Archive for the ‘Industry Reform’ Category

Poll responses to questions about how to improve the economics of racing were less conclusive. For example, we asked which of three areas of growth were most important to the future success of racing: reinvigorating on-track business, expanding account wagering through TV or on-line video streaming, or getting subsidies from slot machines or other forms of gaming. Reinvigorating on-track business got the most votes, 45% of respondents, barely ahead of the 41% who believe account wagering is the industry’s best hope. Only 14% believe growth from slots/alternative gaming is the answer. A more specific question about slot machines ended with a four-way dead heat, with each of the following answers getting 25% of the votes: 1) slots are a short-term fix to boost revenue; 2) they are a long-term necessity for racing to be competitive; 3) they are a necessary evil; and 4) I oppose slot machines at tracks.

We’ve touched on many other areas in our polls. For example, 55% of voters opposed Breeders’ Cup putting all of the filly and mare races on the Friday program of the two-day championships, with 18% in support and 27% taking a “wait and see” approach; 49% opposed having the Breeders’ Cup dirt races run on a synthetic track, while 39% supported it and 12% unsure. In the breeding world, in mid-December, 65% of voters said stud fees had not been reduced enough, 31% said the reductions were “about right,” and 4% felt they had been lowered too much. A comparison of the three highest-priced new stallions of 2009 found that Henrythenavigator offered greater value and opportunity for success to breeders than Curlin and Big Brown. The votes were 52% for Henrythenavigator, 44% for Curlin and 4% for Big Brown.

Finally, in light of the depressed bloodstock markets and a downward trend in pari-mutuel handle in 2008, a year-end poll asked readers if they believe 2009 will be a better year. Only 24% said they feel 2009 will be improved from 2008, with 52% saying it will be worse and 24% believing it will be the same.

Naturally, we hope our readers will be proven wrong and that 2009 will be a year that the industry addresses some of its biggest issues: organizational structure, leadership and a new business model that reflects the reality that roughly 10% of wagers are taken on-track where a race is being run. It’s clear there is a high level of discontent currently running throughout the industry, but it’s just as obvious that the passion to have racing stage a comeback is equally strong.

In pari-mutuel pool participant parlance, it appeared to be an attack of pirHANAs.

As usual, Mr. Pope’s crafted arguments are logical, persuasive, and targeted at racehorse owners. The reader who is primarily a horseplayer, however, soon realizes that Pope doesn’t acknowledge their existence much less recognize them as having any stake in his new business model for racing despite the fact it involves funding purses with pari-mutuel handle – a breath-taking omission to some. Understandably, a few initial reactions from responding horseplayers were overly negative and/or derisive.

Considering the volume and passion of his opposition, Pope’s willingness to engage was laudable, but his live responses to the onslaught were not as convincing as his canned content. One of my objectives in this belated response is to address the concerns of some of racing’s customers who are not among the horseplaying elite; in theory, practice or internet participation. Perhaps a chronological presentation of the salient portions of Mr. Pope’s defense – with assistance from Ray Paulick — will permit easier reader verification, if desired. The bolding in quoted portions is mine.

Pope’s initial reply disparaged most of the industry’s customer base.

“… I value bettors greatly. We have somewhere in the neighborhood of 100,000 handicappers in America and we are losing some every day. They are not being replaced, so time is of the essence. We have about 3 million people who go to tracks each year and have a generally good feeling about racing, but they don’t know how to handicap, so betting isn’t much fun unless the color they picked wins. ….”

Who are those “100,000 handicappers” he referred to and where does that figure come from? How many of them are whales and/or professionals, i.e., the tiny minority of players whose huge bankrolls give them the clout to force the industry to effectively lower takeout on their wagers through rebates. This perversion of the pari-mutuel system puts the vast majority of non-rebated bettors at a competitive disadvantage, especially in the exotic wager pools. Takeout is obviously too high, but only the wealthy are eligible for relief. Some of the average player resentment against horsemen today is derived from the horsemen’s shutting off signals from tracks they were negotiating with to onshore ADWs, but still allowing them to go to offshore ADWs that service those high-volume players.

Where are the free videos the industry should be generating for internet and on-track viewing to acquaint the novice with the game and the environment before, after, and even while attending the races for the first time?

