting only is where the action can lie with those scraping out some margins. New entrants to a space, like Palmerbet, see this in that mature market:

"Most of our clients have four or five accounts and are becoming very price sensitive," Grant says. "But we're a niche player, we're nimble and we're able to adapt to trends in the market ... which I think some of our competitors would struggle to do," Grant said.

To any new player sound advice is usually "bet win" and try and profit like that. Overseas with exchanges and 5%-8% overround's it's easier; over here, not that easy at all. Exotic betting is where most every day players find holes, but for the casual or new player (i.e horse bettors like those DFS players who are pivoting from GPP to every day play as in Adam's graph), it's a quick trip to the ATM and not very much fun at all.

Churn Killing Bets are Approaching the Absurd

Gulfstream Park announced today they are starting "Rolling *Jackpot Super High Fives". Yep, you read that correctly.

"The Rolling $1 Super Hi-5 will have a new twist that has the potential to generate jackpot-size payoffs. The innovative wager with a $1 base will be offered in every race, challenging the bettor to select the first five finishers in exact order. The new twist requires the bettor to hold the only winning ticket in order to cash. If no one holds a unique ticket or if there are multiple tickets with the first five finishers, the entire pool will be carried over to the next race." 

* So, they sent out some sort of correction of the above - the high fives will be rolling, but if multiple people hit one, they do get paid. The rest of this piece is about generic hard to hit bets and churn.

Gulfstream Park now has rolling high fives and a jackpot pick 6. As most know, these bets are based on very high takeout, which almost eliminates any churn. Players like you and me may play this when it's carried over high enough, or on mandatory day. However, that's not the point.

The point is, the casual player can never be attracted to play horse racing more than a few times a year if he or she goes home broke every day.

Gulfstream is encouraging the casual player to come to the track and bet super high fives which are almost impossible to hit. Then they hope this casual player - after losing each race chasing a pot - has enough left over to chase another almost impossible to hit bet, the Rainbow Six.

@racetrackandy @GulfstreamPark @MDHorseRadio I thought "as long as they don't do THIS, the bet will be OK". They did THIS. SMMFGDH

— Mike Dorr (@mikedorr77) December 4, 2015

Compare that to the 1970's and 80's, where your casual player might bet a few bucks to win each race, or an exacta box, cash and have a little back to play the next race. If they got good enough at the craft, they come back the next day to play, with a little bit of a bankroll.

This type of thinking puts a governor on growth; on attracting new people to play. Losing money on hard to hit bets is the lottery, not horse racing, and horse racing can't out-lottery the lottery.

Compare this to a real gambling enterprise - one which track execs and horsemen groups in this country seem to have an issue with, Betfair. From their annual report:

"Racing knows that customers who go racing, and a) feel they had no value for money at the racecourse, and b) don’t win a single bet all day, don’t have much fun. They may not come back. In just the same way, we know that the least valuable customers to Betfair are the ones who lose all their money quickly. They go away and never come back. So, we are happy to take less off our customers per bet."

Churn killing bets can and are being used for promotion and that's fine, but too many of them send more and more people home broke, over and over again. That strategy, for a gambling game, will never work. I think most in charge know this to be true, but they do it anyway, and blame handle losses on contest sites, the weather, or whatever is in the news that helps their narrative at the time.

As one racing person said to me once regarding things like this: The industry can't look further than the end of their nose. 

Saving Racing, by Eliminating Customers One at a Time

Well, the big news today is that racing is saved.

"Stronach" tracks have sued contest site Derby Wars.

The suit alleges DerbyWars contests are a violation of the Interstate Horseracing Act (IHA), the Racketeering Influence and Corruption Act (RICO) and California Business and Professions Code and inflict “intentional interference with prospective economic advantage.”

Shutting down this scourge will hopefully increase handles back to where they were, inflation adjusted, a decade ago. I'm sure of it. Horse racing is saved.

This is on the heels of other big entity decisions to save horse racing, like takeout hikes at Churchill Downs, signal fee hikes in various jurisdictions, and ADW taxes in some states.

Tongue in cheek? Of course.

Takeout hikes are anti-customer. So are signal fee hikes and ADW taxes. Add to the list the suing of a contest site that patrons (particularly new ones who are scared of the pari-mutuel system) enjoy, and use to qualify for NHC events and Breeders' Cup betting challenges.

Horse racing is the only business in the history of mankind who thinks it can grow by eliminating customers.

Derby Wars and other sites represent the contest space and do it well. The Breeders' Cup Betting challenge this year realized over $3M in live handle at Keeneland (at about 18% boat). The NHC is well-attended and keeps players engaged. It offers some free press for the sport. This is all part of a customer ecosystem.  It appears Stronach believes this customer base needs to be shut down.

Maybe it's legally right, I have no idea. The US legal system could probably sue a catholic priest for assault by holy water and win. But it's, in my view, fundamentally wrong.


Horse racing needs partners, its customers need choice, it needs advertising and resellers, just like any other business does. Eliminating such entities and partnerships angers customers and encourages them to do something else. That's the opposite of what this sport - and for that matter any sport - needs.

Disclaimer: I know and like Mike and Mark, at Derby Wars. However, I would feel the same way if Derby Wars was run by anyone.

