Zee Corporation

Good morning peeps!

Yesterday, Keeneland's handle was about flat from last year for their opener. That, as we postulated yesterday on the blog, doesn't mean much either way, but it was interesting, and the corporate types (strangely enough, some of them in the real world hate corporations) were pretty happy.

With my back of the napkin look at results (and help from Crunk posts that show racing outside Keeneland yesterday was up 18%), I surmise that those of you who played Keeneland last year, who did not play this year, totalled perhaps $300,000 in handle. We'll see how it goes the rest of the meet.

Another interesting discussion yesterday was about rebating. Rebating, something that I've been for on the blog since 2008 - mainly because it's the only equitable way to change the racing system and get handle to grow if done correctly - has certainly been bastardized.

Back when the corporations were out of dictating terms, there was an ample degree of both fairness mixed with pro-growth principles. We touched on this here.

In the past several years, when the corporate tracks started running it, it's been all downhill. Now a smaller player who wants to become an everyday player who used to get 5 points at Keeneland is lucky to get a half point. And he or she has to compete against someone getting 12 points. Racing doesn't think things through very well, and the inmates are running the asylum. It's just horrible business.

It's gotten so bad that apparently, signal fees of 9% are not for everyone. Some can get some as low as 5%. I can't express in strong enough terms how terrible this is for the wagering ecosystem.

Not all "corporations" are like this of course. Most outside racing, in fact, do the exact opposite, depending on their brand. Costco asks "how can we get the price of our $1.50 hot dog down", not up. Corporate bookmakers lower takeout, generally, and have few perks, and they pay racing and their shareholders through gross profit, not margin.  Pinnacle Sports looks at CDI or Magna or Keeneland, and shakes their head.

I suspect little can be done about this issue. The wagering side of horse racing itself goes in waves - wave one is the problem, wave two is ignoring the problem, wave three is trying to shut down the problem, and wave four is trying to fix the problem in a way that doesn't work. We're in wave four  with rebating.

That's not good for takeout rates, and not good for most of you. It's not good for the tracks either, but they just don't realize it yet. That's wave 5. It will probably start in 2021 or 2022.

I'm a free market dude. I went to business school, I consult with hundreds of companies in dozens of different businesses. I love curves and numbers and ROAS and ROI and CAPM's and LFTV and all kinds of neat businessey things. I'm as far from a Bernie Sanders guy when it comes to business as you'd ever meet. But I can, without equivocation, say this new corporate world - in racing and in some other businesses - is growing completely foreign to me.

Have a great Saturday everyone.

Shining Lights & Forwarding Customer Education is Never a Bad Thing

There's a lot of tweets on my timeline about the bettor "Boycott" of Keeneland. It's good to see so many talking about important issues with regards to the long term health of the game.

There's probably a lot of people waiting to say "I told you so", either from the customer side, or the corporate side. Generally, however, what happens is a bit of a sideshow.

If it rains the next month, if it's sunny, if field size is down or up, if Keeneland gets antsy and sells a signal fee for less than they wanted to, and myriad other things happen, the data will be completely muddy. It's one of the reasons racing has made absolutely awful wagering decisions the last 40 years or more. On the Wikipedia entry for "muddy data" there's a picture of a smiling track executive, because he (it's probably a he) knows he won't be held accountable for anything he does.

What this chatter and the resulting boycott do, in my view, is shine a light on a policy people may or may not know about, and it educates others who often wonder "why do I lose so much money betting racing." If learning about pricing helps a player win more, and enjoy the sport more, that's a good thing.

What these things also do is give a customer a glimpse into racing's thinking regarding price hikes. As this comment showed, the Ellison interview (unintended I'm sure) let customers know that this rake hike is of the corporate variety and it will subsidize their horse sale and large players, along with the big betting teams. This is a dirty little secret about takeout hikes, and this so called "boycott" brought it out into the open - in black and white for everyone to read. Yes, (shocking I know) the smaller player will subsidize the big bettor and breeding farm.

In four or five years when you see some Bloodhorse story with an executive panel wondering where the small bettor went, you'll have an idea what caused it, and you can hold them accountable, rather than get sent to the smiling muddy data wikipedia page. That's the power of knowing what goes on behind closed doors.

Today some bettors will boycott Keeneland and some won't. Some don't mind corporate tracks and their tactics, some don't mind subsidizing large players or horse sales; they just want to enjoy the sport and play a few races. Others do mind, and they'll bet another track.

But one thing's for sure - both sets of these players are smarter and more educated about how this business is run. They might be able to extract more money from you this meet, but being educated about their tactics is something they can never take away from you.

Enjoy your weekend everyone.

