Monday, July 30, 2018

There's More Than One Response to One Big Aftercare Ask

Crunk tweeted this today --
On the surface, and for regular horse fans and bettors, this is pretty basic - Help aftercare with a touch of a button. Great idea.

If we slap on the critical thinking hat and look a few rungs below the top of the ladder, it becomes a little more problematic.

If you're at the track for the very first time and see this, your response might be different.

"They don't have a plan to take care of these horses when they retire? What kind of business would do that?"

If you're a politician out for a stroll that is unaware of the size of some of the tax breaks, or gaming subsidies, you might say, "I have to find out how much they're getting from the public, because some of it should be used for aftercare."

If you're more of a casual fan, you might be introduced to the topic and look into it more and more. You know an owner of the three paid $900,000 at the OBS for this colt, and you start to wonder why the horse ends up going to Mexico a couple of years later.

Jonah Berger wrote extensively on this topic in a book called Contagious. When people are alerted to something they were unaware of (or assumed was being taken care of) it has a very big influence on them. It causes them to learn about the problem, rather than the solution, and if the problem doesn't make sense to them, it could do the opposite of what's intended.

I like the idea of being able to give $20 or whatever to aftercare. I drop money in the jar each time I go to the track. And maybe I am the proper audience for this tactic. But I know I'm not the only audience.

Have a great Monday everyone.

Tuesday, July 17, 2018

Grinding Down the Bankrolls of the Masses

David Schwartz of UNLV wrote a neat article on blackjack in Forbes today (h/t to Charlie).  In it he explores what's happened over the years as casinos have tried to make changes to the margins to earn more rake from each player. This includes 6-5 blackjacks and standing on a soft 17.

Proponents of 6:5 and the other edge-padding rule changes argue that the vast majority of customers don’t know the difference. Walking a casino floor and seeing 6:5 tables packed with smiling players, they might be right. But the numbers tell a different story. 

Since 2000, the number of blackjack tables in the state of Nevada has fallen by over 31 percent. Yes, but the amount casinos win from blackjack is still the same, some might argue, so things aren’t that bad. Factoring in inflation, though, the amount Nevada casinos have won at blackjack has fallen by 46 percent.

This is not much different than is seen with a marginal takeout increase in any game. Betting volume depends on a few things, one of which is bankroll size - as bankrolls get degraded less is rebet. But also, the enjoyment a bettor gets from a game is directly correlated to them having a chance to win, and although the black jack changes are marginal, over time this enjoyment degrades too. 

The same phenomenon was seen in scratch off lotteries, but things went the other way. These ticket bandits started at well over 50% takeout because lottery players scratching tickets were deemed to be not in any way price sensitive.  Over time this was proven incorrect, where now - at least in one state - scratch off ticket takeout on larger sized ($20 or more) tickets is lower than Del Mar exacta takeout. 

In horse racing we don't talk about this much, and frankly, takeout increases are normally hidden, then trumpeted with a short term revenue bump. The key to that is short term, because in the long term, bankroll degradation is something that stunts growth, and what's particularly penal about it as a strategy - you don't even see it happening in real time. You just wake up one day and wonder where half the people went. 

Have a great Tuesday everyone. 

Thursday, July 12, 2018

May's Numbers Are In - Here's My Completely Back of the Napkin Monmouth Sports Betting Projections

Crunk linked today's New Jersey gaming report, and here were some numbers.
Doing a little math we see Monmouth did about $10.8M in handle for the couple of weeks they were operating in May. Extrapolating handle is pretty problematic because this is like a cat trying to catch a laser pointer, but let's say for an average May this would mean Monmouth would bring in about $20M in sports wagers.

In contrast, Nevada Sports Books did $315M this May.

Playing around with the numbers, we can make some probably wildly inaccurate projections, but projections based on something concrete nonetheless.

I'm taking into account a 5% hold (it was reported as 7.8% but it will likely come down), 9% to the state, 50% to Monmouth as an operator and 40% to purses. Those last two percentages could be off, as Crunk in his tweet notes, but they're probably somewhere in the ball park. If you know for sure, correct me in the comments.

I'm also looking at Monmouth doing 7% what Nevada does (they'll do about $5B in 2018), which about the percentage in May. As more sports betting comes on line, this is probably high.

Here's the grid.

In this scenario, you're looking at $6,125 a race in purses. You can add an error band to make it more accurate.

It'll be interesting to see how this plays out at racetracks that do offer sports wagering in the future.

Note --

We had a go at the odds drop phenomenon this week. Click here if you want to read about it. 

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