Switcheroo

There was an interview with CJ from TimeformUS on the Paulick Report yesterday. It was pretty well done. CJ is an interesting dude, and what they are doing at TF is never uninteresting either. One comment caught my eye, however. which was related to old versus new ways to handicap a horse race.

Handicapping can only be done with paper and pencil, and your knowledge, experience, and most importantly, your observations and interpretations of the horses involved in any given race.

Leaving aside the fact that using Timeform (or other new ways to handicap that looks different than a printed DRF page), still allows you to use your knowledge and observations, this comment is prevalent in the space.

When we pull a switcheroo from the printed page with 8 horses in front of you, in your hot little hands, to something different, it eliminates what we're used to.

When I handicapped for years and years (especially in harness racing) I felt if I did not see the race on one page I was missing out. I wasn't seeing the race, I was not seeing the whole field and making my interpretations. What I learned when I finally branched out to other tools is that the exact opposite was true. I was missing out on almost everything.

Today I do not have to "see a race" with preconceived biases in my handicapping, I can see a race visually through things like a pace projector.

Today I do not have to be married to what is on a printed page, say, seeing the top three from last time and wondering if they are good or bad horses, I can click a mouse and see a figure array of what they ran, and have run since.

Today I do not have to be married to the trainer stats listed below the horse, I can datamine what I want, in a certain time frame, or hundreds of other factors most with a mouse click.

Today I do not have to write down the odds at open on my piece of paper, to see the early money, now the odds are updated beside my horse in dynamic PP's.

Guess what, no, the above is not pen and paper - it's better than pen and paper.

Changing the way we do things in life is difficult at times. I like Excel 2005, I like Windows 7, I liked growing up in the 1970's and kneeling on the hump in the back seat instead of buckled in. But the alternatives tend to be a lot better than what we're used to. Most just have to be given a chance.

WEG's Jim Lawson Interview Shows Where the Customer Stands

In Dave Briggs' piece on TRC today, Seven reasons Woodbine might have a bright future were examined, through an interview with WEG's head honcho Jim Lawson.

Almost three years ago now Woodbine and racing in Ontario was given an ultimatum: Bring in more customers, or else. From the Chair who was running Horse Racing Ontario at the time:

"Everyone, collectively, has to think about how you attract bettors and customers to the track and regain interest in the industry. I said this yesterday: two years ago if we had one of these (industry consultation sessions) I don't think we would have heard 'customer' or 'horseplayer' mentioned. It would have just been about how much money there was and how we were going to divide it up."

So, at least some of these seven reasons were likely customer related, right?

Here is the only snippet in Dave's piece where the customer was mentioned.

"Higher commissions imposed by the Breeders’ Cup forced Woodbine to increase its takeout rates for the day, which, despite being well-publicized, rankled some of Woodbine's customers."We were faced with some tough decisions. Do we not carry the Breeders’ Cup, which our customers would not have appreciated? Do we go ahead and take a loss? To me there’s something terribly wrong about operating a business of this size and having a Breeders' Cup weekend where we’re going into it knowing we’re going to take a loss on the wagers, or, thirdly, do we try and increase, at least for the day, our pari-mutuel commission takeout? That is the route we took and had to take in order to avoid a loss on those pools."

There you have it. The only time the customer was mentioned was when Woodbine increased the takeout rate on them.

Four years ago many people in the province held some hope for the sport, from the customer demand side. That hope has been replaced by the same malaise and frustration that has plagued the customer base for decades. The simple fact is that nothing has changed. In fact, if you are a customer of the sport in Canada, it might very well likely be the worst it has ever been. No exchange rate driven handle increases can gloss over that.

Derby Wars, Exchanges & the Fight For Lost Customers

Today we saw some news from New Jersey, where it appears (finally, unless something happens) exchange wagering will be offered to residents of that state, sometime in 2016.

Meanwhile, back at the ranch, Derby Wars (and others) were looked at in an excellent piece by T.D. Thornton in the TDN.

There's a lot of chatter about both betting systems; cannibalization, cheating, not giving anything back. Pick one, or a few of many. It is what it is.

The first rule, since we can remember (I think it started in North America with beaver pelt sales), is that when you lose a customer, you find out why. Did they not like your product, your hours, your store, your staff? From those answers you can likely improve your sales.

When it comes to horse racing, not nearly enough has been done in this vein, but from what people speak about, and using a little logic, we can make an educated guess. Lost customers were tired of losing, the product was not a good enough gambling product, pricing was too high, the delivery systems were lacking (four ADW's to bet all tracks due to protected signals), etc.

Derby Wars and Exchanges are two avenues that can help get them back. Derby Wars through offering a casual game on a Monday (interestingly enough I played the new harness game on Monday and bet a few races in the pools because of it; I never play Monday), can entice some to play. It's a completely different experience when compared to making a pick 4 ticket.  Betfair offers lower juice and a new way to play the win pools. Losing too much on jackpot, single ticket, pick 30's at 57.5% juice? Ready to give up? Here's something for you to try instead.

