Wednesday, May 31, 2017

Nope, Modern Persuasion Ain't My Thing

If there's something I've learned over the years - right or wrong - is that most of life has to do with sales. And to be a good salesman, or saleswoman, you need to have mastered the art of persuasion.

Donald Trump is a good salesman. He's also a very good persuader.

#Fakenews is persuasion, and Trump has mastered its art. He's picked a group of people who have approval ratings below 20% and he's used them to his advantage. Everything they write that he doesn't like is labelled fake, and his minions (which there are many) rally to him, on social media and elsewhere, because, well, with a big enough audience who hates the media, they are plentiful.

It doesn't matter if the news is real and not #fake, or how ridiculous a narrative may be. When persuasion works, facts don't matter.

I won't let the other side off the hook. Barack Obama was a master persuader and good salesman, too. The republican congress's approval ratings were low and they were supported by Fox commentators. The former President used both as targets, almost each day. His minions would jump when the whip was cracked with Trumpian verve on every bit of "Faux" news, or when his opponents didn't pass what he wanted passed.

It doesn't matter that sometimes the Republicans were right, or that the Fox News story you just saw with a Princeton prof talking health care economics was actually pretty good. To the master persuader and his or her followers, they don't care. The persuader's job is done.

Maybe it's just me, but I find that kind of discourse in today's world nauseating; weak; condescending and annoying to no end. But the fact remains -- the tactics work.

In racing the persuaders are there, too. "Takeout hawk" is a pejorative and it works for that side. Calling us, 'people who'd like optimal pricing to grow handle, and subsequently the horse racing business' just doesn't cut it.

Framing works on the other side, of course. Calling everyone that works at a racetrack an idiot serves a purpose, just like labelling Jake Tapper an agent of the Democratic party does. It marginalizes them, and the marginalized aren't worth listening to. Plus, like the media, this business is shrinking, so they're an easy target. If racing was growing there would be no idiots.

I kind of despise this new wave of banality. Which is why you'll find arguments based on what I am reading, or seeing, or what-have-you (in a racing context) regardless of the frequency, as Sid jokingly pointed out today. We talk, McDonald's sauces, Russian pollution, or anything else that pops on the radar.

Framing things persuasively, like a skilled politician might be better, and it would certainly be easier, and more entertaining. But, I can't do that well. 

For example, I argued the Canterbury takeout reduction (a common topic on this blog) like this -

It's good they're moving the other way while prices have been going up, and trying to build their brand

Hopefully handle will be up this meet, and they get some buzz

Because they have gaming money, they can expense the losses of revenue in year one or two or three as "marketing cost", which a lot of slots tracks should do

In year two and three, tweaks could occur, the experiment can move forward, and their brand could further build

Perhaps in year three, or four, their Thursday and Friday night cards will be doing north of $1.5M a night; maybe with some work even $2 million. They will be a track in the marketplace that people look at, and their brand will be improved

In year four, or five, they will be revenue neutral, and beginning to make more money each racenight. This would make both them, and racing, stronger.

I realize that's not a persuasive argument in today's world. It's not remotely sexy. There are no bumper stickers, or quick fixes, or bigly promises. There's no bogeyman; there's no one to yell and curse at; there's no one who's a villain.

I simply believe there are no quick fixes for a business which has fallen so far, so fast. Why sell sizzle when the solutions aren't? It's not like I'm running for office or something.

Modern persuasion ain't my thing and many of you who've read the blog for ten years seem to be pretty bad persuaders, too. I think we should be okay with that. Racing can't be fixed in 140 characters, and we can't all be Donald Trump.

Have a great night folks. And remember -- mandatory super high five payout at Pompano happens in race 8. Good luck!

So, I Bought Big Mac Sauce at the Grocery Store Yesterday

I walked into a friendly neighborhood grocery store yesterday, and much to my surprise I saw a display.

In nice bottles, with McDonald's logos, stood Big Mac sauce, Filet-o-Fish sauce and McChicken sauce. I found out later these sauces went on sale in Canada-only earlier this spring.

This was, on the surface, kind of a curious decision. McDonald's selling their sauces (through a licensing deal with Kraft) is an affront to their core product (restaurant sales), right? If people can buy the taste of McDonald's on the grocery isle it would seem so.

It's also a potential detriment to franchisees, who they have to keep happy.  A McDonald's franchisee pays big money to own a McD's and works on a high volume low margin business model. For example, a front-line employee who makes $20,000/year has to bring in $200,000 of revenue, or the franchise resale cost will go down. It's why they fight margins, and squeeze suppliers so hard.

Offering a product "off book" is probably no bueno to business owners.

So why would they do such a thing, and why would restaurants accept it?

According to BNN, these sauces act as a gateway product to introduce the flavors to people who have not tried McDonald's. In particular, four of five millienials in Canada do not eat at the food giant, and being front and center on grocery shelves - McDonald's believes - can help. In addition, it's pretty obvious that the flavors keep McDonald's on your tastebud radar, and you can't make the real thing at home, so it helps restaurant sales that way.

