Drib Drab Handle Drib Drabs

While infighting, higher juice, fees, squeezing the lemon economics and more are consuming the sport of horse racing, Daily Fantasy Sports continue to show potential.

New York Business Journal looks at ESPN's potential foray into the market, worried about ad revenue cannibalization:

• On Monday, The Sports Business Journal reported that ESPN executives are weighing all options for how the media giant can get a foothold in an industry expected to process $31 billion in entry fees by 2020. For now, ESPN benefits primarily from cashing FanDuel and DraftKings' checks for their massive advertising spending on its cable channels and websites.

$31 billion in entry fees - if realized - would be close to 300% what horse racing currently does, and in 2011, there were fewer than 1,000 daily fantasy players. 

Meanwhile, Cangamble - who is playing more and more DFS (he sent me an NBA team last night that scored the highest point total on Draft Kings in several tournies) - sees a bit of a dam break:

•  It is bad enough that handle keeps falling, even a red cent, from year to year, when you take into account that the majority of people in North America can now bet on the majority of tracks at any time from the convenience of their own home, 7 days a week, 18 hours a day (though many need multiple online accounts to get their best bang for the buck and full content).  Lets not forget about factoring in inflation and population increases when putting horse racing's numbers in perspective.  Nor should we forget about the online poker ban either. Something is very wrong, and hint: it has nothing to do with lack of technology or people not exposed enough to the majesty of the horse.  Nope, it stems from realizing who the customer is, who the potential customer is, and most importantly, catering to what the customer wants. 

I played a game last week. And I see more and more people named like player number 88 is.

Have a nice day everyone.

Where Is Handle Going in 2015?

I started to write another prediction handle post, like I have other years. Interestingly, I went back and looked at my "Where is Handle Going in 2014" post, and realized...... I barely have to edit it. So, I have striked out a few things, and left it exactly where it is.

Horse racing is Bill Murray. It's groundhog day. It's its method of operation.

Anyhow here is my new post, with a few strike outs. Easiest post I've ever written.

__________

Like we've seen over the past several years, the decrease in racedays causes handle to fall. A decrease in field size causes handle to fall. The other main driver of handle - the price, or takeout - has generally been falling, because rebating has not been a bad word like it was early in the decade.

What will happen in 2014 2015? Well, we are likely to see a further reduction in racedays. With slots revenue falling, as well as handle stagnating and foal crops receding, we aren't pulling out our pocket Kreskin to make that proclamation. Some tracks have finally concentrated on field size, like Keeneland *, and made it a go-to metric, but overall (see NYRA or So Cal), short fields continue to be something this business seems to crave and cling to. I can't see that going up either.

The last metric - takeout - is probably going to be a big determinant the next year or two**, and right now, this does not look pretty for customers who bet.

Lower takeout through modestly rebated handle is becoming extinct for the mid sized and smaller horseplayer. In New York and Pennsylvania***, many rebated players are being shuffled into high takeout regimes, and signal fees are being increased. Right now as I type, some tracks are withholding selling their signals to smaller ADW's who rebate, with the hope that players don't care about price and will continue to play in their systems. They won't. This will not happen.

As Mike Maloney noted in this interview: "All we’re doing when we raise takeout is driving away people. The regulars are coming less often or they’re coming just as often but getting ground down. People within the game still don’t understand how destructive takeout is." I think that's true and I we'll see this hurt handles in 2014.

So to sum up: If field size continues to fall, if racedays continue to fall, and if takeout is hiked as we've seen happen the last month, (along with making it harder and harder for players to conveniently bet the game by stifling choice via resellers, via higher signal fees****), it doesn't take a rocket scientist to predict handles will be lower in 2014 2015. If all three main determinants of handle growth are negative year over year, handle can't go anywhere but down, no matter how much racing insiders tell you otherwise.

* - The post was written before Keeneland went to dirt, and field size fell appreciably, as did handles.
** - The post was written well before the Chuchill takeout hike in April, where they suffered double digit decreases in handle.
*** - Many of these new rules are being instituted for the first time January 1st of this year.
**** - Signal fees have been under severe pressure for horseplayers and this has gotten worse with the conglomerates like Monarch, CDI/Troutnet/Tracknet etc. The environment for everyday customers started to get very bad in the summer of 14, and has gotten worse since then.

