Racing and "I Don't Know"

Why is it that when you ask a question to someone formulating and implementing racing policy, the answer is more often than not, "I Don't Know".

We need geotargeting.

Why?

People are betting on their ADW accounts at the track.

How much?

I don't know.

Are we losing revenue?

Yes.

How do you know?

I don't know.

If we inconvenience customers for a slightly higher margin, will those playing on ADW's bet the same amount when on track at the windows, or will some stay home and play, hurting attendance?

I don't know.

That's one example. But you can ask the same questions about how much Derby Wars is "hurting" Magna, or how much revenue will be lost or gained from a takeout change. The answer, invariably, is "I don't know". 

You'd think with hundreds of billions of dollars of handle over the last 100 years, racing would be able to use data to change policy like a real business: Forecast, model, project, look at the cost-benefits, and then decide.

Instead, it's not like that. It's "I don't know."

Building and Distributing Modern Data. Who Cares?

Crunk had a nice post about data today. It's not sexy like drugs, or stewards, or who is going to start in the Pegasus World Cup, and it's not exactly click bait. But it's a really good piece everyone should, in my view, read.

Disruption is a word often used wrongly, and almost always used in some derogatory fashion.  It's like a Bond villain, who is up to no good. He's loosening double-oh-seven's ski boots, so he'll ski to a horrible death, or other such things (which to me seems odd, because most villains have guns and could just shoot him, but I digress).

Regardless, disruption is not a bad thing. It usually ends up being a good thing. For consumers, and the future of a business.

Innovation and disruption was first spoken about by a smart Harvard fella, who wrote a book called the "Innovator's Dilemma". There are innovations that are soft (he called them "sustainable" innovations). These tweak the current landscape, and look for incremental improvements of a product. "StatsLens" by Equibase, as Crunk notes, is this type of innovation. There are others which are disruptive, which can open new markets, and use them to your advantage.

Modernizing horse racing data -  creating a seamless pipeline of inputs and working to sell, or distribute, those outputs - is a chance to open new markets, and sell to them.

People lament that horse racing is old, that you need to sit for hours to find a bet, reading a paper racing form your grandfather great-grandfather used. A lot of people, in fact, love to do that. But what if horse racing data was more like Stats LLC, or MLBAM, which has data that tracks player movements and launch angles and just about everything else?

Me or you might use this data to model stride length, speed, wind and other factors to create better speed figures. We could use that to model energy distribution. There's no doubt we could do some amazing stuff with that.

Now, with these stats, let's say we find out that they can predict winners, while the race is being run. We are not the only ones. Some whiz kids somewhere found out similar. Now, what if demand for in-running wagering increases exponentially because of this data?

Well, this data was just thrown out into the landscape. It was inert. It wasn't created to service an existing product.

What if, in 25 years, this data spawns a new way to play the Derby or other races. What if millions are bet on the Derby yes, but hundreds of millions are traded during the race itself? That's a whole new market and a new revenue stream for horse racing, created simply by making new, cutting edge data available.

This inert data - the data not created to service an existing product - actually created a new product. 

The above is just an example, that probably will never happen, nor work, but the point I am trying to make is, good ideas, growth for an industry, new markets, and new products, rarely come from the business itself, or what we know in the here and now. This is probably exacerbated in horse racing, because so many are monopolies or duopolies.

New ideas, new products and new innovations occur because a table is set for the marketplace to innovate and find new markets and products.

Modernizing horse racing data might seem like nothing to some - especially those who like to sit outside on a sunny day reading the racing form. But it means a lot. It can find, create and exploit new markets, no matter how old your business or betting game is.

Newspapers Might be Finished, But Racing's Strategic Options Make the Big Tracks a "Strong Buy"

There's a really interesting article I dove through at lunch today by Jack Shafer at Politico.  He looks at a new study from University of Texas researchers who propose that newspapers blew it by moving forward online the way in which they have, and they should retreat to do what they do best - sell print newspapers.

"Buttressed by copious mounds of data and a rigorous, sustained argument, the paper cracks open the watchworks of the newspaper industry to make a convincing case that the tech-heavy Web strategy pursued by most papers has been a bust. The key to the newspaper future might reside in its past and not in smartphones, iPads and VR. “Digital first,” the authors claim, has been a losing proposition for most newspapers."

That smacks a little of what we hear from some out there in horse racing, where retreating to "getting people out to the track" (where margins are higher) is a workable strategy. No doubt the knee-jerk reaction from those in this sport may be,  "see, we have to do the same thing".

I think that's not correct. The quagmire with newspapers is a classic life cycle question.

In the University research, the authors contend (although they don't say it) the industry needs to begin a retrenchment business strategy. This strategy (doing what you do best, and diverting revenue to it) is one of three major business strategies for mature businesses who are at the tail end of the life cycle - the other two are harvesting and consolidation.

I am not remotely sold it will work, but the authors believe it's where the business is. And that is super-important. A lot of business have no idea what strategy is right when declining.

As for horse racing, it cannot retrench. Why? Because, frankly, it does nothing best.

For horse racing at slots tracks, harvesting (milking the cow) seems to rule the roost, as sad as that may be. I think these small tracks know exactly where they are, and that's exactly what they do. If 1% of revenues go into something other than purses and profits, I sure haven't seen it.

 For larger entities and the big tracks that rule the roost, they are certainly not going to retrench, or harvest. Neither of those strategies are remotely optimal.

I think they are going to consolidate. And I say that for more reasons than it's the only choice left that we learn in business school.

A consolidation strategy allows big dogs in an industry to hunker down, and let the competition kill itself off. In the end, the hope is that they will have a stronger position in a weaker industry, but with the industry less competitive, they can grow, and revenues (and margins) can improve.

In real life, a loose example of this would be a NYRA surviving with its three tracks, while Finger Lakes, Batavia, Vernon and other harness tracks fold. Their slot revenue - probably regulated and governed through a department of Agribusiness - would then go to NYRA.

This strategy is often serendipitous, unplanned and in no way normative. I think we're seeing that right now (although, perhaps, a case can be made this is what CDI has been doing for awhile, while divesting from racing).

• Larger tracks are charging more for signals, and importing signals at lower and lower rates. Small tracks need them more than they need small tracks.
• Handle has been trending upwards at large tracks, while small tracks are getting absolutely killed.

I think we are seeing a consolidation at the top, and Florida and NYRA tracks are positioning themselves to take advantage of it, whether they know it or not. As for another big dog -  California - I honestly don't know what they're doing.

Newspapers, I think, are dead. Retrenchment won't work, and neither will harvesting. The big dogs will probably survive online and off, so there might be a consolidation strategy at play, but in no way is that consolidation worth as much as it is to horse racing.

If the big tracks in horse racing were an equity, I think they'd be a "strong buy", whether they know it or not.  For fans, owners, trainers and customers, I believe we best get used to it.

Have a nice Tuesday everyone.