Horse racing insiders often complain there is not enough marketing money being spent. That's probably true. As everyone knows, Draftkings and FanDuel have spent the GDP of a small country on marketing recently. That marketing is about the pro sport in question; it markets for the NHL, NFL, NBA and MLB, and does not cost those leagues a dime. That's why major league sports like the avenues so much, and even with the silly press recently, are reticent to cut the bait.

Places like Betfair and Derby Wars do that, as well. As Mark Midland alluded to in the T.D. Thornton piece, they are operating at break even and sinking money into marketing. Betfair spends oodles on marketing - they will likely operate at a loss in Jersey for some time -  and that only can help Monmouth, for example.

What alphabets can you name that are currently operating at a loss for the sport?

Betfair, Derby Wars and others like them are speaking directly to lost customers in a way in which the tracks are not, and can't, and are using hard dollars to forward that discussion.

Betfair came to North American racing long ago - about 12 years or so - and was rebuffed at every turn. Derby Wars, as we saw at last month's CHRB meeting, drew the ire of old time racing. It's time to embrace some new avenues, because when it comes to lost customers, it is innovative and fresh delivery systems like these which can speak to the lost markets.

In business parlance the partnership with resellers acts like an accretive acquisition. That's a good thing and it's something that racing cannot do alone.

It's More Than Just Being an Immature Market

Some of you might have been following the lack of effort drive in last week's TVG prep at the Meadowlands. The New Jersey judges responded by giving driver Brian Sears a 15 day holiday.

Meanwhile back at the ranch, if you look at the entries for Saturday night at the Big M - 7 days later - there's Brian Sears driving Bee a Magician in the TVG Final.

I'm not sure why he is driving. Maybe President Obama knows.

Conversely, let's look at Aussie racing. I could give you a litany of "lack of effort" fines and suspensions, customer and bettor protection decisions, etc. But it's much easier than that.

Here's a stewards report from a few days ago. Just an average day at the races.

All trainers with multiple engagements in any one particular race were questioned in regard to their tactics.

 Stewards questioned trainer R Veivers in regards to the performance of EMPTY ENVELOPE. He said that he had adjusted the gelding’s training regime in recent times and felt that this was a contributing factor for the improved performance.  Stewards noted Mr. Vievers explanation and outlined they expected the horse to race in a consistent manner.

Connections were advised that MAJOR LEXUS would be placed on its last chance to race truly and trainer M Butler was advised to take corrective measures.

There are many more examples, testing procedures, vet reports, etc. This is protecting the public and the game from monkey business, it's about giving bettors ample information about the health of a horse, intent, and making sure the participants follow rules.

Here, I have no idea why Brian Sears is driving tomorrow. I see chat boards about "it's none of anyone's business how a horse is raced." I hear "bettors need to stop whining." and "if you want to drive a horse go buy one." No insider seems to want to talk about it.

Overseas especially - Australia, the UK - this is taken seriously and there was no government decree making it so, no AG's, no lawyers. It was just considered proper business in a business that had to compete from day one, or die.

In Australia, telling a customer about the intent or health of a horse is a part of the game. Here it's a nuisance. Pricing a bet - here done by a formula that would make Karl Marx pause - was never done like that overseas. They had to compete, so pricing was done with those wacky supply and demand curves. It's why there are no "TOC's" leading the pricing changes, no states taking a percentage of the cut, no price floors. "Will people bet more football instead of racing if we do this", yes, OK then we won't.

People like to wax on about differences abroad, and at times it borders on the silly, but it means so much, fundamentally. You are seeing a crowd on Melbourne Cup day, you are seeing $15B Aussie dollars bet in a country with a smaller GDP of Los Angeles, you are seeing some handle growth in places like this, because it's a market that's had a lot of practice being a market. In a lot of places two or three centuries worth.  It's not about TV commercials or food trucks. It never was.

It's probably a whole lot more than a business being allowed to be a business, however.

What we see here in North American horse racing is something that is thrown some slot cash or government protection and tolerated. It's a business for each state to play footsie with, to use as it chooses, and to disregard as it chooses as well (likely soon in more slots states).

It's not only racing, of course. Penal regulations are being talked about in each state for "daily fantasy sports" as we speak too, which will cause it a good deal of harm, and might very well end up killing its business model. The states, one by one overregulating that internet business, are doing just what they did to racing and customers of it 100 years ago. The issues we all see today like signal caps, taking cash out of margins, ADW taxes, Internet betting bans in Texas and Arizona and Michigan, stopping places like Twinspires from advertising, were all borne from zoot suit politicians in a different time.

The bottom line is, those who want action regarding reversals of form, drivers or jockeys not trying, vet reports, and all other things so many around the world do as a matter of course, are left forever wanting. The gambling market in North America, whether it about fielding a team or making a superfecta bet, is not about us as a customer. It's never been about us as customers. That's not changing anytime soon.

Getting Things Done the Right Way Is Difficult

Satire works when there is a grain of truth to it.

Today I read something satirical that made me laugh. A petition to the Attorney General of New York to stop bingo in the state.

This petition has the formula down.

Introduce something that people are doing down the block, show how said activity is a "gateway" to something more sinister (without evidence, of course), add a little horror like "theft and murder", and voila, you now have a full-blown crisis.

This is a New York Times editorial waiting to happen. Get Drape on the case.

