Thursday, October 27, 2016

Romney was Right

It's been a decent election cycle for Mitt Romney.

He called out the Donald personally very early for what he saw was not a good person, when a lot would not touch it, earning him praise. And of course, he was laughed at and mocked incessantly from the mainstream about his Russia comments in 2012, and now everyone concedes he was correct.

That's a pretty good run for a guy who is not even running for dog catcher in 2016. 

Meanwhile, I had a dabble into some old horse racing policy last week and came across this little gem from Massachusetts in 2003.

This was a plan that 13 years on looks pretty damn good, too.

Blocking money ended up being paid to racing from Atlantic City in Jersey, but that was intrastate, not interstate.

Currently, racinos tend to only benefit the horse racing inside the states themselves, while neighboring ones either move for more market share by passing more casinos, like New York, or pretty much cut out horse racing altogether, like Massachusetts, or are running on fumes, like present day New Jersey.

Those two strategies are counterproductive.

In Ontario, racinos were scrapped but the public didn't want any more casinos. The appetite for them are growing smaller and smaller. Not in my backyard is alive and well. Good luck getting a racino built now. 

Even if you do get one passed, the casino arms race has hurt revenues appreciably. Gross revenue might be higher, but the future looks bleaker and bleaker with government interference, and saturation is the current buzzword.

Years ago, New York would've paid Jersey (they don't want one near Manhattan) racing for a non-compete. So would Pennsylvania, at least Pocono. Casinos in Connecticut and elsewhere in New England would've paid similar to Massachusetts.

Those deals would be alive today and would've likely allowed Suffolk, the Meadowlands and Monmouth to be in pretty decent shape. There'd be no referendum in North Jersey, no issues about Suffolk getting a casino for horse racing. Why bother, they already have the money.

Tuesday, October 25, 2016

Horse Racing's Grumblin', Bumblin', Stumblin'

Average handle fell at the last Meadowlands meet. Handle was $1.07 million per card, down from last year's $1.24 million.

As MH's article notes, they jockeyed around racedates, and field size was off by a horse, and both were detrimental. But, more broadly, this continues the mid-Atlantic carnage we've seen of late (outside Laurel Park).

Now, the meet was not ugly, per se, and in 2014 the Big M thoroughbred meet did $1.03M per card, and in 2013, only $988,000 per card. So, last year's meet did stick out, and this meet was up from those two most recent years.  But because this coincided with a takeout change, there's some rumblin' and grumblin'.
  • While racetrack executives rarely speak out in support of raising or maintaining takeout levels due to fears of public backlash, many privately grumble that supporters of takeout cuts consistently overstate the positive impacts while ignoring the negative effects on a racetrack’s revenue streams.
Oh please.

The Meadowlands meet, way back in 2004 did about $2.5 million per card. In other years, around $2M per card with only $180k or so for purses. In 2016 dollars, this is pushing $3 million per card.

In other words, the business has been circling the drain for a long time. In real terms, handle at the M is down 70%, gross, the last 14 years.

If there's anyone ignoring "the negative effects on a racetrack’s revenue streams" the line is long, and it certainly formed long before anyone was talking about the juice.

Working racetrack pricing is not magic ball that spits out free money. If it was, I'd start PTP Downs, charge 1% takeout and make more dough than Mark Zuckerberg.

It took dozens and dozens of years to destroy customers' betting bankrolls with high juice and lower and lower churn rates. Finding the right price where revenue can increase maybe will never happen, but it sure as hell won't happen overnight. And trying something is a lot better than standing around watching the customer base continue to circle the drain, while waiting for someone to buy the track and turn it into a shopping mall.

Friday, October 21, 2016

Racing and "I Don't Know"

Why is it that when you ask a question to someone formulating and implementing racing policy, the answer is more often than not, "I Don't Know".

We need geotargeting.


People are betting on their ADW accounts at the track.

How much?

I don't know.

Are we losing revenue?


How do you know?

I don't know.

If we inconvenience customers for a slightly higher margin, will those playing on ADW's bet the same amount when on track at the windows, or will some stay home and play, hurting attendance?

I don't know.