What strikes me, reading about the above, is that racing has done exactly the opposite.

When Betfair came to partner with racing a dozen or more years ago with a licensing deal - just as Kraft did to McDonald's - they were told to take a hike; that the core product would suffer, so there's no growth.

When Derby Wars came to partner with racing, the same thing. Take a long walk off a short dock. Quit "stealing". Even worse, they pulled out the legal muscles.

Both exchange wagering and contests work outside the core product. Both products act as a gateway. Both products help keep people engaged and following horse racing. Both products work in tandem with the core product. Both products are the sauce to the pari-mutuel beef.

McDonald's (and other businesses who sell condiments like this) see potential. Potential for core revenue, yes, but potential to keep their product in the minds of consumers. Racing, on the other hand, sees them as threats. They always have. It's ingrained in its culture.

One business is probably right and one is probably wrong. My money is on the golden arches.

Have a nice Wednesday everyone.

(PS - The sauces are quite good)

Tuesday, May 30, 2017

So What's the Big Churchill Downs News Today?

This was tweeted last evening:
Twitter was abuzz. What could this big news be?

No one seems to know, but there have been many, many rumors. Bigly rumors. I'll share a few that I've seen on the social media machine here. I should caution, despite many of these rumors sounding perfectly plausible, they are not news. Some might even turn out to be fake news.

Tax Deal Announced. "Kentucky Derby" to Stay the "Kentucky Derby" -  No, the Kentucky Derby will not be renamed the "Big Fish Jackpot Stakes brought you by Big Fish Games" as proposed by the gaming giant. The Governor gave in to demands for a 0.1% tax rate on all CDI revenue until the year 2055, and a special "Louisville Hardship Development Grant" for the iconic racetrack. Commonwealth crisis averted.

Churchill: Jackpot Pick 6 Last Leg Cancellation was due to "Bad Clams" - I had not heard, but apparently (so twitter tells me) the last leg of the pick 6 was cancelled, with lucky bettors holding winning tickets on five of seven horses, due to one of the stewards eating "bad clams". Thus far they've found everything was done correctly. For the stewards safety and the integrity of horse racing it was the only course of action. The jackpot carryover continues tomorrow.

New App Released on the APP Store - We're hearing a rumor that CDI will be releasing a new app today (for Apple Watch, iPad and iPhone). The app allows a user to replace his or her regular clock with a divestiture clock, where when the numbers hit zero, Churchill Downs will be completely divested from horse racing.

New Takeout Hike - It's rumored there could be more surcharges coming for bettors this fall. CDI and the Governor propose a 35% takeout on supers, tris, exactas and pick 5's to generate money. "1% of the takeout hike will go to purses, and the rest will be used to make open market purchases of Churchill Downs stock," said a source.  When asked what happens if revenue goes down, like it usually does over time, the source said "they don't really have a plan for that contingency."

Churchill to Purchase TVG, Xpressbet, PTC and 11 Other ADW's - This one, if true is a barnburner.  Word is they see how an ADW monopoly works in Canada, and they absolutely love the idea.

New "Computerized" Morning Line Announced - Rumor has it that morning lines will now be made by computer. "They wanted the morning line to add up to 155% so they could make it look like horses are all overlays," said my source. "The employees revolted, so they went to a computer, programmed by bad math puppet masters."

Travis "Headroom" New Race Caller - This one sounds a little unbelievable, but as a cost-cutting measure, Travis Stone has been replaced by a computer mash up of Travis Stone calls. "CDI owns the rights to Travis's voice, likeness and words. Churchill believes they have enough tape to use Travis's voice with snippets of race calls to make the races run smoothly, at pennies on the dollar."

Kentucky Downs' Racedates Announced - Although it may seem odd that a rival track would announce the racedates for another track, it's rumored to be happening this morning. Sources say Kentucky Downs will now be allowed one race every two years.  The race, for maiden steeplechasers will be a non-betting affair, and be run on January 3rd, rain, ,snow, sleet or shine. "The Kentucky Downs slots money will now go right to Churchill, after Kentucky Downs pays expenses for the day," said my source.

Will any (or all?) of the above be true? Tune in later today to find out.

And have a nice Tuesday everyone.

Monday, May 29, 2017

Solvalla Shocks and Superstitions

Yesterday the best trotter in the world - and it's not really close - delivered an awe inspiring performance in Sweden at the Elitloppet, thrilling the fans in a way we will rarely see. Bold Eagle, the six year old Ready Cash horse, raced first up and grinded down a very nice filly in Delicious, on way to a stunningly easy win. The time - about 1:50 - and the ease in which he did it, were equally jaw-dropping.

We all waited with breathless anticipation to see the 1-20 shot win the final easily, stamping himself (yet again) as an all time great.

Then it happened. Clunker city. The horse who could trot a hole in the wind, suddenly could not even spring off perfect cover and hook a horse he had beaten a dozen times with ease. He was 12 to 15 lengths slower. He didn't hit the board.