This represents so much more, though. And in horse racing it's taken to the nth degree because horse racing has little leadership, or structure to get to brass tacks. It's a New York hyperbolic DFS debate on satirical steroids.

Lasix articles abound and they are filled with so many of the same tactics, it's astonishing. Field size is down, because of lasix use. Starts are down, because of lasix use. Breakdowns are up, because of lasix use. If you sign this, we can ban lasix and these things will be fixed.

This weeks "issue" is computer wagering. I have read this week that these computers are betting at the half. They are responsible for late odds drops (but conveniently not late odds rises). They are probably being run by Matthew Broderick and if he is not stopped, a superfecta algo is soon to bomb Togo.

If 'computer robots' are betting at the half with an ADW feed, they are probably doing a hell of a lot worse than someone by hand with an ADW feed (there are hundreds of them) punching $2,000 by hand on that nice lone speed at Finger Lakes with the easy lead.

Considering the ADW and off-track betting dump is about 80% of wagering at the bell, and CRW is at most 20% of it, we're all the other 50%; maybe we're the smart ones.

As for lasix, well if banning it can cure all of racing's horse ills, falling foal crops and starts per year and more, holy moly, Europe's field size must be growing and massive! Pop the champagne, let's have some crumpets.

Yes, once a little old lady slashed the tires of someone who beat her at bingo. But she might've done the same thing if she was beaten at checkers. Yes there are issues in horse racing too, with tires being slashed everywhere in some form, but it doesn't mean the crisis du jour is the culprit.

Racing, in my view, will move forward with reform when the reform makes sense, and has some sort of logical, fundamental business evidence behind it. Takeout studies done by smart people say what might be tried, there is likely truth to the fact that horses are on lasix who don't need to be, synthetic tracks (we had to get rid of them because people like betting dirt, and handle was falling, you know?) and other items, too, show some empirical, logical merit.

Good policy comes from good research and good decisions, not from scaring people and whipping them into a frenzy to support your pet project. Maybe one day, not soon, but one day, things can get better.

Horse Racing Business Fundamentals

Whenever something goes wrong two things invariably happen:

i) The masses want someone to blame for it, even when force majeure is the culprit

ii) Some antithesis of growth policy gains steam

Horse racing, because handle is losing more and more volume most years this century (when inflation is factored in, almost all years), has had their fair share of some major anti-growth policies.

Horse racing handles are down, so it must be Derby Wars!

Horse racing handle is down, so we should stop accepting bets from computer wagering!

Horse racing handle is down, so we need to eliminate rebates!

Horse racing handle is down, so we need to increase margins!

Fundamentally none of those things make any sense whatsoever.

The NFL, NBA, NHL, Nascar, PGA Golf and MMA all love the Derby Wars type platform. Studies have been released showing how they engage customers to watch the sport more and more.

Computer assisted wagering - conditional wagering, looking at overlays etc and batch betting and dutching - adds money to the pools from people who will not sit at their computer all day betting. It attacks the tech demo.

Horse racing takeouts are too high to attract many, and a large gambling demographic with a proclivity to gamble will not touch the sport. Offering lower takeout to them, and me and you (through ADW's that offer them), helps increase handles, not lower them.

Joe opens up a Flapjack Shop on Main. For outreach he decides he is going to sell some of his delicious flapjacks on Saturday morning at the Farmers Market outside of town. He makes little on the excursion, but he hopes people come into town and think about brunch at his restaurant.

Joe's flapjack shop has customers who come in for lunch from local businesses. He only offers cash as payment, and because these people are working on expense accounts, they keep asking for Visa. He decides to implement an Interac and credit card payment system.

Joe sees McDonald's coupons in the mail. He decides to offer coupons, too. 10% off if you come in on Tuesdays and some buy one get one free offers. He looks at his margins and decides that he can lower the price of each flapjack by ten cents, too.

Joe sees his business rise, because the things he did aren't rocket science, they're proper business fundamentals to growing his business.

If Joe does not see his business rise after all that work, he won't stop doing them and expect things to get better (and he sure as heck ain't going to raise prices and put barriers in front of his store to welcome fewer customers). At that point he will look deeper at his pricing, his product, how courteous his wait staff is and his location.

Horse racing does not want to look at their pricing and product; they're offerings, systems, or how they fundamentally do business. That's too hard.

They want to look for scapegoats for the problems. And when the scapegoat they want to kill, or inhibit, is a fundamental business truth, they're only making things worse.

Skill v. Luck is Difficult to Illustrate, Because Professional Gambling Is Boring

The peeps were chatting about "skill vs luck" in pari-mutuel games today, in this case daily fantasy sports.

This, as we've seen, with statements from the press and others during this debacle (in my view, that's exactly what this is), is often misunderstood.

Winning long term at a game that involves skill versus luck is not sexy. It's not something you can "show" on a short youtube video. It's not something you can show on a TV commercial.

It's a grind, and it's really boring.

Picking a player that will likely do well, with some confidence, is not difficult. Todd Gurley should have a good game against the Vikings. Tom Brady should be able to score some fantasy points against Washington. Anyone should score some points against the Saints.

In horse racing, we can all pick winners. In fact, the odds board picks the top two places about 6 or 7 of ten times.

