Horse Racing Needs More Vision, Fewer Monetizers

Ah, my beloved hockey. 

The "white out" is one of the best things you'll ever see at a big NHL tilt. For those who have not heard the term, it’s where upwards of 20,000 fans all come to the game dressed in home whites. It makes our TV screens look like a snowstorm. Home whites are like apple pie, an old blanket, a comfortable pillow; home whites and snowstorms for a winter sport like hockey was positive branding. Then one day that all changed. In 2003, home darks were mandated. Why? You see, the NHL saw everyone in each city buying home whites, but home darks were not sold hardly at all. By mandating this change, it made people buy more jerseys.  The white out is gone and unless the NHL rethinks this (there are petitions by fans out there), it will never return.

Most recently, we’ve seen Wall Street meet main street again in hockey. This time the NHL is moving towards advertising corporations on World Cup uniforms. The NHL, with its traditions, long history, and antifragile nature as a sports business entity has been monetized like never before. It's about squeezing a lemon, with most everything else an afterthought. 

The NHL has increased revenues the last twenty years, but it's not like the league is super-healthy. The top teams, in big cities, make the bulk of the money, while the southern US and small market teams bring in roughly a quarter of those revenues. Sports leagues are built on parity, and in the NHL that suffers.  

In the NFL it is starting to look similar, but it seems there is pushback because the league's vision is paramount. Past commissioners - Rozelle and Tagliabue - were more about growth via principle, long term vision, and catering to what the fans expect and desire. Recently, Commisioner Goodell has been leaning different. In the early part of the century, the first down line was sold to Fed Ex for international broadcasts, and ads on jerseys were broached. Goodell, according to one owner quoted in America's Game, A History of the NFL said with distaste, "he uses the terms monetize and commoditize."

It got so heated that in one league meeting, Pittsburgh Steelers owner Dan Rooney sent Goodell a mock up of an NASCAR looking NFL jersey with a note that said, "This is what we're trying to avoid." Fortunately, there are still some people concerned about long term branding over a few dollars in that sport. 

As we’ve seen the last fifteen or so years, everyone seems hell-bent on monetizing everything. Beating a $2.01 EPS has taken a front seat to long term growth. In some firms, if you can cut ten people for cost savings of $450k, but get others to do most of the work where productivity only goes down by $400k, it's a done deal. It's kind of the way things are done. 

In horse racing, another one of my beloved sports, similar seems to be happening. It’s been going on for a long time and I would argue, the sport is worse off, not better off for it. 

Last year near this time, the big news was the Kentucky Derby. Owners were upset about ticket availability, parking spaces, and seemingly everything under the sun. In early April, there was a takeout hike at the track that even a blind man could see it was about making more money for two days, and little to do with business the other 363. What we've been seeing is a corporation, needing to meet Wall Street expectations, monetizing every inch of space, and every customer, to try and do just that. It’s all about a bigger share of revenue. 

Meanwhile, racing’s other big entity, the Stronach Group is fighting with Mid-Atlantic tracks about revenue splits. It’s about “monetizing a signal” better and getting a bigger share of it. 

In California, there was the big fight regarding SB1072, the takeout hike act. A bigger share of revenue from customers and racetracks was fought for. 

Can anyone tell me how a Churchill Downs Inc EBITDA increase from an event in May grows the horse racing pie?

Can anyone tell me how Magna getting 4% more from a signal, while another racetrack gets 4% less grows a pie?

Can anyone tell me how the TOC getting a bigger slice for a purse, while tracks who put on the races and customers who supply the purse money get less, grows a pie?

Horse racing will grow a pie not by monetizing everything, but by looking at the big picture with some sort of vision. 

Slot money need not be monetized via a purse only. Have you noticed great betting races, more owners, and better racing at Aqueduct since slot cash was added? That money needs to be spent to cultivate ownership and increase wagering as its first and foremost metric. 

Betting money needs not to be monetized by getting a bigger share for an entity, but by cultivating customers to bet more money, and encouraging them to become long term customers. 

Corporations will always monetize racing, and that’s the way it is. Not a heck of a lot can be done about it, but for pete’s sake, if you are writing a slots deal with a casino company at the other end of the table, ensure checks and balances are in place that are pro-growth for horse racing. The way slot deals have been written in North America, have been completely devoid of vision. 

A lot of people look at the horse racing industry as a glass half empty. I tend to disagree. The sport has been run (as an entity) with so little vision, with so little thought to the future, that if it’s ever corrected, it can’t help but grow. The first step is changing the culture to think less about monetizing one revenue stream for today, and about how multiple revenue streams can be achieved for tomorrow.

Why Horse Racing Has to Niche Market

Growing up as a kid, if I wanted to bet something, I would play a game off toss the hockey cards, target practice with a puck (most cardboard hits in the top corner after ten shots won fifty cents), or find someone to bet a football game with. It wasn't overly addictive and I sure as heck could not play it each day.