When have you seen an elimination winner so far ahead of his foes bounce in a second heat before? It's not only uncommon to see a horse win his elimination so easily, with such command, with no urging, come back and race so poorly, in 100 years of heat racing in this sport, I am not sure it's even happened. It's why, after all, we see plethora of $2.80 second heat winners. Standardbreds are built for heats.

Thus far there is no apparent reason given for the clunker, but perhaps we can chalk this up to something we all live by as horse owners - crossing the harness Gods.

Bold Eagle's driver, after his elimination win:

“The horse is just so much better than all the others, I am pretty sure that he will be even better in the final,”

For every superstitious horse owner, driver, trainer, or groom out there - in likely the most superstitious sport on the planet - that's yet more evidence to never, ever tempt the Racing Gods.

Regardless, for those of us who expected a coronation, it did not happen; proving yet again, that when we're dealing with 1,100 pound animals, anything is possible.

Have a nice Monday everyone.

Tuesday, May 23, 2017

"If Only Those Gamblers Were Just Like Me"

Racing has interesting subsets of customers. Of course there's the gambler, looking for a score. There's the participant, who earns money from the sport. And there's a fan, who may bet a little, but he or she mainly watches racing, because he or she loves racing.

In many sports, these three subsets of customers happily mix, and almost all the time their interests overlap. In the NFL, for example, a gambler might want better injury information. But so does the fan, and so does the opposing coach. A player might want lower ticket prices because they want to play in front of a packed house and this is what the fan wants, too. It's all simpatico.

In racing it's not like this at all. The gambler - who might want higher field size and lower takeout - is completely at odds with many participants and fans, who seem to want to work against them. It's almost like it's a challenge of some sort, like a grand boxing match of yore.

"If only those gamblers were just like me," you'll often hear in pleading fashion.

Why this happens, I don't really know. But one thing I do know -- thank goodness gamblers are gambling.

Here's a breakdown of  revenue by sport (mainly from a European perspective):

What you quickly notice is that other sports make money from the gate, from being shown on television, and from selling commercial items, like shirts, hats and game gear.

Racing doesn't sell Todd Pletcher jersey's, it pays to be shown on TV, is not paid, and raceday revenues are miniscule, especially in the US (these are Europe gate numbers)

Racing makes the vast majority of its revenue from bettors.

Why the blue bar is so important - other than the obvious - is that this segment is the most malleable.

High juice, worse races - these players slowly leave. When the blue bar goes down, everyone loses.

Also, the blue bar represents a $500B to $1T worldwide skill game gambling market. Horse racing has only a small slice. It can grow, if the sport caters to them.

The grey segment and green segment are both more static, and it takes a Mack truck to move them.

Marketer Seth Godin wrote recently:

“One vestige of the TV-industrial complex is a need to think mass. If it doesn’t appeal to everyone, the thinking goes, it’s not worth it. No longer. Find the group that’s most profitable. Figure out how to develop for, advertise to, or reward them. Cater to the customers you would choose if you could choose your customers.”

Racing must choose the customer who i) brings in the most revenue ii) can be easily catered to with change and iii) will respond with an elasticity that can bring in the most return on investment.

That's the blue bar. Why so many in the sport fight against them is a great mystery.  

Takeout, field size, and other betting customer issues are the most important issues for this industry to address. When or if that happens is anyone's guess, but I can unequivocally say - until it does this sport will grow smaller and smaller each year.

Have a nice Tuesday everyone.

Saturday, May 20, 2017

Derby-Preakness Coverage Contrasts

Those tweets are self explanatory. If you are not watching the XBTV, or Pimlico hosted track feed today, you're probably missing out.

For those who want the pomp and pageantry, the NBC feed will have it. For the rest of us, we have a nice option - crisp, clear, smart coverage, while we bet a few dollars into the pools.


Who cares who I like in the Preakness (I'm not sure I even know before seeing the odds board), but one horse I will not bet, will be Always Dreaming. Not because I don't think he can win, not because I don't think he can win by a lot. Not because 3-5, or whatever he may be, might be totally fair.

It's just a simple habit - I automatically throw out horses who had a good trip on the best part of a racetrack. When 15 million people saw the trip, it's even more reason for me to bet against.

For a much better analysis, you can read Crunk.  

I see the horse inventory is better at Canterbury, the bridgejumper is back, the weather will probably be better than last year's "not this much rain since 1896" thing. But I can't play it. I feel this little track could've done $2M on good Thursday cards in a few years; it bothers me they threw in the towel so early.

On the big track side - big handle days are getting bigger. So, I'd expect to see a nice handle this weekend for Pimlico. If you're trying a shot at exotics, the 12% pick 5 ensures you'll get paid.

Good luck today, and have a nice weekend. In Canada, it's a long weekend, so enjoy it that much more.