That's one example. But you can ask the same questions about how much Derby Wars is "hurting" Magna, or how much revenue will be lost or gained from a takeout change. The answer, invariably, is "I don't know". 

You'd think with hundreds of billions of dollars of handle over the last 100 years, racing would be able to use data to change policy like a real business: Forecast, model, project, look at the cost-benefits, and then decide.

Instead, it's not like that. It's "I don't know."

Wednesday, October 19, 2016

Building and Distributing Modern Data. Who Cares?

Crunk had a nice post about data today. It's not sexy like drugs, or stewards, or who is going to start in the Pegasus World Cup, and it's not exactly click bait. But it's a really good piece everyone should, in my view, read.

Disruption is a word often used wrongly, and almost always used in some derogatory fashion.  It's like a Bond villain, who is up to no good. He's loosening double-oh-seven's ski boots, so he'll ski to a horrible death, or other such things (which to me seems odd, because most villains have guns and could just shoot him, but I digress).

Regardless, disruption is not a bad thing. It usually ends up being a good thing. For consumers, and the future of a business.

Innovation and disruption was first spoken about by a smart Harvard fella, who wrote a book called the "Innovator's Dilemma". There are innovations that are soft (he called them "sustainable" innovations). These tweak the current landscape, and look for incremental improvements of a product. "StatsLens" by Equibase, as Crunk notes, is this type of innovation. There are others which are disruptive, which can open new markets, and use them to your advantage.

Modernizing horse racing data -  creating a seamless pipeline of inputs and working to sell, or distribute, those outputs - is a chance to open new markets, and sell to them.

People lament that horse racing is old, that you need to sit for hours to find a bet, reading a paper racing form your grandfather great-grandfather used. A lot of people, in fact, love to do that. But what if horse racing data was more like Stats LLC, or MLBAM, which has data that tracks player movements and launch angles and just about everything else?

Me or you might use this data to model stride length, speed, wind and other factors to create better speed figures. We could use that to model energy distribution. There's no doubt we could do some amazing stuff with that.

Now, with these stats, let's say we find out that they can predict winners, while the race is being run. We are not the only ones. Some whiz kids somewhere found out similar. Now, what if demand for in-running wagering increases exponentially because of this data?

Well, this data was just thrown out into the landscape. It was inert. It wasn't created to service an existing product.

What if, in 25 years, this data spawns a new way to play the Derby or other races. What if millions are bet on the Derby yes, but hundreds of millions are traded during the race itself? That's a whole new market and a new revenue stream for horse racing, created simply by making new, cutting edge data available.

This inert data - the data not created to service an existing product - actually created a new product

The above is just an example, that probably will never happen, nor work, but the point I am trying to make is, good ideas, growth for an industry, new markets, and new products, rarely come from the business itself, or what we know in the here and now. This is probably exacerbated in horse racing, because so many are monopolies or duopolies.

New ideas, new products and new innovations occur because a table is set for the marketplace to innovate and find new markets and products.

Modernizing horse racing data might seem like nothing to some - especially those who like to sit outside on a sunny day reading the racing form. But it means a lot. It can find, create and exploit new markets, no matter how old your business or betting game is.

Tuesday, October 18, 2016

Newspapers Might be Finished, But Racing's Strategic Options Make the Big Tracks a "Strong Buy"

There's a really interesting article I dove through at lunch today by Jack Shafer at Politico.  He looks at a new study from University of Texas researchers who propose that newspapers blew it by moving forward online the way in which they have, and they should retreat to do what they do best - sell print newspapers.

"Buttressed by copious mounds of data and a rigorous, sustained argument, the paper cracks open the watchworks of the newspaper industry to make a convincing case that the tech-heavy Web strategy pursued by most papers has been a bust. The key to the newspaper future might reside in its past and not in smartphones, iPads and VR. “Digital first,” the authors claim, has been a losing proposition for most newspapers."

That smacks a little of what we hear from some out there in horse racing, where retreating to "getting people out to the track" (where margins are higher) is a workable strategy. No doubt the knee-jerk reaction from those in this sport may be,  "see, we have to do the same thing".

