Thursday, December 28, 2017

Where Things Are Going in '18 Horse Racing is Anyone's Guess

The 2017 business of racing season is almost in the books. This year, for players and the business, we've seen some good and some bad, but things look to be up slightly on the handle front from 2016.

Was it a good year or bad year? I lean that it's been pretty static.

Racing generally sets a low bar, primarily because the handle trend has been down for so long, so any uptick is viewed positively. But, any business which has neglected some basic business instruments - field size, competitive racing, poor scheduling and a sub-optimal race allocation mix - for so long, it should incrementally get better through trial and error, and better management.

I think that's happened over the last couple of years.

We see more and more racetracks look at scheduling better races; we've had the higher handle tracks keep or expand dates, lower handle tracks reduce them; Twinspires, TVG etc have experimented with new promotions, learning new ways to increase churn; the big entities have been running their own rebate shops; signals have expanded internationally more than ever before.

When we add an economy that's had some major zip the last two quarters, and that horseplayer bankrolls have grown marginally through the IRS legislation, I think handle - ceteris paribus - should be up.

But it's not up nearly enough.

What's held racing back, in my view, is the same thing that's always held racing back. It's not a contested market, and these markets rarely take the leaps of faith needed to grow at greater than inflation.

We see this most recently with Santa Anita. Tim Ritvo is clearly firing salvos at the TOC, but these arrows haven't landed. Retention caps are still there, and when they created a "new bet" the new bet was just an old bet at a higher takeout rate. They've added churn killing rolling super high fives, and yes, a post drag. They're Gulfstream Park West-of-the-Mississippi. Minus the middling players able to get lower pricing.

Keeneland, despite being hammered by industry analysts who look farther than the bridge of their nose, players groups and (surprisingly) a good deal of the sometimes sycophantic racing press, has stuck to their high pricing guns. They aren't budging.

Churchill is Churchill. NYRA is political football that tries to not rock the boat.

Where are things going in 2018? It's anyone's guess, I suppose. But, I think the smart money says we'll see more of the same.

The big signals will navigate the morass and try to incrementally increase business. The large ADW entities will grow, through both continued protectionism and incrementalism. So Cal racing will try to break free from the culture of mediocrity and some changes may occur, ,but for the average player - those who've been asking for change for the better - it will probably be pretty much the status quo.

If you're looking for a shining light that makes you want to jump back into the pools you didn't find it in 2017. Unless something changes, I doubt you'll find a reason to in 2018 either.

Friday, November 24, 2017

The Restaurant is Open, We Just Don't Have a Menu

As most know by now, Churchill Downs has banned the DRF from its premises. There's good news though - you can still buy it at a nearby gas station.
Come for the food, just don't bring the menu you've used since Duke Ellington was on the charts. If it wasn't so sad it would be comical.
Racing - especially the corporate variety - has become more and more insular. Signals are withheld, big day signals are priced super-high, the usual horsemen-track signal fights, and increased takeout are all signs of shuffling the pie, in a business that simply can't seem to grow it.

In every instance some faction wins something from another faction for the short term, but then the faction that was aggrieved does the same thing in a month. No one really wins.

There is someone that always loses, though: The Customer.

I've gone to conferences, chatted from time to time with people in power, and I often hear the same complaint : "Why don't we have more customers?" Racing doesn't have more customers because continually and without fail, they treat them like crap.


Mike Maloney and Peter Fornatale wrote what I think is one of the most wonderful, informative, and interesting books written from the horseplayer side of the game. "Betting With An Edge" is both life story between fathers, sons and friends at the track, and handicapping book. I'll review it at some point, but really great job guys.

Can half mile track racing be improved? Here's a deep dive into some stats, and what may help increase field depth and make for better racing. 

The Woodbine harness pick 5 is continuing its run of not only beating, but crushing the throughbred pick 5 handle at the same venue. I know why they chose 25% takeout for the pick 5 at the runners and 15% at harness, but they should've dropped the hoodwink and went 15% for both.

Speaking of hoodwink, the 14% pick 5 at California racetracks is so popular they are adding another pick 5. This one at 23.68% takeout. Trevor Denman's call of Zenyatta winning the 2009 Classic comes to mind.

Have a great Friday everyone!

Monday, November 20, 2017

Racing Transparency

I followed along with an interesting twitter conversation this weekend between several insiders talking about what should, and should not be spoken about publicly.

In this case, it was about an Australian caller talking about a horse bleeding from EIPH, something fairly common in horse racing. Vic believed if he did it in North America, he might be out of a job. He may be right.

Australia is a very mature racing and betting market, and like the UK and some other jurisdictions, both fans and gamblers understand the implications and causes of bleeds. When an announcer or commentator mentions it, well, it's kind of old hat. It's not too much unlike an NFL announcer talking about concussion protocols because it's "part of the game". I suppose Roger Goodell could call Jim Nantz and get him fired for talking about it, but since everyone knows the concussion issues in the NFL, it wouldn't do much good.

In Thoroughbred racing in North America, however, it's almost sacrosanct not to mention something like this. Probably because someone could be listening, and if they are, they'll learn everything is not roses and lollipops. This, to many in the sport, is big time trouble.

Flipping over to a sport a little more down the curve - I've always thought harness racing is a leading indicator for Thoroughbred racing - it's a little more open, and transparent. Harness racing's struggles are for all to see, and the protagonists don't seem to care all that much.

This weekend in Harness Racing Update, the letters to the editor were flying. Joe Faraldo - leader of a New York horsemen group, called Meadowlands Racetrack owner Jeff Gural a "punk" for suggesting that if drivers want to participate in his $12M stakes program, they should race at his track.

As most know, this is something that has stuck in Gural's craw for some time. He's been propping up the stakes schedule and his overnight purses are a fraction of what they are across the river at slots-filled Yonkers. Because of these low purses, drivers - who are independent contractors - have been leaving his track more and more often. Then, of course, when the money gets better they parachute back to the stakes program.

Gural really isn't doing too much out of school here, and such deals can be common in the rest of the world with privately owned racing clubs, but to say it doesn't sit well with a lot of people is an understatement.

Regardless, this fight is open and transparent, and in the end, you'd hope when a policy is changed people know why, and got their say. 

Further to that, Clay Horner, a big time Toronto lawyer and Chairman of the Woodbine Entertainment Group, continues to stoke the fires regarding trainers who have had some trouble (along with some miraculous training results), and the movement of their stock to switch barns for (mostly) stakes racing. 
  •  Events of the past couple of months have reinforced the need to adopt new staking conditions based on increased trainer and owner accountability. Most who follow our top-level racing are aware of the epic double failure of Lady Shadow in the Milton elimination and final and the panicked effort to restore her lustre by immediately returning her to her prior trainer. That was followed by a similar failure to perform on the part of two high-profile and accomplished horses in the Breeders Crown following a necessitated trainer change. Of course, they immediately returned to their former trainer and won their next starts, one in a track record time. In a new twist, the trainer of a Breeders Crown winner had another stable star scratched due to a prerace test in a stakes race only a week later. 
In Thoroughbred racing this thing happens as well - the Navarro situation is similar - but it's all kind of hush hush and no one in a position of power like Horner would say much. Even when Randy Moss casually mentioned the story on the Breeders Cup telecast, you could feel the industry cringe, praying for a quick throw to a Slim Fast commercial.

But in harness racing, it's boom just like that. There's a want (some might say a wish) to hammer home what some think are ruining the game, to improve the game. On the runner side there, in my view, is still a want, or a wish, that it simply all goes away.

Racing overseas is a mature market and they don't run away from publishing vet reports, fully disseminating and distributing news about drugs or positives, and being open with their seasoned fans and participants. Harness racing is a whole lot different. They have serious issues in terms of their  place in the betting marketplace, and relevance, but they too share a certain transparency.

Thoroughbred racing in North America has not followed those two sports. In my view they will at some point, but that point is probably not right around the corner. Until that day comes, expect more feel good news tweeted and facebooked regularly, and relegate yourself to the Thoroughbred Dark Web if you want to discuss many of the real issues.

Wednesday, November 8, 2017

Gambling Growth & Racing: The Importance of Eyeballs, Regulatory Value & Positioning

Legal Sports Report shared some comments from the Draft Kings CEO recently. The DFS company's head said that down the road Draft Kings could become an online sportsbook, if laws are changed in states to allow sports betting.

