WILL HORSEPLAYERS AND HORSEMEN FIND COMMON GROUND?
The following analysis on the issue was written by a California-based horseplayer who goes by the pen name “Indulto.” He previously wrote a Paulick Report
guest commentary on the Breeders’ Cup in October and has contributed to other racing-related blogs and web sites. Indulto’s views, like those of any guest commentary, do not necessarily represent those of the Paulick Report. – Ray PaulickBy Indulto
I heard there was a mugging going on at the Paulick Report recently, but when I got there it looked more like a series of drive-bys.
What is it about Fred Pope that riles up horseplayers? When the Paulick Report offered a second exposure to Pope’s agenda in “
PRIORITY 1: RACING’S BUSINESS MODEL,” it was swamped by responses from horseplayers including multiple comments from several staff members of HANA (Horseplayer’s Association of North America).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.
Shortly thereafter, Paulick followed up with his own summary in “
POPE’S UPSIDE-DOWN BUSINESS MODEL PROVES HOT TOPIC.”“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.
“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
. … 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.” 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 added:
“You know, it is hard to have it both ways. You want a better racing product, but the money from a better product is now going to the bet takers who give you a discount. … Which way do you want it? Do you really want a better product that will grow the sport, or do you want your discount.”Actually, we want both. To imply the two are mutually exclusive is also misleading. One problem that players now attribute to owners, as well as tracks, is the degradation in quality of the product. Higher purses aren’t drawing large fields, and graded stakes seldom attract previous winners at the higher levels. There are simply too many races being carded and insufficient cooperative scheduling. The result has been lower demand and thus handle. In fairness, synthetic surfaces may also be a contributing factor in this area.
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.
Thoroughbred racing is the racehorse owners’ game. The track facilities are important partners, but at the end of the day, racehorse owners and breeders will decide the racing product, its distribution, pricing and promotion. From time to time, they need to stand up and fix problems. I think that is exactly what they will do with the IHA.”
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.”
One truth Pope can’t hide from is that his plans will have to not only overcome resistance from his fellow horsemen, but also from horseplayers. If nothing else, he must now realize that there are people as determined as he is to put racing back on track, and that they have organized in order to accomplish some of the same objectives. Another truth is that my former colleagues’ reactions had prior momentum. I was still working with the founding HANA team when the Pope agenda got its first airing on the Paulick Report in “POPE TO OWNERS: ‘IT’S YOUR GAME’.” After experiencing a similar reaction to Pope’s remarks in that article, I submitted an opinion piece to the HANA Blog, “Horseplayers to Pope: It’s Our Game Too.” I assume, Mr. Pope either never saw it or felt no response was necessary.
It’s probably no coincidence that, in the absence of my daily dissidence, HANA has progressed well beyond a handful of posters at the www.paceadvantage.com Web site to become a corporate entity with now very public officers, a distinguished advisory board, and an internet sign-up membership that has (to the best of my knowledge) quadrupled since Mr. Pope’s work initially appeared on the Paulick Report. HANA is now led by its president and principal spokesman, Jeff Platt, who is no less logical and persuasive than Mr. Pope in articulating his organization’s concerns and goals. It’s clear to me that these two gentlemen should be talking to one another and developing a new business model that both horsemen and horseplayers can support.
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.”
Simulcasting and technology helped create the off-track wagering advantage in terms of cost, convenience, and competitiveness. It’s time to reverse that drain by pulling customers back to a future where on-track patrons are viewed and treated as racing’s best customers. Hopefully, Hollywood Park will get the message by next April. What have they got to lose?
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Tags: Account Wagering, advance deposit wagering, ADW, betting rebates, fred pope, hana, handicappers, horseplayers, horseplayers association of north america, indulto, jeff platt, pari-mutuel wagering, Paulick Report, racing's business model, Ray Paulick, Simulcasting, simulcasting revenue splits, takeout, thoroughbred owners, www.paceadvantage.com
January 3rd, 2009 at 10:12 am
I hereby offer to pay for a dinner meeting between Mr. Pope and Mr. Platt (airfare excluded).
January 3rd, 2009 at 10:19 am
I realize that “Indulto” does make a case for the agrument that the current state of affairs in racing is not an “either or” situation; I’d just like to see it made a bit stonger. Also, I don’t agree with a few of the conclusions (e.g. lower take out at track can compete with off-track), but don’t think they are incorrect assumptions or positions…just incomplete.
Why is it that when I read either side’s points I get the distinct impression that neither side, or more importantly all sides are working together…regardless? Or one side thinks they have the problem completely identified, better than the multiple other sides? But then, I don’t bet.
Very good post Indulto. Thanks Ray.
January 3rd, 2009 at 10:31 am
Indulto,
You have a limited future in racing. Your comments are way too logical and well thought out for this industry.
BombsAwayBob has it partially right. Bill Finley had another good idea a while back — lower takeout ON TRACK, but not at OTBs.
Finally, tracks which actually give bettors timely information on equipment, medication, and gelding changes — instead of paying lip service to the idea — will benefit as well.
On Friday, there was an announcement at Aqueduct right before race eight that a horse in race nine was getting a blinker change. Tough luck for those players who had already made Pick Six, Pick Four, and Pick Three wagers.
The solution to this issue is simple. Let the horse run for purse only if it is the racetrack’s mistake, or scratch them if it is the trainer’s mistake. Then no one but the guilty party is penalized.
Too logical.
January 3rd, 2009 at 10:51 am
Racing has received $100’s of million from casino subsidies and has done absolutely nothing for their bettors/customers. Almost every dollar has gone toward one thing….raising purses for owners like myself. Will things change when the next 9 figure subsidy checks roll in? No chance!
I have learned over the years that the almost universal attitude of my fellow owners/horsemen is that they could care less about bettors.
It’s sickening.
January 3rd, 2009 at 11:20 am
Ron Crockett for U.S. Thoroughbred Racing Commissioner.