I think that's not correct. The quagmire with newspapers is a classic life cycle question.

In the University research, the authors contend (although they don't say it) the industry needs to begin a retrenchment business strategy. This strategy (doing what you do best, and diverting revenue to it) is one of three major business strategies for mature businesses who are at the tail end of the life cycle - the other two are harvesting and consolidation.

I am not remotely sold it will work, but the authors believe it's where the business is. And that is super-important. A lot of business have no idea what strategy is right when declining.

As for horse racing, it cannot retrench. Why? Because, frankly, it does nothing best.

For horse racing at slots tracks, harvesting (milking the cow) seems to rule the roost, as sad as that may be. I think these small tracks know exactly where they are, and that's exactly what they do. If 1% of revenues go into something other than purses and profits, I sure haven't seen it.

 For larger entities and the big tracks that rule the roost, they are certainly not going to retrench, or harvest. Neither of those strategies are remotely optimal.

I think they are going to consolidate. And I say that for more reasons than it's the only choice left that we learn in business school.

A consolidation strategy allows big dogs in an industry to hunker down, and let the competition kill itself off. In the end, the hope is that they will have a stronger position in a weaker industry, but with the industry less competitive, they can grow, and revenues (and margins) can improve.

In real life, a loose example of this would be a NYRA surviving with its three tracks, while Finger Lakes, Batavia, Vernon and other harness tracks fold. Their slot revenue - probably regulated and governed through a department of Agribusiness - would then go to NYRA.

This strategy is often serendipitous, unplanned and in no way normative. I think we're seeing that right now (although, perhaps, a case can be made this is what CDI has been doing for awhile, while divesting from racing).
  • Larger tracks are charging more for signals, and importing signals at lower and lower rates. Small tracks need them more than they need small tracks.
  • Handle has been trending upwards at large tracks, while small tracks are getting absolutely killed.
I think we are seeing a consolidation at the top, and Florida and NYRA tracks are positioning themselves to take advantage of it, whether they know it or not. As for another big dog -  California - I honestly don't know what they're doing.

Newspapers, I think, are dead. Retrenchment won't work, and neither will harvesting. The big dogs will probably survive online and off, so there might be a consolidation strategy at play, but in no way is that consolidation worth as much as it is to horse racing.

If the big tracks in horse racing were an equity, I think they'd be a "strong buy", whether they know it or not.  For fans, owners, trainers and customers, I believe we best get used to it.

Have a nice Tuesday everyone.

Friday, October 14, 2016

Stronach's Willingness to Take Shots Is Racing's Vanguard

Good morning everyone!

The big news yesterday that filtered twitter had to do with the announced ticket prices of the Pegasus World Cup, to be held at Gulfstream in January.

$100 to $765 sounds a bit steep to most, and I think that's true, but with a smaller venue, and  corporate sponsorship buying the seats, who knows. Plus, I hail from Toronto, where people pay $400 on a Saturday evening to watch the Toronto Maple Leafs. A couple hundred to watch the "world's best racehorses" might not be that bad at all.

Regardless, Frank Stronach makes us think and he makes us wonder. It looks like he is going to pull this off.  And in another 'who knows', one wonders if this could change horse racing.

This past week saw a couple of items in the news. Exaggerator was retired early, as we see so often in the sport, ho hum. And, the Thoroughbred Commentary piece on American Pharoah raised some eyebrows too.

From the piece, who is better, American Pharoah or California Chrome was broached, from an inside baseball, dirty laundry perspective. Whatever you may think, no one really knows, because, like Exaggerator, the cash in the breeding barn is too powerful to ever find out.

Most stud deals are not of the sweetheart variety like American Pharoah, however. But racing to breed beats racing to race, 10 times out of 10.

This is why what Frank is doing peaks my interest.

We now have $12 million for the Pegasus World Cup in January.

We have $10 million for the Dubai World Cup in March.

I wonder, if, say NYRA (after looking at the JCGC field this past week, and in past years where the race has simply lost its edge) follows suit and offers something out in May for the "World's Best Racehorses"

This made for TV 'Triple Crown' of greenbacks could (yes, I am projecting) total upwards of $30 million in purses over a six month period.