Look at any graph at odds levels with low variance choices and expectation. It's a pretty smooth curve with the takeout your loss level.

So it's all luck right, or fraud, like early on some newspapers led you to believe?

No. The skill in any game lies solely on the margins.

It's what you do with your choice - ticket construction, sound betting philosophy - that tends to matter. It's the one of twelve times you successfully fade Todd Gurley or the chalk in a race that tends to matter. It's the 1% ROI you receive on these bets over a year that tends to matter.

You can't follow that with a camera and a big plastic check. It's completely boring.

The skill to win at racing, or DFS is Warren Buffet. After a short period of time some of his investments look silly, and he doesn't have the flash of a fly-by-nighter that just scored a check because she wrote naked puts on cocoa before an unexpected tropical storm. But when the cameras are off, this boring, ugly grind wins.

Managing the boring, sticking with a plan, not getting caught up in the day to day trying to look like a winner, is the definition of winning at a skill game.

Marketing?

Perhaps you've seen a commercial recently with "Brad".

Out of the thousands of players who play and have fun with DFS partake in unregulated gambling that everyone with law degrees seem so upset about, Brad, with "$349" in winning teams was chosen as a poster boy.

Awful Announcing found Brad and asked him a few questions. It turns out Brad is really a regular guy who plays some tournaments with friends for fun, and just happens to have won a couple of dollars.

That’s one of the main reasons my winnings were $349. To be completely honest, last season was my first season in fantasy period. I had a lot of fun and kind of got bit by the fantasy bug. Then I started playing DFS with FanDuel primarily. So probably just a little bit over a year ago. I don’t play $25 buy ins to win a million bucks. Mainly just these fun games between me and my buddies just to make the season more interesting.  Or I’ll play some buddies in a 1 on 1 heads up $1 game, because if I lost it in the week before in a season long game I can play then for getting back at them, or maybe I’ll lose again. It’s that kind of thing as opposed to using it trying to make money. A lot of people on those commercials, yeah you won $2 million bucks, you are gonna be sitting there every week putting in 900 lineups and researching these stats and doing that. I’ve got a real job and a real life outside of playing games on the internet. It’s just a lot more fun for me.

How's old Brad doing now?

 Those commercials were from back in April and that $349 was real, and I can tell you that as of a few days ago the actual number is $650. Like I said, I’m not blowing chunks of wads, I’m still the regular guy.

That's real marketing.

A newbie with a few buddies play a game. The game is fun and with a little work you can win a few dollars.

We read a lot about today's gambler and most of it is true. You have to work hard, study often and dive into a game to succeed. However, for the masses, they mostly just want to have a little fun and have a chance to make money.

FanDuel, DraftKings and other games like this offer that, and they're not blowing smoke. They don't scrape everything out of a pot. They don't nickel and dime at every turn. They don't make the betting experience painful (although AG's and some states are wanting to do just that). That's a big reason why they've succeeded thus far.

Horse racing, on the other hand, is an older game fighting an old tagline: "You can beat a race but you can't beat the races." "Bradley C" knows that and marketing this same way to people like him is a non-starter.

Changing that stigma, that tagline, will take reform and a major cultural shift for the sport of horse racing. Thus far that has been elusive.

In Harness, Culture Changes Are Hard

As most of you who follow the blog know, we've spoken about lack of efforts by harness drivers with odds-on horses since its inception. For Thoroughbred friends, this is an issue because harness horses do not have running styles; try or no try is in the hands of the driver.

It's a real issue for a few reasons:

i) A billion or so dollars is bet each year on the sport, and bettors need to know they are given a fair shake.

ii) The judges have been reticent to do anything to participants when it occurs

iii) It makes the sport look insider based, and insiders feel they can do whatever they want, with impunity.

Yesterday's drive on Bee a Magician at the Meadowlands finally resulted in some action. Driver Brian Sears was given a 15 day penalty. This is not 15 days of course, he is not a regular. What it is, is a suspension for next week's stakes card.

Already, insiders have begun griping about it. That's what happens when a culture change begins - denial, anger..... "this is our game, how dare they!" Some are so dumbfounded they think it must be some sort of joke.

It's not "their" game, of course, it's the public's game - through their betting dollars and slot machines.

There's a simple lesson to be learned from all this: If you have an odds on horse, you have to make an effort for the public. Hundreds and hundreds of thousands of dollars are bet on a race and those dollars are bet based on form. That form must be raced to.

It will take time, because like with whipping, or kicking, or late for lasix, you are asking people to do something different. As well, the judges have to be consistent and levy fines when warranted. But when you think about it, it's really not very complicated. It should've been addressed long ago, and that the only person to address it is a man with a racetrack - not judges or commissions - shows just how far gone this sport really is.

Reactions Sure Are Different When Things are Popular

Harness racing was popular at one time, not really that long ago.

That popularity helped push forth some interesting vibes from time to time, like the night when the crowd went crazy and rioted at old Roosevelt Raceway when a race was made official that should not have been. There have been many "riots" in some form in racing over the years. Attention-seeking politicians, every day folks, newspapers, all paid attention.

Now, it's just ho hum.