Sports betting, as most know, has been growing. In Nevada alone, $557 million in bets were taken in September, which was a new record. States like Pennsylvania are setting the table to take bets, should the federal laws change. ESPN, and other mainstream websites, now happily report point spreads, like it's old hat.

Draft Kings (and DFS in general) has been taking some major hits of late, with some feeling their value is overblown. That isn't new in the tech world, and there's some truth to it, but Draft Kings has an edge most others do not.

They are already approved, through regulation, in many states.

They are positioned to generate big ROI from a sports betting offering from day one, because they have active users and plenty of eyeballs. Their database of 8 million users, 4.5 million of which are active, is an ocean of potential revenue. These people are already prequalified to play (and wager on) sports. They are already captured.

If you need to know why investors purchase shares, or are bullish on tech companies who have "eyeballs" but no real revenue, that's the reason why. Tomorrow's revenue is not today's.

For, say, Draft Kings, let's say 4.5 million users bet one $20 bet on each NFL week (including the playoffs) and lose 5%. That's over $100M in revenue on just the NFL season.

Racing, on the other hand, is in an entirely different position. Their regulatory edge lies in bricks and mortar, which has allowed them to gain slot revenue. As a business long along the curve, they've had serious trouble increasing eyeballs, and in fact, it can be said that they don't even know who their customer is (trainers, grooms, owners, bettors?).

And, on days where there is an audience, say when 15 million watch a Derby, or 50,000 people are jammed into Oaklawn, these folks aren't Draft Kings customers, they're one-off eyeballs. Racing can't - never has really - converted them.

When we talk about eyeballs on the blog - and racing's lack of them from an end-user perspective - this is what we're alluding. And when we complain that when someone enterprising in this sport - for example a Betfair, or Derby Wars or data companies - who are positioning themselves to grow eyeballs are shut down in a myopic way, we do so because in the long run it hurts the business.

Draft Kings is regulatorily positioned to take advantage of legislative changes with sports betting. For them, they bait the hook, and drop their line in a pond and immediately get bite after bite after bite.

In contrast, racing drops their line and finds out the pond has been fished out.

That's what happens when your focus has been on squeezing the customer - increasing takeout, making it harder and harder to be a customer through closing the tent and not embracing pro-growth policies - rather than attracting more and more of them.

Tuesday, November 7, 2017

Incremental Racetrack Changes -- Glass Hall Full or Empty?

Over the last ten or so years the racing industry, and how it presents races, has gone through some changes. These aren't big changes, no, but they're incremental.

You've heard, no doubt, racetracks now talking a great deal about field size and presenting better races. This concept was not pushed nearly as hard decades ago, as racing was a slave to the putting on races and they will come narrative. Southern California racing, along with the races at now defunct Bay Meadows, were the prime examples of that.

Yet another example I've seen, is the scheduling of races.

I remember years and years ago watching the Breeders Cup, while at the same time watching Woodbine, which I played religiously when they were featured on Betfair. Without a word of a lie, the gates for a race at Woodbine and the Breeders' Cup Marathon sprung at exactly the same time. I couldn't believe my eyes, but it's the way it was. Many tracks were operating in a vacuum.

You've read complaints about the scheduling of races from bettors for years. These were not uncommon problems in the trenches. 

Fast forwarding to today, I received a spreadsheet from a friend yesterday (thanks Mike) where he examined and detailed a lot about the BC races, including off times at other racetracks. Here's the off time grid:

This, nowadays, doesn't look much different than it has for many years among the top racetracks in the UK. There was very little overlap between Del Mar, Aqueduct, Woodbine and Gulfstream, and supply was increased, to a customer base willing to play the races on an important day.

We see this incremental improvement elsewhere too. Gulfstream has maximized their reach with good results. Tracks like Canterbury who had myriad problems last season were forced to study them deeply and improved in 2017 (it's sad they raised juice back up or it really would've improved) and so on.

This concept, firing bullets instead of cannonballs, is done in the corporate world all the time, and racing has been finally catching up.

So, the business has gotten better at maximizing reach. They've gotten better putting on better races. They, like Magna, have increased their audience by exporting to other countries. They schedule things much, much better to extract more dollars for customers.

But still, there is no real growth, and new customers are not responding. Handle over the last three years will be near flat, and when looked at with inflation, it's negative. Is the glass half full - firing bullets is helping the sport grow-  or half empty - despite doing things much better than they were ten years ago, there's still no growth? Time will tell.

Monday, November 6, 2017

Breeders' Cup Postscript

Good morning everyone. Here are a few of my thoughts on this year's Breeders' Cup.

I thought Del Mar was a great venue from a betting perspective. Both courses seemed fair, and the surfaces played perfectly. This is in sharp contrast to some BC's where souped up dirt tracks make the racing less interesting for both spectators and bettors alike. Kudos to Del Mar.

Handle was again good, buttressing the argument made here and elsewhere that the big days and big meets (outside Keeneland this year, I suppose) keep getting bigger in this sport. The everyday bettor is screaming for fields that offer potential value, and the BC delivers that in spades. Its field size, as well as the quirky nature of the fields makes for some excellent wagering. You rarely have to make excuses, like checking the New York weather report, when the handle is going where it should be.

To the Classic, I enjoyed the Steve Asmussen video watching Gun Runner down the stretch. I submit that wasn't about money and it wasn't about winning a trophy. I think a part of it was about being told all week from some that his horse could not win at ten furlongs. It was being told his horse could not beat Arrogate, who owned him in previous attempts. It was being told his fine horse was beating "tomato cans" all summer and would wilt on this big stage.

I think I know that look and that emotion. It was, "That's my horse. His name is Gun Runner. Take that".

Checking the wagering, how is it when every eye is on these horses we get so many overlays? I'm not speaking about horses we think are overlays (we all do when a horse we like pays $14) but real overlays that help beat the takeout? Lady Aurelia, Lady Eli and Arrogate are obviously fantastic horses who had a shot to win their races, but they don't win those races what they were priced at.

Taking Arrogate as an example, let's say you were right and pitched him out. Sensing he's either great and beats you from the win spot, or nowhere, you can get paid in verticals. Pitching out a horse with over 30% of the pools from a trifecta negates the 22% juice. You can get paid. Time and time again the BC presents many such opportunities.

On the big score angle, these deep fields reminded me a little of the old Keeneland poly. If you were right about a simple pace scenario, you could make them. My nearest hit was the superfecta in the Ami's Mesa race. On pure pace, I bet a closer super that had the 14 with the 1, 5 and 10, with 1, 5 and 10 with all. I also played alls in the other slots. The 5 nipped me, and the 5-14-1-12 super paid $35,000 for 20 cents. You can argue with me that I should've reversed the wager in the top slot, and from a ticket construction angle on a closer ticket that's sound - but the fact remains you don't get that chance near anywhere else in this game.

Gun Runner in one corner, and Arrogate in the other provides us a train of thought. If Nyquist and Exaggerator get stuck in traffic and Gun Runner wins the Derby, there's a chance he's long at stud. We never get to see him develop into the amazing athlete he now is. He's lights out better than a year ago, where the connections were avoiding the Classic because he 'might be a good miler'.

Arrogate, on the other hand, was given a chance to develop by not going into the Triple Crown series, and it paid off with jaw dropping performances the like we've probably never seen. Then, for whatever reason (I think soundness, but that's just a guess) he goes off form.

Horses are horses, not machines. They get good, they get bad. It depends on a lot of things. It's also why I hold horses like California Chrome and Zenyatta in such high esteem. They danced virtually every dance for years, and they showed up each and every time. I couldn't care less what Beyer they ran, what surface they won on, or if a field they beat had a few "tomato cans".

I pitched Arrogate, but I don't say that to crow (you know I don't do that on the blog, or at least try not to), but to share one reason why. Arrogate is a really long strider, and likes sweeping turns - (even his trainer has long said so). From the wood, at tighter turn Del Mar, he was probably going to have a tough time. Adding that the inside wasn't great, and two very good horses could get around Del Mar like a hoop around a barrel - Collected and Gun Runner - it was a no brainer for me, even if he showed up.

I know several people who handicapped the Cup beautifully this year, but could not put it all together to make a big score. It was tough. If you loved a bomb like Ami's Mesa like Brian DiDonato at the TDN did, you'd be four and five wide near the pace, and yet get nipped on your massive win price. If you played her underneath in exotics, you'd need another bomb to cash. If you loved the Juvy Filly winner, but played pick 3's, you had to go "all" in legs, because the winner of the Turf Sprint was mind numbing. Tough game.