Wednesday, May 17, 2017

Racing Goes Full- Blown Napster

I've been reading some of the interwebs today regarding the Stronach lawsuit against Derby Wars. As most know, Derby Wars - a contest site - has been in business for quite awhile (even partnering with some tracks with a revenue share).
  • Last year, after the suit was filed, Derby Wars reached an agreement with Hawthorne Racecourse near Chicago giving the track a portion of its entry fees on tournaments using Hawthorne’s races. At the time, Midland said the agreement was part of a larger strategy to work with the racing industry. “We see working with racetracks as important to growing contests,” Midland said. “Partnering with the tracks is a natural way to do that.”
Stronach does not want to do that, apparently. Instead they've gone full-blown Napster.

The problem, as I see it, is you should never go full-blown Napster. Full-blown Napster is not considered good business. And you don't even have to possess a fancy business degree to understand why you never go full-blown Napster.

Let Marco, a Napster user, explain in his article way back in 2004:

From that time in late 1999 to present day in summer 2001, my MP3 collection has grown from 500 to over 2200 songs, and Napster was largely responsible. The record companies accused Napster of irreparably harming CD sales. My collection contains hundreds of artists, but this is the key point that most record companies don’t understand: A pirated MP3 does not equal a lost CD sale. 

I have songs from over 300 artists. Assuming each artist has only one CD that I’d buy, and each CD costs the RIAA’s bend-over-a-bit-more price of $16, that’s $4800 in “lost sales” from me. But I would not have bought all 300 CDs!

 As my collection started to really expand with Napster, I discovered many new bands and expanded my collections from others. In the last year, I’ve bought more CDs than I did in the previous three years (ironically, Metallica’s S&M is among them), and I’ve bought more concert tickets than the previous 19 years. I’m more likely to give new bands a chance, since I can pirate some of their songs and see if I really like them before buying the CD. And I’m much more likely to go to concerts when bands come to town, because now I know 300 bands.

Napster expanded my musical taste and has greatly INCREASED the number of CDs and concert tickets I’ve bought in the last year.

No, an MP3 does not equal a lost CD sale. Nor does a contest play mean the $12 would've been spent on a Rainbow Six. Just because the market is doing something, it doesn't mean it wants your something.

What Marco describes is the way modern web ecosystems have been working (and helping the underlying business thrive), as told by Jarvis, Anderson, and most recently, Kelley. It's not about substitutes, or widgets, or what a customer would've done in 1984 that they aren't doing now.

Knee-jerk reactions in racing - to be honest, sometimes I wonder if there are any other - tend to lean on the side of what entity is getting what share of what. It's like clockwork. It devolves into a shouting match about slices of the present landscape, when the land has shifted right under their feet and there is no present landscape anymore. It's now about engagement, exposure, and building a modern ecosystem to feed the high funnel, while at the same time taking care of the low.

18 years ago the music industry learned that going full-blown Napster didn't solve their problems. It just shrunk a market, annoyed customers, and delayed the inevitable. It's taken them (literally) 20 years to dig out.

Why racing - a game beautifully made for the internet, for mass betting, for a captured online audience - is doing things entities were doing in 1999 is completely mind-boggling to me.

Stronach v Derby Wars - Killing Customers, One at a Time

It was announced today that a federal judge ruled for the Stronach Group and against Derby Wars, citing that the contest site was operating like an OTB or ADW.

"A federal judge has ruled that horse racing tournament website Derby Wars has been operating as an off-track betting business and is subject to the federal Interstate Horseracing Act, which requires consent of racetracks and racing commissions prior to accepting any wagers."

This probably pretty much shuts down the company, as is.

Leaving aside that Derby Wars is probably about as close to an ADW or OTB as a hamburger is to an octopus, this is really, really disturbing. Other sports simply do not act like this.  No, most other leagues or games, looking for reach for its core product have looked to partner with tournament games. This is especially true for small, niche leagues, like the CFL:

“This new fantasy offering will give avid CFL fans and sports fans new to our league an opportunity to deepen their engagement with our game. It’s an important part of our strategy to serve our existing fan base better than ever before at the same time we attract new fans, including the next generation of fans," said Christina Litz, the CFL’s Senior Vice-President of Content and Marketing.

That's called "vision". That's a league not worrying that entity X is earning revenue off team names, or game outcomes, but a league trying to partner with a new game as a gateway to becoming a fan and paying customer (or just as important - a vehicle to keep the existing base engaged).

Racing doesn't think like this, and never has.

In racing, as we've opined here, if the big dogs can take more and more of the national betting product, they'd be happy, no matter what the top line number is. For example, if a group could control $2B of $3B in handle, it's better for them than having $2B of $11B in handle. This is simply another step in that direction.

These rulings serve even more of a purpose however, in this quest for a larger market share of a dwindling market. It's a flashing billboard saying to enterprising companies, or people who might want to create something for horse racing : "Go away"

I doubt this is any way to grow an industry. And since horse racing hasn't been growing, they're doing pretty good job at accomplishing that.

Monday, May 15, 2017

Squeezing Those ADWs Out of Business

Some racetracks and horsemen groups search for a lot of bogeymen under their beds at night. The latest, in that long line, are ADW companies. They either don't pay enough, or need to be monitored at every turn, including with geo-targeting.

