I'm So Glad Zenyatta Did Not Go to the Personal Ensign

Rachel Alexandra was beaten today in the Personal Ensign stakes at Belmont by a closer aptly named Persistently. Rachel battled her main foe through 47, 12 and 37 fractions before coming home in a very slow 27.1 to be defeated by the closer. As many of you have noted on the blog here about the mare in her previous '10 efforts, she is just not last year's horse.

It appears that Steve Assmussen agrees and appeared almost melancholy:

“I’m very disappointed that she lost, but I am always very happy with Rachel. It hurts to lose and you’re disappointed for it, but if that’s the case, just think about how happy she’s made you and all the things she has done for us. She’s a tremendous mare. If she isn’t exactly where she was last year, hopefully she can get back there.”

I bet hundreds of races a week, both thoroughbred and harness, and I find I truly watch so very few races. If I have four tracks going I have perfected listening to the call for my horse's name, while I scan for opportunities in the other race cards. For a horse like Rachel's 2009 sked, that was not the case. Horses like her make me pause, turn off my betting systems and windows, grab a coke, and be a fan. However, this year it is all-too-obvious that she is not quite the same horse.

Superstars like her rarely come along in our sport and we are very lucky to have watched her. We see that each year in the three year old divisions. People will get excited about a horse, but the horse is nothing to really get excited about. The horse simply wins races against other horses his or her age; someone has to win the Derby or Belmont. But not Rachel - she was generational - she was a filly you knew was special. She gave us goosebumps and she was an absolute superstar. She did not just win, she crushed.

Special horses - horses with innate greatness - are very rare. In my opinion, greatness in equine sport is when other horses know when they are beaten at about the quarter pole. Last year in the Woodward, we all remember when Rachel went a hot pace and won the race holding off the closers. During that race she absolutely destroyed the spirit of a couple of her speed foes, one of whom was knocked out of the race with an injury. Zenyatta did similar with St. Trinians in the Vanity. Great horses do more than just win, they dominate and break another horse's will. Rachel was that kind of horse.

Which brings me to my thought. If Zenyatta had have made the trip to the Personal Ensign like so many wanted, she would have won easily. Yes, I realize that the dynamics might have been different, but a trotting horse last quarter off a three quarters of 12 and change showed that this field was not much at all, and little match for the big mare.

But, I thank god she didn't.

If Zenyatta had come and won, we probably would have heard just how much better she was than Rachel. We would have heard that "maybe Rachel's 2009 was not as good as we thought". We might have have heard some say "she clearly is not one of the greats of this game if you look at her whole career". All because a 2010 Rachel at maybe 80% lost one race to Zenyatta.

To some fans, in 2 minutes and four seconds virtually everything Rachel had done up to that point would have been forgotten.

What a disservice that would have been to this wonderful, wonderful filly.

I will remember Rachel winning the Preakness off a 46 half, while wide. I will remember her destroying older males in the Woodward off fractions that would have wilted all but a very few. I will remember her as the filly who broke many colt's spirits and chewed them up like she was relaxing on an off-day with a carrot.

Rachel is a superstar, and no matter what happens from here on out, that is the way I will remember her. I'm just glad Zenyatta did not show up to spoil the party.

6 Reasons Why It Ain't Easy For Racing to Run an Exchange

There is quite a bit of chatter about the Betfair bill in front of the California state legislature. There seems to be a good chance this will not pass, and one of the ideas floated about by many is the simple (logical, really) argument that racing can and should run its own exchange and 'keep all the money'.

This is nothing new in business. Bricks and mortar auctioneers saw Ebay in '98 and someone said "why don't we be Ebay". Newspapers saw Craigslist and said "why don't we be them". It is common in Internet business and has been for many years.

Currently, it is really not that difficult to get an exchange going. With a small investment (sometimes under $100k, if you give away a slice of the commissions), the resources and the back end can be had, and it can be up and running in no time, really.

So why not then? Why not finally get off our duffs and create one? Here are a few reasons why it is a tough row to hoe, in my opinion.

1. Too Many Fingers in the Pie

Takeout was 5% in North America in 1908. Now it is over 22% blended. If there is something we know racing likes, it's high takeout. Conversely, low takeout is the attraction to Betfair (and other gambling games online) and it is their hook.

From Betfair's annual review when asked about their low takeout:

"We know that the least valuable customers to Betfair are the ones who lose all their money quickly. They go away and never come back. So, we are happy to take less off our customers per bet."

Racing seems to not believe this, and never has, so one would suspect an exchanges biggest edge (price), would be muted by a racing led exchange. Even if they did start at a low takeout, once revenues were not what they wanted, the take would go higher. Horsemen would want most of the money, the investors would want their cut. They will complain when it is not enough and the fingers in the pie would raise the price and shrink the pie, just like we have seen the past ten years in racing.

2. Technological Advancement Will Be Second-Rate

E*Trade, Ebay, Betfair, Facebook and many other successful web companies know one thing: If you do not invest heavily in your technology, you will get killed. Today's savvy web-consumer demands a few things - they want stuff, it better be good, and they want it yesterday. Betfair alone has 400 IT people on their payroll and 1500 servers in five or six countries. They are constantly on the move.