The TV coverage - for me as a bettor - was impossible to watch. A race would end, I'd wait for the prices and often they'd come ten minutes later. And if I see another human interest story on last year's Classic (one of the reasons Arrogate took such a beating at the windows, no doubt) my head's gonna explode.

It's okay, I'm not their audience, but if they're (because of TV contracts) going to stop XBTV and others from showing the races live, they can receive our criticism.

Speaking of XBTV - great coverage guys and gals.

Snips - Lady Eli almost died. Her not firing for whatever reason in her last start is nothing to me as a fan of her. I hope she lives a long and happy life. She's fantastic.

Peter Miller's celebration reminded me of the sack races TD celebration by the Chiefs yesterday. Unbridled joy.

Chuck Fipke is an old time prospector and I know quite a few of those. It's a tough life where you scoured the streets looking for flow through financings, and trudged the bush for decades seeking a big win. You have to be tough as nails to survive it. When I saw Sid Fernando's video of him watching Forever Unbridled down the stretch, he looked like a 12 year old on Christmas morning getting a Red Rider BB Gun. Glorious.

Speaking of Sid, his mug was on NBC for like ten minutes and his eyes never left his phone. The man has two phones in case one dies; I don't know what he'd do without his phone. Seriously, congrats to Sid, he's a really good egg and an honest guy in this sometimes bad business.

To y'all who I chat with on twitter from time to time who had their mugs on TV doing analysis, or coverage. Kudos. You represented the sport beautifully. 

Tuesday, October 31, 2017

The Juxtapositions Keep Juxtaposing

The headlines of today:


This is kind of nothing new. Sports betting is legal in Nevada, and has grown leaps and bounds (up about 100% since 2006), despite only being offered, primarily, in bricks and mortar casinos.

Horse racing, which has had an carve out online since 2006, well, hasn't.

The news isn't all bad, I suppose, as tracks other than Keeneland have had a good fall, with both Belmont and Santa Anita up. In fact, racing outside Keeneland was up the month of October, by about 5%, or over 10% per entry. (gee, I wonder why Keeneland was the outlier; if we read track exec quotes, it's a complete mystery!).

The interesting thing (as we've spoken before here) is that just because sports betting handle is growing, it doesn't (more accurately, shouldn't) mean horse racing handle will tank. It's not that way in Australia, where sports betting has grown from virtually nothing since the year 2000, to over $5B now, while horse racing handles have grown as well.

The difference, is, in my view, that Australia's gamblers have grown in number (inflation and population growth) and gamblers bet both sports and horse racing. This is achieved because both horse racing and sports are treated as gambling games, and offer good betting value for punters - sports betting juice is near what it is here, total horse racing takeout in Australia is about 11%, or half of what it is here. You can also, as a customer, find myriad avenues at various takeout levels to play Australian racing.

In North America, sports betting is offered as value - you'll pay 4.54% juice in Vegas in 2017, just like you'd pay 4.54% juice with Vinny at the pub down the street, in 2017; or 1917 for that matter. Racing, as Bob Elliston and Keeneland illustrate, keeps making the gap in the racing-sports betting value prop wider.

Have a great Breeders' Cup week everyone.

Monday, October 30, 2017

The Night Everyone Watched a Baseball Game

Last night, game 5 of the World Series between Houston and LA was a marathon of long-ball proportions that must've made MLB purists physically ill. But boy, it was really exciting.

And on my timeline at least, it was the only game in town.

This, surprisingly, despite the SNF game between the Steelers and Lions being head to head with the Fall Classic. It's a ratings battle the NFL on Sunday night almost always wins and when the ratings come in it still might, but I sure couldn't tell.

Whatever happens, it's no secret that the NFL has gone through a year or so of ratings declines. There are dozens of reasons given for the decline, and who knows at this point which are right or wrong. But one thing everyone can agree on, is that the NFL has been listening.

For one major fan complaint - the game has no flow, and goes on too long with too many stops and starts due to commercial breaks - the NFL responded. If you're an avid NFL watcher this is noticeable. After kickoffs when we expect a break there isn't one this year. We see split screens during timeouts, with a commercial happily coexisting with the live feed of the timeout. It's completely different.

This is a sport who sees a viable and honest complaint that could hurt their brand forever and decides to address it. And it's not easy to address such a complaint - TV deals and commercial slots are long-sold, and are in contract. Cutting commercials costs everyone short term revenue. But there you go, it's done, with barely a month or two notice.

Flipping over to another sport, we have Keeneland.

As Bill Finley writes in today's TDN:
  • All sources handle at the meet dropped by $11.2 million, from $132.9 million to $121.7 million. Keeneland’s next move seems obvious. They should announce that they tried something, it didn’t work out as they had hoped and, therefore, the takeout level at the 2018 spring meet will return to the same levels that it was pre-increase. If nothing else, that would be a PR home run and turn the hats they have been wearing lately from black to white.
If they were the NFL who addresses long term revenue and branding issues - even if there's a short term revenue hit - that's exactly what they'd do.

Will they? Probably not. Because horse racing does not correct bad policy, it usually doubles down on it. Horse racing has rarely, if ever, looked at falling handle numbers and their effects on the long term health of the sport. This is one of the major reasons the pari-mutuel handle chart in horse racing looks like this.

The NFL has its issues and that's apparent. But i) they know it and ii) they're doing something about it. I wish we could say the same thing about Keeneland, and racetracks like them.

Have a great Monday everyone.

Note: Ratings are in. Baseball wins the night at a rate no one could've predicted.

Saturday, October 28, 2017

Hoosier Seeded Pick 4 Handicapping and #Crown17 Links

The Breeders Crown card kicks off at Hoosier, and this year there's a little bit of value for bettors.

In race 5 there's a $10,000 seed to the pick 4 pool.

Seeded pools are exactly like carryovers, however, major ADW's datafeed of carryovers do not normally include seeded bets. So, there's probably going to be more value in the pool, because the pool will probably smaller than a regular carryover.

The bet starts in race 5 and we'll share a few thoughts on each bet of the sequence here. 

Free Video Feed

Program (pdf)

Race 5: This is a tough, contentious race. In normal sequences, we may want to dig deep and take a shot on a key horse, but with a seeded pool we should probably be more considerate to hitting the bet, and going a little deeper. 1,2,3,5,7,9 and 11 are all capable of winning the race, and probably each have fair odds in the single digits. The horse I am probably most interested in is the 5 at 8-1, Pacific Image. One would expect him to show speed this time. The nine is also interesting at a price.

Race 6: This is a little easier on paper, and if you're looking for a key, perhaps it's Filibuster Hanover from the trailing 10. If keying a trailer isn't for you, Fear the Dragon might be a bounce back candidate to use and Eddard Hanover is a nice horse. 1,3 and 6 are double digits and I think useable, if so inclined.

Race 7: Is the first Crown event of the evening and the chalk is world record holder Hannelore Hanover. She's a superstar and an obvious potential key. I'll be leaning on others, though. 3 and 5 are both sneaky here and I think one of them - probably the 5 - upsets the applecart. Mambo Lindy, Resolve and Crazy Wow are all possible in superspreads with keys in others races.

Race 8: Is the Crown for 2 year old colt trotters and the race goes through the 4 horse, who I think is a monster. He's not the best going colt out there, and maybe with some pressure he'll have issues, so I will use a couple more in other tickets - Met's Hall, Crystal Fashion and You Know You Do. If the 11 draws in somehow, I'd also throw him on a ticket or two.

As I see it there are three potential chalk leans in the last three legs, with a very contentious first race. I believe all three chalk are beatable, though. There's some meat on the bone.

There's a good deal of misconception with carryover pools. Often times I see people wanting to play them based solely on pool size to make a lifetime score (like in a Rainbow 6 mandatory). The fact is, the larger the pool, the worse the chance for a big score because there are so many people seeking for such a score (the A-A-All crowd), and they have more money than most of us do. This gives us a favorite longshot bias on meth.

In reality, the game is a grind. It's about getting paid at a rate and a level above expectation. It's this grind that's available in pools like tonight's pick 4 at Hoosier, that isn't available most everywhere else.