And, if a horse wins these races (or even one of three), not only do his connections earn some massive purse money, his stud value is sure to rise many millions, as well.

Would you retire a top three year old for $30 million in the fall, if you have a shot to race for $30 million at 4 before next May? Especially where your $30 million stud deal could be worth $40 or $50 million if you win a leg or two against top horses?

Most sports evolve and get better through trail and error. The playoffs are changed to include divisional series, and TV ratings and revenue are examined. Rule changes - a lot of times coming from fans -  are tried and tried again, and perfected. Horse racing can't do much of that because it's stuck in a strange, regulatory, alphabet and fiefdom bog that we all know well.

Horse racing changes, or experiments, only when there is someone there to take a shot.

Is Frank Stronach - one of the few willing to take shots - changing the game more than he thinks, with this crazy, wild, $100 to $765 a seat, $12 million dollar race? Time will tell.

But as Frank often does, he is sure making us wonder.

Wednesday, October 12, 2016

Trust But Verify, Horse of the Year Chatter

Good day everyone!

Crunk and I had a twitter chat awhile back about the connections of top horses, and their thoughts when comparing horse A to horse B, where one (or even both of them) are their horses. In effect, we proclaimed we put little faith in these thoughts, and look towards speed figures, head to head match-ups, tops, bottoms and comparing performances to other historical horses to judge.

Generally, in cases like that, it comes down to trust but verify, because trusting alone sometimes involves some serious astroturfing.

Today, Bob Ehalt wrote the ultimate sausage making article about American Pharoah's big Triple Crown year. It is (in my view) one of the best articles you'll ever read about the inside-out's of the business.

In one part, we learn quite a bit about when a jock (driver) talks about a horse being better than another, or the best ever:
  • “Victor tells people I didn’t give him breeding rights. Why should I? It’s not standard at all,” Zayat said. “Now I hear talk he has a deal to get breeding rights to California Chrome and he goes around saying California Chrome is better than American Pharoah. 
Chrome might very well be better than American Pharoah, or he might not. For that we have figures, and comparisons and our handicapping judgement. But that's where, in my view, the analysis should probably end.

Our favorite sweater wearing Syracuse alum Justin Horowitz asked a question on the twitter today:

This year is harder than most.

Marion Marauder is up against it, despite winning the Triple Crown, through no fault of his own, really. Glidemaster won the Triple and Horse of the Year in 2006, because the cupboard wasn't really stuffed (horses like Total Truth and Darlin's Delight were not generational). His main foe, who had every bit as much talent, did not win enough of those big races against him either.

In 2004, Triple Crown winner Windsong's Legacy ended up losing Horse of the Year for a pretty good reason - Rainbow Blue. I remember lobbying hard for the mare that year, because, well, she was pretty special.

This year is much like 2004 but you have have not one, but two horses who are pretty darn fast - Miki and Wiggle It.

When both have similar resumes (Wiggle's numbers could be padded with restricted 4YO stakes, so he raced more and won more money), in my view, you always have to lean to who was the faster horse, when both are firing on all cylinders.

Wiggle had some down weeks (he lost to Rockin' Ron twice) and Miki was softer, and less sharp in August, but when both were at the top of their games (the two weeks of the Franklin, for example), I think Miki proved he was the better horse. You don't make a half mile brush and crush, get rebuffed and still somehow win the race without being much better. That's a tell tale mile.

There are still some weeks left in the calendar, but right now, Miki is my choice.

Have a nice Wednesday everyone!

Tuesday, October 11, 2016

Speed Badges & Figs, and What's the Regulatory Crystal Ball Say?

Good morning peeps!

Earlier this year in New South Wales, greyhound racing was chopped, primarily due to animal welfare issues. Too many dogs were being euthanized after their racing career, or not able to race in the first place (an industry practice called "wastage", due to overbreeding), and live-baiting - a training technique that didn't sit well in today's culture - was exposed.

This week, after intense lobbying, the government allowed the industry to continue. But there are some major-league strings attached.
  • Capping breeding to 2,000
  • Reducing the number of tracks
  • Reducing the number of race events
  • Whole-of-life dog cycle management
  • $1,500 bond for every dog bred
All of the above will not be funded by the government, the industry itself has to pay for it.