Now, I am not here to defend a rather strange and sub-optimal betting delivery system, but I will continue to defend one simple point: Squeezing them won't grow horse racing.

Today at TechCrunch, Zack Kanter, the founder of Sedi (a company in the really tough ERP space) wrote a fantastic article about retail, and the various machinations of it. The article is really good, and if you're interested it's worth a read. One part of it, about backward (or forward) linkages caught my eye:
  • "the increased margins typically evaporate over time. There are great examples of this in the automotive industry, where automakers have gone through alternating periods of supplier acquisitions and subsequent divestitures as component costs skyrocketed. Divisions get fat and inefficient without external competition. Attempts to mitigate this through competitive/external bid comparison, detailed cost accountings and quotas usually just lead to increased bureaucracy with little effect on actual cost structure."
Signal fee cost is the ADW's component cost and it has skyrocketed. It's harder than ever, in 2017, to deliver an efficient, vibrant product to the end-user, which stunts growth. What ends up happening, and probably will continue to, is the takeover of some ADW's, by track ADW's, or larger entities who can deal with this issue easier than they can.

As that happens, what you're left with are divisions that "get fat and inefficient without external competition."

The industry will never grow by trying to increase margins on the backs of the end user. It's completely short-sighted and untenable.

Friday, May 12, 2017

Please Powers that Be: "Save Us From the Twinspires Players Pool!"

Crunk's well-written piece about the Twinspires player's pool has been getting some traction on the interwebs. For those who have not read it, Crunkland talks about the brouhaha with the Derby superfecta hit outside the player's pool, and the overall ROI of the player's pool over the last eight months or so (it's poor).

The reaction to this in some quarters (and maybe this should surprise no one in this day and age) is to ban these player pools.

That in my view, is nonsensical overreach.

Player's pools have existed for a long time, in many countries, including Australia, where they continue to be quite popular. For a low buy-in, customers can play along, looking for a huge score in a carryover pick 6, or place pot, or what-have-you, in pools that are too expensive for their bankrolls.

They, like you and I who may be playing more money into these pools, get the same thrill cheering along as we get one, or two, or three winners on our tickets. It's worth $20 or $40 to some people; it's a fun part of this sport, and the fact that they do exist and draw money is testament to that.

The fact that the Twinspires Player's Pool is ROI negative is, to me, completely irrelevant. Beating huge rake is hard, so it should not be surprising. Plus, they could hit a $900k score next week and be ROI positive. It's the nature of the game with hard-to-hit bets.

Player's pools are what they are -- a collection of a whole lot of people, placing a few dollars into a pool, to try and have a little fun, and maybe earn a little money. What in heavens name is wrong with that?

Where player's pools and other machinations like this break down, is when something strange happens, like last weekend, as Crunk dutifully explains. But that's a correctable mistake, nothing more, nothing less. Protocols and disclosures (they probably should disclose ROI's as a matter of course) should be fixed, and probably will, unless Churchill Downs is actually the evil empire they are satirically made out to be.

Lastly, and most importantly, the market is not stupid. If the player's pool is truly villainous -  sucking money out of unsuspecting horseplayers, while they roam the streets looking for someone to hit "send" on their ADW interface because they're too dumb to themselves -  the market will eventually take care of it.

Someone seems to always be looking for someone to save us from something. DFS needed to be regulated to save us all; to stop something that was ridiculously simple for a market to fix.  What happened, as often does in cases like this, was the cure - higher prices, less choice, smaller pools of money - was worse than the disease.

People might be 'dumb' to play into the Twinspires player's pool. But what's really dumb is not letting us - should we so choose, through our own free will - play into them.


It's here. Inside the Pylons speaks! Well, it's a bit more than that - the 9th Annual Track Ratings Issue from HANA is released. There are some interesting stats, and some excellent commentary. Nice work by Greg Reinhart and Charlie Davis, once again. Give it a download and pass it around if you can. Those two work hard at it. 

Have a nice Friday everyone.

Thursday, May 11, 2017

Big Racing Days Are Great, But They're Missing Out on Landing New Fans & Customers

Over the last few years there's been quite a bit of talk about big racing days. As smaller tracks struggle with handles, the large tracks have done fairly well (in racing context well, which is incremental). When a big day is added, a track can do really well.

And, when a track does really well, like Churchill's handle was this weekend, it does spin off.
This is, when we think of it logically, the way things are supposed to happen. It's all good.

Further to the core numbers, as written last week, the Derby brand creates buzz, and this buzz spins off in other ways:

As those graphs show, not only are there more bettors and fans watching these days, there are more people who are newbies who are looking to learn about horse racing.

That's wonderful, right? Sure it is.

Check out the same phenomenon with the Super Bowl and searches for "NFL apparel" during the big game (2014 stats, but it's the same every year):

That's great. This overpriced gear is a huge driver of revenue, for both the players and the league, and it's important. Seeing a huge spike, with hundreds of thousands of willing buyers, is a ready-made market.

The NFL market differs from racing from here on out, though.

The NFL searcher goes directly to He or she puts in a simple credit card, goes to checkout, and gets a shirt in a week.

