Letter to NYRA: Time to Maximize Revenue

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As the New York Racing Association continues its latest transition under new president and CEO Chris Kay, discussion has focused on the need for NYRA to increase revenues and cut expenses as it works toward re-privatization.  NYRA trustees have also indicated the agency has to figure out a way to be profitable without dependence on Video Lottery Terminal (VLT) revenue that is out of its control.

In an open letter to NYRA, Lexington advertising executive Fred A. Pope urges decision-makers to look at an obvious source of revenue that is being ignored.


There are a lot of very smart people on the NYRA board. In their careers, they knew exactly what business they were in and its mission. I’m not sure a single one of them today would write out the correct mission for NYRA. They are not alone.

I submit the mission of NYRA is to produce Thoroughbred horse races and maximize the revenue from them.

When off-track betting started, NYRA lost its way to taking bets on other tracks’ races. The tracks made a deal that was soon perverted, as non-track bet takers were allowed into the market, the rate paid to live racing hit bottom. Instead of the 20% NYRA made from on-track bets, the off-track bet takers paid 3% and kept the rest. Today the rate has climbed a couple points, but bet takers still keep the lion’s share of the bet.

As the leading producer of live racing, NYRA has lost more than anyone. It has sufficient handle to make a lot of money and restore purses, marketing, staff for live racing and infrastructure. But, it cannot achieve its mission to maximize revenue from its races without changing the amount it receives from off-track wagers.

NYRA exports 5 times more than it imports. Last year the races generated over $1.8 billion in off-track handle. Every 1% increase NYRA earns on its exported races is worth $18 million to its bottom line. That new revenue can make NYRA racing profitable in 2014. This is not increasing takeout rates; this is increasing the amount NYRA receives from off-track bets on its races. In the short term, NYRA can earn over $100 million in new revenue by solving this distribution problem.

The huge demand for NYRA races can drive partnerships with other major producers, direct distribution to customers and revised distribution agreements. Anyone saying it cannot be done has the mindset of a bet taker, not a producer. NYRA board members are experienced business and entertainment producers. Once the mission focuses on live racing, they will have lots of ideas to contribute.

As a non-profit, NYRA returns everything back to the sport, racehorse owners and breeders. As our largest, most-sophisticated market, New York is and always has been Thoroughbred racing’s True North.

Embrace the mission that built NYRA and every decision will be easy.

Fred A. Pope

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  • Sal Carcia

    Haven’t thought about this topic in a while. Fred Pope is basically saying that with a blended takeout of 20%, the NYRA gets 5% and the bet-taker gets 15%. In my other life as a marketer of software, my worse distribution agreements were 50/50 splits. In horseracing, that would mean 10% for the NYRA and 10% for the bet-takers. Using Pope’s formula that would result in increase in revenues of $90 million annually for the NYRA. That would solve the NYRA’s profitabilty problem pronto. By the way, Ray Paulick is extremely knowledgeable about this subject and has the knack of explaining it clearly.

    • LongTimeEconomist

      Sal, NYRA wouldn’t get the full $90 million in your example. Some locations would stop taking the NYRA signal, preferring to aim their customers at tracks where they get the highest percentage. But, if the four or five tracks that produce the most desirable betting product all moved to an even split, the betting sites would have more pressure on them to accept the new 50-50 split.

      • Sal Carcia

        LTE, it comes down to who really owns the customer. I think it’s the host racetracks. ADWs are in a much stronger position today. But, they don’t have total comtrol of the customer. I am not proposing something radical. It’s just a tweaking as Tinky suggests to create a fairer distribution agreement.

        Another factor not mentioned so far is the racing TV stations. TVG appears to be adding value to the tracks they focus on. I am not certain that their value is widely recognized in the industry.

  • Tinky

    I’ve had my disagreements with Fred on this forum in the past, but in this case we’re in agreement.

    • Barry Irwin

      I am absolutely certain that Fred will walk with a lighter step today because of your approval Tinky. You are so, so generous in your praise. I just hope to God that this boost to Fred’s confidence doesn’t make his head swell up too much.