I would offer that - perhaps in a couple of decades - something not dissimilar will be the regulatory framework imposed on harness racing, to be followed by the Thoroughbreds. As revenues dry up, so does forced contraction, and with more and more power to the anti-Seaworld lobbies (which in my view is inevitable), life-cycle management and "401k's for horses" (previously proposed to racing by economist Caroline Betts) would be very likely in some form.

Unless something drastically changes, I think ceilings on foal crops are not too far-fetched either.

h/t to Jennifer for tweeting the piece.

On Sunday at the Red Mile, pacer Always B Miki did what everyone knew he was capable of doing - pace a faster mile than the 146.4 race record. His 146 mile will probably stand for some time - if for no other reason that the circumstances have to be right to go this kind of speed, and it's rare to find them.

What was interesting about this mile for me, in contrast to the last assault at the world record by Somebeachsomewhere, was that two other horses beat the old record too, in Shamballa and All Bets Off. There was very little separation, and it shows just how fast horses are today. In fact, the field was devoid of two other stalwarts (harness racing's big three) who would've likely went faster than 146.4, as well.

If we're looking at speed figures per se, I believe Somebeachsomewhere ran the better fig because of conditions (and the fact it was him against the clock). Horses that have partners to race with go faster, as Miki had, or Nihilator had with Falcon Seelster 30 years ago. This is the same in thoroughbred racing, but at times I feel handicappers (and some figure makers) do not pay nearly enough attention to this pack animal tendency.

If we're talking performance figures, I still think Always B Miki owns that badge, but not for Sunday, because of his no-man's land journey in the Meadowlands Pace. That mile was stunning and I can't think of any horse who could pace 1:47 off that journey. To me, that race is legend, and signaled that we were looking at something pretty special, if not other-worldly.

Congratulations to Miki and the connections, as well as Dr. Hogan who helped put him back together. Sometimes we forget he had two operations which would've sidelined almost every thoroughbred in existence, and even some standardbreds, too. Miki is some kind of powerful horse with a massive constitution. He represents the sport of harness racing really well, and deserves to be known as this sports' fastest horse.

Have a nice Tuesday everyone.

Thursday, October 6, 2016

Detention Barn Follies Continue

As y'all know, Little Brown Jug week was a rather interesting one. From the inside baseball side of things, the story that won't go away involved the capturing of the Jug winning trainer's phone, and related text messages, two of which were:

“Where is the (stuff) for betting line?”

“Anytime between 830-1030 range when its clear to saftly (sic) get his treatments into him.”

The result was protested by a few trainers, because the detention barn is a place where, I personally as a horse owner, tried to bring in a can of diet coke once, and it was like I was carrying an uzi into a baby shower. You don't bring anything into the D barn. If you do, you're up the creek.

Although most thought the fireworks ended Jug day, it hasn't. Legal teams are now involved.

I am not a legal dude, but it seems trainer Coleman, who (according to the story) did admit to wanting to bring in a syringe (for yogurt, mind you), might end up having her words, not the texts, be the issue in this defacto appeal. Syringes in a D barn are worse than diet coke, no doubt, and even yogurt is a no-no, as Susie Kerwood at Woodbine can tell you. 'Wanting' and 'doing' are two separate issues, though, I suppose. We'll let the legal types figure that out.

Regardless, this will be an interesting story to follow.


Story on Event Marketing and Racing today in the TDN. Chrome and Zenyatta are two of very few horses in Thoroughbred racing who capture the imagination of most everyone, over time. They're outliers, and the fact that racing places so much hope on horses like this coming around every year or so is not wise, in my view. Even current darlings like Tepin, or past ones like Wise Dan are a notch below the outliers. Because of the state of affairs and the structure of the sport, events > great horses, and I think it has to be that way. 

Pricci talks about a rider not riding a horse out and getting a $500 fine. I think those who find this odd have a point. In Hong Kong he'd have probably been escorted to the tarmac and put on a plane.

Enjoy your Thursday everyone.

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