Tuesday, December 31, 2019

You Gotta Be on Your Game To Cash

The last at the Big A today was an interesting exercise.

The field was pretty horrible, and the chalk was not worth anywhere near 4-5; in my view more like 5-2, so I thought I'd take a stab.

The 1,4 and 6 were plodding types that could hit the ticket, and the 2 and 8 were FTS's. I liked both FTS because of the dearth of talent. The numbers on the 8's trainer weren't bad, and the two horse showed he was a racehorse in his debut last March, and the connections removed the shadow roll all  these months later. The 8 was 10-1 and the 2 was 17-1.

Because I'm not really thinking, and just playing around, I created the following superfecta ticket.


The 8 won, the chalk came second, 5 third (at 80-1) and the 6 was fourth. It paid around $4,600 for a dollar.

Now, if I was on my game - a la playing regularly - I'd have probably done the following.


I'd have the FTS who I would choose to use as a win or out. I'd have my plodders to hit the ticket, and spray in all's looking for a price.

For say a ten cent ticket, I'd have spent around $30 and got back $460, which doesn't sound like much (just bet the 2 and 8 to win, right?), but I gave myself chance at a hell of a lot more; if 8-5-6-4 comes in for example, which it almost did.

Anyhow, when you're messing around, you're messing around at this game, and more often than not (with me) that means losses in situations like this instead of wins.

Have a great New Year everyone, and good luck at threading the needle to make some big ticket scores in 2020.

Friday, December 27, 2019

The Foot in the Door (& Kicking it Down)

The DraftKings RTO was made public this week in a $3.3 billion deal.

Of interest to me, was their investor package, page 17, as below.

The bar chart on the right is revenue (with 65% of the U.S. population being legalized to wager). Notice that the projected revenue for Daily Fantasy Sports is $0.3M or $300M. This is dwarfed by the $2.3 billion from sports betting.

As we all know, DraftKings started as a DFS company.

We've spoken a lot about the monetization of critical mass here on the blog. Namely, if you have a lot of people with a propensity to spend money with you, this group has a good deal of future value. DraftKings has leveraged their critical mass to build not a DFS company, but a gaming company.

This is not unlike Betfair's critical mass in the mid 2000's, with one million customers and $3B on account, with over 50% of their players engaged in horse racing. Nothing was done to foster this critical mass - not by lack of trying by Betfair - and that mass moved onto something else.

When people like me - and I'll caveat this with WDIK - talk about creating critical mass through lower takeout, this is kind of what we're getting at. If you have 200,000 people giving you 4% margins, it's a hell of a lot better than the current 20,000 or so giving you 20% margins. 200,000 people you can work with; with 20,000, you're simply focused on squeezing to meet revenue targets.

Have a nice Friday everyone.

Tuesday, December 24, 2019

Breaking - Racing's 2020 Christmas Movie Strategy is Now in Play

I got an email today from Cub Reporter with some hot news. I know that because he said so:

"PTP, I have some hot news," he wrote.

"Based on the success of America's Best Racing's strategy of increasing hat and alcohol purchases to grow the sport, racing has decided to hop onto the Christmas movie success train, popularized by Hallmark, Netflix and HULU," Cub typed.

"For 2020, Operation Racing Holiday Movie has been passed and all the big guns - Magna, NYRA, Woodbine, Keeneland, Mountaineer - are behind the project. I have a list of new movies that are in pre-production and I'll share them with you. But, once again I caution, they are super-secret so don't post them, " he said.

So, here's the list!

Christmas in Arcadia - Tim Ritvo (himself) is informed it might rain over Christmas, throwing the whole Santa Anita meet into chaos. Rather than installing something called an "all-weather surface", Tim summons Julie to fix the problem. She, along with hundreds of underpaid backstretch workers design a Christmas quilt that keeps the rain off the track, and the meet shatters handle records.

Holiday Hearts at Fair Grounds - In the Hallmark movie tradition of a high powered female executive heading home to find love over the holidays, Susan rolls back to Fair Grounds to run the track where she meets a handsome and scrappy track handicapper, played by Marcus Hersh. They fall in love, but CDI tries to nix the wedding because Marcus is employed by the DRF. Note - this project is not green-lighted yet as the producers feel a female racing executive might be too unbelievable for the general public. 

Sid's Horse Sex Christmas - Pedigree guru Sid Fernando embarks on a journey to visit horse sex farms across the south over the holidays. In Arkansas, a freak snowstorm hits and his Harley breaks down. He walks for miles and comes across a community center, heading in for warmth. Unbeknownst to Sid, along with baked goods, the center is home to a Christmas #MAGA rally. When the rally leader (Peter Rotondo senior) gets fed a link to Sid's twitter feed, the tension is palpable. But in the end, both Sid and the #MAGA's learn the true meaning of Christmas.

Whip Me at Christmas - Andy Asaro (himself) is protesting against PETA outside Del Mar on Christmas eve. His pro-whip protest sign catches the eye of a dominatrix who happens to be passing by and they fall in love.

Beem Me Up Christmas - This film documents track announcer Jason Beem's trek across America over the holiday season. He wows everyone he meets, including Magna's Sal Sinatra (in a cameo). Sal offers Jason Beem the full time Pimlico and Laurel announcing job and he's thrilled, but CDI (played by the voice of James Earl Jones) won't let him out of his podcast contract.

ITP's Holiday Giveaway - Inside the Pylons (himself) finds he wants to give back during the holiday season. ITP invites kids from a local elementary school for a ticket construction session, led by him. After the session, the kids are tested and those who pass get a $500 credit voucher, while those who do not are sent home with no Christmas, teaching them an important lesson that will last them a lifetime.

Pat's Christmas Fantasy - Pat Cummings (himself) asks the Santa at the local mall for one wish - that he could be horse racing commissioner. It's granted, and he wakes up the next day with full power; the grand poobah. Pat immediately enacts Category One rules. After the first week of getting slammed mercilessly on twitter by Gate to Wire, he returns to the Santa and asks for his old job back.

Gabe's #Senditin Christmas - In this holiday tale, Gabe Prewitt's #senditin catch phrase is noticed by a New York executive (Acacia Courtney), and she offers Gabe a job at her big toy company over Christmas. The two young, unbelievably good looking people (well one of them) make a great pair and fall in love. However, the heartstrings pull Gabe to his only true love - Pompano Park. Gabe returns home, and in a Capraesque final scene, Gabe learns that no man is a failure who has Pompano.

Have a wonderful Christmas, and all the best in 2020.

Sunday, December 22, 2019

Pitching the Chalk

If you follow Inside the Pylons on twitter, you'll often hear him talk about taking stands against any heavy chalk with holes.

This is tough for a lot of folks because often times that chalk (probably over 70% of the time) will hit the ticket and your tickets are toast. This is not even montioning (for casual bettors especially) psychologically it's hard to go against the crowd because of FOMO and prospect theory.

What warm and cuddly ITP will tell you though, is that if you do invest in such races, when you win, you can really, really get paid.

Last night we had a couple of these races, one at the start of the Mohawk card and one at the end of the Big M card.

In the first race, the very clever Ryan Willis noted to me that the heavy chalk at Mohawk - a brother to Warawee Ubeuat - looked rather odd on the far turn last week. He wondered why the driver let another horse look him in the eye, which is usually not a good strategy. It was a very minor thing, but it was something that perhaps foretold some gait issues.

The horse ran out at 1-2 because of those gait issues.

The tri with a 5-1, 6-1 and 10-1 morning line horses running one through three paid $1,700. The superfecta paid $7,000.

In the last race at the Big M there was another one of these nuanced pitches. Chris Ryder's horse bled last time and was adding lasix. His form before this was pretty poor as well, but the horse had massive back class. He was bet completely off the board to 3-5.