In a gambling game where our bankrolls are silently, yet potently getting kicked in the ass -  making it harder and harder to win long term (see Keeneland) - it's nice to see a pool where we have a chance to make a little scratch, and not feel like we need a shower after. 

Here are the betting levels and takeouts for tonight's seeded bet.  Good luck grinding away everyone.

Friday, October 27, 2017

Friday Notes, Sans Spin

Good happy Friday everyone.

Mike Maloney applauds the new IRS rules in the BH, as most of us do. What's disconcerting however, is how this came about.
  • "It was a big dropping of the ball to let that go on all of those years. It kind of illustrates to me the difference between casino leadership and management and racing leadership and management. When we try to go head to head, it seems like the casinos are almost always one step ahead of us. They understand their customers better; they understand the regulatory landscape better; They're just sharper from a lot of perspectives than we are." 
It's very hard to get excited about future pro-customer changes in the sport when something so vital was brushed aside for so long.

Further to that, Keeneland's handle day yesterday was, frankly embarrassing, dropping 17% per interest with a bang up card, filled to the brim with horses. If that card was raced at Kentucky Downs a month ago, it probably would've been up 40% or more year over year.

Like Mike notes, there is simply no urgency in the sport to grow the top line number. It's like top line handle - which would be a key performance indicator for any retail business (which racing is) on earth - is an afterthought.

It's maddening to see people in power - and those who carry water for them - who think the sport will be better off with fewer customers wagering less money.

The first night of the two night Breeders Crown goes this evening at Hoosier. The card is pretty decent, despite the older trotting mares somehow drawing only four horses, two of which are still eligible to conditions at their home tracks.

Free Livestream here:
Programs for Friday (pdf)
For Saturday (pdf)

Handle for the Crown can be soft, so here are a few ideas how that handle might grow. It's about making the card special, with more focus on the betting customer.

High handle tracks keep growing, while middling or lower handle tracks keep shrinking. This is an important finding, because it allows the business to compare their metrics based on their place in the market.

For example, when Canterbury lowered juice last season and was up 10% per entry (and I think 5% or 6% overall), it bucked a trend.

Keeneland, who increased takeout this season has been getting its ass kicked, and this bucks another trend.

Racing has to look at numbers ceteris paribus, because everything else walks mighty close to the propoganda ledge. We should leave that to the DC spinmeisters.

Big talk about the tax rates for potential new offerings in Pennsylvania, as sports betting will likely be subject to a $10M flat fee and 36% tax on gross revenue. So, if the business does $100M or so on single game betting at -110 plus rewards, they'll get to keep no more than around $6M in profit, before expenses (and amortization of the $10M license fee).

Now, what if they have to do that in 25 states over the next two years? Holy cow.

The US is a fascinating study. The country was generally built on doing things differently than others. As we've explored before, there were no lobbyists pushing "Red Flag Laws" to squelch the testing and proliferation of the modern combustion engine in the US like there were in the UK. There's similar examples in patent law and others. It's just not the way the country worked.

But with gambling (outside rough and tumble Nevada), it is.

Gambling is highly regulated, and lobbied against by the puritanical right who hates it, and the left who wants all the chocolates to spend on government programs. I think gamblers in the US will be dependent on offshore and other avenues for their gambling pursuits with sports for some time. There's just not enough want or will to make it a real business, like it is in other parts of the world.

I think sports gambling will do okay in the US, when and if it passes because the pricing will be better than, say, DFS. But it's probably not going to be like you and I are used to in the private markets.

Of special note with the new Pennsylvania legislation - horse racing's carve out for a share of new casinos built has been extinguished

Have a super nice weekend everyone, and if watching, enjoy the Breeders' Crown (and the countdown to the Cup).

Tuesday, October 24, 2017

These Monsters are Usually Created

For most of you who have followed the DFS machinations the last several years, you're well aware that there are two big companies plying their trade in the space - Draftkings and FanDuel.

It wasn't always like this, of course. During the space's growth period there were several companies vying for customers' bankrolls. Many have fallen by the wayside, as AG's, states and others have made it tougher to do business. A duopoly was created.

That duopoly has now come full circle - at a point where they have price control - and customers are well, kind of upset.
  • Users began paying increased rake — the percentage of entry fees kept by the site — across some daily fantasy football contests on the site in Week 4, and the move did not go unnoticed on Twitter. By taking more fees off the top of contests, DraftKings puts a dent in the return on investment of every single user. And by skewing that increase toward casual contests, the little guys are the ones paying the biggest price. Anyone who’s played a low-limit poker game knows how hard it is to beat the rake in the long run. Without a constant influx of new players, the table dries up and the house ends up as the big winner. Increasing the rake accelerates that process. 
Make no mistake, your neighborhood bookie could act exactly like this, if there were only two of them.  This monster, like most entities who can exert price control, was created.

In racing we see many of the same traits from the big dogs. As "A" signals get more and more prevalent in the landscape, their margins have gone up, not down, as they try and exert price control. California starts, Churchill follows, Keeneland follows, and so on. It's the major reason plenty of horseplayers have tried to draw lines in the sand with boycotts : when one does it, and it succeeds, it's not like it stops.

"DFS" in my view, will probably end up a lot like racing, when and if sports betting becomes legalized. It's doubtful there will be one or two sports betting providers, and that will keep the monsters in the wings. You'll get -110 lines, because that's what the market bears. The DFS customers will then substitute by moving their play to sports betting.

And I doubt DFS will be able to get slots to help them out.

For industry types, like those who love playing fantasy football, and love betting horse racing, these tactics are really quite disconcerting. Both create a shrinking pie, where the top line numbers inevitably fall. We've all seen that - horse racing compared to yesteryear is like visiting a Myspace page.

This hurts virtually everyone in the wagering ecosystem - in DFS's case, it's the data providers, touts, information gatherers; in racing it's the ADW (you do not put money into innovation if your top line isn't growing), data, handicapping information sellers, and touts, too. The ecosystem just kind of fades, and revenue shrinks. But, they hope they make more margin, from the shrink, to stay afloat.


It's enjoyable to see what social media (as well as a boycott, to ensure people are speaking about a policy) can do. Skip Sauer, a Clemson economist, pops out to tackle the Keeneland numbers in a great twitter thread. He gave Crunk some props for his analysis, which was nice to see. He probably still has nightmares trying to convince the masses that using "difference in difference" estimates for Canterbury results was proper, instead of "holy crap, when I multiply handle by juice they made more money this year so Crunk is nuts"
Give Skip's thread a read. It's quite good.

Have a great Tuesday everyone.


Saturday, October 21, 2017

Waiting for Godot

I was scanning this week and saw a few posts from players doing a little griping - some about Keeneland's juice hike, others about everyday things customers tend to gripe about. Let's face it, griping is a cottage industry in the sport, so it's not like it was anything new.

But looking back and scanning a few posts it reminded me of something.

Back in 2003 or 2004, the Southern Cal signals were big at Pace. Everyone loved watching the races from Santa Anita, and a lot of the handicapping done on the site was west coast focused. Over time, though, you'd see griping. And it had to do with field size. As I am sure many of you remember, Santa Anita - all Cal tracks really - was the King of the 5 horse field.

"I can't play this, I can't even find a bet in this six horse field"

"Why don't they have horses, I am about to quit"

You'd see these thoughts weekly from all sorts of customers. But when you looked at the handle, boom, it was still huge. So much for field size and griping, we'd think.

What five horse fields and 22% juice does, however, is degrade bankrolls over time; mainly because you can't find value with so few combinations, at such a high price. They're virtually impossible to beat.

The key phrase is over time. because on a Saturday afternoon everyone doesn't suddenly say, "I'm out" and leave. Nor do they take an ad out in the paper to tell you why they left, they just do.

Sometimes a raise in takeout does the trick to push them over the edge, sometimes it's finding another track to play instead, and sometimes it's the Lenny Moon thing, where he simply had enough.

I find it sadly funny in a way. California customers were telling you in 2003 they didn't want short fields. The response from California was i) continue to serve up short fields, ii) raise juice in 2006 iii) raise it again in 2010.

Equally interesting, is that in 2017 - virtually 15 years after these initial complaints about field size and bettable races - Tim Ritvo joins Santa Anita, and what does he talk about? You got it, field size and putting on better betting races.