Mr. Paulick then came to Pope’s defense.

“I didn’t interpret in reading Fred Pope’s article that the horseplayers don’t matter. Of course they matter. But so do the owners who invest a whole lot more than an OTB or a phone betting company, and so do the tracks that have huge investments in bricks and mortar. Horseplayers lose on average 20% of what they bet. Horse owners lose more like 50%. Tracks may be show a minor profit, but not enough to rebuild their infrastructure or invest in the future. Right now, no one seems to be winning.”

Those percentages are misleading, in my opinion. Without implementing a level playing field from an equine medication standpoint, wouldn’t the bulk of any purse increases continue to go to the same owners who currently collect a disproportionate share of purses just as rebated professional bettors cash a disproportionate number of IRS signers?

Apparently emboldened by that support, Pope responded to his detractors in kind.

“ Now, how some of you got the impression that I am against lowering takeout and don’t care about bettors, is hard to understand. But, I have a wife, so here it is: I apologize honey for not considering your feelings and I promise to never do it again. I was trying to get the front door back on and should have thought about the fact you are feeling a chill.”

Okay, Mr. Pope. We are a sensitive bunch. We’re watching an industry devoid of leadership and deficient in integrity self-destruct. You aren’t the only one passionate about saving it and seeing it prosper. Concentrating on the unhinged front door while ignoring the broken back door hardly seems a recipe for success. Like a politician whose message changes with his audience, you provide no indication in any of your speeches and articles that bettors should benefit as well as owners.

In his concluding response there, Pope wrote, ”But, I think most people were not aware the bet takers were getting the lion’s share and now most want to change the IHA to restore live racing. What I would like to hear is from some young folks in marketing about what this change could do for the host tracks and the sport.”

I would guess that as many people were unaware of who gets the “lion’s share” as were unaware that the playing field is tilted against the non-rebated bettor. Horseplayers prefer ADWs to other bet takers when they provide rebates or access to venues the others do not. In my opinion, enabling residents of all states to wager on-line through the bet taker of choice on races at any venue, would by itself justify modifying the IHA. Establishing a centralized industry authority would be icing on the cake. John Pricci once proposed Bill Clinton for Racing Commissioner. Is anyone better prepared to deal with industry politics?

In Paulick’s last response he wrote, “What has gone up is the access to exotic wagers (multiple types of exotics on every race, which wasn’t the case 25 years ago). With that increased access to exotics is an increase in the blended takeout, since players invest more in exotics than in lower takeout WPS wagers. Did racing make a mistake in offering too many exotic wagers, or should the higher risk-reward bets have the same takeout as WPS, which most serious players don’t seem to play?”

Currently the “serious players” dominate the Pick Six wagering pools because the $2 minimum for each combination effectively bars virtually all but big-bankroll bettors from playing it competitively. Defenders of the current minimum insist that a lower minimum would reduce the number of carryovers and thus the huge payoffs the wager sometimes generates. Perhaps a compromise is warranted. New York offers a lower Pick Six takeout on non-carryover days. Lower minimums on weekends and holidays – and only when there is no carryover — would enable more players to compete in the Pick Six Pool. Allowing on-track patrons to purchase a minimum of say 100 combinations at $.50 on those days should spur attendance as well as handle.

“Comments from horseplayers focused largely on what they believe is an onerous level of takeout,… Not many of the horseplayers who commented seem to have much sympathy for horse owners who spend at least $2 billion a year on training costs and compete for half that amount in purses.

“Many of those horseplayers want to see takeout reduced, especially on exotic bets such as exactas, trifectas, superfectas or multi-race wagers where the takeout often exceeds 25%. Some of them feel ADW companies should get a large enough share of the takeout so they can be profitable and still offer rebates to their best customers.

Sympathy on all fronts is obviously in short supply. Maybe I should have changed the title to “Can’t we all get along?” Seriously, owners need to consider reducing costs where practical. Purses aren”t supposed to support extravagance or subsidize bad judgment. Trainer fees, vet bills, stud fees, and sales prices are likely places to start. Why are fees generally greater for high-profile trainers whose "expertise" is funneled through assistants and applied increasingly hands-off across venues and among clients? Are their total earnings to total charges (including vets) ratios always competitive?