      • Tinky

        If I’ve come across a more nuanced example of sarcasm before, I really can’t place it.

        • RayPaulick

          I’m thinking something akin to the Good Housekeeping Seal of Approval would be a useful graphic.

          • Don Reed

            Ray, we’re coming up on Halloween (actually, Christmas; we got junk mail yesterday with the outer envelope featuring Santa Claus draping tinsel on a fire hydrant) . Something along this line of thought would be more visually on-target.

            Barry, sarcasm is most effective when it issued in small doses.
            When it is overdone, it has the appeal of burnt food.

            Tinky: Just saw a newspaper editorial endorsing a new movement that will require new college graduates to take “exit” exams after graduation, to guard against the relatively recent wholesale practice of the colleges and universities – whereby if the final tuition check clears, the kid gets a diploma. What think you?

          • Tinky

            Hi Don,

            I’d say that such tests could helpful if they are constructed intelligently, For example, if a student is found to be able to successfully distinguish “lose” from “loose”, then the $250,000 in non-dichargable student debt can’t be considered a total loss.

            Seriously, though, there are so many problems with higher education in the U.S. at the moment (tuition inflation and the student loan bubble being chief among them), that there are, of course, no simple answers. However, anything that helps to undermine the perception that only expensive, high-profile universities produce good results, is OK in my book.

          • Don Reed

            Saw a lady in Ogunquit Maine with a T-Shirt with the words, ” ‘Their’ and ‘They’re’ Are Not The Same Word.”
            I figure that if students are saddled with $100,000 loan debts at age 22, they’ll be in a position to be able to sign up for a house mortgage at the average age of 114.
            I share your “high-profile” aversion, but is it relevant in a society where, regardless of the origin of the degree, the graduates as a generation are willing, enthusiastic slaves of the electronics they think that they control?

  • PTP

    The racing industry is so devoid of ideas, in my opinion, it always comes to trying to grab a bigger slice of the pie to fix its ills.

    I have to chuckle, because I was reading an article from a Harvard Business school prof titled “Five Self Defeating Behaviors that Ruin Companies”.

    The first one was “Demanding a Bigger Share of a Shrinking Pie”

    I think that’s the easiest way to end up worse off that you started. In my opinion, it doesn’t matter if digital music has hurt your margins, McDonald’s is squeezing you as a cattle farmer, or the meth dealer at the end of the block upped his commission to 12% from 8% because of increased DEA surveillance and bad debt expense. It is what it is, and trying to find a way to survive and flourish in the new economic reality that faces whatever business is a sign of leadership and smarts. Recoiling back to the age old axiom of trying to get more for delivering the exact same product to an unwilling audience, only assures failure.

    That’s my 2 cents. Which is probably all its worth.

    PTP

    • Sal Carcia

      The split between tracks and the ADWs has been ill-conceived from day one. In many ways the imbalance has an overall negative effect on the game. If the people who put on the show are not compensated fairly, then the quality of the show will correspondly get worse. Then, this results in less revenue for everyone. Churchill is a good example. As a company they have put more emphasis on Twinspires than the racetracks based on contribution to the bottom line.

      When doing distribution deals I like to think about costs as a percentge of sales. To me the costs to put on and market the show have to amount to much greater than 50% of sales. That is not even including the cost that went into building the brand.

      • PTP

        Sal what is inconceivable is thinking you can create money by shuffling it around.

        “Churchill is a good example. As a company they have put more emphasis on
        Twinspires than the racetracks based on contribution to the bottom
        line.”

        That is shortsighted in my opinion.

        Take away Twinspires and all of them. Take away the innovations, the
        marketing, the Twinspires TV, the free past performances, the 0% takeout
        promos, the mobile and tablet betting. Take it all away.

        Take it away from TVG while you are at it. And HRTV, and Premier Turf Club.
        Take away Powell’s rebating ADW where a billion is bet a year and pays a
        10% signal fee. Take away all your resellers. Tax them out of business. And tax your horseplayers 5 points too, because “your product is so good.” Get rid of them.