To wager the horse, we have to assume lasix is going to completely turn this horse around. This can happen, but often times this is a pattern seen in barns. So, when we check how well Ryder - a great horseman, but one not overly concerned with his win percentage - has done first time lasix, we see it hasn't been good at all. In fact, when I looked back I didn't even find a single horse who won first out.

He also ran out.

In this short field affair, with the three completely logical horses running 1,2,3, the tri paid a whopping $580. The super paid $2,400 for a buck. There was nothing remotely difficult in hitting both. You didn't even need to handicap.

We can't beat every chalk, but we can beat some. And when we have nuanced reasons to pitch one - like in the above two examples from last night - we have to take our shots, because if we're right, it can make the month.

Have a nice Sunday everyone.

Friday, December 20, 2019

Pirates or Partners

This holiday season I can't help but see Rakuten commercials, and I suspect you have as well.

Rakuten was formerly Ebates.com. When you purchase an item through them (at thousands of online stores), they give you cash back on your purchase. The business model is relatively simple: Stores give commissions for sales, and Rakuten shares their commission with you. This person earned about 5% back on his couple thousand in purchases this season.

Affiliate marketing is a partnership, because affiliates work to sell your products for you. Sure, a Rakuten user could go directly to Target and buy, and Target would make more money that way. However, affiliates like this one have critical mass, and is (as we see this Holiday Season on our TV screens) spending their marketing money (on your products).  As well, their members are hyper-engaged users who buy online, and have very good lifetime value. Despite giving up a bunch (sometimes the majority) of margin, the system seems to work.

If this sounds familiar to us, it's because it is. It's the ADW model in horse racing.

What's different is the response. Target is not withholding their products from Rakuten like a Sword of Damoclese signal deal. Target executives are not calling Ebates "pirates". We don't read articles on the Paulickshoppingreport saying Ebates has killed online purchasing and should be shut down.

There was a conversation this week on the twitter where a bunch of pretty sharp folks were talking about online wagering, mobile, horse racing wagering advertising, and assorted issues. There was a lament that racing has really missed the boat in the last fifteen years or so.

When we think about it - if you've long ago decided that someone selling your product for you is a pirate, how could it have turned out any other way?

Thursday, December 12, 2019

Racing's Cost-Benefit Choices are Pretty Clear

When we open the interwebs we can read much opinion on horse racing's current malaise when it comes to horse safety. In one area - whipping or not whipping - the opinion can reach a fever pitch. It's the #MAGA v old media, Cowboys versus Eagles, Pens versus Caps of this sport.

Why is it this way? I don't know; perhaps it's tradition, perhaps something else. But it's real. And I think it's much ado about nothing.

When any business or entity looks to make a decision on something - new investments, product changes, capex - they compute some form of Cost-Benefit analysis. We all know at its core this is fairly basic - costs are added to one side and they're analyzed against, or with, benefits on the other.

What are the dollar costs of whipping much less? Like most jurisdictions who have broached this topic and eliminated over-whipping, they aren't much of anything. Handle in Australia is up just fine, and in harness racing, the elimination of the striking of a horse was a big yawn.

What are the dollar benefits of underwhipping on business? Like most jurisdictions have shown here also, none really. It appears no one has said, "boy I really have to bet the third today because they will whip the horses six fewer times." Handle, entries, field size, all about the same.

Seeing the hard dollar benefits or costs are negligible on each side, then what's the big deal? Why change; why not just leave things the way they are?

I believe the biggest, most formidable cost to horse racing in the current climate (but perhaps since forever) has been the political risk component. This is a cost.

Entities use political risk all the time to make decisions, and at times, this risk can mean everything for pass/fail positions. The markets took a massive hit in Argentina last summer when the polls were wrong and the ruling party (partaking in reform) was surprise defeated in an election. Immediately, sovereign bonds fell 50% and business investment plummeted -  the political risk was far too high and it trumped just about everything.

In horse racing, political risk is in Spinal Tap eleven territory. When sitting senators or the governor of a state with a massive economy starts tweeting or dropping dimes about racing, it's true.

The problem with this risk - like the province of Ontario saw with slots, or Florida and others saw with dog racing - is with one strike of a pen, everything can go away. This is not incremental or something you can revisit and reverse course if you're wrong. It's not just a few barns, or one track, it's literally an entire industry going poof.

So yes, let's add up the costs, and add up the benefits with hard dollars on some of these issues like whipping. In the end we'll find the core, tangible costs are minor. We'll find the status quo very comfy cosy.

But when we add in the massive political risk, it's anything but comfy cosy. That's why, in my view, racing must move forward with many of these decisions. When the sport does nothing, the downside comes into play. And that downside is savage.

Friday, November 29, 2019

Betting Luck, Variance (And Those Cowboys!)

We speak a lot about variance here on the blog because it's a topic that each of us - no matter what game we play - have to deal with almost every day. This variance can mean the difference between winning and losing on that given day, but it's more than that - it spawns so many other biases we have to work through as we try and become better and better bettors.

I opened the interweb today to see some serious consternation in Dallas Cowboys land. As most know, the Texas team had a less-than-stellar performance to the Bills yesterday and the headlines are murder. It's all but a done deal that Head Coach Jason Garrett is done after the season - a season that everyone seems to feel is toast, despite leading the division, with a tiebreaker.

Let's go back five days and play the variance game.

On Sunday, Dallas does not get called on that phantom (super variance) tripping call, and have the ball 1st and ten at the New England 40. Prescott drops back to pass and more football luck kicks in. A New England safety slips, Cooper is wide open, Dallas wins 16-14.

They - including Jason Garrett - slayed New England, right in Foxboro.

Then the entire narrative changes. Jason Garrett just "beat Belichick" at home. He's not on any hot seat, he's probably getting talked about glowingly. All because of one slip.

In betting this is something I think we need to come to grips with.

Many of us will hit scores that are high in variance. We grabbed that freaky pick 5 and made $11,000. We hit an odd superfecta that paid $4,000. Those are wonderful, but if we can't show profit consistently, they are kind of meaningless in the long term.

It's why when we analyze our betting we should probably take out one or two high variance scores (and maybe drop one or two very bad days where we let our emotions take over as the losses mounted during that losing streak). If, after doing that, and looking what we do at the mean, not at the fringes, we find out we're near break even, well we're onto something. If our ROI is barely beating the takeout, we have a lot of work to do.

It's one of the only ways we can be honest with ourselves and our ability. It's not what we do at our best and worst, it's what we consistently do that will guide us.

Whether Jason Garrett's team beat Belichick's team or not last Sunday shouldn't make a ton of difference, because win or lose he's still the same Jason Garrett. And it works the same way with us. Variance can be a blessing or a curse, but it tells us little about ourselves.

Have a nice Friday everyone.

Tuesday, November 26, 2019


Have you heard the news, the big, big news!?

Tampa Bay Downs is creating a brand new wager. It's a low denomination pick 6 and if one lucky bettor holds the only ticket, they scoop the pool. It's called a "Pick 6 Jackpot".

Why do these things exist?

I was reading a book recently called Hit Makers. In one section the concept of familiarity and human nature (and in tandem, business demand) was discussed.

For instance, there's a pop song writing school in Sweden, where invariably pop hits are rolled onto vinyl digital files like an assembly line. These songs have a perfect pattern - a pattern that works because they're all so familiar. You and I have heard many of them. They have billions of hits on YouTube.

We see the same thing in movie sequels, your Hallmark Christmas Movie fix - girl heads back to small town, meets boy, coincidences and love ensues, they have a snowball fight, and fall in love  - and just about everywhere else.

We, as humans, like something familiar, expect more of it, and cling to it.

In horse racing - with our relatively closed group of customers - it, in my view, is the exact same thing.

