Chris Kay Must Dig the Bowl Season

It's Bowl season and tomorrow and Friday are special days, stacked to the hilt. In fact, pretty much every day is stacked with Bowl, after Bowl after Bowl.

Bowl season has always been big business, although it looks a little different than the old days.

I remember being a wee lad in the 1970's, and growing up in a small northern place, it was tough to watch Bowl games. We had two channels; one was English and one was French, and I could not speak a word of French, so we had one channel. Interestingly enough, the French channel was the only channel that ever showed NFL games - for years I thought the NFL was "Le LNF". And also rather interesting (to me anyway), they constantly showed Minnesota Vikings games. The Purple People Eaters were less imposing when they were "Violette" things that ate running backs. Anyway, I digress. The only channel showed Bowl games, did it one day only: New Years Day. I could watch the Cotton Bowl and the Rose Bowl, and I think the Orange Bowl. Rose didn't fit, because it was not a commodity, but as a kid I didn't know the difference. They were three great games and a staple of life on New Year's Day.

Fast forwarding to tomorrow and Friday, there are a gazillion bowls. They are stacking grade 3's and making them grade 1's and promoting the heck out of them. I personally am super-stoked for the Taxslayer Bowl, and nothing says Christmas like the AdvoCare V100 Texas Bowl. I think last week there was a Popeye's Bowl. We have a couple of those in Toronto of all places. The one I have been to strangely at the top end of Chinatown, at Spadina and College. For those who have not been there, Popeye's is deep friend chicken, shrimp and other things, served with deep fried french fries. I think they deep fry the coke too, in the meal deal. Anyhow, it's gotten so bad that at least twenty Bowls are now named after places of business I have never heard of, or places that serve deep fried food.

I guess it works, but it doesn't make it better. I'll probably watch the big two games, and nothing else. Over the past week, seeing the San Diego County Credit Union Poinsettia Bowl does not make me want to join a bank in California, and I don't even know what the Raycom Media Camellia Bowl is.

One of the more bizarre decisions I thought made in 2014 was the stacking of stakes races. Some might make sense, like trying to make Pennsylvania Derby day a big day to get people to play into 30% rakes with a smile. Even stacking a Travers Day makes some sense to me. Big days are important, but stacking the Belmont Stakes day? They got lucky there was a Triple Crown on the line, because I believe it made a toy company executive who runs a racing jurisdiction (that sounds funny, I know), look pretty good. 

With more grade I, II and III races, and more of them on top of each other (some racing at the same time, even!), racing has its current version of Bowl mania. Some people love it, and more power to them, but I can't get stoked for five horse fields going for big money in place after place, dressed up like the big time, just like I can't get too excited for the Godaddy Bowl, brought to you by, well, Godaddy.You can squeeze more money from an event, but people are too smart to not realize what they're watching is a poor product. Sooner or later that'll bite you in the rear.

Thanks for reading the blog this year everyone. I appreciate it. To you and yours, may you have and enjoy a very Happy New Year.

Merry Christmas Vegas Horseplayers

Vegas racebook patrons (what's left of them) will likely be unable to wager on New York racetracks in the upcoming days or weeks. 

•  NYRA, which showed a profit for the first time in 13 years, reportedly is asking to almost double the fee for its signal, which would mean between 10 to 12 percent that Nevada would have to pay.

The knee-jerk reaction from many in the sport is "good, they should pay more," but that's way too simplistic. Nevada racebooks and others are part of a distribution network that takes a racetrack like Belmont and allows a customer base to bet. It's no different than a car dealership, Amazon.com or a million other distribution points that allow a business to sell their product. NYRA can go and purchase a casino in Vegas if they'd like and take all the money from the signal, but that's not feasible, so others sell their product for them.

Casino's, like ADW's and others, are not charities. Floor space for a racebook could be used for another gambling game, so the profit that a racebook makes has to exceed the opportunity cost of doing something else.  NYRA - as is the case with this new management team, led by a former toy company executive - wants more from the casino's, and about everyone else, without investing through a forward linkage.