Last night there was an elimination race for the TVG Trot at the Big M. As most know, elimination races can yield some wacky results because the drivers don't drive - even though they are supposed to - for the betting public but for the trainer. Not all drivers, but some.

This one was arguably one for the ages, with heavy favorite Bee a Magician heading to the back of the bus in soft fractions.

There was no riot, nothing more than griping on social media, a ten or twelve page thread on a chat board. This is old hat now, and the masses know nothing will be done about it. Shut up and bet; or in recent history, shut up and don't bet.

Flipping the popularity switch, with people picking a few players for a football team and throwing in $3 to see how they do in a tournament, it is the exact opposite. 

"Evidently conflating banning DFS with saving the world, AG Eric Schneiderman’s statement concluded in a blaze of self-importance: ‘Today we have sent a clear message: not in New York, and not on my watch’. The hubris was laid on so thick, you could almost taste it."

Since the companies in question are fighting it, and didn't cower in the presence of the words of the all mighty Schneiderman, he upped the ante and is going after the banks. 

DFS popular, racing not popular. DFS political hay, harness racing political nothing.

Someone going to the back with a heavy chalk with hundreds of thousands of dollars bet on the outcome is no big deal. It's buyer beware. It's 'part of the game'. Go tell it to a fencepost. Meanwhile, the world is ending because people are playing a game they've played for 50 years, but it's now done in one spot over the internet.  It's like this because very few people are watching one of those things, and are engaged in the other.

An Historical Look at Racing Protests

Since the 60's - probably the 860's - protests have been frequent and ubiquitous; well in the free world anyway.

Some are very socially important and some, well, kind of aren't.

This morning's one might fit into the latter category. Yes, hundreds of 25-44 year olds with incomes over $75,000 per year, had a DAILY FANTASY SPORTS PROTEST in New York.

I doubt much will happen with this protest, because they're fighting the man, plus the newspapers, and Drape, and anti-gambling casinos (I think that's one of those oxymorons), and a church that doesn't like gambling unless it is being done at a bingo in their basement, and some rich people.

Regardless, it's nice to see young people today doing their thing.

It got me to thinking about some of the greatest horse racing protests in this sports' long and detailed history. You probably remember some of these, but let's recap.

The ZENYATTA MUST GO ON DIRT Protest - This, in the height of the polytrack era, was a doozy. Zenyatta, the undefeated mare, was racing on synthetic tracks in California, and this did not sit well with some (especially with people who still think Easy Goer was better than Sunday Silence). They wanted her on dirt, and when pointed out that she was, twice on dirt, at Oaklawn, it wasn't the right dirt and it was not against horses with testicles. When she raced well on dirt in the Breeders Cup against testicle horses, protesters could finally enjoy her first 19 races.

The BAN LASIX Protest - This protest was organized by the Jockey Club and involved many owners of Grade I horses marching the streets writing articles and things about one simple fact: Lasix is dangerous and its use can kill horses. This was different than The WE NEED LASIX Protest. This protest was organized by horsemen groups and involved many trainers of horses writing articles and things about one simple fact: Not using Lasix is dangerous and its non-use can kill horses.

The BRING HOME CHROME Protest - This was real, and at times, frightening. Chrome's owners were not only blamed for shipping him to the UK, but for Justin Bieber's resurgence, ISIS and Glen's fate on the Walking Dead.

The BAN PITTSBURGH PHIL Protest - Very early on Phil won too much and people began to protest it.  The New York AG at the time left it alone, and Phil's career was allowed to flourish. "Some people are just better than others at some things", the AG said.

The LOWER TAKEOUT Protests - These have been going on for years. To clamp down on the vociferous masses, the industry alerts the media to incessantly mention the one-week Laurel takeout experiment. There, over the years, has been talk of using rubber bullets to stop the uprising, but instead the executives have punished customers with more jackpot bets.

The INTERNET FREEDOM Protest - This one too has been ongoing. Several in the industry have looked to create cutting edge offerings to increase wagering in the sport. This has been extinguished by data providers asking for cease and desist, and then once that doesn't work, charging $10k a month for use of a newspaper race chart.

The FREE RICHARD DUTROW Protest - This one, sadly, had no legs.

The GET RID OF THE BREEDERS CUP MARATHON Protest - This one did have legs. No, no more can we bet horses going around and around and around. And around. But it might be a good thing, because nowadays most dirt horses in North America get tired after 5 and a half furlongs.

The KEENELAND GO BACK TO POLY Protests - This baby started off slow, because everyone supposedly loves the glorious dirt. When the field size crumbled and handle tanked, it has picked up steam.

The KENTUCKY DOWNS NEEDS MORE DATES Protest - This baby is in full swing each September, but never really results in too much good happening for Kentucky Downs. After all, a few dates hundreds of miles south of Keeneland hurts their field size and we all know how important field size is when it comes to decision making.

The SARATOGA ATTENDANCE Protests -  There are "attendance truthers" out there, and they are not stopping. Each year they protest the reporting of Saratoga attendance numbers, mainly pointing out that "look around, there's lots of people here" is simply not good enough. Many have been shouted down, and these protests now mainly occur on the dark web.

This sport has a long history of protests. They are alive and well and like most other protests, rather futile.

Keep fighting the good fight people. And have a nice weekend.