NYRA's graphics are familiar, and so is the pre-game show and betting menu. Do you want to double handle at Finger Lakes? Hire NYRA's brand and I bet you will. No change in product is needed.

We saw just about that same thing with CDI-owned Calder, when it moved to the familiar confines and looked exactly like the Gulfstream Park feed. In fact, they even used the Gulfstream Park name. Handle skyrocketed.

To our existing customer base, a pick 6 is a brand. It's a bet everyone loves, but even fewer (at $2 denominations) could play. Enter a pick 6 jackpot. For a price of a $1 pick 4 you can get coverage, play a bet you've always wanted to, and spread to your heart's desire. The fact that it's a terrible, awful, horrible gamble? Pretty irrelevant to that cohort.

Racing exists to shuffle the deck chairs, it succeeds in this micro, insular way when it stays completely familiar.

That's great for intra-track business, and we should keep expecting it. But on the flip side it's bad for growth. Outside the industry, gamblers find a game with jackpot bets unfamiliar. That might fit the industry's maddening harvesting business strategy, but therein lies the rub.

Have a nice evening folks.

Monday, November 25, 2019

Horse Racing's Mainstream Column Inches

Horse racing has always seemed to crave mainstream press, because, as the thought goes, mainstream press means relevance with the general public. I don't see a need to debate that point (which I believe is a little dubious in 2019), but it's been a hard industry ask since Seabiscuit-War Admiral match race radio feeds.

Today (thanks for the tweet) there was an editorial in the Los Angeles Times titled, Saudi Money in U.S. Horse Racing is the Next Moral Jam. The opinion focuses on how Saudi Arabia's charm offensive (usually with cold hard cash) is used to quell criticisms of their regime, and how horse racing dutifully comes to the rescue to help them out.

I read the article half-expecting it to be written by a racing hater, or someone vested in the breakdown issue, or some other insider piling on. It wasn't; it was written by the Executive Director for International Studies at M.I.T.

Breakdowns at Santa Anita have opened a box; one of the Pandora variety. Every day people hear about racing's practices, are a little startled, and then start to dig thinking there must be more. And when they do dig, they tend to hit some paydirt.

When Brett wrote long ago, "Do you ever find racing craves mainstream press, but not mainstream opinion?" this is probably what he had in mind. Until some of these long-standing racing issues are addressed, I think we should probably expect more of it.

Have a nice Monday everyone.

Friday, November 15, 2019

Sports Betting & The Elusive Crossover

There's a good twitter thread today between Keith and Crunk right here.

Summarizing, despite upwards of $500M bet in Jersey on football this past month (a smashing number), overall pari-mutuel handle at Jersey tracks has not seen any real bump that can be attributed to the spark in willingness to skill-game gamble. Neither - so far it appears - has on-track handle.

If these trends continue, in this day and age it should not overly surprise us, in my opinion.

"Foot traffic" and promotion sure meant something when people had rotary phones. But with mobile betting, it's just not there. And make no mistake, the jurisdictions that have embraced mobile are growing rapidly in sports betting. It's tough for racing to plant its flagpole.

Similarly, without offering new products - perhaps side by side - with sports betting, there's little chance of crossover. This point, in my view, is not nearly as strong as the first point, however. The internet, and consumers, are harder to attract because marketing is so pinpoint. It's why banner ads are losing so much relevance -  I want a pair of blue socks so I find them with ease on my mobile phone. Thanks for the shirt ad, and it looks interesting, but I don't need a shirt right now. It's one of the reasons google owns the world.

In addition, it's very difficult to promote crossover because of the pure volume of consumer choice. If I am watching the football game and see a race going off, I may bet it if something catches my eye; others might too, for action bets. But when I can bet in-running, or each quarter, who needs action?

Combating the above is tough, but it's not impossible, of course.

There are oil companies harvesting what they have, while investing and working on other fuel sources as demand for energy rises and will rise, rapidly. Companies are nimble, capital mobile, and there are opportunities around each corner. In as little as 25 years China might be paying Exxon billions for popup nuclear power plants; Gulf for charging stations or fuel cells. In 25 more it could be their core business.

Racing, thus far, appears to want a slice of sports betting as a subsidy, and there's nothing wrong with that. Protecting legacy industries with regulation and forced commerce is as old as the day is long, and taking advantage of it is not heresy. However, the added revenue from such ventures - like slots provided before it - presents the sport with a choice:  Use the capital to invest and experiment, or use it solely to harvest.

Saturday, October 26, 2019

#Crown19 Thoughts

It's night two of the Crown at Woodbine/Mohawk Raceway Park (I think that's it).

Since two of the best people in harness racing - Ms. Fanning and Mr. Campbell - are involved in the Breeders' Crown, it is incumbent on me (and all people without hearts of coal) to publish some #Crown19 thoughts. As you know, millions dozens of people and thousands of Russian bots read this blog daily, so my reach to drive handle is formidable.

Let's go.

First pick 5 (15% juice, decent bet sometimes) -

Race 1 -

This overnight might be a tricky affair and I think going deep is the elixir. The evil deep state, or someone, was against me last time, because there is no other way I can describe the drive on my wager of Classic Pro. This horse is a project for the Lilly's who are tremendous at nursing back horses to good health. He has big time back class, will be a bomb price, and is very sharp. I'll use.

Race 2 - Mares Crown

Many will use Shartin as a single and there's a strong chance you'll be on to the next leg. However, after losing in Kentucky, the bloom is off the rose, and I'll try and beat her. One filly who is razor-sharp, better than ever, and will be longer than a #MAGA rally with Trump on full-crazy-riff is Kendall Seelster. I wagered on her at 1 trillion to one in the Milton, Sleepy Sylvain got her off 9th by a hundred, but she was absolutely on fire coming home. We have a driver switch and I think she can be heard from again. Others I'll look at are Caviart Ally and Youaremycandygirl, who seems to be learning how to race.

ITP as Hoosier Buddy
Race 3 - Mares Trot

Do we go deeper than the 80% or so expected win of Plunge and Manchego? Maybe if you have an Inside the Pylons bankroll, but for us normal people, it might be tough. I do like Custom Cantab as a bomb. She was not on the bit last time, and she usually is. If something wild happens I could see her storming home at big odds if she's back to being racy. The rail filly flashed some finish.

Race 4 - Filly Trot

Winndivie got the protypical Sears elimination drive last time, but overcame that nonsense to fire home faster than an Alberta oil worker made it to the voting station. She's my wager. When Doves Cry was flat last time, but you can't leave her out. Asiago and the Ice Dutchess are other obvious uses I suppose.

Race 5 - Filly Pace

Ubeaut will probably have to beat herself, correct? I mean I won at the track one time around last Christmas, and @gregreinhart tweeted something positive about one of the teams he cheers for last month, but I don't see it happening. It will allow us to go deep in the other legs, should we so choose.

Race 6 (start of the second pick 5, again at 15%)

The Open Pace is where we find PTP's Super-Secret #Crown19 Play, for Subscribers Only. OK, forget that last part.

Easy Lover Hanover has been nothing short of sensational of late. I know what you're saying: "This horse doesn't fit in here PTP, you're dumber than a bag of hammers". I won't argue with that, but I really think he has a chance to surprise.

Race 7 - Colt Trot

Greenshoe is a beast, and I think he just got syndicated for the GDP of Denmark. The forces of nature in racing (the breeders) all want him to crush. And he probably will. But I will use Gimpanzee, because that last drive was one for the ages, and the horse overcame more than a Parx horseplayer has to. We also have a tiny, weeny, small - and if I had a thesaurus handy, other words - shot to beat the Shoe. He has shipped from Lexington, and might not be as good.

If you want to go deep to beat Greenshoe, Don't Let Em has learned how to be a racehorse, and Soul Strong is crazy fast when he puts it all together. On the board, he'll be longer than the line for the penny slots when the races are over.