Pope then rallied back to his original position.

“So, you guys are contending the growth of claiming races to over 70% is a better racing product?

And, the main reason for racing’s decline is the takeout rate?

… I think you will find the people spending $500 million each year on yearlings want to get back more than the claiming ranks provide. They also want to participate in a sport, not just make a bet.

So, I’m going to say horseplayers are overpopulating this discussion.

The internet wagering/viewing genie is out of the bottle, and it is the only access for fans too remotely located or too physically infirm to attend live racing. Racing should expand that market with the IHA, not abandon it. As one who follows the sport at its highest level and bets for entertainment, I would prefer to compete on a level playing field for all bettors regardless of bankroll size; just as many horsemen would prefer to compete in an environment with uniform medication policies accompanied by more appropriate penalties for violators.

Pope continued, ”The reason we have the problems in the sport is the lack of owner leadership. We need the basic structure of a major league like the other sports. … I apologize for jumping in on those who want to discuss takeout, however, I think that issue belongs in another forum. It would not be a part of the IHA.

… We spend too much time hiding from the truth. The truth is medication, drugs, animal welfare and the details of the right mix of takeout and customer service are not the basic problem. The basic problem is structure, or more specifically, the lack of it.”

Among the many worthwhile player comments focused on ADWs and takeout, there was one that I am certain deserves wider distribution. Poster BombsAwayBob Grant wrote, “The first track in the country offering strong rebates for bettors making wagers AT THEIR TRACK will be the first one to see their bottom line improve. It will get bettors back to the track, while still allowing full ADW access for their signal.”

Rarick (pictured, left) began her career in journalism nearly a quarter-century ago at the Milwaukee Journal and she wound up as the turf writer for the International Herald Tribune in Paris, France, covering major race meetings around the world. She never completely lost her rural roots, taking riding lessons while working in Chicago and later in Paris. She got serious about horses in France, getting her jockey’s license and riding into the winner’s circle in her first race in 2001 at the age of 38.

Racing in Britain is in horrible shape, with breeders producing far more horses than the sport can support, counting on a lucrative export market that is drying up. The average purse in Britain last year was 15,000 euros (and that’s the total purse, not the win prize). But that tops the average 12,000 euro purse in the United States. In France, where the pari-mutuel PMU system has a monopoly on betting, the average purse was 21,000 euros.

One of the big arguments that bettors make is that lowering the takeout will increase the betting handle. But the takeout in the United States has remained constant for the past decade, while the handle has fallen.

True, the takeout in France and England has dropped, and the handle has risen. And it’s also true that big players are cognizant of this sort of thing. I’m a trainer, not a gambler (or at least not a serious one), but it’s my impression that most casual bettors, and certainly new, small players, pay absolutely no attention to the takeout. They’re here for the spectacle and the horses. When the pretty gray filly shatters her ankles and is euthanized on the track, they’re disgusted and they’re not coming back.

And as much as we like to think the whales run the sport, it’s the small players that provide the lifeblood. In France, the average bet last year was 11 euros; 40% of the players were women, and one in four were under 35 years of age. The PMU operation in France has a stunning marketing campaign, and the daily “Quinte Plus” handicap, where the object is to pick the first five past the post in order, has a huge national following. Many people who play don’t know beans about horses – they pick random numbers. That bet alone – offered on one race a day – was responsible for 23% of the handle last year.

The other misconception seems to be that the sport needs to draw fans to the track. Again, as a trainer, I would love to see more people in the stands other than the 10 guys and a cat that show up on any given day here in France. But the numbers in the United States and France show us that most people prefer to bet at home or at off-track facilities. In the United States in 2006, only 11% of the betting was done at the track, compared with 39% in Britain, where people have to show up to get the best odds from the on-course bookies.

In France in 2006, only 2% of the bets were made at the track. I’m not kidding. The only people who show up here are the ones who have to actually saddle the horse or ride it. But advances in technology and ever-better television coverage (at least in France) make it too enticing to curl up on the couch and bet by remote control. Accepting this, rather than trying to change it, seems the only logical way to proceed.

