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.


ron said...

Computer assisted betting definitely helps handle and attracts people who may not have been betting, but it has turned me and 1000s of other bettors off and causes extreme frustration. I'd rather throw darts at a board rather than bet certain tracks. It doesn't really matter though, my handle is down 80% anyway. Not that anyone cares about my measly handle.

Eric Poteck said...

Why would a business want CUSTOMERS if their government provides them with enough revenue (with no strings attached) to earn a comfortable living?

Answer-so they are prepared for the day the government stops funding the business.

Most racetracks have made a conscious choice not to develop customers..because they don't have to. The future be damned!

ron said...

I'm actually talking about the robotic batch wagering that wreaks havoc with the late odds changes.


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