This has been going on for awhile now, and has been occurring in dozens of other industry's, especially as the web has taken hold. Examples from the book industry are prevalent, when it comes to middlemen, marketing, and reselling. That business is in flux, like we see with Amazon.com and ebooks. Authors receive only about 7% of all sales on Amazon when they have a traditional book (the middleman - the publisher - takes a great deal of it, as does Amazon), whereby with self-published ebooks, authors receive about 65% of the revenues (lower with back end marketing support, or help from Amazon).

It's nice to feel all Oprah-warm-and-fuzzy-like and say "NYRA deserves 80% or 90% of the revenue in the win place show pools because it's their product" but that is not realistic. Margins - probably well over half - have to be set aside to keep the reselling distribution network, its marketing, its customer cultivation,lower takeout to price sensitive patrons, and other growth oriented characteristics to ensure the health of the entire market.  I feel this salient point is being lost on Monarch, CDI and NYRA, and it should be paid attention to, or they will wake up with many more customers lost in the ensuing years.

ITP & Sid Are Both Right

Two of my pals - Sid Fernando and Inside the Pylons - were having a twitter chat today. It began with some chatter about Hong Kong, the way things are done there, versus here across the pond. Sid stated racing in Hong Kong can do many of the right things because it is a stand-alone entity with government as a strong partner.  ITP stated that racing could've been like that here, but it hijacked itself. In the end, I suspect they both agree with each other.

In Hong Kong, racing and governments have a symbiotic, linked relationship. When racing does well, they do well, because revenues are taxed at the back end. This is likely why, when they had to fight the Macau casino's in 2006 and were losing customers, the Vice President of Wagering (they have one of those) reacted quickly with a rebate program. It was done to protect wagering, revenues etc, for the long term. There was no horsemen group, no state, nothing standing in their way. They just got it done.

When that happens here it is not like that at all. It's so bad, governments partially own casino's, so they don't much care what happens to whatever tax or wagering slice they get from racing. It's meaningless to them. It's a different world here.

Sid is right. It's been the opposite for like forever. And there is no comparison.

ITP's point is more nuanced and I think it's strong.

What if racing and government's had fostered a similar relationship long ago? In that case, NYRA would be a gambling mecca where like in Hong Kong, it would've led as a distribution point for other wagering. It would be a part (as operator, for example) of casino's. It would be a part of virtually everything when it came to gambling. Cuomo would not be fighting it, that's for sure.

In about 1930, a government (for example, New York's) came to racing and asked for 5% to be added to takeout. Racing said yes, because they could add another 2.5% for themselves. That began the process of bleeding the sport dry. That strategy never changed, and it's like that to this day.

Doing that, racing lost power; they were not partners, they were "a split". Racing lost any edge it may have had to partner in a new gambling enterprise. It was not able to lead slots or casino deals as operator in chief, it was relegated to asking for a form of rent from slot machines, where that rent could be extinguished at anytime.

In North America, entities - from 100 years or more ago to today - were focused on splitting it up the pie. In contrast, Hong Kong worries to this day (and always has) about growing a pie and splitting it up later. As partners.

To see just how ingrained that system is in North America, look no further than 1996. In Ontario, the Harris government had a revitalization plan for horse racing. In addition to allowing slots at racetracks, they immediately stopped taxing takeout by 7% as a growth mechanism for the sport. Did racing immediately slash takeouts to 6% on the win end and 15% on the exotics end, like any business would? No, they left rakes the same, and kept the 7% for themselves to split up to line their pockets. 

Margaret Thatcher's line,  “The problem with socialism is that you eventually run out of other people's money.” is pretty sharp when it comes to horse racing in North America, in my opinion. The problem with horse racing is that by constantly taking cash off the top it too runs out of money. When there is little money left to take, governments leave you out in the cold. When what's left is peanuts you are peanuts,and you go to the back of the bus. When the government in Ontario killed the slots deal two years ago, it was done because racing was meaningless to them. There was no money left.

ITP wonders what would have happened if horse racing had leadership and foresight to say no to the cronyist, backscratching deals they made many years ago, with those after slices off the top. Sid believes that comparing Hong Kong to here is pure folly and wishing otherwise is silly - it will never change because it can't change.

Both of them, I think, are completely right and it will be a strong reason why horse racing handles will be below $9 billion per year within 24 months.