Race 8 - 3YO Colt Pace

One of the soundest, best gaited horse we'd ever want to see is Bettors Wish. And his connections are some of the best people this sport has to offer. I mean, they could tweet something negative about murderous communist oppressors, and the NBA wouldn't even mind.  I hope he wins, and he probably will. However, Dancin Lou will be my wager. Time after time, the sharpest horses win these end of year tilts, and although we don't see any reason to believe Bettors Wish is tired, this horse is a knife's edge. If the odds are good, I'm in.

If you like Southwind Ozzie, word is he's been scoping yukky (aka, horses I often wager) and they've fixed him up.

Race 9 - Open Trot

I love Bold Eagle came, and to see one of the greatest horses in harness racing history is a real bonus. Sadly, he won't be on my tickets.

I think Six Pack can get it done via the north end parking lot at a nice price, and he'll be a use for me. Atlanta apparently had the thumps in the International and could bounce back. Mission Accepted, Guardian Angel and even the very uneven Marion Maurader would be uses if I go deep. If Bold Eagle's odds are low, this race is a must play for me.

Race 10 (A Crown consolation of sorts) - 

I think a lot of people will use Fast n First and Cant Beach That, which is fine, but I'll lean on Hervey Hanover at a generous 8-1 morning line. He's sharp, and I don't think he loved the sticky track last time.

Good luck tonight everyone. And remember, all of the above picks were free. Please, no wagering.

Friday, October 25, 2019

Horses Run Around in a Circle

There was an interesting conversation on the twitter today after Ray Paulick tweeted a link to his piece about Woodbine deserving another Breeders' Cup. Most would think a world class venue like Woodbine's wouldn't cause much consternation in a topic of holding a world class event, but it does because Woodbine's "dirt" surface is tapeta.

The Breeders' Cup is for turf and "American dirt horses." Tradition kind of demands it, we hear.

Without getting into the usual (sometimes) nonsensical circular discussion about surfaces, the reliance on tradition or not wanting to change the game in many quarters, to me, can be lacking.

The backbone of a game is changed often; often by economics, and sometimes by the world evolving.

There are many football fans over a certain age who believe the game is not football anymore, because of the lack of hitting that defined the entire game.

But has the game's core changed? No, it was modified. It's still played on a rectangular field, the ball is thrown and caught, rushed with and spiked; you still get 6 for a TD, 3 for a FG. It's still watched, wagered on, and is growing. The game is fine. It's just evolving.

The core of the horse racing game, since forever and probably for forever, is pretty simple when we get right down to it: Who has the faster horse? Which of these horses racing in a circle or semi-circle will win? What will they pay if they win; what will I get as an owner if the horse wins?

What color the ground they raced on; if it's wet or dry, boggy or pristine; 87% sand and 12% beachball, doesn't really matter.

We always have to embrace change even if it flies into the face of tradition, because it can make the game better.

As an example, one of horse racing's great traditions (I kid, this one sucks) is unloading a lame horse on an unsuspecting owner, or racing a lame horse to get rid of it. Let's say there's a new technology that can cheaply bone scan a horse before it goes out to race, or before it's bought or sold, preventing fraud or breakdowns. Of course, that's not a threat to tradition, it's progress.

In this day and age we're pretty tribal, and horse racing seems to rely a lot on how things were done in the past, with change only happening when a lead shank is pried out of cold dead hands. I don't believe that's optimal.

Change can happen in horse racing, and when we enact it (hopefully with some proper analysis, although maybe that's a pipe dream), in my view we only really have to worry about the sport's true core being held constant: People buy horses, people train horses, people race horses and people bet on horses - Horses who run around in a circle.

Tuesday, October 15, 2019

Horse Racing Innovation, a Task None too Small

I read an interesting article by the Atlantic's Derek Thompson on Thomas Edison yesterday. The article, summarizing a book on the amazing man's life, touched on something we've been hearing about for some time - the incubation of innovation, or lack of it of late.

Back in the 1870's, Edison created a full blown lab for invention in Menlo Park. Working with others, invention (and innovation) was fostered through these unique interactions. The established business community, at times slower to move than its smaller counterparts, were critical of such a collaborative lab. The head of AT&T at the time said -

"It has never, is not now, and never will pay to keep an establishment of professional inventors."

Fortunately, that company acquiesced on that position, creating Bell Labs, which gave us the laser, transistor, and through others, rubber, nylon, the computer and the building blocks for the internet.

Lately, the corporate goals through innovation and invention have changed. Researchers at Duke University submitted a study that concludes these incubation labs have left most big businesses. Invention is left to others, like universities (or smaller companies), with businesses focusing on the end product.

I might be talking out of my hat, but that makes some sense qualitatively doesn't it? New, cutting edge ideas, like for example wunderkind Boyan Slat's Ocean Clean Up tech that is projected to solve the world's plastics problem by 2040 have popped up. This non-profit has been funded by Silicon Valley and individuals; a GE would not even touch it with a ten foot pole. There are countless other examples almost every day in the news.

When looking at horse racing, does anyone know what's put directly into research and development? I don't but I surmise it's very small. The innovation and invention is left to others, like back in 2002, with UK based Betfair. This disruption, however, was pretty short lived, frankly. When Betfair was bought out by super-large Paddy Power its appeared the innovation almost ceased - just as the researchers from Duke predicted it would.

When larger companies do not innovate, it's left to the Boyan Slats of the world. But in horse racing, that can't happen. We (and others like Superterrific and Crunk to name two) have talked about this for a long time. Have an idea about data? Equibase owns it. Have a great idea about wagering? It's constrained by the tote system and places like CDI and TSG control signals. How about something new, fun and vibrant with video? There's a place called Roberts that will shoot you down quicker than Dick Cheney on a hunting trip.

The obvious solution is to (oh god, don't go here PTP) take a slice of slot revenue, and create a Bell Labs for horse racing. But that too is handcuffed by the same shedrow shackles.

Perhaps the naysayers are correct - horse racing is here to harvest the revenue it has, until there is none left. But it sure would be nice if somehow, someway, the morass can be navigated to make something happen. This game, with thousands of bettable events, with millions of data points, in a world where a 16 year old kid can come with an idea to clean up oceans, can and should do better.

Have a nice Tuesday everyone.

Wednesday, October 9, 2019

The Business of Horse Racing's Zero Expectation

I saw a tweet last evening -
We've seen - since last spring - many tweets or articles or columns echoing much of the same from disparate areas of the public. It's certainly been rough.

Western society is generally pretty fair (if you don't use social media or political fringes as your yardstick). It tolerates quite a bit, quite frankly. We tolerate things that are bad for us because not being free to do them is considered worse. We tolerate automobile deaths, deaths by alcohol, guns, airplanes and many other things.

When it reaches a certain level it becomes more of a concern. But with all of those things that level is never zero.

Horse racing, in my view, is not in that same place.

Since the spring, to many, the "equine body count" is supposed to be zero. Even horse racing has talked about it - when Del Mar had no on track breakdowns during its last meet, it was trumpeted. That, I think, is shortsighted. Horse racing's zero expectation can never be met.

If this was deemed more of a problem several years ago and there was a plan to get it to an "acceptable" level, things would be better; the zero expectation would not exist. But, for whatever reason, it wasn't tackled with near the urgency it should have been.

I believe horse racing needs to do its best to flip the argument. The public and politicians realize horse racing is an athletic game with 1,000 pound animals carrying 100 pound jocks. They will accept a certain level of danger (and yes, death).

It's above my pay grade to offer a solution to a problem that has been ignored and gone on for so long. Plus, I'm a dude with a blog. But, showing improvement in the numbers and conditioning the public the number will never be zero could be wise. Playing the political expectation game might be all the sport has left.

