Monday, March 26, 2018

Big Racing Competition & The "Lottery" Bet

Good Monday everyone. Here are a couple items that I'd like to share with you.

Ah, it appears we've got some competition coming. Sports betting - at racetracks, online, and perhaps their own stand -alone shops might be happening soon.

We know in the past that slot machines and table games on racetrack grounds resulted in an approximate 20% drop in live handle (those numbers could be a little apple to grapefruity, but they're probably close).

If you're an old timer, perhaps you remember going to Belmont in the 1940's, where on-track on Memorial Day $5M was bet (about $60M today), and per capita handle was $77 (almost $1,000 today). Today, as we all know, a formidable amount of money is bet, but about 90% of it is off track, and on-track per capita - as we saw at Sunland Park yesterday for their big raceday - is about $20. It's not the only game in town.

Competition clearly matters. So, what could sports betting do to racing handles? Since we don't know what the potential offering looks like it's hard to speculate on with any firm confidence, but there are some common themes, as well as an historical context to examine. That was done here in HRU yesterday.

"The interest in wagering on sports has been on the rise. Through increased demand, Vegas casinos and sports books have seen revenue jump by more than 400 per cent from the early 1990s. We have a pretty attractive, low-priced product entering horse racing’s space. It should be clear that if legalized, it’s poised to capture more of the market..."

Moving over to another kind of green, Sid Fernando wrote an excellent piece for his newly announced bi-weekly column at the TDN on turf racing. The numbers (supplied by Crunk) are eye-opening. Great piece.

Did you ever wonder what types of tickets hit the super high five "jackpot" pools when there's no mandatory? Gabe Prewitt from Pompano posted the ticket that hit the one for $56k last night.
We know that people taking "all" tickets hit these things from time to time.

But it appears we can add, "my cat walked on my keypad and made a bet" to the possibles.

Have a super Monday everyone.

Tuesday, March 20, 2018

Being Nimble. For Racing it's Harder Than it Should Be

I was perusing the betting news this morning and saw this about Draft Kings and Fanduel innovating their offerings to customers.

"After testing the legal fencework, DFS operators have been on an innovation blitz over the last year or so. FanDuel created a whole division, FanDuel Labs, which is charged with developing new formats and game types. It’s been busy, too, rolling out ideas on a near-weekly schedule, it seems."

Innovating by offering new contests, new games, different formats and new technologies is nothing new in gambling over the web. But what is striking is the ease in which these companies can be nimble. It's essential to most businesses on the web, but certainly so in gambling.

Meanwhile, I read an article at the Washington Post by the always interesting Megan McArdle. She looked at a completely different phenomenon - changes in a product via slow rolling incrementalism; in this case, motor vehicles.

"For one thing, regular old-fashioned cars were none too safe when they first arrived on American roads. In 1921, the first year for which such data is available, there were 24 deaths for every 100 million vehicle miles traveled. Over time, improved cars, drivers and roads reduced that figure by nearly 95 percent."

Cars are in a heavily regulated industry, just like gambling companies are, but it's much easier to be nimble when your offerings are over the internet (and don't potentially kill people). Cars have changed, but it's been slower.

Horse racing is a highly regulated industry as well, but it, in my view, lags on both incremental improvement and innovation.

Let's take equine fatalities and look at them in the motor vehicle safety context. We know that synthetic tracks are safer - the trends were clear, over time, and they certainly worked in slowing the problem. This incrementalism would've been adopted by the car industry and regulators. In racing, this incrementalism was stopped. Even Keeneland, the (often times self-described) leader in equine safety, ripped up their polytrack.

In terms of innovation, racing lags far behind as well.

While Draft Kings and Fan Duel in 2009 did not exist, they have now i) created a product to exploit a loophole, ii) built a customer base iii) invested in their platform, and nimbly changed and modified offerings where today's games look nothing like a lot of yesterday's and iv) are legal in a whole whack of states.

That's not a bad innovative run.

Horse racing since 2009 has created a jackpot bet or two, created a Survivor bet at the Meadowlands that reportedly took a year or two to get approved and has exchange wagering in one state, at higher than optimal juice.

Why can motor vehicles and gambling over the web innovate and get incrementally better over time? I think it's because they both possess leadership to get better.

It's in the consumer, the regulator, and the firm's best interests to make cars safer and more mainstream. It's the same, or similar for Draft Kings and Fan Duel.

For racing if you ask 100 people how to get better, you'll get 70 or 80 different answers based on whatever tribe, or faction the person belongs to. This causes things to break down, where it's easier to do nothing.

We often ask why racing isn't nimble like others; why it can't seem to embrace even incremental change. In my view, it's simply not built for it, and until it is, we're destined to see much of the same.

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