Bay Meadows is gone, they paved Hollywood Park and put up a parking lot, executives have been fired, handle has been decimated. I'm not sure any of it could've been avoided - in fact I doubt it could've been - because the industry has a very, very slow response time. In this case, and I don't think it's hyperbole, it took a decade and a half.

What I hope California teaches us (and them, if I may be so bold) is that when customers are griping, you learn something. They are creatures of habit, so they stick around some, but as time marches on, they leave for the original reason they complained about. Customer burn rates are a slow flame, not a raging fire.

When we analyze Keeneland handles this meet I hope we can use the same strategy. Sure there's a boycott and handle is down bigly, but what happens today is not as important as tomorrow. Raising prices degrades bankrolls, and frankly, we have enough racetracks in North America struggling. We don't need to add another.

Listen to customers; they're telling you something. They're waiting for you to help them become better customers.

Have a great Saturday everyone.

Tuesday, October 17, 2017

** Exclusive ** Cub Reporter Releases the Secret Keeneland Tapes

My phone rang - rare in this day and age - and lo and behold it was Cub Reporter, the racing insider.

"I saw that horse sex guy on twitter mention me. Does he know something?"

He was referring to Sid Fernando, the pedigree guru.

"I don't think so, he just wondered what you were up to." I replied.

After getting some relief he was not exposed, he began to tell me a story.

"I'm undercover at Keeneland as a junior data analyst," he said. "Don't tell anyone, but I've got a tape that should blow the doors off the place! It's their emergency board meeting. I'll share it with you, but you can't tell anyone."

He gave me the tape, and I present it, transcribed, here for you.


Exec 1, 2,3 and Cub (background)
Keeneland Exec 1: "Call to order board meeting 41. Let's turn to our data analyst for a handle update. How are things looking?"

Cub Reporter Posing as Data Analyst: "Things do not look good. Despite more horses and more races our handle is down this meet. Per race we're getting killed."

Keeneland Exec 2: "Balderdash. I saw lots of people here this meet, it's been sunny and they're all having a great time! The tailgaters are all drunk. This sounds like Fake News."

Keeneland Exec 3: "Gotta be fake news."

Cub Reporter Posing as Data Analyst: "No, it's not looking good. What's worse about it all is that horse racing is have a great fall. Handle is up everywhere, except for us. With the IRS rules, our growth rate, our bigger fields, and the growth of big meets, our projections were for us to be up 15%, but we're down millions. Our customers are not betting us like they used to, and perhaps there's less churn due to the takeout hike."

Keeneland Exec 1: "People love us. We never say anything bad about them. Plus, they're all degenerates. There has to be some other reason. And churn, is that something with butter? We don't make butter."

Keeneland Exec 3: "No butter here."

Keeneland Exec 2: "My wife uses butter instead of margarine when she bakes. Swears by the stuff"

Keeneland Exec 3: "Didn't the wife have a tough time recently, a little trouble with the bourbon?

Keeneland Exec 2: "No, she was just thinking of becoming a Democrat."

Keeneland Exec 3: "That's tough. God bless."

Keeneland Exec 1: "Back to business. Focus gentlemen. There has to be some track we're beating. How about Charles Town or that track in Montana? Les Bois Downs or something?"

Cub Reporter Posing as Data Analyst: "Per race we're beating Jack Thistledown by a whisker, but out of 22 tracks, we're having the second worst month."

Keeneland Exec 2: "What in the hell is Jack Thistledown?"

Keeneland Exec 3: "I knew a Jack Thistledown in high school. Coincidentally, his parents were dairy farmers."

Cub Reporter Posing as Data Analyst:"That's a racetrack in Ohio. They're down a little more than we are."

Keeneland Exec 1: "All right, then. If the racing press calls we say "We're beating Jack Thistledown" so they can all print it. And if by some off-chance they want to do some digging and have another question, just mention butter."

Keeneland Exec 1: "Now, onto the second part of meeting so turn to page two, titled - "How we can crush Kentucky Downs and look like we're helping the industry". For this we have to call Churchill.

Keeneland Exec 3: "OK, but that guy scares me. He's the guy who went after Ron Turcotte's parking space."

< phone dials out, man answers with heavy breathing >

Mysterious CD Exec: "Luke I am your father. What can I do for you (breathing). Do you need some direction on crushing something small? (breathing).

Keeneland Exec 1: "Hello. Yes, we're wondering what steps we should take to put Kentucky Downs. out of business. What can we do?"

KEE/CDI (l) Kentucky Downs (r)
Mysterious CD Exec: "We have everything done for you. We've done this hundreds of times. Just follow our lead and trumpet everything we say. If you do, you and yours will be safe (breathing, with some ominous silence). Is there anything else?

Keeneland Exec 1: "Yes, what should we do about our handle numbers. They're down since we raised takeout."

Mysterious CD Exec: "Call Equibase - tell them I sent you -  and get them to remove all handle numbers from the charts. Then when the press asks, tell them things are great. (breathing). Since you don't have a share price to point to that goes up from you crushing smaller things, that's all you can do. Oh, twitter block o_crunk."

Keeneland Exec 1: "Great idea. Thank you for your time"

Keeneland Exec 1: "This was a good meeting. Thank you everyone. We're having a great meet and the future looks bright. We're beating Jack Thistledown! "

Other executives: "Hear hear!"


That concluded the meeting. We'll keep our ear to the ground for future correspondence from Cub.

Have a nice Tuesday everyone.

Monday, October 16, 2017

Expected Value & Getting Paid

I, like the vast majority of you, really concentrate on carryover pools. Carryover pools are unique in this high takeout sport, because money is  added to a pool that can be many times over the takeout for the pool. This results in what gamblers call positive expected value - it's a roulette table with 30 landing spots that pays 35-1, it's a game of coin toss, where every 5th toss you get to play for free.

This, on the surface, might not sound like much to a casual player. They, often times, simply want to hit a ticket and cash a bet, regardless of the takeout, and see profit if they hit. They will - even if takeout is 50% - see a profit most times. You need to hit a ticket to cash.

But like everything in gambling, the devil is in the details.

Yes, winning on a given day is fun, but it's not the battle on that day that counts, it's the long, protracted war. The war is where we make the choice. It's where we as horseplayers can let takeout kill us, or define us.

I was going through my pick 5 bets recently, and I subset bets into pick 5's that I only played where there was a carryover pool in one of my ADW's (something that does not happen all that often with 50 cent bets). Some of these carryovers were at very small tracks where ticket sizes were small, some at larger ones where they were a bit bigger. Most of these tickets were of the spread variety, where my goal was to hit a ticket (not my usual style of play). In all instances I had a distinct advantage - upwards of 20% positive expected value.

Here's a subset of those results.

This is a good result. My ROI was 28%. That's great, right.

Well, sure, I made money. But here's where positive expectation comes into play.

Let's say I was not getting a 20% takeout advantage and these were zero takeout pools. In that case, my ROI drops to 8%, and I make only $598. Considering the hours I spent handicapping and watching these tracks - some tracks I knew nothing about - someone might want to sue me for paying myself lower than minimum wage.

But still, it was profit.

Now, what if I pay full takeout on those bets instead.

My $9,624 payoff isn't $9,624 anymore. With 20% takeout, even with my hit rate and ROI above average, it's $6,944.

Instead of making a couple of grand, I lose about $500.

That has nothing to do with my handicapping or "cashing a ticket". It has everything to do with takeout and expected value.

When you see a seasoned horseplayer mention expected value and "positive bets", that's what he or she is referring to. Sure the bet may be hard to hit, sure it make take a lot of work and a little luck. And yes, you might not hit a ticket for awhile. But, when you see a carryover, give it a look, because if you hit you're very likely to get paid. And getting paid in bets where low or no takeout is offered is usually what keeps us as bettors afloat in the long run, allowing our ADW accounts to holster the bullets we need to keep firing at this very difficult game.

Have a nice Monday everyone.

Friday, October 13, 2017

Racing's Circling of the Wagons

Recently, figure maker (and someone you no doubt know if you're a horseplayer) Craig Milkowski shared some information on timing, as he has done many times before. And just like many times before, the tracks (and their minions) circled the wagons.
Here's someone who cares about accurate timing (like the tracks do, I imagine), shares when he sees mistakes, or missteps that he encounters as a figure maker (like the tracks would want him to, I imagine), and when he does, he gets told to keep quiet.