Keeneland Rake Hike Time: Your Guide to the Horseplaying Tribes

I had a chuckle a few weeks ago on the ever increasingly tribal twitter. A CNN contributor posted this, about a political movement, trying to convince others to join theirs.

You're irredeemable, fellow Americans, & you shall have no respite in life from hearing how gross we think you are. Join us! Vote for us!

— Mary Katharine Ham (@mkhammer) September 24, 2017

I see this sometime in racing, as well. If you don't do "X" you're the dumbest human being alive and you need your head examined, but please come join me and my tribe!

It sure is an interesting recruiting tool, seeing that it kind of throws the idiom that we catch flies with honey out the window.

This Friday, Keeneland opens with higher takeout rates. For the uninitiated about rake, this simply means that the payouts you see on your screen - for win, place, show; supers or tris - will be lower than they were last year. When you hit something - if you choose to play Keeneland - you won't get back as much money.

Like on political twitter there are a great deal of horseplayer tribes and they are all subsets that react differently to policy changes.  Allow me to go through a little primer here.

i) The Entertainment Tribe - These folks love racing, and the takeout could be keno-like and it would not affect them because they rarely play the races. They'll enjoy Keeneland like they always enjoy Keeneland. Different tribes should probably tip their cap and be happy they like the sport, because attendance would be worse than it already is if they didn't.

ii) The Turkey Takeouter Tribe - These are the folks who simply are not sensitive to price in any way, shape or form. They lose a ton of money, and really don't mind losing more money. If they hit a $20 exacta in Turkey with a 5-2 onto a 3-1 that pays $11, they beam they won $90. Racing needs these types, so be happy they're there.

iii) The Spot Playing Tribe -  This crew will play Keeneland this meet, but will probably (unconsciously) not play as much. Spot plays - exacta overlays, board overlays - are fewer when prices go up.

iv) The Warrior Tribe - These folks work very, very hard at racing. They read the form, pay for handicapping information, and read Ed DeRosa Grids ® religiously. They probably play at TVG or Twinspires or their local track at full takeout. This tribe is split into two sub tribes, and they, this weekend, will react differently.

• A portion will boycott, because they went through their Keeneland results the past years and saw they lost money. A takeout hike just means they will lose more money, and they already work so hard at the game trying to make money, they can't work any harder to lose more. So they'll sit it out, and play something else.
• They know they lose money, but "what's another 10% on my payoffs, if I hit a big pick 5 it's all good". There's also the justifier portion of the tribe that says, "takeouts are all crap, so I might as well play Keeneland. It's better than Parx"*. This subset will give er a go.

v) The Rational Consumer Tribe - This is the tribe who acts like most people act. They aren't married to a product or service, they just a act like economics textbooks say they will. If the price of steak doubles to $20, they pivot into pork or chicken; if the gas price gets too high they trade the Cherokee in for a Ford Focus. If they look at their betting results and feel this 15% increase in exotics will hurt them, and they have no hope to beat it, they'll pivot into something else. 

vi) The Had Enoughers - This tribe could be a subset of the spot players, or warrior tribe, or even the rational consumer tribe.  These folks are old timers (usually) who have seen almost every policy go against them over the years, and this one was the final straw. Horse racing has had a lot of had enoughers over the years, which is why it isn't growing. The Keeneland Board can take credit this month for pushing at least some of this tribe over the edge.

vii) The Big Players - This group, as a whole, will either boycott Keeneland, or maybe more likely, bet less. The signal fee went up, so that's a mathematical certainty, all things equal.

viii) The Lines in the Sand Tribe - This one includes probably me, and if you're reading this blog, perhaps you. We draw lines in the sand when certain tracks decrease our payouts, or implement policies that hurt us as customers; and in turn hurt the sport we grew up with. We don't play Churchill or Santa Anita and we won't play Keeneland.

No matter what tribe you're in, you'll probably get yelled at this next month by someone. The entertainment tribe is not dumb for wanting to watch a race; the guy who doesn't care if his ROI goes from 0.82 to 0.79 is not an enemy; the gal who tweets incessantly that they are mad at Keeneland for killing her payoffs is not an enemy either. It's a world of tribes, yes, but each tribe is an individual, with different views, and different ways to express them. Take a breath before yelling at them; it does the body good.

It'll be an interesting month, I suppose. For those of you who have said "enough is enough" you're probably going to save yourselves some money, and that's great. For those who wager, good luck at the windows - you'll have to be better than you were last year at picking winners - and I sincerely hope you come out ahead.

Have a great Wednesday everyone.

* Alan informs me that Keeneland takeout on doubles and exactas is now higher than Parx. My bad.