It's a little more than that, because the newly interested person is captured. He or she is signing up to a very good website in the process, with all kinds of information on the NFL, including fantasy sports, live video, highlights, information on teams, players (historical and today's) and just about every statistic imaginable.

Meanwhile, searchers for horse racing - new fans too - probably visit Twinspires or TVG and see an encompassing process. They don't see free video, or statistics, or anything else of true value. All they see is a company trying to hook them into something.

Maybe they land on equibase and wonder why they have to go through a process to see how many times Always Dreaming raced this season. Maybe they click on a few links and wonder why that link drove them to a paywall. 

For those who search how to be a horse owner, well good luck learning anything.

If a game is leaning on big days, that's fine. But the business has to be streamlined to take advantage of big days. If not, the sport, or business is not acting in optimal fashion.

Racing has not taken advantage of a willing audience on their biggest and brightest days, while others have worked very hard - and work hard each day - to do exactly that. It's an issue that, if addressed, can help horse racing do more with their big events.

Have a nice Thursday everyone.

Wednesday, May 10, 2017

Horse Racing's Unwillingness to Create Wealth, Destroys It

I saw a couple of stories recently. has continued to expand their reach, this time with something called the "Amazon Echo Show".  It's, generally, a hub to turn your home into an automated, voice activated, connected system. It's actually pretty remarkable. Tech Crunch reports that this device (and its hardware, the Echo) will have 70% of the voice activated speaker market in 2017. This is while competing against tech giants Google and Samsung.

More close to home, Betfair has purchased a Daily Fantasy Sports company for what could be $48 million.
  • Scale is the key word with this acquisition and expects that the company will grow from ten people to twenty very quickly, as well as increase its marketing spend by roughly 100x over what was spent last year. The substantial marketing investment will cause DRAFT to incur a $20 million operating loss during this financial year.
The edge that betfair sees (and the reason they are willing to incur a $20M loss, as well as pony up a lot of stock and cash) is pretty clear. Since they are a gaming company, well versed, and well positioned both with regulators and with economies of scale, this investment can be ROI positive long term.

Amazon, way back when, was considered by everyone an "online bookstore". Betfair was considered to be an exchange company; its parent, an old-school bookmaker. Both have used cash, risk and their edge to create wealth (and sometimes lose it, nothing is assured) in businesses outside their sphere.

Racing on the other hand does very little of this.

Exchanges are built for racing; especially for races like the Kentucky Derby. A vibrant exchange market, worldwide, with hundreds of millions of dollars being traded on horses should've been accomplished long ago. It's a marketers dream. 

If Paddy Power/Betfair can spend $48M on a fantasy site (certainly using their regulatory edge) to try and create wealth, where is the push for racing fantasy sites from some of the big guns?

Both of the above are stopped before they are even started. Before they're discussed.

Churchill "owns" the Derby. They'd much rather have Derby futures at 15% or 22% juice than have a vibrant exchange. Plus, Churchill wants nothing to do with Betfair, or exchanges, and in racing such things are looked at as cannibilzation, anyway.

Similarly, a fantasy game for, say, the Derby is sacrilege for this very same reason. It doesn't matter this could grow; could act as a high funnel pipeline for new customers.

In the real world everything is on the table. Companies use their built-in edge each and every day. Heck, Churchill buying Big Fish happens right now with racing companies. But just not with racing products.

If racing doesn't use its edge to create wealth, wealth will not be created. And as handle falls, and foal crops recede, wealth is not only not being created, it's being destroyed.

Tuesday, May 9, 2017

The Derby Betting Crowd Isn't Dumb

Handicapper Mark Cramer has a nice section in one of his books about chaos races. In general, he believes that when there are four or five solid contenders in a contentious field you want to land on the chalk. The thinking is pretty simple -- the crowd is smart, and if you can't decipher something, the wisdom of them will do a better job.

At this past weekend's Kentucky Derby, Always Dreaming was one of four main contenders.

Irish War Cry, who had some pretty solid buzz surrounding him, and who came off a smashing win in the Wood.

McCraken, who in training could do no wrong, massively loved Churchill Downs, and was ready to run a big top, with a trainer who points for such things.

Classic Empire, who had a similar profile to McCraken, but who was also the fastest horse on paper in the race. He was the morning line favorite, and I did not see one person, pundit or twitter comment that disagreed with that morning line promise.

As for Always Dreaming, well he was a bucking bronco in training. He was trained by Todd Pletcher who had a one for 842,000 record at Churchill, and who was shipping to the Twin Spires from the hard, Gulfstream racing strip. He had really soft fractions in his preps and when he was faced with stiffer, he'd probably have some trouble.

Meanwhile back at the betting ranch, Classic Empire was not the early favorite; nor was Irish War Cry or McCraken. Always Dreaming was.

That would change, though, correct? When more money gets placed in the pool, yes. When the man who won the Derby free bet, bet Classic Empire, yes.

It never changed. Almost $4M more was bet on Always Dreaming compared to his three foes.