Have a nice Wednesday folks.

Thursday, September 12, 2019

California Racing Has Always Been an Island

By now everyone's read the Drape story about Triple Crown winner Justify receiving an alleged (no one has disputed it yet, so maybe they'll drop the alleged part soon) positive test for the drug scopolamine.

This drug is not new to horse racing, as over the years positives have resulted in trace amounts (through contamination) where trainers are held accountable. But, as the data has come in, it has been studied, and jurisdictions around the world have set limits on the amount of the drug that can, according to the science, be attributed to the environment.

In Louisiana, it's 75 ng/ml, Europe 30 ng/ml.

The International Federation of Horse Racing Authorities has the contamination limit at 60 ng/ml.

In Australia, it's 25 ng/ml. 

Justify's test, according to Drape, showed 300 ng/ml.

California seems - at least some protagonists do - to think 300 mg/ml can still be a contaminant.

This leads to a broader discussion about uniform rules on drugs and suspensions. Let's face it, that should've been done an epoch ago; uniform rules are directly proportional to fewer regulatory clown shows. But, for whatever reason, California racing does not seem to take heed. It does what it does.

I've always felt it's why the general public doesn't much understand horse racing.

To your average Joe or Jane, this reads fairly simple. It's a case of a 0.08 blood alcohol limit for drunk driving because everyone agrees that's proper. But in California, a guy who blew a 0.12 was let drive home because someone arbitrarily decided he's a big dude and he said he drank some mouthwash. It just doesn't compute.

Have a nice Thursday everyone.

Friday, September 6, 2019

Can We Beat the Computer Horse Betting Models? At Times, Sure We Can.

On a previous post I mentioned a book I read a couple of weeks ago called "Digital Marketing in an AI World" and promised a couple of thoughts on AI or big data models for horse racing.

If you're interested I'll share a few of those thoughts below.

First, I'm a believer in modeling for sports betting and racing, because with proper discipline, some smarts, and a malleable model we can make hay when the sun shines. Numbers remove bias, and they take away what we thought we knew, but really never knew out of a wager. A good model, even in horse racing's high rake environment, can work, and work pretty well.

When we analyze data in horse racing a few characteristics generally occur.

i) We learn pretty quickly how difficult the game is to beat. The angles we thought were great, aren't great at all (unless you like losing 15 or 20 cents of every dollar you bet). When you run a model on a subset of (statistically significant) data, the chances of it showing +EV are slim. When you parse or layer too much, you're chasing your tail with bad information.

ii) The horses a model may signal as plays are pure overlays, and some of these horses - on paper - will look gawd awful. We'll see an 0 for 11 horse, a bad jockey switch, terrible form - what we may call 'qualitative anti-angles' - that make us not want to wager on the animal (which is precisely why these wagers can approach 1.00 ROI).

iii) the price of the horse (or the bet type) is everything.

The teams we read so much about are doing much of the above religiously. Can we beat them? In my view, Fred's book tells us one way how.

Self driving cars are in the news, sometimes for terrible reasons. When an accident occurs, it sheds light on the problems with AI, and in-turn, some of racing's computer modeling.

This AI works on a three-step process - perceive, plan and execute. In Tempe, Arizona last year, this was on display, and not in a good way.

A woman was walking her bicycle across a four lane highway after dark and was struck and killed by a self driving car. The car's LIDAR perceived a human with a bicycle, but in the planning stage it computed it could not be a human with a bicycle because it's a 4 lane highway at night. In the execution stage the AI asked "what should we do?" and the answer was, "keep going."

Fred writes: "Machine learning systems can make mistakes, and it's possible to outflank the competition by capitalizing on them."

In racing, in my view, we see this often.

Several years ago I remember playing the Woodbine polytrack for the first day of the meet. Like other computer modelers I knew the poly is fast, and horses who make the lead are great bets. At times, even with bad trainers or riders, you could make a score. But, at least one modeler was slow to the draw.

At Woodbine, the fifth race had a horse who my model said would make the lead, and horses who made the lead were 4 for 4* already. It was a green light. But one bot, run on a model, didn't agree. Whether it was working with late pace numbers, didn't have a built-in bias, or what I do not know, but it just kept fading the animal. It was 6-1 on the board 14-1 on the exchange, then 16-1, then 17-1. I kept putting up cash, wondering what in the hell price this model was working on. It took the offers up to 25-1. The horse won easily and paid $18.

The above is not as isolated occurrence.

What other mistakes do we see?

In my view - lame horses. If you're an old school horse watcher, you can take these models to school, using the model itself - perceive, plan, execute. Did the horse look like this last time? No, then execute, because that model betting $1,400 on its nose likely has no clue.

I have seen horses head to the gate lame who were gate scratched that the models were on. They're losing money, so we have to be the one to beat them.

Overall, I am certainly no expert, but I love modeling and models, for horse racing or otherwise. They work. But, it doesn't mean they can't be exploited. Those are a couple of areas I think they can be had.

Have a really nice Friday everyone.

* My top pace figure (with a slight speed track modification) went 10 for 10 that day. It was a rare Let It Ride type day that keeps a lot of us coming back. 

Wednesday, September 4, 2019

The Tantalizing Touts

@bvalvsracing tweeted out a nice article last week about the touts. It talks a great deal about entertainment content versus hard-edged +EV predictions. Namely, it pays to tout for entertainment purposes, because it's sexier. That's why we see a lot of content presented like this -

“The wrong team is favored and I love this team as a home underdog. They are coming off extra rest and the defense has been impenetrable so far this season. I will be taking them on the money line and expect them to win the game.”

You and I know the obvious - that information is already considered in the line, so it's kind of useless. But if that team performs well, then this tout is off to the races.

Meanwhile, for the +EV dude or gal, they're off in the tout wilderness with their analysis.

“Due to many factors and variables within the model, we have the home team priced at -9.75 with a current edge over the market price of x%, being our biggest edge even after regression back to the market price. Also, I see variations in price/spread from -6.5 -120 to -7 +105 and a few other prices across the screen so it will also depend on how much you value 7 in today’s NFL and what outs you have among other considerations.”


Horse racing represents this phenomenon a lot.

"Chad Brown wins with shippers from overseas in routes."

Thanks, that's why the horse is 6-5.

However, unlike in sports betting - where you do see the second kind of content - in horse racing there is very little. The HANA Horseplayer Magazine had some, you'll find a little on twitter now and again. But it's pretty much a dearth.

I think there are a couple of reasons for it - i) most profitable players keep their oddslines and angles a secret, and ii) there is almost no market for this analysis in horse racing; math players aren't trying to beat 20% juice in horse racing in some six horse field scattered almost minute by minute on any given day.

Another point that struck me while reading the article. The tantalizing touts, with angles, and all the rest can make hay in sports, because if they are not horrible people will win enough over a season to keep firing. You only have to beat 4.8% (or lower if you line shop) takeout. I think that's why we see so many of them. It's difficult to break even over a season (no offense to them, they are just doing their jobs) playing TVG host pick 4 tickets.

Have a nice Wednesday everyone.

Friday, August 30, 2019

Gambling - Skill Game Success Must Be Achievable

I was reading the Atlantic's Derek Thompson's book Hitmakers this week. Thompson explores a lot when it comes to marketing, business and human psychology and I found it kind of interesting.

One section of the book is devoted to why some games catch on and some don't, where he introduced a concept called "MAYA".

To illustrate his point, he talked about Tetris, the best selling video game of all time, created in the 1980's by a Russian programmer, and Minecraft, the second biggest seller ever. Both games, the author contends, are pure puzzles not unlike lego or other childhood games and they have a few common themes.