If he posts about it again, he'll get tweeted to or commented on like he is somehow the enemy. Which is wild, because the only thing he is the enemy of is bad times; something you'd think the whole industry is against.

If this were an isolated case, like for example there is a Federation of Timers who get offended when one of their own steps out and hammer him for it, then that's fine I guess. The tracks, customers, everyone else who wants customers (and trainers) to have accurate timing of races would have his back.

But it's not. This happens so often, so many times in horse racing, it's pathological.

Take the recent (and very good) work by the NTRA for tax withholding. The change in rules will do two things, at the very least, i) increase customers' bankrolls which will increase handles and make them happier customers, ii) signal to other gamblers, or those that left the game, that there's more edge in betting horse racing, and maybe it can grow the tent, and the game.

Justifiably, the entire industry rejoiced.  I'd see email after email, press release after press release and tweet after tweet - from executives, alphabets and insider after insider - happy that customers bankrolls will increase and it may entice more people to play racing.

Flipping over to Keeneland. They, as you know, recently raised takeout to pretty stout levels. For crying out loud their exacta rake is higher than Parx's. This has the opposite effect of the tax changes, of course - customers' bankrolls fall, and people who left the game because they found it unbeatable stay away from it, and they tell their friends who might be thinking about coming back it's still no bueno.

The entire industry who just rejoiced, immediately changes their tune. They circle the wagons. People who are for the thing they just rejoiced about, are suddenly the enemy.

Maybe it makes some sense (I don't think it does, but a case can be made) that they're all Keeneland employees, carrying water for the boss. But it's not - employees and insiders from other tracks are standing up for them; they're cheering for them to succeed.

That, in my view, definitely makes no sense. This track is squeezing more bankrolls from their track's customer (there's only one customer) so he or she has less money to bet their places of business. In addition, the customer base is annoyed, and the data and experts (many who racing has paid to study this) has shown, and will show, a portion of these bettors will leave forever. It harms, as Pete Denk said, the entire ecosystem. They should be as annoyed as the rest of us.

It's been said by hundreds of people before me, and it will be said by hundreds of people after - this business is unlike any business in the world. Everyone agrees the sky is blue, until they check who is saying so. Then, well, the wagons are circled and despite us all seeing the same thing, we're told it's raining.

Have a really nice weekend everyone.

Wednesday, October 11, 2017

When Customers Tell You There's a Fly in the Soup, There's a Fly in the Soup

Yesterday on twitter there was a conversation about why some people are withholding money from Keeneland this meet. A simple question, with a simple answer ("they raised prices and I don't think that's good for me, or for horse racing") gets twisted and mulched and argued. It's suddenly turned into Swahili.

Then the goalposts get moved around, and no one listens to something that's really not hard to understand in the first place.

It's not like this in other businesses. If you found a fly in your soup at Pete's, and moved your business over to Sue's across the street, the conversation is pretty simple.

"Why did you move your business?"

"I found a fly in my soup"


The fact that Sue's soup is 50 cents more a bowl, or they play Fox News instead of CNN, or the waiter's ties are bland isn't a concern.

Keeneland put a fly in the soup and some people don't like it so they're eating someone else's soup. The end.

Some folks have asked me why I don't present as often as a once did at industry conferences, or why I'm not quite into things as much as before. Generally, the short answer is, because the discussion above happens not once, or twice, but frequently in horse racing. A customer can tell you something, the data can tell you something, then the industry responds by telling them how wrong or misguided it all is. And nothing ever changes.

I had to laugh last evening. I was playing Mohawk for their 15% pick 5 - it's a good bet and it pays pretty well. It's about the only thing I play there. I saw they upped their guarantee on the bet to $50,000 from $30,000, and the pool regularly does $80,000. Their pick 4 (at $25% juice), which historically was a $75,000 guarantee, now brings in about $60,000. It's been guaranteed at only $50,000 for awhile now.

The lower take pick 5 didn't start like this (it did around $20,000 early on), but over time it grew and grew to almost 400% higher a few years later. It consistently kicks the pick 4's ass.

Over at the Thoroughbreds, they brought in a pick 5 the same time harness did, but they chose to offer the bet at 25% takeout not 15%. Bettors complained; Woodbine was showed the average pick 5 takeout in racing was much, much lower, and they were an outlier; customers said they would not play it as much as other tracks. Even over at the Horseplayers' Association, Woodbine wanted to advertise the bet in the HANA Monthly, but was told no, because the takeout was way too high.

They knew exactly what the customer was telling them.

What happened? The pick 5 pool at Woodbine Tbred on Monday was $60,000 - unbelievably, much lower than Mohawk's - and their pick 4 pool was double the pick 5, at $122,000.

The above data at these two tracks - owned and operated by the same company - has been like this for not days, or months, but years.

When I again suggested that Woodbine might want to look at 15% takeout for their thoroughbred pick 5, promote it, and raise handles (something they say is a goal), I got looked at like I had six heads. The goalposts moved, you see. The fly in the soup was not a problem. I was just not looking at things right.

Customers tell racing what it needs to know each and every day -  hell, parimutuel handle with inflation (which should be a standard measure if they're serious about handle) has been almost cut in half the last 15 years. But to understand what they're telling them they have to be willing to listen.

Have a great day everyone!

Note: For those not playing Keeneland, Hawthorne has a pick 5 carryover today.

Monday, October 9, 2017

Go Phishing

We're a few days into the newly minted higher takeout Keeneland meet, and we're seeing some data that may suggest handle has suffered due to the increase in pricing.

Three days does not make a trend, and looking at Wednesday's card - which is much better than last year's first Wednesday card - handle could rebound that day. Or not.

Regardless, it's early, either way.

One thing that strikes me, however, during this (and other, see Canterbury Park's takeout changes), is the level of misinformation when it comes to reporting horse racing results. It's been like this for a long time. It's not just in horse racing of course, but it's always been there.

We have to remember - when the information is being fed by people in power who make a policy - it's probably best to look elsewhere.

Heeding that advice, let's look at some numbers from someone who is not making policy, but who analyzes it:

This quick analysis in 140 characters (he should have 280, which proves twitter's 140/280 choice algo kinda sucks) tells you more than you'll ever get from most elsewhere.

It standardizes the data in one small but statistically significant way (a potential betting pivot from Keeneland to others) and it compares a datapoint (per entry handle) that's more relevant than any topline number.

You might not like a story it can tell, but it tells a story.

The thing that's always worried me in this sport, is that this data is being forwarded not by a Department of Wagering for the Horse Racing Commissioner ®, but by a guy on social media with a strange avatar who likes to go to Phish concerts. 

It's good in a way - it shows the power of good information, and social media has created an outlet for it to be shared. But it's bad in another way - the data the industry needs to pay attention to, and make pass/fail policy decisions on, is from a guy on social media with a strange avatar who likes to go to Phish concerts. 

If you're following the Keeneland story, may I respectfully suggest: Go Phishing. You might not like what the data says, and it may completely fly into the face of your horse racing worldview, but smart information and the resulting analysis will make you smarter.

Have a nice Monday everyone. To my friends north of the 49th, may you and your family enjoy your Thanksgiving.

Saturday, October 7, 2017

Zee Corporation

Good morning peeps!

Yesterday, Keeneland's handle was about flat from last year for their opener. That, as we postulated yesterday on the blog, doesn't mean much either way, but it was interesting, and the corporate types (strangely enough, some of them in the real world hate corporations) were pretty happy.

With my back of the napkin look at results (and help from Crunk posts that show racing outside Keeneland yesterday was up 18%), I surmise that those of you who played Keeneland last year, who did not play this year, totalled perhaps $300,000 in handle. We'll see how it goes the rest of the meet.

Another interesting discussion yesterday was about rebating. Rebating, something that I've been for on the blog since 2008 - mainly because it's the only equitable way to change the racing system and get handle to grow if done correctly - has certainly been bastardized.

Back when the corporations were out of dictating terms, there was an ample degree of both fairness mixed with pro-growth principles. We touched on this here.

In the past several years, when the corporate tracks started running it, it's been all downhill. Now a smaller player who wants to become an everyday player who used to get 5 points at Keeneland is lucky to get a half point. And he or she has to compete against someone getting 12 points. Racing doesn't think things through very well, and the inmates are running the asylum. It's just horrible business.

It's gotten so bad that apparently, signal fees of 9% are not for everyone. Some can get some as low as 5%. I can't express in strong enough terms how terrible this is for the wagering ecosystem.