January 3rd, 2009 at 12:22 pm
Vaudeville (and I know this isn’t the horse of the same name that was owned by Ron Crockett, because, sadly, he was euthanized a couple years ago)… I found Ron Crockett to be one of the most knowledgable racetrack owners or executives I’ve ever known. No one I know understands the numbers at his business better than Ron does at Emerald Downs.
I might have to second that nomination of yours.
January 3rd, 2009 at 12:27 pm
In response to Mr. Whiteley’s generous offer, Mr. Pope and Mr. Platt may need a moderator or Sergeant at Arms…I volunteer and will pay my own way. I have followed this debate since its inception. As an owner, breeder, former trainer and attorney representing all of the above, plus tracks, ADW operators and others in the industry for the last 24 years I would like to think that I should be able to help keep the discussion constructively focused on the issues. We need to look to the future and stop finding fault with the past. The present issues have been adequately identified. We have some obvious targets. We are in a deep hole, but with all the great and generous minds we have involved in the debate, coupled with the committed, hard working souls who want this business to survive and prosper, we should be able to dig ourselves out. The first step in any rehabilitation project is to agree on what we all want the end result to look like, then get everyone building the scaffolds to get at the structure that needs repair. All strong foundations start by digging. We have exposed the bedrock. We need to shore up the foundation and rebuild. There has been, in the several blogs about the present dilemma, a strong desire shared by all participants to uncover the issues undermining the stability of the Thoroughbred racing, breeding, wagering business and address these challenges in earnest. This has been going on piecemeal in the business for several years. The need to rebuild is clear and in a fragmentd way, efforts have been made to address some of the issues. This effort needs focus and the strong leadership of a new and inclusive body representing all stakeholders. The first challenge is to, in effect, write a new constitution for new governance. What we have at present has no real authority to implement change. Without a clear, detailed, comprehensive vision of the future, a strong committment by all to a common purpose and a governing body with the authority to implement change, we are shackled to the past and doomed to the status quo. The Thoroughbred business has something uniquely different to offer. It has built-in advantages over its competitors–the incredible, inscrutable appeal the of the horse, the intellectual challenge of handicaping, the personalities of the participants, the physical charm of the racetrack experience, the social aspects of an afternoon at the track, the commraderie of an afternoon at the OTB/Simulcast site, the personal satisfaction of the solitary on line bettor cashing a ticket, the pride of a winning owner/breeder, the energy of a busy morning on the backside, (the list could go on)– in short, there is something for everyone, PLUS the economic advantage of having, by virtue of the IHA and the Wire Act, the exclusive right to conduct legal wagering on line or over the telephone. The Thoroughbred racing, breeding, wagering business has a unique architecture. It needs to be rebuilt in such a manner as to preserve what is best, strengthening the core, with a sharp focus on building a new, creative, inclusive business plan for the future; one responsive to the demands of all of its twenty first century participants. Mr. Whiteley, Mr. Pope, Mr. Platt, if I can help in any way, let me know…no charge…my contribution to the game.
January 3rd, 2009 at 1:21 pm
Mr. Kling,
Thanks for the kind words and for your encouragement in our comment exchanges at horseracinginsider.com this past year that inspired me to increased activism. Happy New Year and may 2009 see you break your own 2003 record as a public selector for the “Troy Record,†a performance I learned of only recently from another archived Bill Finley article for ESPN.
Denise,
Thank you for the insightful assessment. Hopefully horseplayers and horsemen will come together to help resolve differences not only between the two groups, but within each group as well. Even if you don’t bet, you can appreciate that high takeout has made the game too hard to beat to remain popular, which has resulted in handle stagnation.
The pie will continue to shrink until all involved are willing to take smaller slices that many of us believe will result in larger pies. From my own perspective, whales and/or professionals are unofficial industry stakeholders demanding too large a slice just as some horsemen and bet takers. I personally believe that either lowering direct takeout or else rebating equal percentages to all players is a more workable solution for all parties involved.
To me, fairness is the critical issue. Just as moving forward in solving this country’s economic problems will have to involve consideration of what is “fair,†so it must be for racing. No more shortcuts to success. Everyone — horseplayers, horsemen, tracks, and ADWs — has to start playing fairly and transparently with each other. All boats must float. Reward can only come through risk, but the rules must be the same for all participants.
January 3rd, 2009 at 1:22 pm
Anything that will avoid the proverbial “War Between The States (Civil War)” in this industry, is worth the effort in my book. Right now we have skirmishers left and right with little being resolved strategically.
January 3rd, 2009 at 1:25 pm
Yesterday - Friday Jan. 2 - we were surprised at the large crowd at Santa Anita, it being a weekday and no big races on the card. The crowd was larger than both days on the previous weekend which featured several stakes including a GII. Why? Dollar beer, dollar popcorn, and free admission. Simple way to bring ‘em in to the track.
In defense of trainers - who seem to be generally vilified in these discussions - unless you are a trainer or an accountant of a trainer, you cannot imagine the costs of training. Trainers don’t make money on their day rate, in fact many lose money. The question above as to “Why fees are generally greater for high-profile trainers whose “expertise” is funneled through assistants” is because more assistants means payroll eats up a higher percentage of your day rate. Using human hotwalkers instead of machines means much higher labor costs. High quality stables incur numerous costs that a small stable where horses remain local does not. Stables that race in multiple states must hold a workers’ comp policy and licenses for each state, driving up costs enormously. Each separate string means a complete set of tack, office equipment, ice machine, washing machine, etc. The price of a bale of timothy can be drastically different at tracks, for example $31 at Del Mar and $37 at Saratoga. The Pletchers and Assussens subsidize their day rate with their percentage. Stables such as those do not break even at $100 per day. And make no mistake about who is making the training decisions. The boss knows what is going on and the assistants know how the boss wants things done. Just look at the results and it is not hard to see why owners are willing to pay the higher day rates.