Politics Shows the Importance of Testing Under One Roof

As most of you who follow the machinations of gambling and governments know, the New York AG has asked daily fantasy sports companies to cease operations in that state. This is another instance of a state or jurisdiction in a growing list of them - California, Florida, Nevada, Pennsylvania etc - to weigh in on the legality of these games.

New York (although most seem to think this is a big overreach) is an example of too many cooks in the kitchen, acting in a capricious way. The Feds passed a law stating these games are perfectly legal, companies invested capital in creating a form of them to be offered to the market, and the market - in massive numbers - has spoken. Now, the states are trying to find every which way to interpret that law, for whatever motivation (there are literally dozens, in my view) strikes them. It's a mess, with consumers (an estimated 60 million people enjoy fantasy as a hobby) caught in the middle.

Charles Hayward wrote an article today on his site, that I thought made some good points about federal testing and oversight. Reading the New York AG, and all the other states' Keystone Kops routine the last month with DFS, it should hit home.

".......the existing system is broken, seriously flawed, getting worse and is directly contributing to the decline in the Thoroughbred racing industry. Rules vary widely, state by state and are inconsistent. Drug testing is woefully inadequate with little differentiation between overages of legal therapeutic drugs and true performance enhancing drugs with penalties not consistent with the severity of the infraction. The individual states simply do not have the funding, the personnel or the motivation to do a competent job.
 

Anyone who has worked in U.S. racing and had contact with state racing regulators knows that generally these organizations are politically motivated and truly not interested in solving the serious problems that racing faces."

We read a lot about federal oversight, and USADA, and there are strong points on both sides, for and against. However, the system - with states sticking their noses in with "opinions", with appeals and lawyers, and lawyers and opinions, and different rules, and labs, and penalties - is broken. Badly broken.

Moving this under one roof, with one set of protocols and one set of penalties, and one set of appeals, and one set of ...... just about anything....... is much preferred.

If overzealous politicians or commissions aren't on board, or try to act in the arbitrary way in disparate states like they are with "DFS", well then wield the hammer -  the Interstate Horse Racing Act.

If this 'federal' legislation passes (an obvious longshot) there will be a lot of fighting and plenty of growing pains. There will be mistakes. USADA is not perfect. But wow, when I look at New York AG's and Pennsylvania politicians with DFS, I can't help but conclude it's badly needed. Removing these cooks from the kitchen can't help but make for a better broth.

Notes:

I expected American Pharoah to run away with the Sportsperson of the Year vote for SI. He's a horse and he stands out, and in a long human list that's a  built in edge. However the Royals - an interesting nominee seeing they're a team - are winning. You can do your part if you are so inclined.

The Big M begins tomorrow. I have to hand it to them, at least they try hard.

@TheMeadowlands Midtown Manhattan at 46th Street and 7th Avenue as well as 49th Street and 7th Avenue. pic.twitter.com/E0NhWogV2m

— Jason Settlemoir (@settles4) November 12, 2015

Horse Racing's Dangerous Margin Game

The margin for a product or service is a funny thing. It's a fine line between profit and loss, growth and stagnation, or success and failure. It's the building block, the foundation, for any real business, and it's something that's fought through each day.

In horse racing it tends to be none of those things, though. It tends to be a number that those in charge use not as a sextant or rudder guided by markets that tells you which way you're headed, but something they want to steer. 

Last weekend, Woodbine increased the takeout on Breeders' Cup wagers in Canada; some pools as high as a whopping 27%, which in real terms is 42% higher than what all other ADW's charged their customers. This was a function of the dangerous margin game.

Deals written between tracks and horsemen groups can take many flavors, but in Canada, for some time now, they've been written differently. Instead of giving 50/50 on simulcast wagering revenue, 4% for tris and 2% for exacta wagering went directly to purses. This is a monumental difference, because the funding came from not revenue, but margin.

Hypothetically, if a signal fee is 12% and a host track has, say, a 15% takeout on exactas, along with, say, a 1% tax to the government, there is no money left over for the receiving track to take the bet. They make nothing. It's a system built to fail.

This was needed to be changed recently in Ontario, because of the discontinuation of the slots at racetracks program. Good, right? They could expunge that strange system and replace it with a better one.

Nope. They ostensibly kept the same system. Now, 3% of margin from all wagers go to the "Horse Improvement Fund".

That my friends is how you get to a track charging 27% takeout for an event where everyone else gets 19%. It's also why takeout can really never be lowered. With margin the weapon of choice for racetracks and horsemen, it's a squeeze game, not a profit game.

And that's not good for horse racing wagering, well, if you want to see it increase, that is. As Vinod Kosla, one of the founders of Sun Microsystems once said, "Business is a strategy tradeoff; the lower the margin you take, the faster you grow." It works both ways.

Horse racing's dangerous margin game is so entrenched in the system that it cannot break free to grow. The effects are virtually endless.

Dunkin Donuts recently -  like other coffee shops - has started selling K Cups. They're cheaper for customers than buying a coffee in a store, so why would they do it? Well, they make profit on each K Cup sold and by increasing distribution points it means more profit, they get brand loyalty and they grow their in-store business, they allow a customer to have a Dunkin's at 7PM after dinner, without driving to a store, instead of having a Nescafe instant. If they used margin as their decision maker, like horse racing does, this never happens. The margin is too low for the slice or alphabet du jour.