Racing would have to become an Ebay - they would have to sink piles of money in the exchange, and reinvest a lot of the profits back in. The first time the purses are hurt, or times are tough, whomever runs the exchange will say "we need to invest our money to make this great" and someone, somewhere will say "we need the money to run horses because if we go, there is no exchange" The latter will win, and the IT department would lose.

Hugh Mitchell, CEO of Western Fair and a former Woodbine executive recently said that change and innovation in racing is hard because "it's like turning around a 747 on a tennis court". Companies that can not turn that jet on a dime, have their lunch eaten.

Here is a screen shot of software for exchange players on Betfair, showing a simple 5 horse dash. Will this be done here with little IT investment and edge?

3. Marketing Will Be Old-School

This to me is the most interesting, since I am a marketer. I can not believe some folks I speak with in racing who believe that marketing is a) Easy and b) Not that costly. It is very difficult and it is very expensive.

Betfair just embarked on the largest ad campaign in world history for a gambling company. TV, print, online, everything. Via Marketing Week their agency rep said "“Throughout the development process, we were encouraged by Betfair to keep pushing the boundaries. ’Middleman’ a compelling and competitive creative proposition which once again shows that Betfair is a real force to be reckoned with.”

I have heard racing be described as many things, but as a business that "pushes the boundaries" is not one of them.

Betfair is constantly looking for new markets, and do it in myriad ways, as witnessed in their TV commercial. Don't worry, it is not broken, it is in Bulgarian.

Can anyone see racing try this kind of reach and spend for an industry run exchange to grow it outside existing markets? Since they have not done that yet this century - and no one has been stopping them from trying - I can't.

4. It Will Cannibalize Wagering

Betfair does not cannibalize wagering when they enter a market. In each jurisdiction, the tote pools stayed the same, or went up. How? Because they bring in a brand new demographic, target new markets, and their players play more.

Will racing be able to do this with their exchange? As above, I doubt it. Where will they run ads for their exchange? I bet we'd seem them target Horseplayer Magazine, American Turf Monthly, at tracks themselves, and of course the old industry stand by: On simulcast screens. They will be advertising to their existing customers, just like they always seem to do. We will not be creating new customers, we'd simply be shuffling them.

5. No Volume, No Exchange, No Business

If racing had an exchange rolling right now, it makes me wonder. By advertising to existing customers, charging a high price, and having no real value proposition, who exactly is going to get hooked?

Betfair has three million customers, with hundreds of millions (if not billions) in their accounts. It's ready made and it offers volume immediately to any racetrack who chooses to partner with them. Racing would be starting from scratch, and with some of the points above I believe volume and savvy bettors would not be seen, even if we are an exchange monopoly. A dead exchange is worse than a track with a $100 win pool.

6. It Won't Go Viral

Internet gambling or service businesses grow because they are viral. Facebook grows because people sign up, chat and tell friends. Ebay grows because someone sold an old coin for $100 and they told 100 people about it. Online stock trading grew because people told people about it. Online poker grew because friends can invite friends to come play with them, and with others from all over the world.

If a racing exchange charges a high price, really is not that great, and very few people are playing, who is going to tell people to come play on it? We will hear what we always hear, even if we attract some newbies: "it is too complicated, I don't understand, and I lose money" so that person does not want to join, or tell friends.



"Racing should run an exchange and keep all the profits for themselves" is heard time and time again, and is usually met with a nod. Quite honestly it makes sense. There is a musician out there right now saying they should create an "ITunes" and keep all the money for their songs. There are many others who see something work on the net and say "I should do that"

It's not easy. Even with a monopoly, the issues that plague racing - too many cooks in the kitchen calling the shots, lack of reinvestment, lack of vision, charging too high a price for their product in a new world, and lack of customers - will rear their ugly head. We need to get rid of those horrible traits if we ever hope to compete. Until that happens, send the business to a reseller who actually knows how to do today's business. We'd be better off.

For me I guess it all comes down to one simple point. Racing has presided over the Internet age since about 1998. Since 1998, if racing simply held on to their customers and had them bet only to the rate of inflation, handle would be $20B this year. Instead it will be about $10B. A regime who lost half their business in the internet age (where they have held a legal monopoly no less), suddenly knowing how to run a new internet business successfully, is an argument I have trouble taking seriously.

More Wild and Wacky Quotes

Yesterday, we had two "quotes of the day" and today we see another.

There is a bill in California that raises takeout and adds exchange wagering. The takeout bill seemed to be sailing through just fine, as we see all too often in racing since about 1908 when takeout was 5%, with unanimous consent. However, the exchange thingy really seemed to get some shorts in a bunch. So now, it looks like it is 50/50 to pass.

Republicans are lining up to oppose this exchange wagering concept. And thus, we have our newest quote of the day:

" In fact, according to a Republican caucus analysis opposing the bill, between 1998, when exchange wagering was first allowed, and 2008, “purse revenues” went up 54 percent. Track attendance went up 10 percent, the number of horses in competition increased 19 percent, and the number of races jumped 26 percent."

OK. Let me see if I understand. In horse racing, which has been getting its ass kicked everywhere, an introduction of an exchange coincided with, higher handle, higher purses, more attendance, more horses bought, and more races.

And they're against it?

I am getting precariously close to following a new sport.