"The level of play must be simple enough to execute, and the point of these games is neither to make players tear out their hair nor give  away the secret too easily," he writes. "... these [most successful] games are designed with what neurologist Judy Willis called an achievable challenge. People will take up a challenge if they think they can solve it - Most Advanced Yet Achievable : MAYA."

In terms of gambling games, this is pretty obvious isn't it?

Poker is a tough game to learn, but it's not overly daunting. And, with low juice you have a chance to win - MAYA.

Black Jack rose to prominence in the 1960's with the classic book, Beat the Dealer. You can beat blackjack, if you try, and someone is showing you how - MAYA.

Sports Betting has been around forever at about 5% juice. It's a tough game to beat, but it feels achievable to millions of people because the house edge is not usurious. MAYA.

When the misanthropes on twitter talk about grinding out in horse racing, jackpot bets kill the game, there are no low takeout bets to allow people to churn, and all the rest of those mean, nasty things, they aren't being misanthropic. They're just telling you that betting horse racing is not MAYA; succeeding at it is not achievable to the masses like those other games. And if the business would do more to make solving the puzzles (at potential profit) more achievable, the sport would be better off.

Have a great long weekend folks. And best wishes for a safe weekend to our friends in Florida and area.

Tuesday, August 20, 2019

Data Can Market Itself into Something Really Big

I finished a decent book recently - Digital Marketing in an AI World - about artificial intelligence in marketing, and big data.

Author Fred Vallaeys was one of the earliest google employees and he was involved in a lot of the big data (and systems) google has created over the years to enhance their marketing platform (which still makes up almost all of the company's revenue).

In the book Fred made a couple of interesting points that relates in some way to horse racing.

One of them - software, big teams, big data and wagering - I will cover later when I have some time. The one I'd like to share some thoughts relates to "the data"; a topic not unfamiliar to those in this sport.

Fred noted that back in 2005, google looked into the purchase of Urchin. Urchin was a system that collected data from various sources and allowed a business to see where pretty much every metric they could imagine was coming from. I used the system in my work, and it was a leg up. There was a lot of money being spent on developing these analytic packages at the time, but it truly was nascent.

Google being in the space scared a whole lot of folks:

"Many people were afraid that this was going to kill the analytics industry. Chills went up the spines of businesses and vendors who were installing tracking systems," Fred wrote.

When google announced this package - one they could charge a high price for; this is called Google Analytics today - was going to be free, it was even more concerning. It could be the end of many businesses, in a new space.

The result was the exact opposite:

"Because google made analytics plentiful and cheap, all of a sudden everyone was paying attention, and able to afford analytics. This turned out to be a huge boon for the industry. Businesses began to say "this is something we should do more with."

This freeing up of the data caused massive ripple effects, and it sure didn't kill an industry.

Back at a conference in about 2004 I hung around with these folks from Utah, all smiling and wearing green shirts. They had an awesome tracking and analytics company, but they were quite small. As demand for analytics grew, though, so did they. Four years later the small team were rich - Adobe acquired them for $1.8 billion.

Google freeing up data and making it all very mainstream no doubt helped them - and others; there were dozens of these companies, and many are still in business today - succeed. It created a massive ecosystem where each and every new entity - third party ads, internal ad spend (like Amazon) - and just about everyone else can enhance their sales process and grow their business.

Unlike web analytics which is still growing today, horse racing at the very best is stalled. Perhaps using institutional roadblocks and heavy regulation to keep others out is ROI positive in the long-term for the sport when it comes to data. However, when we look at where the growth is coming from in other industries, it makes one wonder. If Equibase invited participation and intra-sport growth through transactional-type economics, would the sport be better off? Perhaps it would.

Have a nice Tuesday everyone.

Wednesday, August 14, 2019

Fixed Odds Betting Solutions Seem Simple, Because They Probably Are

You might've heard a lot about fixed odds betting over the last few months.

In horse racing, some quarters believe that fixed odds wagering would be welcomed, primarily due to the failings of the pari-mutuel system - namely, money dumps at 1 minute or closer to post, making the odds board look like barely a suggestion. I'm one of those people, in theory.

The gripes about fixed odds wagering frequently revolve around the immutable truth that, at times (especially if you have a clue what you're doing), your wager size will be limited, or the book will not even accept your bets - the "no sharps allowed" phenomenon.

This is not difficult to understand, of course. If someone is making 1% or 2% returns with lots of volume, your book can get killed in a hurry at $5,000 or $10,000 per bet. In a sport like horse racing, with billions wagered, the inside money, the sharps; it could be pretty hellish for those taking the bets.

What I find curious about this whole system is that the problems are completely obvious, but we've seen a solution that's already been vetted and works - a betting exchange.

If you wanted to bet $20k on a soccer game in the UK, it wasn't overly difficult with an exchange. Ditto if you wanted to get $1,000 down on a horse, or even an NFL game. There was usually someone there to match your price - there's sharp money on both sides after all - and if there wasn't, you'd hang your bid (or offer, if you prefer) at a more attractive price and would probably get matched.

The advantages of this system were pretty clear. There was little risk to the bookie and the consumer could place a bet of virtually any size, seamlessly, at takeout rates which encouraged volume and sticky LTV's. In addition, those who were "stuck" in a position, either personally or owning a book, could lay off action, or balance. It could be used as a clearing house.

Earlier this decade, though, the largest exchange - Betfair - went public, and then was swallowed up, as we often see in the current M&A century we live in. Perhaps the new owners needed more margin per customer and the book itself was better for that, or maybe there was another reason (or fifty); but for whatever reason, the exchanges were not marketed.

Despite this technology and its numerous advantages, it's not being used like it even was a decade ago. It's the cousin you forgot you had.

Meanwhile, markets have long taught us that when there's demand, there's going to be supply. In the Far East, unregulated betting exchanges and similar services have popped up. One exchange alone is rumored to be doing over $50B in matched markets - a good deal of it in horse racing. This excahnge was rumored to be bringing in close to 20% of Hong Kong racing's turnover, although that's probably high. There are several others, some in my view pretty scary, which are linked to money laundering and organized crime. 

As well, new unregulated full service betting companies are doing what we describe above - using the exchange as a clearing house. I won't link the site, but I noticed one betting service scours the web for your price, and if your price is not available, it will automatically place your bid for you on the exchanges. With some regulation it would be pretty much the perfect betting ecosystem. It's exactly how this is all supposed to work.

What if racing - with its near monopoly, regulatory capture and $500M or more in subsidy - created a system like this for the sport a dozen years ago? Perhaps in 2019, Draft Kings and other books, now happily taking sports bets, would be a forgotten cousin to the racing exchange.

Fixed odds betting is fantastic for horse racing. Placing a bet at 5-2 when you like the horse at 5-2 and getting 5-2 is the way things should work. However, it's simply not the way it is, or it appears it's ever going to be. For that we should not blame fixed odds, we should blame the system the power brokers have created.

Have a nice Wednesday everyone.

Tuesday, July 30, 2019

The Change Train Needs More Than a Conductor

I caught a quick story in the Financial Post today about what companies do when things aren't going well, and they need a paradigm shift. The author focused on how one company - Best Buy - turned things around.

I found two planks kind of interesting. One plank,  is about a reorg -

"Putting a plan into action also requires the right people in the right places. Who gets brought in depends on whether the culture of the organization needs to be completely gutted or if a few tweaks will suffice. For example, in a situation of a complete reorganization, it may be better to change out entire teams under divisional leaders, especially if there is complacency and little buy-in. "

This strikes me, as I read this tweet this morning about Del Mar.
As most know, we've seen a couple things happen at Del Mar the last decade. They (along with others in California) raised juice, making payouts to customers worse; they replaced polytrack surfaces with dirt, which raised favorite win percentage, and resulted in (both in theory and practice) more breakdowns.

Now, let's say, like Best Buy, the culture was changed at the top.