When Always Dreaming romped to victory, the crowd was right all along.

We can count this post up, and the Always Dreaming win as happenstance, like we're cherrypicking. After all, Derby chalk has not been exactly perfect or anything. Some chalk have run up the track horribly. But in this instance, in this situation with these contenders and the surrounding buzz, I think it provides a pretty good betting lesson. When looked at collectively, the crowd is anything but dumb.

Monday, May 8, 2017

Derby Handle Was Up, For More than the Obvious Reasons

The Derby card handle was up to over $200 million this year. It's a big number, in an industry that (outside big days) doesn't see many big numbers.

There's a rush to judgement on big days like this, namely, it's a one-off, the promotion and red carpets and NBC coverage and well, the Derby, is the reason for this big number alone.

Of course the obvious makes a difference, but, for me, it's much more about Occam's Razor than anything else - attracting betting dollars is a very basic proposition. Cards that we see at the Derby, or Oaks, provide betting value.  

In the Edgewood on Friday, the two logical horses were coupled - the sensational La Coronel and Dream Dancing. These two fillies were 4-5 through most of the betting, but the place pool lagged and lagged the win proposition. On other days, in smaller pools, with less interest, this gap gets filled near post time. It happens almost all the time. But not on this day. The entry ran one-two and paid $4.40 to place.

On Saturday, this phenomenon was on steroids, when Patch - a horse with maybe a 1% or 2% chance to win - was bet down to 13-1 early. Yes, but it's early. Well, 20 hours later, he went off at 14-1 at post time.

In a game where favorites are winning at about a 40% clip, and implied probability is near reality, these cards drive more and more interest from serious bettors. In fact, I'd submit that Derby day as a percentage of wagering from serious every day players has increased year over year, precisely for this reason.

Racing can't do this every day, but the principles of value should be striven for every day and they really aren't. In many cases they're an afterthought.

When you offer value, it makes more and more people look at your racecards and you don't need a red carpet for that.

Sunday, May 7, 2017

One of the Kentucky Derby's Two Tribes is Taken For Granted

Horse racing, in my view, has always had a problem subsetting their customer base.

I think I first realized this many years ago at a conference. I talked about some betting stats and threw up some gambling charts on takeout rates and rebates. These showed the obvious - regular players, if given a price break, invest back in the pools without thinking, and it's a good way to reward customers to keep them engaged.

A track person replied, "I went into the grandstand and asked a handful of people. They didn't even know what takeout was."

Oh well, that's that then.

This weekend, the Kentucky Derby nicely illustrated these two tribes. The fans, dressed to the nines, having fun partying, along with the folks who bet Patch because he looked super-cute. On the other side you had folks who were constructing tickets with the precision of a NASA engineer, watching replays over and over; trying to find an elusive Derby day score.

Although there is some overlap of course (there's nothing wrong with getting dressed up, going to a Derby party and betting at the same time), that's generally what the industry is looking at. 

I had a nice glimpse of that during a phone call yesterday.

A friend who is a professional gambler was playing poker and betting a few races downstairs at Woodbine. The concierge, who knows he is a horseplayer, told him he'd comp him to the Kentucky Derby party upstairs.

My buddy said "sure." And he called me from the party.

"Hey, I'm at the Derby party at Woodbine"

"Cool, do you see anyone [horseplayers, regulars] we know?"

"No, everyone is dressed up here. It's really weird."

"Are you dressed up at all?"

"Jeans and a Tee-shirt. People are looking at me funny."
The man who bets more than the entire room, is in the room. His tribe is in the grandstand, or at home playing online.

While racing seems to do wonders with the party crew - the NBC feed is 24/7 party and feel-good story central, the promotions are all "mass" - it completely dumbfounds me how bad of a job they do with the regulars (regulars who are fans or bettors) or those who want to be betting regulars.

Feed quality of what bettors watched on Derby Day
The rights are sold to NBC, which is fine. But nowhere does Churchill Downs write in the deal that people might want to watch horse racing, and not showing all the races is heresy. For regulars, it's not the end of the world we have to watch the Derby in standard definition in a little box on our computer. But if the party feed - capable of showing a race in HD - is not going to show an actual race, have some respect for the people who want to watch the race and give them an option.

TVG on tape delay, XBTV not being able to show the races. I mean c'mon. I watched ten minutes of the NBC coverage and it's ten minutes of my life I will never get back.

When Churchill takes money from a Derby pick 6 pool to seed a jackpot, gets complaints and does nothing, I understand. Churchill enjoys regulatory capture, and where other gambling businesses would get their knuckles rapped they carry on with impunity. Doing things like this is built right into the industry mindset and most are so blind they see absolutely nothing wrong with it.

But asking a simple question when making policy - "What will our regulars think of this?" - the answer is helpful.

Parties are fine and wonderful, and Churchill and others are really, really good at them. But for the other 364 days a year one tribe matters. Racing should stop letting them down.

Wednesday, May 3, 2017

Cub Reporter Visits the Kentucky Derby Trainer Dinner

As everyone knows by now, the hundred and somethingth Annual Kentucky Derby Trainer Dinner happened yesterday at the warm confines of Churchill Downs.