January 3rd, 2009 at 1:30 pm
Indulto,
Fairness and control of greed is critical; in the same vein, getting rid of drugs (including Salix/Lasix…and I know I’m going to get banged for saying that) in horses within reasonable time periods before raceday is priority number 1. No horse or a doped one, does not a race make. But I’m a fan of the horses first. And I forgot to say, I do bet, very little…just never realized I was getting screwed when I cashed my ticket…didn’t even get a kiss.
January 3rd, 2009 at 2:42 pm
Yes, my namesake has passed on, unfortunately.
I nominated Ron Crockett because I think he brings many elements to the table: as an owner-breeder, a profitable bettor, and a profitable racetrack owner-operator, he has a lot of “skin in the game”–more than most. He’s a very shrewd decision-maker who loves this great sport.
January 3rd, 2009 at 3:57 pm
It is perhaps the ultimate irony that a marketing person would be taken to task for not considering customers.
I wrote an Op/Ed piece for TDN on July 8, 2008 titled “Racing’s Upside Down Distribution Model”. When you sit down to write about a subject, you need to know your audience. In the case of TDN, the audience I was writing for was breeders and racehorse owners. The length of the Op/Ed’s is limited, so you need to make the points with very few words and you cannot include every consideration.
A followup Op/Ed was in TDN on October 10, 2008 titled “Writing Races for Everyone But the Customer”, which addressed how to package and present customers a better racing product. Breeders and owners need to understand this sport can be successful.
When I wrote the speech that ran in Ray’s blog, Priority 1—Racing’s Business Model, it was written for an audience of racetrack officials and racing commissioners who attend the racetrack symposium.
If I wrote a piece for HANA, it would address concerns and benefits for horseplayers.
I’m not running for political office. I don’t have a title in racing like the NTRA, TOBA, or HANA. I’m just a guy who from time to time tries to convince the industry there is a simple way to solve the problems everyone thinks are so complicated. Fixing the upside down business model by correcting the IHA is one them.
When I created the NTA, a major league for the sport, it included the NTA Advisory Board, with a seat for horseplayers and fans.
The NTA was about delivering a superior product for horseplayers, racehorse owners, participating tracks and sporting fans. It was a simple concept, to bring the same major league model to racing that works in every other sport. I just figured out a way to make it work nationwide within a regulated industry.
The Thoroughbred media didn’t embrace the NTA. They didn’t want racehorse owners doing what the owners in every other sport do… package and present the highest level of the sport. Even Ray, as editor of the Blood-Horse, supported killing the NTA to bring about the NTRA, a more inclusive, feel good organization with a structure that could do nothing but waste money, which it certainly has accomplished.
I feel we have an emergency, because the current business model for ninety percent of the handle, is upside down. I don’t mean just another problem. I mean an emergency that can be averted, if we can convince some people to correct the IHA.
Wealthy people in racing and breeding, who over the years have used their political influence to get wagering legalized, then get expanded distribution through the IHA and lately the internet, are the same people we need now to use their influence to correct the IHA and thus the business model.
These individuals, who many blame for problems in racing, are the ones I am trying to make aware of the problem and have them see how easily a collapse of the system can be averted and turned around to benefit the sport. Some may think this elitist and not inclusive, but in an emergency it is political realty.
I agree the tracks have done a lousy job with our sport. Gambling has been a crutch that permitted them to get by with horrific packaging and presentation of the racing product and inferior service to customers. But, now they cannot overcome the upside down business model, they are too weak. They are searching for alternative revenue sources. Their best revenue source is Thoroughbred racing under a new business model, and it cannot come too soon.
As Indulto noted, those placing wagers want a fair shake, not one where fellow customers have the advantage of a higher discount, or rebate.
This is the emergency as I see it. Those betting into the tote machines at host and receiving tracks and track-owned OTB’s are paying “retailâ€. Their wagers are primarily funding the tracks and purses today.
How long will it take the “suckers†paying retail to realize the guy on the phone next to them is getting a rebate and they too can switch to phone bets and stop funding the game? This conversion is happening every day and the velocity is going to accelerate.
Once we lose the tracks in our major markets, it is doubtful anyone can justify the investment to replace them, much less the political will to support a declining sport. Restore the business model and everything changes for those putting on a good show and taking care of their customers. Like in every business, those who fail, will fail.
I’m have no illusion of changing the minds of people benefitting from the current upside down model, but I hope those of you with an investment in the industry will see through the smoke and support the Number 1 Priority today, correcting the IHA.
January 3rd, 2009 at 4:01 pm
Excuse me, OT…but 5 horses in the Count Fleet at Aqueduct???? What the h***?
Example of problems with the industry is reason for the post. 5 horses? That’s it? What’s the problem? Isn’t this a prep for the Derby? God saves us.
OK, back to the betting drama that is racing.
January 3rd, 2009 at 5:41 pm
Mr. Pope,
You need to get the most basic of facts straight before you can have the answer to save racing.
You keep stating as fact that the tracks charge 3% for their signals to all bet takers. That is 100% false. The major circuits (So Cal, NYRA, Kee etc.) charge all rebate shops and some other bet takers an appx avg of 8% for their product. If you don’t believe it, ask someone who knows.
When you are that far off on the main fact to your entire premise, it is either utter incompetence or blatant propaganda. Either way, it makes your entire argument suspect.
There is not one rebate player who wouldn’t trade his rebate for 10% across the board takeout for everybody (including your so called “suckers”)..
January 3rd, 2009 at 6:15 pm
Hello Mr. Pope,
Thank you for your contributions to the sport, particularly the concept of the Thoroughbred Championship Tour. 2003 was apparently an interesting year for several people involved in racing as evidenced by a February DRF article about you by Stan Bergstein.