Not all "corporations" are like this of course. Most outside racing, in fact, do the exact opposite, depending on their brand. Costco asks "how can we get the price of our $1.50 hot dog down", not up. Corporate bookmakers lower takeout, generally, and have few perks, and they pay racing and their shareholders through gross profit, not margin.  Pinnacle Sports looks at CDI or Magna or Keeneland, and shakes their head.

I suspect little can be done about this issue. The wagering side of horse racing itself goes in waves - wave one is the problem, wave two is ignoring the problem, wave three is trying to shut down the problem, and wave four is trying to fix the problem in a way that doesn't work. We're in wave four  with rebating.

That's not good for takeout rates, and not good for most of you. It's not good for the tracks either, but they just don't realize it yet. That's wave 5. It will probably start in 2021 or 2022.

I'm a free market dude. I went to business school, I consult with hundreds of companies in dozens of different businesses. I love curves and numbers and ROAS and ROI and CAPM's and LFTV and all kinds of neat businessey things. I'm as far from a Bernie Sanders guy when it comes to business as you'd ever meet. But I can, without equivocation, say this new corporate world - in racing and in some other businesses - is growing completely foreign to me.

Have a great Saturday everyone.

Friday, October 6, 2017

Shining Lights & Forwarding Customer Education is Never a Bad Thing

There's a lot of tweets on my timeline about the bettor "Boycott" of Keeneland. It's good to see so many talking about important issues with regards to the long term health of the game.

There's probably a lot of people waiting to say "I told you so", either from the customer side, or the corporate side. Generally, however, what happens is a bit of a sideshow.

If it rains the next month, if it's sunny, if field size is down or up, if Keeneland gets antsy and sells a signal fee for less than they wanted to, and myriad other things happen, the data will be completely muddy. It's one of the reasons racing has made absolutely awful wagering decisions the last 40 years or more. On the Wikipedia entry for "muddy data" there's a picture of a smiling track executive, because he (it's probably a he) knows he won't be held accountable for anything he does.

What this chatter and the resulting boycott do, in my view, is shine a light on a policy people may or may not know about, and it educates others who often wonder "why do I lose so much money betting racing." If learning about pricing helps a player win more, and enjoy the sport more, that's a good thing.

What these things also do is give a customer a glimpse into racing's thinking regarding price hikes. As this comment showed, the Ellison interview (unintended I'm sure) let customers know that this rake hike is of the corporate variety and it will subsidize their horse sale and large players, along with the big betting teams. This is a dirty little secret about takeout hikes, and this so called "boycott" brought it out into the open - in black and white for everyone to read. Yes, (shocking I know) the smaller player will subsidize the big bettor and breeding farm.

In four or five years when you see some Bloodhorse story with an executive panel wondering where the small bettor went, you'll have an idea what caused it, and you can hold them accountable, rather than get sent to the smiling muddy data wikipedia page. That's the power of knowing what goes on behind closed doors.

Today some bettors will boycott Keeneland and some won't. Some don't mind corporate tracks and their tactics, some don't mind subsidizing large players or horse sales; they just want to enjoy the sport and play a few races. Others do mind, and they'll bet another track.

But one thing's for sure - both sets of these players are smarter and more educated about how this business is run. They might be able to extract more money from you this meet, but being educated about their tactics is something they can never take away from you.

Enjoy your weekend everyone.

Wednesday, October 4, 2017

Keeneland Rake Hike Time: Your Guide to the Horseplaying Tribes

I had a chuckle a few weeks ago on the ever increasingly tribal twitter. A CNN contributor posted this, about a political movement, trying to convince others to join theirs.
I see this sometime in racing, as well. If you don't do "X" you're the dumbest human being alive and you need your head examined, but please come join me and my tribe!

It sure is an interesting recruiting tool, seeing that it kind of throws the idiom that we catch flies with honey out the window.

This Friday, Keeneland opens with higher takeout rates. For the uninitiated about rake, this simply means that the payouts you see on your screen - for win, place, show; supers or tris - will be lower than they were last year. When you hit something - if you choose to play Keeneland - you won't get back as much money.

Like on political twitter there are a great deal of horseplayer tribes and they are all subsets that react differently to policy changes.  Allow me to go through a little primer here.

i) The Entertainment Tribe - These folks love racing, and the takeout could be keno-like and it would not affect them because they rarely play the races. They'll enjoy Keeneland like they always enjoy Keeneland. Different tribes should probably tip their cap and be happy they like the sport, because attendance would be worse than it already is if they didn't.

ii) The Turkey Takeouter Tribe - These are the folks who simply are not sensitive to price in any way, shape or form. They lose a ton of money, and really don't mind losing more money. If they hit a $20 exacta in Turkey with a 5-2 onto a 3-1 that pays $11, they beam they won $90. Racing needs these types, so be happy they're there.

iii) The Spot Playing Tribe -  This crew will play Keeneland this meet, but will probably (unconsciously) not play as much. Spot plays - exacta overlays, board overlays - are fewer when prices go up.

iv) The Warrior Tribe - These folks work very, very hard at racing. They read the form, pay for handicapping information, and read Ed DeRosa Grids ® religiously. They probably play at TVG or Twinspires or their local track at full takeout. This tribe is split into two sub tribes, and they, this weekend, will react differently.
  • A portion will boycott, because they went through their Keeneland results the past years and saw they lost money. A takeout hike just means they will lose more money, and they already work so hard at the game trying to make money, they can't work any harder to lose more. So they'll sit it out, and play something else.
  • They know they lose money, but "what's another 10% on my payoffs, if I hit a big pick 5 it's all good". There's also the justifier portion of the tribe that says, "takeouts are all crap, so I might as well play Keeneland. It's better than Parx"*. This subset will give er a go.
v) The Rational Consumer Tribe - This is the tribe who acts like most people act. They aren't married to a product or service, they just a act like economics textbooks say they will. If the price of steak doubles to $20, they pivot into pork or chicken; if the gas price gets too high they trade the Cherokee in for a Ford Focus. If they look at their betting results and feel this 15% increase in exotics will hurt them, and they have no hope to beat it, they'll pivot into something else. 

vi) The Had Enoughers - This tribe could be a subset of the spot players, or warrior tribe, or even the rational consumer tribe.  These folks are old timers (usually) who have seen almost every policy go against them over the years, and this one was the final straw. Horse racing has had a lot of had enoughers over the years, which is why it isn't growing. The Keeneland Board can take credit this month for pushing at least some of this tribe over the edge.

vii) The Big Players - This group, as a whole, will either boycott Keeneland, or maybe more likely, bet less. The signal fee went up, so that's a mathematical certainty, all things equal.

viii) The Lines in the Sand Tribe - This one includes probably me, and if you're reading this blog, perhaps you. We draw lines in the sand when certain tracks decrease our payouts, or implement policies that hurt us as customers; and in turn hurt the sport we grew up with. We don't play Churchill or Santa Anita and we won't play Keeneland.

No matter what tribe you're in, you'll probably get yelled at this next month by someone. The entertainment tribe is not dumb for wanting to watch a race; the guy who doesn't care if his ROI goes from 0.82 to 0.79 is not an enemy; the gal who tweets incessantly that they are mad at Keeneland for killing her payoffs is not an enemy either. It's a world of tribes, yes, but each tribe is an individual, with different views, and different ways to express them. Take a breath before yelling at them; it does the body good.

It'll be an interesting month, I suppose. For those of you who have said "enough is enough" you're probably going to save yourselves some money, and that's great. For those who wager, good luck at the windows - you'll have to be better than you were last year at picking winners - and I sincerely hope you come out ahead.

Have a great Wednesday everyone.

* Alan informs me that Keeneland takeout on doubles and exactas is now higher than Parx. My bad.

Friday, September 29, 2017

The NFL Takes a Branding Hit, But You Might Want to Check the Narrative at the Door

Morning Consult put out a poll result today on NFL branding.

Via their tracking, "NFL's Brand Favorability Drops To Lowest Point Since Morning Consult Started Tracking: The NFL's net favorability has dropped from 30% on September 21 to 17% on September 28."

I have zero doubt their data is correct; however before everyone picks their favorite narrative, it's important for us, in my view, to understand branding.