Higher margin at the source, begets lower margin at the distribution point, which means fewer distribution points, which means higher prices and less choice for customers. For the horse racing industry, that means lower betting volume.

Horse racing needs to focus on maximizing profit, not their specific slices' margin. As Woodbine proved last week, this much-needed shift in strategy is no closer to being accomplished than it was a hundred years ago.

Have a nice Monday folks.

Friday's Juxtaposition

Here we go......

Enjoy your weekend everyone.

As Baseball Shows, Some Numbers are Just Numbers

There was a look today, from the Fox Sr. VP of sports programming, at the television numbers for the recently concluded World Series:

"As a longtime television partner to Major League Baseball, we at FOX Sports also engage in a decades-long debate about baseball numbers and their meaning, but in our case the numbers are Nielsen television ratings.  Here again, context is key, and differing points of view can paint sharply different pictures of the health of the game, as we see every October when World Series ratings are dissected by industry observers. 

The defining trend of media in our lifetime is fragmentation – the process by which the enormous audiences once generated by a small number of entertainment options have splintered over the years and have been redistributed across hundreds of TV networks and many thousands of digital destinations...... media content has become ever more individualized and on-demand."

Yes, people are not watching the World Series in huge share any longer (e.g the 28.7 share for the Big Red Machine series in '75 versus this year's 8.7), but in this television-polluted, fragmented landscape, it's all relative. Relatively, the World Series share is fine. 

So is the "health of the game".

Baseball revenues, salaries, team value, TV contract value, attendance, are all doing very well (even with a strong "old folks" demographic lean).

 As we in racing read about TV numbers, we have to look at them in context, too. Just like people in 1975 had a choice between a rerun of Laugh In or Cannon (William Conrad rocked, I just thought I'd throw that in) and a World Series game and the game kicked butt, racing had little choice against it in the media when Sea Biscuit raced War Admiral, or when Northern Dancer won a Derby.

That fact that Derby TV ratings are not what they once were, or that meager Breeders' Cup Classic share we read about happened, or that the percentage of people are not watching racing on TV like they once did, is not really worthwhile to be talking about. Like baseball, it's fairly meaningless.

What is meaningful, though, is the fact that unlike baseball that's where the similarity ends.

In horse racing we have our revenue metric to talk about and examine, and that's betting handle. That's the number that drives revenues and is a pretty decent barometer of the health of the game. It's been the most troubling number of course; this sport needs betting handle to increase each year at about the rate of inflation (say 2%) just to hold even, and it ain't happening.

Betting handle has been increasingly been fragmented, due to both the competition and internal strife. And it's those holes, that fragmentation - not TV ratings or social media mentions or twitter trends - that really needs to be filled.

The American Pharoah "Experience" Starts About Now

There was an article this morning at Charles Hayward's site penned by a writer experiencing a strong American racing event for the first time, and what that "means for the health of horse racing".

I expect many around the world would be amazed at what's 'left' of this sport here in North America. But it is not surprising to us. We know 15 million or so watch a Derby, we know 10's of millions watched Zenyatta on 60 Minutes (and many tuned in for her Classic). We know sports' stories in a mad-TV sports and twitter world still exist, and in many cases thrive.

We also know that much of it has little to do with the immediate health of a sport.

This business - for years - has been filled with the knee-jerk. Things need to be fixed yesterday. Field experiments for takeout are a dirty thing, despite being done in some form by virtually every other business: Laurel lowered takeout for a week and lost money, don't you now. Tracks should be ripped up, then ripped up again. It's this business.

The truth of the matter, as I see it, is that nothing is simple. Most policies take time, whether they be the drip, drip of higher takeout, the time lag where people get in and out of the business because they're fed up with drugs, the worth or non-worth of a polytrack, or what have you.

The "American Pharoah experience" - if there is one - will take some time, and I suspect the monitoring begins right now.

The Dow Jones Industrial Average, as the baby boom was in full force in the 1950's, sat at about 500. In the mid-eighties - 30 years later - 1,000 was broken, a pretty nice double. In thirty years since, the Dow has touched 18,000, a whopping 18 multiple. We're not lacking for one-percenter's for this very reason. The thing is, while this wealth has been created for these folks, they are leaving it in the markets, or shifting luxury buys away from the sport of kings, and to other pursuits. Foal crops have been down, while the bloodstock target market gets richer.

In my view, if American Pharoah has coattails, it will lie in what happens this year, and next, and next, with bloodstock purchases. Did enough of the well-to-do who are pre-qualified to love competition see the headlines, see the media buzz, see the fun and excitement from America Pharoah? Will enough of them be touched to own a horse in this sport and try to duplicate the feat? Is it worth selling X shares AAPL at a crazy gain to take a poke on $4 million worth of babies? Did any of them get the metaphorical "bug"?

That, I feel, - not handle, not social media mentions, or hikes in TV ratings - will be the metric this sport needs to look at when evaluating the net worth of the column inches the last year. And I think it will take a lot of time.

Have a nice Wednesday everyone.