I hate to belabor the point, but it isn’t sufficient to simply eliminate selective discounting based on volume. Takeout is too high and lowering it is a function of signal price and distribution. Are the horsemen willing to accept, support, and help implement pricing that permits equally lower takeout (direct or effective) for everyone whether they’re betting at host or receiving tracks, at OTBs; or at on-shore or off-shore ADWs? Any other approach creates a “sucker†somewhere. This is part of the support non-professional horseplayers are seeking from horsemen.
Of course the question then becomes: “Will less really become more?†Horsemen need horseplayers to bet more for that to happen. The churn created by rebates as opposed to lower direct takeout has to be explored, but so does lowering the pick six minimum to create more participation in the wager from smaller bettors representing the greatest potential for expansion.
We need experimentation to find out what the optimum level of takeout is. But experimentation can’t be limited to abbreviated periods at selected venues. Everyone must be involved simultaneously. Horsemen must support the experiment with larger fields and more plentiful stakes competition. Fewer racing dates, keeping older horses in training, cooperative scheduling, and tying purses paid out to actual field size and strength may all be necessary.
Are you willing to use the IHA to liberate horseplayers in all states so that they can participate on-line through whichever licensed bet taker they prefer? Can you see us as partners in restoring the game?
January 3rd, 2009 at 6:25 pm
ITB, I’ll stick with host tracks getting an average of 3% from off-track bet takers.
What would you say the biggest, NYOTB, pays out of state tracks for their races? I’d say an average of less than 3%.
What would you say New Jersey receiving tracks and outlets pay to out of state tracks? I’d say an average of less than 3%.
I don’t think I have said all bet takers pay exactly 3%, I know a lot of them pay less, and a few pay more.
January 3rd, 2009 at 6:44 pm
Fred Pope said…..”ITB, I’ll stick with host tracks getting an average of 3% from off-track bet takers. I don’t think I have said all bet takers pay exactly 3%, I know a lot of them pay less, and a few pay more.”
Are you serious? You can’t possibly be this clueless about the issue you are a reputed expert about.
Do you have any idea what % of ADW handle comes from all rebate shops and TVG, Youbet, etc providers? All of these bet takers pay AT LEAST 7% to ALL major circuits for their signal. Just these places alone are AT LEAST20% of any major tracks TOTAL handle which means it’s a much higher % of total offtrack handle.
I’m just in shock how you seem to be either clueless about this or are stubbornly sticking with the propaganda path.
January 3rd, 2009 at 7:09 pm
I cannot believe the self serving comments from bettors on this issue.
This is the game, like it or bet on the NFL and the 10% vig.
Racetracks that put on the show and the horsemen that supply the talent MUST get the lions share of the takeout. Not a bunch of bet takers with absolutely no stake in the industry.
That this is apparently not obvious to everyone is a shame.
January 3rd, 2009 at 7:34 pm
Indulto, thanks for the nod, but the National Championship Tour was the name of the TOBA project, the one Stan wrote me up about was similar, the Thoroughbred National Tour. If we can correct the IHA, we can have have a business model to operate such a tour, or any other innovative racing product. You cannot do it now with an upside down business model.
I separate horseplayers into two groups, those who know how to make an educated bet “handicappers” and the many who are casual fans and bet without handicapping knowledge. So yes, your group should have a key role. I would love to see a education and merchandizing effort where there are incentives to educate racing fans into becoming handicappers. Those providing past performance information have a vested interest in doing such. But, I don’t want to see it until we have a better racing product, where horses are more likely to run to their past performances. That was a mistake they made in Japan. They brought new people to the track before the product was ready. Then two years later, they had the product right and re-engaged the public with great success.
I believe the host track and racehorse owners putting on the show should control the distribution of their product. Period. It is regulated to try to keep it honest, but otherwise it is a private business. I don’t know of any profitable business that doesn’t need to control the distribution of its product.
Regarding takeout, each track (state) is going to set its own takeout rate. That’s why I have not wanted to spend time debating the best number, because each state is going to set it.
Now, it would seem good business for the host track’s to have the widest distribution possible and it would seem a private company with multiple tracks could do a better, more efficient job of handling the transactions, maybe even marketing the host track’s brand. But, I would prefer to see the host track have a marketing department for on-track and off-track wagering. My guess is technology will merge the media to deliver the host product to the customer.
The problems with the product are caused by the current upside down model. The host track gets nothing for its product and nothing for having full fields and good quality horses at its facility. Think about that and join me in trying to get the emergency averted.
Then you can work on state takeouts and incentives.
January 3rd, 2009 at 7:56 pm
When Horseracing goes from a Poor gamble to a Good gamble only then will the game flourish.
January 3rd, 2009 at 8:56 pm
I’ll bring a well behaved four legged, handsome gentleman to represent “the live product” at the much anticipated Pope-Platt dinner so horses are an important part of the discussion.
Horses are the true foundation of horse racing. The industry needs to make their welfare top priority in order to improve morally, physically and financially.
PP: many trainers make a good or excellent living selling their free stallion breedings as well as buying and selling horses. Todd Pletcher’s stallion list is extremely rich.
January 3rd, 2009 at 9:11 pm
I appreciate all the comments on this subject, but don’t see any benefit from some of the name calling that’s gone on. Let’s be civil, as Indulto suggested in his original piece..
Couple of points I’d like to make:
Fred, you’re right. I bought into the argument that the NTRA would be a better vehicle than NTA. I was wrong. I thought an “all hands on deck” approach was better, primarily because I didn’t think the NTA would actually get off the ground, and I’m still not sure horse owners in this business have the stomach to fight for their rights as the “owner” of the product that is being sold. Also, I didn’t know as much then as I do now about how certain powerbrokers in the industry work to keep as much control as possible.
ITP, you’re wrong about what ADWs pay for the right to take bets on certain track signals. I don’t know what RGS and other offshore rebaters pay, but the TVGs, Youbets, etc., don’t pay that much if they are paying source market fees.
