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).

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