Instead of switching surfaces, this new management said, we want fewer breakdowns, bigger fields, less chalk, and a better betting menu, and we'll reverse all those decisions.

I wish them luck. The existing stakeholders would want nothing of it.

Which brings me to the second plank, according to the author.

"A restructuring gives the company the opportunity to replace those shareholders who are not willing to support the company’s refocus. It is an important process to go through as capital partners need to be aligned with management and the plan about to be implemented."

The people who are giving you money need to buy-in as well. It's a house of cards without them.

In racing I find we often ask for change at the top; that management is bad; that they don't know what they're doing. Leaving aside if that's accurate or not, I'd contend it doesn't matter much. If someone was put in charge that demanded change, I highly suspect he or she would be run out of Dodge in two shakes of a lamb's tail.

Have a nice Tuesday everyone.

Monday, July 29, 2019

When Handicapping is Irrelevant

There are things that happen from time to time that reminds us that gambling is a gambling game.

This weekend we saw something during the Barracuda golf tournament that doesn't happen very often - the scoreboards across the interwebs failed to update. If you happened to watch the TV coverage (and kept track of what a birdie or eagle meant) you were better than most, but if you were watching on your phone or computer, it was pre-Pony Express.

With that, the big bookmakers were caught in the crosshairs, and the gamblers could find gambles.

Golfer John Chin, who played a few holes well and was in the mix, was offered at 80-1; he should've probably been 15-1. Collin Morikawa, a kid who looks all-world, was near tied, and instead of being +300 or +350, sat at over +700 at some places.

After about a half hour, the books pulled everything off the board.

Come Sunday, Morikawa got the job done, Chin was top three, with top four each/way bets cashing at 20-1.

This had nothing to do with handicapping. It was just a gambler being presented with a good price and having to take it.

In horse racing this too happens (albeit rarely). And it pays to be ready if it does.

Garnet wrote about the "mad bomber" at Northfield Park a couple of weeks ago. With the smaller pools, any large across the board bets will add pool value, and someone betting large was messing things up royally. Gamblers like King of Yonkers Bucky Swope didn't even have a program, but were there in the pools, trying to catch a place price 6X what it should've paid.

Although these are extreme examples, I think it still provides a lesson to those of us who play the game. Sure it's important to try and figure out who is going to win, but when you're betting, the odds offered to us is the great pass/fail question.

Have a nice Monday everyone.

Monday, July 15, 2019

Fitting the Horse Racing Odds Changes Narrative

Crunk and Bill Finley have been having a chat on twitter with respect to Bill's "rant" on late odds drops.

In some corners of horse racing late odds drops are a function of the prevaailing us versus them narrative - the one in which "computer players" are hammering the pools late, and they're only to blame for it happening. Again, in some quarters, the solution to this is simple - ban them.

Leaving aside the fact that horse racing is not in any position (most businesses aren't, of course) to tell bettors not to give them money, it's a reaction that, in my view, lacks nuance.

As Crunk duly notes, most of the money comes in late now - your money, my money, the "computer guy's" money. With so little bet early, it's inevitable late odds changes will happen. It is not an exchange or fixed odds, it's pari-mutuel.

If you banned "computer guy" you'd still have late odds changes. Maybe it won't be quite as much, or quite as noticeable, because they are clearly a large force in the changes, but it will still be there. A 4-1 horse who is 7-1 at one minute to post is still a 4-1 horse. It's just the way gambling works.

Down the horse racing grapevine, which may or may not be accurate, I heard the teams often switch tactics and instead of betting most of their cash late, they trickle in money at various points of the wagering. Has anyone noticed a difference in late odds changes, if that's true? I sure haven't.

Horse racing twitter - any twitter, really - is not a place to discuss nuance. It's about being on one side (big huge bettors!) versus the other side (the rest of us), and the labels it all brings.  In many cases - like this one - the sides don't matter, because the tribes are irrelevant.

Odds drops happen because the system lends itself for them to happen. And the system is not going to change any time soon. As silly as it all is, and how maddening it can be, bettors and customers need to learn that a 6-1 horse who's paying 3-1 in the doubles is going down to 3-1.

Have a great Monday everyone.

Monday, July 8, 2019

Inevitable Change is Inevitable

The Calgary Stampede is under way for yet another year, and looking at the record attendance numbers from day one - over the two weeks it attracts upwards of 1.5 million fans - it should be a well-attended event.

The Stampede, over the years, but especially in 2012 when 9 horses perished, has been the target of animal activists. In response, some changes were made.

Since that time:
  • Animal researchers have been given full access to all animals and data, and are allowed to publish, and make recommendations. 
  • The Calgary Humane Society and SPCA are given unfettered access to the grounds. 
  • Vet checks before and after competitions, days of rest, and other procedures for safety were put in place. 
  • All animals are chipped and the chip keeps track of all vet work and drug treatments; and are logged and stored, and made public. 
  • Rules have been changed - in fact, the sport of calf roping is completely changed now, and if the contestant competes the 'old way', they are disqualified. 
  • The Board of the event is comprised of people from the community, including SPCA volunteers. 
The above, naturally, has not satisfied the activists - nothing but a ban would. However, the general public has been on board, and most-importantly, so have the politicians who hold power over the event. The prevailing thought this year is that, no, the event in Calgary is not in jeopardy. 

Horse racing has reached a similar crossroads, and if we truly examine it, some good things have been done. 

But, the changes are nowhere near as comprehensive, quick, thoughtful and effective as the Stampede. 

In horse racing a simple whip change causes consternation that can last three social media lifetimes. A chip showing vet work planted in a horse for its welfare is considered an affront to "my property" and none of anyone's business. Changing the rules of the game like the Stampede has would be sent to horse racing committee hell, and might not resurface by Equestricon 2049. Unfettered university research, with a carte blanche to study our animals? Good luck. 

Calgary's libertarian, agrarian, cowboy culture has so far embraced the changes, and if they can get meaningful reform done, one might suspect horse racing would too. But so far, horse racing's infighting about lasix, a reluctance to change the game, and private property issues have seemed to won the day.

Have a nice Monday everyone. 

Friday, June 21, 2019

Carryovers Provide Big Reach and an Immediate Return

Sinking marketing money directly into the horseplayer by seeding pools is effective, in both theory and practice
In Ontario and elsewhere, we’ve heard a lot of talk about marketing over the last several years. The discussion is certainly a valid one. According to a 2016 CMO Survey, US companies spend between 5% and 20% of general revenues on marketing. In the gambling space, casinos, bingos and lottery companies can spend as much as 25% of total revenue on marketing alone.
However, when the sport explores a marketing plan, it often involves spending money like a Barnes and Noble or Molson Breweries does; with commercials, giveaways, or event marketing. Most of these tactics have been tried, and although they have encouraged fans to visit Ontario racetracks, turning those visitors into long-term betting customers has been elusive.  
Perhaps this should not be surprising. In today’s world, marketing is less about the sizzle and more about the steak. Jeff Bezos, the CEO of Amazon.com, told PBS’s Charlie Rose this in November:
"Before, if you were making a product, the right business strategy was to put 70% of your attention, energy, and dollars into shouting about a product, and 30% into making a great product.  The balance of power is shifting toward consumers and away from companies, the individual is empowered. If I build a great product or service, my customers will tell each other."
The theme that – in this new world – your product is your marketing was put a little more brusquely by venture capitalist Fred Wilson, who recently said, “marketing is for sucky products.”
You may be thinking that if the product truly is the marketing, then harness racing is a hard sell in the modern world. But if we look beyond the on-track sport and concentrate on the gambling product, there is some evidence that harness racing’s revenues can be improved, using something that can sell itself.
Enter the carryover.
Most everyone knows that a carryover is added money to a betting pool. But understanding how and why they work is a little more complex. Basically, there are two reasons carryovers are effective, and using a little simple betting math we’ll explore them. 
First, carryovers lower the takeout on a wager.
If a pick 4 pool has a 20% takeout and $10,000 is wagered, $2,000 is withheld by the industry for purses and profits, and $8,000 is returned to bettors. This happens each day, and we’re all very familiar with these bets. Now, let’s change the mix and add a $5,000 carryover to that same pick 4 pool. For simplicity we’ll hold constant the $10,000 the bet usually attracts.
With a simple formula (where we divide the money distributed to bettors by the total pool) we land on an effective takeout rate. In our example - with the new money added - the takeout is no longer 20%, but negative 30%. This means there’s 30 cents of extra value for each dollar wagered. In gambling parlance this is called a positive expectation pool and it’s the holy grail for wagering customers (for any game, not just horse racing).