I’m not sure why the terms of these simulcast agreements are so secretive. Horse owners should demand to know the terms and they should be publicized throughout the industry.
January 3rd, 2009 at 9:12 pm
When you play at the top of the game, you should make plenty of money. It’s a seven day a week job at 12+ hours a day with no guarantees that you’ll still be in business next year. It takes talent, dedication, good people skills as well as good horsemanship, years of experience if you are fortunate enough to land the right assistant’s job, then rare opportunity, and a ton of luck. The competition is fierce. The challenges can be overwhelming. The highs and lows are like no other job. The stress would kill lesser men. You’re loved and hated, respected and reviled, mostly by people who haven’t a clue what goes on in a training barn.
Todd Pletcher donates all of his stallion seasons to a charity auction in which he keeps only part of the proceeds. If he has helped developed a successful stallion, he should share in the prosperity of that stallion. Buying and selling horses is usually the only area in which most trainers actually make any money.
January 4th, 2009 at 7:15 am
Don’t the corporations that own the tracks, create another corporation that is entirely separate from the track for signal rights and then, in turn try to sell to betting venues or even their own additional betting corporation? Thereby creating an unfair playing field with nonbid contract rights for signal and locking other signal and betting corps out of competition. Don’t Churchill and Magna do that? As the middlemen, can’t they skim like crazy without public disclosure of same? It is very confusing to me. Seems like alot of layers….kind of like Madoff and the other finacial scandels we are witnessing.
January 4th, 2009 at 9:43 am
Ray,
Please don’t follow Mr. Pope off the cliff. Go and ask somebody that actually knows something about what TVG/Youbet pay for SoCal/NYRA signals before you tell me I am wrong.
Stop believing this 3% nonsense. It’s amazing how “industry leaders” accept this as fact.
From a DRF article about the THG nonsense…..”THG officials say that on average, horsemen are receiving about 4.5 percent of each wager that flows through an account-wagering operation, and that they believe horsemen should receive approximately 7 percent.”
Ray…..Now if ADW’s are paying 3% as Mr. Pope and yourself obviously proclaim, how do horsemen receive about 4.5% for THEIR SHARE ONLY……not even including the tracks share?
January 4th, 2009 at 10:02 am
Watchtower, the vig on sports betting is closer to 5%, because theoretically when I bet I have a 50% chance of winning or losing, so I may bet 100 on one team, another person bets 100 on the other team, so 200 was bet, but the bookie only takes in 10 dollars.
As for tracks getting the lion’s share. I agree they should strive for it. They should start their own ADW’s and compete with others for our business.
January 4th, 2009 at 10:21 am
ITP…
Your question: “Now if ADW’s are paying 3% as Mr. Pope and yourself obviously proclaim, how do horsemen receive about 4.5% for THEIR SHARE ONLY……not even including the tracks share?”
Here’s how: Some of the licensed on-shore ADWs pay a source market fee to tracks and horsemen. It may still be required by statute in California. For example, if I as a Kentucky resident bet on a California race through TVG, a portion of my wager goes to Keeneland, because it is a “TVG track” and is located nearest to me in the state where I live. Keeneland splits that fee 50/50 with local horsemen. The logic of a source market fee is that without ADW, I would have gone to Keeneland to make that wager (instead of using an ADW), and the source market fee is a concession to the tracks/horsemen in the area where the ADW customer lives. If the signal fee is 3% and source market fee is 6%, the 9% is divided equally and horsemen (at host and receive end) get a total of 4.5%.
Here’s something I wrote about it at Bloodhorse some years back: http://www.bloodhorse.com/horse-racing/articles/6747/californias-challenge
I plan to look into this more, and still do not understand why there is a shroud of secrecy over these contracts.
January 4th, 2009 at 10:45 am
Ray,
C’mon! You need to look into this a litlle further obviously.
You are trying to tell us that all ADW bets are charged a source market fee in your example. You obviously have no idea how this works.
Let me explain it to you with real math and facts.
Major tracks on avg probably recieve 6-7% from their signal fees to ADW’s (not 3%). Then a minority of the bets receive a source market fee which brings the total up to the 9% in which horseman get their 4.5%.
Once again……ONLY A MINORITY OF WAGERS ARE CHARGED A SOURCE MARKET FEE. Rebate shops pay ZERO source market fees and they account for a big chunk of ADW handle. TVG/Youbet probably pays a source market fee on 25% of their wagers total.
So when you try to justify your propaganda 3% number by saying that a source market fee is paid on every ADW bet it is just ridiculous!
It is just amazing that the people who have a say in this industry have no understanding how or where the income is attained.
January 4th, 2009 at 11:23 am
edit above…..TVG/Youbet probably pay a source market fee on appx. half of their wagers so coupled with rebate shops and other ADW’s paying zero source market fees, a source market fee is probably paid on 25% of ADW wagers total.
January 4th, 2009 at 11:41 am
ITP…
Please re-read this first sentence from my response.
RAY: Some of the licensed on-shore ADWs pay a source market fee to tracks and horsemen (key words being “some” and “on-shore”)
ITP’s reply: You are trying to tell us that all ADW bets are charged a source market fee in your example. (key word being “all”)
January 4th, 2009 at 11:51 am
Ray…
You said……”If the signal fee is 3% and source market fee is 6%, the 9% is divided equally and horsemen (at host and receive end) get a total of 4.5%.”
Your math is saying that all ADW bets pay a source market fee.
January 4th, 2009 at 11:53 am
ITB, you keep sliding ADW’s into the discussion about the whole off-track business model. I have never said that ADW’s pay 3%. I say the average paid to host tracks by all off-track bet takers is about 3%. It may be 3 1/2% or 2.9%, the figures are not readily available for 2008.
ADW’s are less than 10 % of all handle and yes, some pay 6 or 7% to the host track. That means 13+% goes to the bet taker and that is what this discussion is about. The ADW, not the host track, gets to decide how to dispense the funds to gain an advantage over all other bet takers to the detriment of the host track and purse account.