In actuality, a brand does not get crushed by one, or even two missteps. United, or Coke, or hundreds of others snap back quickly from bad news. Bad branding, and resulting revenue losses are more of a boulder rolling down a hill, than an avalanche. It's why (old school) marketing firms estimate changing (or repairing) a brand can cost upwards of $50 million and take over 5 years.

The NFL has suffered from a lot of bad branding the last several years. They've had stars retire, they've saturated the airwaves and watered down the product, the games are taking longer to complete, the competitiveness of the games have been less than interesting, and ticket prices have increased; to name a few. This has caused a drip, drip, and people have been slowly losing passion for the events.

Then - boom. Politics enter the lexicon and it's another drip. Not an avalanche, but something that bothers people just enough to keep that boulder going. Because it's the latest thing that bothers them, they all answer with the latest thing that bothers them,

The above, in my view, is just the way things happen, in sports, or in business with brands. And for racing it's a cautionary tale.

In our sport you'll see a lot of customers (and horse owners) complain about the little things. They'll talk about trainers who win at big rates, rules that are more guidelines than rules, racing opportunities and the like. Bettors will speak about signal fee hikes, takeout hikes, short fields, cheap penalties for rule breakers, Churchill Downs cancelling a pick 6, the cost of data, or the fact that a bunch of horses without testicles win at Santa Anita with "h" beside their name in the form, and the trainer is given a pass.

Insiders often pick just one of these things and say, "it's a small thing, what are you complaining about?" But it's more than that. When taken in totality, it's a boulder gaining more and more speed, and when that happens, that boulder is hard to stop.

It's tempting to pick our favorite cognitive biased element as the reason for a decline in something. But when we truly examine branding it's never about one thing. It's about a lot of moving parts; parts that are moving in one anti-brand direction.

Have a nice weekend everyone.

Wednesday, September 27, 2017

Unintended Consequences

I had a scan of yesterday's news that was filtering social media channels about the Saudi 'government' allowing women to drive. It was expected, no doubt, by those who passed the new law that people would think more positively about that country. In terms of public relations, it was supposed to be a good thing. But, things like this don't do exactly what they're supposed to.

When you highlight something like this, it becomes news. And many consumers of the news learn something they didn't know about a topic before; in this case, the fact that women could not drive in a modern, rich country. The policy was supposed to improve outsiders thoughts towards the regime, but it can do the opposite. I bet if you took a poll today about freedom in Saudi Arabia, it would score worse than it did last week.

This phenomenon, highlighted by marketers and economists like Peters and Berger, was also seen with the War on Drugs. Upon the policy's inception, drug use actually grew, because the government was running a massive ad campaign highlighting different kinds of drugs - their effects, where they're sold, and how they're used. It was an infomercial, because a great many people watching had not even heard of half of them.

For horse racing, I think something can be learned.

Current horse racing policy, say with banning more and more allowed drugs, should not be trumpeted, but slowly and slowly improved from within.  The sport does not need headlines "Race Day Drugs Banned", because the general public's reaction won't be, "great, they're not giving horses drugs before they race", it will be "they were allowed to give drugs to racehorses before a race? What's wrong with these people?"

It's not dissimilar, in my view, with "wastage", or the fact that so, so many horses born and sold as yearlings this month won't make it far in life.  The general public's expectation is that they do make it far in life. By enacting policy that helps this problem, and trumpeting it to the world, the public won't think more of you, but less.

In a world of 140 280 characters,  there's plenty of room for good policy. But, how a business or industry manages the minefield is most important. For horse racing, whip rules, drug issues and wastage are all very important things to work on to bring horse racing more in line with today's urbanized world. But creating and forwarding a policy in the shadows that meets the public's expectations is, in my view, the best way to go.

Have a nice Wednesday everyone.

Friday, September 22, 2017

"Give Us the Free Market!"

"They can't tell us what to do with our horses. Get out of my business, because it's my business", is an often heard complaint from horse owners, and horsepeople.

Whether it's about out of competition testing, suspending the horse for positive tests, house rules, commission rules, jail time rules, federal oversight, or whipping rules, the drumbeat is pretty constant. "Don't tread on me."

Being a free market type (don't hate, twitter!) who believes when Adam Smith's invisible hand becomes visible we're a whole lot worse off, I get it. I truly do. But for horse racing, I think the arguments screaming for a "free market" are not only futile, but dangerous.

If you're asking for that free market, you're asking for a few things you might not like much.

A free market means the $40,000 purse at the track you're racing at will immediately fall to $5,000 or less because in a free market slot machine revenue doesn't go into a purse, but into someone elses pocket.

The yearling you're selling doesn't go for $250,000, but half that, because big bad NYRA is run on handle revenue, and big days aren't that big anymore.

The corporate track that owns your raceway isn't there to yell at, because they exist almost solely because they're holding out for (or already have) casino money. Board of Directors and shareholders of stocks in their 401k don't tolerate losses. When the market is "free", owning a horse track doesn't give them any edge, of course.

Twinspires and other entities probably don't look like they do because the UIEGA, passed by Congress in 2006 to protect horse racing, doesn't exist. Yes, handle gets crushed by internet competition, and in the free market handle pays for purses, so they go down too.

The TOC doesn't hold out and lobby for poker money, because politicians say, "why should they get any poker revenue?"

In a free market there's no Canterbury Park to get mad at for raising takeout, because the native tribe who shares market space and $75M for purse money by government decree doesn't have to any longer.

In the free market, your city track is probably Hollywood Park. And no one wants to build a new one to replace it.

The free market is a wonderful thing. Innovation and invention are spurred by it, new drugs and medical techniques that make us healthier and happier and living longer are being invented every day. Worldwide wealth is skyrocketing and poverty is declining. Preach it from the rooftops! It's a great thing!

But for horse racing, grab the collected works of Karl Marx and hug it like a warm blanket. And then embrace the rules, the meddling from the government and commissions, and animal activist do-gooders. It's the world in which horse racing lives, and we should all thank our lucky stars it is. Because although the state of the game ain't perfect, it ensures the sport is a whole lot bigger than the laws of supply and demand say it should be.

Have a nice weekend everyone.

Monday, September 18, 2017

Canterbury Park's Cautionary Handle Tale

Canterbury Park - the small Minnesota track that lowered takeout last year, only to raise it this season - concluded their meet recently. The numbers, year over year, are in: Thoroughbred handle was up 2.6%, and handle per betting interest was down 1.8%.

Last year, with the takeout decrease, handle was up 5%, and handle per betting interest was up 10%. 

Racetrack handle analysis (which tends to be pretty rudimentary) will conclude what it wants to conclude regarding the above. And, quite honestly, since reported racetrack handle numbers are where lines of best fit go to die (and people use cognitive bias to analyze these numbers), I completely understand that. But, we'll try and take a deeper dive.

Using some comparative analysis, regional tracks had a very good year. This season, Prairie Meadows was up 21.2% and Arlington up 11.3% per entry. Last year the weather in the midwest made it hard to race on the turf at two of the three regionals, and barns were nowhere near as plentiful. In 2016, these tracks were down 16% and 10% respectively.

So, last year, Canterbury's handle - up 10% - outperformed their regional friends.

This season - again comparatively - Canterbury Park did not rebound like their regional counterparts did, and vastly underperformed.

We can probably conclude with some certitude that a majority of the "new" money that entered the Canterbury pools in 2016 did not return. Anecdotally (which is never a good thing I suppose), I do know personally of about $400,000 in meet handle that this year was zero dollars.

When we factor in signal fees and SMF's the landscape gets even muddier. I don't think we can go a lot further.

What did we learn? Not much that we didn't already know, I guess. The marketing buzz of a takeout decrease, along with the churn gained from a takeout decrease, helped handles, at least some in 2016. And hurt it some in 2017.

Revenue was certainly up year over year - probably apples to apples several hundred thousand dollars - which I am certain is important to a public company being yelled at by a BOD. There's that.

But, for a racetrack who gets $6M earmarked for marketing from an $81M war chest of gaming money that's mandated to be spent to "grow handle", isn't using a few hundred thousand dollars a year to do exactly that fulfilling the mandate?

One conclusion that's easy to make, in my view, is that horse racing makes decisions on where they are, not where they want to be. Canterbury appeared to have momentum on their side in 2016, and for whatever reason, despite a perfect weather season with good field size, the momentum stalled. That, I think, isn't good for anyone who cares about the long term health of the game.

Have a nice Monday everyone.

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