When a carryover is offered, time and time again we see handle increases as bettors chase this value. 

Although carryovers and their efficacy is a relatively new concept here in North America, overseas they’ve been around for awhile. In Australia, for example, it was mandated by law that blended takeout rates could not exceed 16%, and any revenue over that level had to be returned to customers. To return the surplus betting cash they created a 0% takeout pick 4 called a “Fat Quaddie”. Australian pick 4 handle - usually in the $200,000 range – vaulted to well over $2 million in some Fat Quaddie pools. Australia is a more mature gambling market than North America’s, so taking advantage of positive expectation pools was old hat for customers.   
The reason the industry sees such massive inflows of betting capital with carryovers, but much lower volumes with guaranteed pools and jackpot carryovers, is precisely for this reason. Guarantees are often set below what a pool usually brings in, and jackpot bets (on non-mandatory payout days) have high takeout. In other words, carryovers have pool value, guaranteed pools and jackpot wagers do not.  
The second reason carryovers have cache in the horseplayer world has particular relevance to harness racing: carryovers increase pool size.
It’s no secret that unlike many Thoroughbred tracks, harness racing pools are smaller and less viable to bet into. It’s a problem talked about over and over again at conferences or in track boardrooms across North America. Why small pool size is an issue is, again, illustrated with a little bit of betting math.
Let’s examine a pick 3 pool at a medium sized harness track; one with a pool size of $4,000 ($3,000 after a 25% takeout). If you want three 20-1 longshots on your ticket, the parlay payoff for that $1 bet is $9,261. If you bet into a pick 3 pool with your three 20-1 shots - and are lucky enough to hit it as a single ticket - you are paid only $3,000. This is a ridiculous wager for anyone to make, and dedicated gamblers will not enter the fray.

What happens if we add a modest $2,500 carryover to this pick 3 pool? As this chart below shows, the bet or don’t bet decision changes.

Any carryover pool should at the very least attract money to the 0% takeout level. In this case, that’s $10,000. Now the bettor’s 20-1 three horse parlay can pay 10,000-1, and he or she may choose to pull the trigger. Pool size and carryovers work together, and feed off themselves through this synergy.
At this point perhaps you’re saying, “that’s theory, but show me reality. Is handle being increased? Do carryovers work in Canada and the US for harness racing?”
With carryovers occurring with some frequency, we do have some data.
In February at the Meadowlands, a $25,000 pick 5 carryover brought in $171,000 of new money. A week later, over $200,000 in new money was bet into a $38,000 pick 5 carryover. Pick 5’s of this size are on par with what many large Thoroughbred tracks achieve.  
No doubt everyone in the harness racing industry is well aware of the super high five mandatory payout pools Woodbine has offered a few times a year. An almost $550,000 carryover produced over $1.4 million in new money, just last month.
Because Canadian harness racing houses several smaller tracks with modest handles (and they’re not going to have $30,000 carryovers, or $500,000 mandatory payouts), Pompano Park is probably a worthwhile empirical example.
This past January, a $3,400 carryover in Pompano’s 12% takeout pick 4 pool brought in $35,000 of new money. 
In February, a very small $1,500 carryover enticed a total betting pool of over $19,000 for a super high five wager.
In March, another super high five pool’s $3,900 carryover attracted over $32,000 in new money.
Overall, carryover amounts have averaged approximately $4,200 at Pompano this winter, and they’ve spurred an approximate $25,000 average pool size. This pool size is about 400% higher than their average in non-carryover pools.
“Regular customers know that carryover pools can create great value. We have experimented with our wagering menu the last few years, and some of our bets have produced carryovers. When we offer added money there’s a real action and buzz surrounding the card – both on social media and in the grandstand - and our customers respond with their dollars,” noted Gabe Prewitt, Pompano Park’s Director of Racing.
Pompano has been on a bit of a run of late. Handle has grown from $29 million to $61 million since 2014.  
“Our carryover pools have definitely been a part of our handle growth. We’re on more horseplayer’s radar,” Gabe added.
Beyond the obvious handle increase, there are additional accretive benefits to carryover pools. A study by Jeff Platt of the Horseplayers Association of North America recently looked at the benefits surrounding the promotion of the California Players Pick 5 at Santa Anita, with 14% takeout. Although not specifically carryover related, Jeff examined the races which comprised the pick 5 and noticed that with more eyeballs on that one value bet, all pools increased. At the now defunct Balmoral Park, they too noticed this phenomenon when they lowered takeout on their pick 4 pools.
In addition to attracting new money and adding handle across the races that make up the carryover pool, there are other positive benefits.
Ed DeRosa, Director of Marketing for Brisnet.com, notices strong interest across his company’s handicapping product division when a carryover is announced.
“Non-jackpot Carryovers are a marketers best friend. As someone who works for both racing information and wagering websites, I can attest that telling our customers about carryovers gets them to buy more information and wager more with it,” Ed noted via email.
Having more people involved and interested in all facets of the product is what marketing is supposed to do, isn’t it?
By now you may agree that carryovers can be a good marketing avenue, but how is one manufactured; they just happen sporadically, right? That’s true, carryovers do take some serendipity to occur, but they can be easily created, by seeding a pool.
Seeding pools – tried before with some success in Southern California – work exactly the same way as a carryover. A track, not the customer, supplies the $3,000 or $5,000 for the carryover and places it directly into the starting pool – whichever pool the track chooses. This creates an ‘instant carryover’.
Once the seed amount and pool are chosen (and this step is very important) this information then needs to be filtered through the usual carryover channels. For an added boost, the bet may be advertised via Woodbine’s HPI Bets hub, and through some American mediums, frequented by customers.
You now have a carryover. You have a viable betting product to promote.
This system will clearly take planning and foresight, a budget, and some testing. Without that, seeding can work sub-optimally, and without a doubt Grand River is not going to seed $1,000 in their pick 4 tomorrow and have it fly off the virtual betting shelves. The track, race, day of the week, seed size amount and pool will all need to be experimented with to see what works best. Field tests have to occur and all hands need to be on deck in a professional way. Success, if achieved, will likely take some time, but both the theory and empirical results are sound.
Perhaps the most exciting characteristic of this marketing spend for the industry itself is that it’s measurable and supplies an immediate return. As the chart below shows, for a $5,000 seed, revenue to bet takers and the track is break-even at the $25,000 inflection point. For the track alone, the break-even handle amount is higher ($62,500), but with benchmark setting and testing, this is probably attainable. 

We hear a great deal about marketing harness racing. Often times this involves thousands of dollars in giveaways, free parking, or radio and TV ads. Instead, why not create a pool of marketing money and use it to invest directly into customers. If the goal of marketing is expanding reach, getting more eyeballs on the Canadian harness racing product, encouraging the download of handicapping materials, and increasing handle (that provides a measurable return), seeding pools seems like an interesting and viable option. 

This article originally appeared in the Industry Issue of Trot Magazine via Standardbred Canada. 

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