If the total handle is $15 billion, then 90% being wagered off-track is $13.5 billion. Sixty percent of all off-track handle is made at receiving tracks and track-owned OTB’s, which amounts to $8.1 billion. Currently this largest segment of the off-track business is paying about 3% to the host tracks. If a new model goes into place and the host and receiving tracks split the takeout 50-50, then an extra 6% will start going to the host tracks and purse account, or a net of about $500 million.
Forty percent of the $13.5 billion wagered off-track is through OTB’s, Casinos, ADW’s, etc. That’s $5.4 billion of non-racing entities, who on average pay 3%. If a new model goes into place and those bet takers start paying a phased-in average of 13% the first year, that’s a net of $540 million. Each host track and their partner racehorse owners would decide the price to pay those taking bets on their product. So some may pay 5%, or 10% and some may pay 15%, it will be up to the host tracks and the market. If the host tracks can go direct by correcting the IHA, they will be in a good bargaining position.
Now, if you don’t think Ray and/or I understand the Thoroughbred industry, you are welcome to your opinion. But, if you think you are going to discredit he or I on this issue because of the exact percentage going to ADW’s, my opinion is other readers are going to see through it.
January 4th, 2009 at 11:58 am
Ray & ITP,
Please comment on the following:
“The Youbet.com agreements with the South Florida tracks have the same revenue splits as agreements reached Dec. 22 with TwinSpires.com and XpressBet.com, Gordon said. Those deals call for the advance deposit wagering (ADW) companies to pay a 9% fee on their handle for the Gulfstream signal and a 7% fee on their handle from the Calder signal.”
Seems like way more than 3%. Now that’s only two tracks. I’m not as knowledgeable about all this, but a simple google search seemed to provide a good answer.
Enjoying the debate and hoping for lower takeout for non-whales.
January 4th, 2009 at 12:03 pm
Addendum to post 34. Fred seems to have clarified the 3% issue.
Why can there not be some transparency about this? Or do the tracks charge everybody differently and don’t want anyone to know?
January 4th, 2009 at 12:28 pm
Fred Pope said…..”ADW’s are less than 10 % of all handle”
How can you be this wrong? Are you serious? 10% of all handle? You have now removed all doubt that you are clueless.
From the DRF article about THG on 4/18/08….”Account-wagering handle has been the only growing segment of the pari-mutuel market for most of the past decade. Domestically, handle through account-wagering operations likely tops $2 billion annually; another $1 billion or more is estimated to flow through offshore rebate shops, though figures are hard to come by.”
Let me see if I can add……tops $2 billion + $1 billon or more (and trust me, it’s more) = $3 billion +++++
$14 billion will be wagered this year divided by $3 billion + = 21.4% at a bare minimum conservative number.
The Oregon ADW Hub did $1.6 billion last year……..Yes! That’s one of numerous hubs that did over 11% on it’s own!
Pope said….”Now, if you don’t think Ray and/or I understand the Thoroughbred industry, you are welcome to your opinion. But, if you think you are going to discredit he or I on this issue because of the exact percentage going to ADW’s, my opinion is other readers are going to see through it.”
I think you are doing a fine job of discrediting yourself…..Keep up the good work!
January 4th, 2009 at 12:41 pm
ITB, we had a disruption in ADW business this year. I’ll stand by the 10% for 2008.
January 4th, 2009 at 12:49 pm
Fred,
The Oregon hub did over $1billion for the 1st 3 quarters of 2008 http://www.oregon.gov/RACING/docs/quarterly_hub_handles.pdf
No rebate shops were cutoff from wagering in the disruption so their handle is unaffected.
Now how in your web of lies or stubborn incompetence are you going stick to your “ADW’s are less than 10 % of all handle” statement?
January 4th, 2009 at 1:09 pm
Steve D…thanks for that reminder on Gulfstream and Calder. I’m assuming those deals exclude source market fees. I’m glad to see the numbers are increasing for the signal fee. They should go higher, and as Fred Pope says, so should the simulcast fee paid by receiving tracks and OTBs.
ITP… I’m assuming you are one of those people who are never wrong, no matter what the facts are.
The following is from a Bloodhorse.com online story from one year ago. The math works out to RGS paying 4.5% on average for the various signals they offer to their high volume players.
“Racing and Gaming Services, perhaps the whale of high-volume betting shops, is based in St. Kitts in the Caribbean but has a pari-mutuel hub in the United States. Company chief executive officer Kirk Brooks made his case for rebate operators to about 150 horsemen, some of which remain skeptical. Brooks said RGS in 2007 handled $445.2 million and paid $19.8 million in host fees to racetracks.”
Here’s the link to the story: http://news.bloodhorse.com/article/43354.htm
January 4th, 2009 at 1:20 pm
ITB, if your figures are correct and up to date, then the emergency of the upside down business model is accelerating faster than my figures project.
I’ll check into your numbers and if they are correct, I’ll start using them.
Thanks
January 4th, 2009 at 1:24 pm
Ray,
Yes….An avg of 4.5% in 2007.
Prices have increased in 2008. They are charging more this year.
RGS has a sweetheart deal with CDI/Tracknet because CD is a business partner with them so they pay much less for those signals than any other ADW/rebate shop.
The non CDI/Tracknet major tracks, as I’ve said in all my examples, charge an avg 6-8% where as the numerous minor tracks (MTN, TX tracks, LA tracks etc charge 3%) coupled with the sweeheart deal so the avg at RGS is going to be in that range.
Ray….Are you saying I’m wrong about total ADW handle being much more than 10%?
I am wrong all the time…..just not on this kind of stuff because as a major price sensitive player with many connections in the industry, I have to stay on top of these issues.