Much of the reporting so far has been from the racing media. And we know they're in the tank, like the New York Times is for the Trumpster. I wanted to know what really happened, and since classy, seasoned newsmen like Bill O'Reilly have been recently canned, I texted my old pal Cub Reporter.

"Cub", I said when I reached him at a pay phone at the track, "You there? Can you get me some quotes for my hundreds of thousands of blog readers?"

"I'm here. I sneaked by security when they were checking Steve Asmussen's hair for weapons. I'm standing right beside a CDI Vice President right now; although he's on an expensive cell phone, and I think he's firing an entire small town as a cost cutting measure. So he's busy," said Cub.

"I'll be back to you," said Cub.

Sure enough, less than 24 hours later Cub faxed me some quotes. I print them here, unedited, for you, the unwashed racing masses; those who can't get into the Mansion, even if you know someone powerful in Louisville, like Ed DeRosa.

Off we go:

Chad Brown, trainer of Practical Joke:

Cub: "Why did you put the blinkers on Practical Joke?"

Brown: "We were thinking of using him as a rabbit"

Cub: "He's your only horse in the race"

Brown: "Now you know why we're not using them."

Ian Wilkes, trainer of McCraken:

Cub: "Ian, there's been a lot of hyperbole regarding McCraken the past few weeks. There were reports he is almost human like, doing things horses never do - working himself, talking to reporters, going into other horses stalls and eating their food. Does this nonsense bother you?"

Wilkes: "Ha [laughs], I have to chuckle at it all because I was just mentioning this same thing to McCraken this morning when he was driving me to work."

Todd Pletcher, trainer of a bunch of horses:

[Note - Todd Pletcher only shows up to trainer dinners every 63 days - optimal for him - and since he went to the Arkansas Derby trainer dinner he wasn't here. He hopes to show up for the trainer dinner at the Belmont. In his absence, Todd told me to ask Dale Romans any questions I had]

Cub: "Dale, Always Dreaming has looked fractious...."

Romans: "Ya, I saw some reports of that."

Cub: "How have you been trying to settle him down?"

Romans: "How in the hell am I supposed to know."

Mark Casse, trainer of morning line favorite Classic Empire:

Cub: "Mark, there was a lot of talk earlier this week about Empire racing in glue-on shoes. Is this something we should be worried about?"

Casse: "No, not even a bit. When McCraken reshod him the other day he acted perfect."

Joe Sharp, trainer of Girvin:

Cub: "Joe, how did you enjoy dinner?"

Sharp: "Who wants to know?"

Bob Baffert

Cub: "What do you think  of your chances this year Bob"

Baffert: "Not good Cub."

Steve Asmussen, trainer of three horses:

Cub: "Where's Steve?"

Security Guard: "We found a six pack of coke, three screwdrivers and a pizza in his hair. He got bounced."

The staff of the PTP blog will be covering the Derby all week. So - like millions of you already do - watch for updates. As always, thanks for reading. 

Tuesday, May 2, 2017

Why Lowering Takeout Increases Handle 100 out of 100 Times

@righthind tweeted out a great link this morning, a research paper titled - "How Do Prior Gains and Losses Affect Subsequent Risk Taking? New Evidence from Individual-Level Horse Race Bets."

One of the conclusions:
  •  The “house money effect” [shows that] bettors ..... mostly spend the money they have won.
This means what it says - when you are making gains, you bet most of what you've won. This behavior is often linked to the "break even effect", which is a way of saying the vast majority of people will bet at a slot machine until their original $20 is gone.

This is, in fact, a big reason why slot machines were taxed, at one time, at 25% juice, but this rate went lower and lower. The people playing to break even were not enjoying themselves at 25% and the casino was not making as much as it should've been.  At 5% you had a whole lot of people on the floor chasing break even. Chasing is maximizing utility.

This theory is relatively simple, and it's not solely used for racing, or slots.

In finance, Tobin's Q is (loosely) the market value of a stock divided by the firm's replacement value. Companies with a low Tobin's Q use the house money effect to chase gains, and even when they have minor losses in a given year, will increase their risk, chasing break even the following year. Companies with a high Tobin's Q do not exhibit this behavior.

In racing, low Tobin's Q users are your casual user. People like to say "they don't care about takeout" but they do, because they always know where they are when it comes to break even, and when they have (or don't have) house money. Higher takeout moves them away from break even, and in response, over time they leave the market.

This is also why, in my view, jackpot bets are so terrible for the casual bettor. When you take a bunch of a user's money and tie it up, they can't exhibit the behavior they are predisposed to exhibit. Then, adding to the deleterious effect, jackpot money is not spread out for masses to chase break even, it's sent to one winner and he or she puts much of that money away.

When I type, as I often do here, "people don't take their incremental winnings and stick them in a sock" this is what, more or less, I am referring to.

When you give people more back for them to bet, they bet. This is why, 100 out of 100 times, takeout rate decreases increase handle.

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