Out With the Old, In With the New, In With the Old

Happy New Year everyone! The blog post title may be cryptic, but horse racing is cryptic, so take that.

Gulfstream recorded $1.2 billion in handle for 2014, which is up from $826 million in 2013. They raced more days and rejigged the whole schedule, to maximize their handle.

GP President, Tim Ritvo: "We believe with no head-to-head competition this coming year our commitment to grow the sport of Thoroughbred racing in Florida will produce even greater results."

That may be true, but little birds tell me that source market fees may enter the landscape in 2015 in the Sunshine State.  We've been through SMF's on the blog about as many times as Britney Spears ends up on TMZ, so no need to rehash it, however, if Florida does embrace them, the short term gains they're seeing will certainly be lost in a matter of years.

Gulfstream really rocked the Casbah with handle, though, so that should be good news for overall handles, should it not? Well no.

Crunkbase ® reports that handle for the month of December in the US was down about $60M or 9%. The number of races were down, as per usual. Remarkably (for some, since this was the Churchill Downs spoon-fed pablum earlier this year for their handle losses) field size for the month was up.  Shivers.

Overall handle for the year looks to be down in the 3% range. Early in the year - sans Churchill - handle was okay. Buoyed by decent big day handles, and a Triple Crown try this year (which probably added $50 million or so alone), things were looking solid. As Crunkbase ® reports, the losses started piling up in September at a greater rate. My spies tell me that one of the teams began scaling back at Del Mar and that continued. Most mid-range larger players ($3M-$6M) have gotten pretty destroyed by the new fees and higher signal fees, but from what I see, they've been leaving in drabs. You can't get a straight answer from the powers that be, so it's often speculation. However, I suspect that's a major reason for the declines.

First time gelding reporting chatter has been going on for like, eleventry gazzilion years. Even though the movie reported that Hidalgo was a gelding, you just never know. The industry itself, policed by their own with about as much respect for accurate PP's as Ted Cruz has for the Prez, never seemed to care either. Recently, Jeff Platt of HANA and Hank Zetlin of Equibase started pushing the reporting of geldings into the news with changes to the Equibase system (geldings are listed on Equibase, and now in PP's like at the DRF and TimeFormUS). Clearly not ideal, racing at least looks to be giving the new system some respect, in some quarters. Today, the DRF reported that a So Cal based trainer has been fined for not reporting a new gelding correctly.

Change in racing moves at a snails pace, and often times change never occurs. With first time geldings, I do sense some movement. Perhaps in a year or two when they are reported, we as customers can actually believe what we're reading is true.

There was a carryover in the Super High Five in Cali yesterday, and bettors plowed about $1.7 million into the pool. How does a carryover of only $300,000 or so encourage that kind of new money? It's  takeout reduction, and no one cares about takeout, so we hear. Go figure. 

I am reading an interesting book, "America's Game, The History of the NFL". Much of it is long on business, which is pretty fascinating. I will probably write more about how the league grew from its infancy, but I read an interesting chapter last night I thought I would share. Back in the late 1950's, football was having trouble getting column inches, and the sport was viewed more as one of brutality, rather than skill and strategy. Pete Rozelle wanted to change that. After changing a few rules - things like piling on, scrums, late hits, etc, were all taken more seriously, and punished - Rozelle moved on to the stats. He enlisted the Elias Sports Bureau to be the statstaker for football, created a bunch of new stats, and distributed these new numbers to newspapers everywhere.

Soon after, these statistics were at the forefront of everything NFL. Bookies and customers used them, stats geeks who liked them for baseball found them interesting. In one anecdote shared by former player Pat Summerall, Richard Nixon, then Vice-President, walked into the Giants locker room before the Championship game in 1958. He went to each player, introduced himself, said their names and talked about their stats. Summerall said "he knew everything about our play who we were and our complete statistics." The sport was not even on television, so Richard M, like everyone, got them from newspapers. Rozelle was a pretty sharp fellow.

Have a great weekend everyone. And Happy New Year.