Tuesday, December 29, 2015

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.

Monday, December 28, 2015

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.

Thursday, December 24, 2015

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.

Monday, December 21, 2015

#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.

Thursday, December 17, 2015

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.

Wednesday, December 16, 2015

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.


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.

Monday, December 14, 2015

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.

Thursday, December 10, 2015

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.


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.

Monday, December 7, 2015

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.
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.

Friday, December 4, 2015

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.
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. 

Thursday, December 3, 2015

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.

Wednesday, December 2, 2015


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.

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