Today, it's different.

Ever wonder how Clash of Clans and Game of War can afford Super Bowl ads? Because they are worth a ton of money. 

•  Clash of Clans" and "Game of War" are the highest-grossing games in both Apple's and Google's app stores. The website Think Gaming, which tracks top games, says "Clash of Clans" rakes in more than $1.6 million a day just from iPhone users. "Game of War" isn't far behind at $1.1 million daily.

and my favorite quote:

"The experts we talked to said the thrill of a win keeps the cash flowing."

When you ask racing execs or horsemen reps what kind of customer they want, they will often say  "young people." Well, a lot young people are playing these games and spending money that way (some well over $100 a day).

It's harder and harder to gain the market you want. It's easier if you decide you're a niche market and learn what type of person you can attract, and go from there.

Comparing Super Bowls to Racing's Super Bowls- One in the same

I watched most of the Super Bowl last evening, like I am sure a few of you did. The game itself was a bit of a dud until the fireworks started in the fourth quarter, but as usual, as a spectacle, it was fun to watch.

It got me thinking. Are there parallels between the big game and racing? You bet there is.

We Hate Camera Angles

The Networks, for some strange reason, like to put a camera on the goal line in Super Bowls, when they don't use one for regular games. When you've watched eight gazillion football games, this camera angle messes with your brain. My twitter feed was not impressed, while casual fans were wondering what the big deal was.

This is tantamount to goofy camera angles in horse racing. Bettors like the pan shot, because they've been watching races that way since Thomas Edison (I think it was him; he invented everything) created the film projector. It messes with our heads and we get really cranky.

Katy Perry, Music, Lenny Kravitz

The Super Bowl halftime show has grown into a monetary giant. The NFL gets top acts to perform, on stages transformed right before our eyes. There are paper tigers or lions or maybe leopards (hard to tell), dancing sharks, costume changes, lip syncing, and an obligatory song with dancers to end it, that's primarily rap hip hop based. It's quite the spectacle.

In racing, it's kind of the same thing. Big huge draws like the English Beat frequent Hollywood Park Santa Anita. The guy who plays guitar for Bon Jovi and once was married to a Melrose Place actress plays the national anthem. New York, New York is sung by a distant relative of Frank Sinatra (except that one year at the Belmont when they played a song that no one in the demographic ever hear of). I have not even mentioned the fact that if your racetrack is tethered to a casino, you can pop over and watch a really cool Abba cover band for free. Like the Super Bowl, racing loves the music.

In-between Races and Plays Entertainment

Advertising pays the bills, and for the Super Bowl, this advertising is a big part of the event. There are car ads, car ads, car ads, insurance ads, insurance ads, insurance ads and car ads. Most are one minute long and cost more than a bunch of cars that are fully insured. They're the bomb.

Like the NFL, racing's TV channels are filled with ads. Especially on late night. There you can get new fangled brooms for $19.99 (not one broom, but if you call RIGHT NOW, you can get two, plus a handy kit that can turn your broom into a toaster), and other such needed items. While the Super Bowl deals with flashy ads, late night racing TV is more utilitarian. But they are one in the same.

Second Guessing: "Julien Leparoux called the last play"

On the last play of the game, Pete Carroll (or the OC) called a quick slant that was jumped by a first year corner and picked off. This probably cost Seattle the game. If there's one thing you learn quickly about the masses (and talk radio dudes) in football, it's that when a pass play fails inside the two yard line, it's a bad call because you should always run. If you don't run, you're stupid. It doesn't matter that pass plays inside the one work better than run plays, there was clock time to look at, or that they had a perfect match up play. You run.

In horse racing, when a horse loses, it's the driver or jockey's fault. The horse could've been coughing a storm after the race, got run into by another horse, ran over a pop can thrown by a drunk Preakness infielder, or didn't feel like running that day. Somewhere, somehow in that two minute trot race, or 1:50 9 furlong affair, the jockey or driver did something stupid. It's just the way it is.

When In Doubt, Charge a lot of Money

Super Bowl tickets were through the roof. Hotels were outrageously priced. A cardboard filled thingy of nachos cost more than three gallons of petrol. Chris Christie would get stopped at the door at after parties cuz he didn't have enough cash. It's amazing.

At the Derby, it's kind of the same. Takeout hikes, ticket hikes, tents, moving the media area from the stretch to somewhere in Western Lexington, you know the drill.  We live in a time where if something is popular, it must be bled of every penny or someone will get yelled at during shareholder meetings. The NFL and the Derby are joined at the hip.

The Betting

Hey, the track is all about the betting. Just ask this guy.

The NFL is all...... hold it. No gambling at all went on yesterday. The NFL doesn't allow it.

Have a great Monday everyone.