The powers that be in racing – both in France and abroad – seem to be focusing on the top end of the game rather than the bottom, which feeds the top. Your average race-goer (or racing couch potato) doesn’t know the difference between Curlin and a 10,000 euro claimer. These guys want to see full fields to make the betting interesting. Sure, it’s nice to have a good story with a horse running in Group or Grade 1 races to use as a marketing tool. But those stories are few and far between these days, and concentrating on building up only those top races, at the expense of the bottom end, will further eat into the handle.

I’m not saying we have a racing Utopia over here. Every jurisdiction has its problems, and ours is the cold north wind blowing from Brussels that is pushing France to open the betting monopoly. If this happens, our purses are likely to go the way of the rest of the Continent, and the sport will begin to die, just as it is in Germany, Belgium and, unfortunately, Great Britain. As it is, runners from all those countries are regular visitors here, trying to earn some money the old-fashioned way – by crossing the line first.

I can’t see how American racing can save itself without some sort of nationwide governing body. I know this idea is anathema to many and downright offensive to some, but I can’t see how the sport can survive with a different set of medication rules and different betting systems for every state. Only with a unified front — and a total ban on race-day medication — can the United States truly participate in the sport on an international level and build confidence at home.

Colombo (pictured, left) got his start in the business in 1969, when he sold to an American syndicate an Italian-bred horse named Bacuco, who came to the United States and finished third in the now-defunct Washington, D.C., International. Ten years later, Colombo himself became a U.S. import, moving his international bloodstock agency first to New York, then to Southern California, and most recently to the Ocala, Fla., area.

His client list reads like a Who’s Who of international racing and breeding. It includes some of the most respected owners and breeders in Europe, North America, Asia and Australia. It’s no surprise that Colombo’s philosophy is to establish and build long-term relationships with his clients.

Like so many of us who love Thoroughbred racing and breeding, Colombo is deeply concerned about the current state of the industry. He doesn’t claim to be an expert on simulcasting or Advance Deposit Wagering and isn’t offering to mediate the ongoing disputes involving horsemen’s organizations, racetracks and wagering companies.

What he does know is horses, and the brief commentary that follows serves as an appropriate reminder of the noble, living and breathing animal that is at the center of this global, multi-billion-dollar business of Thoroughbred racing and breeding. Without the horse, we have nothing.

MEDICATION:  Medication has reached the point of no return, producing obscene veterinary bills, and a very negative image on our society of a sport filled with cheaters and animal abusers. The rest of the world runs on ZERO medication. We must line up with them.

Copyright © 2008, The Paulick Report

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Though his widely-read article has elicited nearly 90 comments from horse owners, breeders and gamblers whose opinions fall on all sides of the issue, participants in the Daily Paulick Poll voiced overwhelming disapproval of the current business model. To date, only 6% of those who voted say the current model is the right one. Sixty-five percent believe the lion’s share of the simulcast proceeds should go to the track and owners putting on the race, while 27% feel it should be divided evenly between the live track and horsemen and the simulcast site, OTB or ADW and affiliated horsemen at that end.

Comments from horseplayers focused largely on what they believe is an onerous level of takeout, but many of them also feel disenfranchised or taken for granted by an industry that once had a monopoly on gambling and has not done a very good job of competing in this new world of Indian casinos, riverboats, and online gaming, whether it be poker or sports betting through offshore bookmakers. Not many of the horseplayers who commented seem to have much sympathy for horse owners who spend at least $2 billion a year on training costs and compete for half that amount in purses.

Many of those horseplayers want to see takeout reduced, especially on exotic bets such as exactas, trifectas, superfectas or multi-race wagers where the takeout often exceeds 25%. Some of them feel ADW companies should get a large enough share of the takeout so they can be profitable and still offer rebates to their best customers.

The problem with that, as I see it, is that the stronger position the ADW companies have, the greater a percentage of handle will migrate from on-track business to phone or internet wagering. We’re already seeing horseplayers at the track making wagers through ADW companies because some of them will offer rebates. As handle moves from on-track to ADWs, there is less retained revenue for the tracks and local horsemen to put on the show. Less revenue means lower budgets for marketing, capital improvements and technology advancement for tracks, and less incentive for horse owners to stay in the game.

Pope’s proposal may not be without flaws, but the current model clearly is upside down, and any business structure that puts more power in the hands of the bet takers is going to make it even worse.