January 4th, 2009 at 2:14 pm
ITP is 100% correct. There is an incredible amount of misinformation going on here. It shows just what a mess we are in. Not only does the business not know who the customer is, they don’t even have a clue how revenues are split.
January 4th, 2009 at 2:49 pm
I know this was not the intent of the original piece, and I realize it is not the intent of Mr. Pope or Mr. Paulick to further rile up the players in their comments.
The integrity of the numbers used matter to an extraordinary degree. It is not a thing of whimsy.
January 4th, 2009 at 2:58 pm
my only other comment is this is basically just an extension of original comments from the preceding threads….the outrage then, as now, was not about feelings, or sympathy, or concerns over fairness. It was that the numbers used were terribly wrong.
It does not matter who you make a presentation to, the numbers have to be correct, and projections have to have some basis in logic or fact.
January 4th, 2009 at 3:00 pm
Hi Mr. Pope,
From reading statements like this: “How long will it take the “suckers†paying retail to realize the guy on the phone next to them is getting a rebate and they too can switch to phone bets and stop funding the game?”….. it shows that you are not taking into account the elasticity of demand (probably as high as -3.0 for some players. We can not shoehorn the players into one set model. This assures a loss in handles, and a less popular sport.
Please give the HANA 2.0 series a read. Look at the debate regarding what booksellers and digital music are going through in the changing world. Everyone wants to charge and deliver music and books like they did in 1980 - who doesnt want to receive $22 for a CD. But the world has changed.
This IHA is pretty much exactly like the Sony music model that they pushed in 1999, as written about in a new book by Sony’s lead counsel. It was a failure and the music industry might never recover.
This business is at a serious crossroads. Those people on the phone you are speaking about (who you say do not contribute to the business, which is not true) are the future of this business. It is the only growing segment. When I was at Mountaineer this summer and I went on track the simulcast director told me about $40,000 will be bet on track, versus about 2.2M bet off track. If you charge the people betting 98% of Mountaineers handle a high price, or tax or penalize them, they will not bet anything close to 2.2M any longer. It is a very big hole in your plan that you seem reluctant to address.
Price elasticity was 1.0 when we were a monopoly, it is not 1.0 any longer, because we are not one. We can not completely turn the game upside down without receiving 30-40% less gross handles. Our business can not grow if we take a bigger slice of a smaller number. In fact, I would argue it is the exact opposite of what we should be doing. We can not afford to lose even one customer in this tough gambling world.
January 4th, 2009 at 7:26 pm
All,
I don’t think either side would characterize our contract with TrackNet as a “sweetheart deal.”
The above referenced “business partner” relationship no longer exists and hasn’t existed for at least a year.
Ray is right about what Kirk said at the HBPA convention but the 4.5% is a gross number for all tracks and breeds. We do a large business on greyhound and standardbred racing. If you were to isolate thoroughbred racing from the total it’s a lot higher. Some tracks have been willing to lower host fee percentages knowing that we will give the difference to the player and this will result in more revenue to that track and its horsemen. I only wish we paid what some think that we paid.
Not only do we consistently pay fees at or near the top rate for all tracks, we return most of the difference to the player which results in them betting more. And, it’s not just churning more bets. If the player can be successful to a point and with a rebate, becomes profitable, they tend to increase their wagering by huge amounts. If you can grind out a net profit of 2% on $2 million handle to earn a $40,000 profit, you might bump your handle up to $10 million to try to earn a $200,000 profit. The rebate makes this possible.
The player that bets $1 million a year on tracks that charge an average of 6% host fee generates $60,000 in revenue for the host track and its horsemen. But the $1 million player that gets a substantial rebate is now betting at least $1.5 million due to the increase churn (let’s say one percentage point of lower takeout stimulates 6% more in handle). Now, the track and its horsemen are getting $90,000 in revenue from what used to be a $1 million a year player or 9%. When you factor in how much more that player bets if he/she can show a net profit, it’s a win/win for everyone.
Takeout is too high making the game of playing horses extremely difficult and risky to do. We all wish it were lower but also understand that tracks have to pay their bills and horsemen need to run for purses that keep them in the game. It’s a balancing act which means that we all should be respectful of the other components of the equation.
Dick Powell, RGS
January 4th, 2009 at 8:10 pm
Mr.Pope:
I know for a fact that some of the most prominent owners and trainers in New York and California as well as some executives with racing commissioners throughout the country wagering not through racetracks or ADWs but through bookies. You seem like a smart guy and you no doubt know exactly who I am talking about but if not I would be happy to meet with you and tell you face to face. We are talking about trainers and owners that have won multiple breeders cup and triple crown races. How do you expect bettors to pay you high takeout rates when your own owners and trainers piss in their own pool?
January 5th, 2009 at 2:33 am
Mr. Powell,
If RGS “consistently pay fees at or near the top rate for all tracks†and returns “most of the difference to the player which results in them betting more,†why isn’t this same approach by some on-shore ADWs acceptable to some major tracks? Do RGS contracts involve some type of “exclusivity†analogous to TVG’s?
Mr. Pope and Mr. Paulick,
If the RGS model is, in fact, among the best in the industry for horsemen and tracks, then why shouldn’t all ADWs compete in this same manner. I assume original investment and operating costs are a factor, but there are some onshore ADWs that are able to offer cash rewards to smaller-bankroll players, which are not allowed to compete in certain markets; particularly California and New York. In California, the TOC appears to be the major stumbling block. Can either of you provide any insight as to why this situation exists? Can anyone offer an opinion as to whether or not this situation constitutes restraint of trade in some manner?
January 5th, 2009 at 9:12 am
Mr. Powell, it really isn’t a balancing act. You have stats to back up the fact that rebated players bet more. I’m sure you know that even those who lose, bet more.
What you offer is pretty much equal to reduced takeouts.
Reduced takeouts would in fact cause handle to rise significantly, and also attract a lot of monies that are bet at exchanges and with bookies.
They also get players to play more often, which means possibly bringing their family and friends into the handicapping/betting world, which again will create much more handle.
January 5th, 2009 at 10:53 am
Indulto, Hobbs and Cangamble,
RGS contracts do not have any type of exclusivity analogous to anyone.
We have similar issues with track signals that other ADWs have.
Offshore bookmakers are a major problem since they return nothing to host tracks and their horsemen. People that bet with them are hurting the racing industry. I brought this up at the Simulcast Conference at least six years ago and it fell on deaf ears.
What’s the difference between poker and horse racing? Poker makes heroes of its successful players.
Dick Powell, RGS
January 5th, 2009 at 1:25 pm
If two thousand of you would buy a $15,000 horse, which ITB suggest might be good racing prospects, then purchase a studio-only track facility in a state that would grant you a license, you could put on races with a takeout of 10% and see how it works out for you. Maybe bettors would fill the wagering pools for the racing product you present. There is nothing stopping you from joining together and making such an investment.
You could sell your off-track racing product to other tracks under the current off-track model and get 3%. If you also sell through ADW’s, with the low takeout of 10% and the ADW needing 5% (with little or no rebate because of your low takeout), your average after simulcast costs might be 3% to split between the facility debt, maintenance, operating costs and purses. If your handle is above average at $5 million a day, that means your gross is $150,000. That would give you $75,000 a day for your horse expenses and purses. Training costs of $50 a day on 2,000 horses would total $100,000 a day.
If your theories on lower takeout are right and the handle balloons to $50 million a day, your investment would deliver $1,500,000 a day. Not only could you show the tracks and racehorse owners how bad they package, present, price and promote racing, but you could make a great return on your investment.
But, here’s the rub, the other tracks, which currently provide 60% of off-track handle, will not take your races. With your track’s 10% takeout, after paying you 3%, they only get 7%, instead of the 17% they currently get from the market So, they shut you out and only trade with host tracks offering the full margin. Also, they will not allow your ADW’s to operate in their state because you are offering a competitive advantage of lower takeout (they have IHA approval as a receiving state). If they did allow you in, they would also require the ADW’s to kickback to them artificial source market fees and there is no margin for the kickbacks.
Now if the IHA is corrected, your prospective track or any other racetrack, could do all the things you dream about.
When Mr. Powell of RGS says it is a balancing act, I think he means the track facilities providing the tent and the racehorse owners working on the tight rope are struggling to put on a good act and keep their footing. Mr. Powell is down below selling discounted tickets. He doesn’t have an investment in the act, but he certainly has an interest. I think Mr. Powell probably understands the risks of putting on the show and he understands his business very well.
The consensus on this thread and with the public at large is the racing act isn’t very good and is in fact, getting worse. A large number of racehorse owners, who find the economics crazy to begin with, are losing their desire to participant.
Each year, 30,000+ Thoroughbreds are registered and try to make it to the tracks. About 3% will win a stakes race, so just a few have the degree of success that encourages the breeders to try again and make a profit on what they sell. Last year the breeders took such a haircut at the sales, it appears a good number of them are going to fall off the wire.
I am not familiar with a track that is doing well. How could they possibly do well, they do not get anything for their product out of the current off-track business model. Even tracks with alternative gaming are now seeing the politicians moving their promised revenues to other needs in those states.
The Wall Street Journal reported last week that gambling is falling out of favor, not just because of the economy. The social costs are becoming apparent and revenue to states less so. Gambling has fallen out of favor before in America and some states outlawed racing as well. Some states treated racing differently from casinos because of its image as a sport and that it provided a lot of clean agricultural jobs.
As adamant as some in this discussion are about gambling only, Thoroughbred racing’s ability to survive a downward cycle against gambling will depend upon the image, economic benefits and the involvement of powerful friends of racing.
The first step to recovery is to undo the upside down business model by correcting the IHA.
p.s. I agree with Mr. Powell about promoting big winners. Also, jockeys, big pools, educating new handicappers, etc. The problem is the tracks have no money to promote winners on their own racing product. Under the upside down model, they have a lot of incentive to promote big winners on other tracks’ races, but does that make sense for them and the core use of their facility?
Fix the off-track business model to allow the host track to distribute its product to its best advantage and the profit motive will drive a successful sport for everyone. What we have now is upside down and artificial because of mistakes in the IHA. If the host tracks and racehorse owners at a private business track are convinced they will make more money with lower takeout, that will happen, but first Congress must correct the IHA and free them to grow their own racing product.
Sorry for the long response, but people are reading this thread and it is important.
January 5th, 2009 at 7:06 pm
Hey Fred, I used to own horses. But saw purses drop on races my horses wound up in. Why did they drop? Because the racing model is broken due to the fact less people are playing. Less people are playing because track takeout is too high. People leave because they are either price sensitive or they just realize their bankrolls don’t last.
I feel you just do not have any grasp on the reality of gambling and gamblers.
And again, you give tracks way too much credit. Philadelphia and Woodbine got slots to subsidize purses tremendously. They also maintain some of the largest takeouts in the game despite this.
Give the tracks more, and they will continue to bleed the customer to death.
Change the IHA and rebates will dry up. For a while, the tracks will make more, but it will be a quick band aid and will lead to stagnancy in growth, and then a decrease as more and more players find other games and/or just die with no one replacing them.
January 5th, 2009 at 10:06 pm
There is a post on HANA this evening detailing how Australia is working through many of these issues at high speed. Their focus for the 2020 track industry blueprint focuses on 1) the customer 2) Increasing markets by spending money overseas 3) Gamblers 4) Cutting costs for horse owners
5) Embracing Internet gambling models to grow their racing
There is not one discussion on fighting over the pie in that 2020 plan. It seems they have a strategy of “grow the gambling customer base and purses will take care of themselves”, not the other way around.
http://blog.horseplayersassociation.org/2009/01/reactive-versus-proactive.html
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