        Charge Woodbine a 15% signal fee. Don’t worry that that takes away from their purses and from horsemen. Charge Lone Star and other tracks more too. Dont worry that it will hurt them and hurt racing. Just take it away.

        Take it all away.

        Now, what do you have left?

        You have a bunch of racetracks scattered across a landscape (fewer in
        number than we have now, but a lot), offering racing for six hours, at
        high takeout, when there is a casino at the end of the block and
        internet wagering on poker or football or whatever else.

        All
        those customers who play via the new mediums will be gone. Money made
        by tracks offering simulcast will lose revenue. Purses will go down and
        your distribution network will suffer. Handle will plummet.

        Racing
        is broken, and has been for some time. It’s not because of splits, it’s
        because it does not have enough customers. The next person who talks
        about splits solving problems, is part of the problem itself.

        PTP

        • Tinky

          While I am broadly sympathetic, I don’t believe that it is a binary situation. Splits can, and in some cases should be tweaked, even if such massaging won’t fundamentally change the game.

        • Sal Carcia

          The ADWs didn’t create the customer. The tracks created the customer through the manufacturing and marketing of the product. In the end, it just shifted the customer base around. The end result is the manufacturer/marketer of the show has less money to put on the show. This results in a systemic problem. It’s a negative feedback loop. I am not advocating a radical shift in the industry. It’s just a fix to create a fairer balance between the manufacturer/marketer and distributor. It doesn’t take away the need to grow the customer base though.

        • Fred A Pope

          PTP, in your earlier comment you said there have been no new ideas for racing and you are right.

          Since the Breeders’ Cup, there has been no innovation in racing. There have been some unsuccessful attempts, but all failed.

          The host tracks cannot make money on their own product, so all the marketing people who might come up with ideas are gone.

          As you state, all innovation has come from bet takers, whether track-owned or independent. Bet takers have the ability to make a profit because the margins are too good to be true. They can spend on merchandising, rebates, etc.

          The problem is racing content. Hollywood is gone because their pockets weren’t as deep as NYRA and they chose to get out. What about the others?

          If the host tracks figure out how to control their product, the bet takers will figure out how to work with them. The difference is the ideas and marketing will be with producer.

          The lotteries pay gas stations 5% to take bets. Last year, that 5% was worth $4 billion to the bet takers. The lotteries, as producers, cooperated on wagering platforms, etc, and that is how successful businesses operate.

          The tracks screwed themselves. They could have used the lottery model and prospered. Instead, they chose a model based upon where the bet is made.

    • Fred A Pope

      When a new CEO comes into a red ink situation and figures out the basics, there are two questions: What are we doing wrong? How do we stop the bleeding?

      NYRA will not gain market share by getting a fair amount for their product, but it will stop the bleeding and provide them with revenue to fix racing problems.

      I wrote the letter because it was announced NYRA is going to build a $20 million simulcast facility. That decision seems at odds with the mission of live racing and seems to ignore the fact that if NYRA is successful is getting more from off-track wagers, they have to give up the margins they make from depressed prices paid to other tracks. There is quid pro quo. Those reduced margins may not pay off a new facility that doesn’t speak to the mission.

      The NYRA board cannot just tell the staff to get more for our live product, while at the same time enjoy the fruits of being a major bet taker.

      That’s what makes putting a mission statement into writing so tough. You cannot get away with the “you knows” and “that won’t be a problem” when it is in print.

      NYRA is the leader in live racing. They need to champion a sellers’ market for live racing.

      Once NYRA focuses on live racing and invest in live racing, then they do need to package and present a better live product. That can be as simple as moving all the bad races that are required to weekdays and presenting all the premium races on the weekends. No other track does that, so it would be an innovation.

  • ron

    NetPtp is right on. using Maryland as an example, in the early 70s ,after the state, retirement funds,and breeding industry took their cuts, the tracks and horseman had about 9% of the take. By the late 70′s they received around 14%. by the late 80′s they received 18.5%. In the early 90′s they also received 7 million a yr purse subsidy from the Lottery Commission. when they lost that they just raised the take approx 1.25%. there are only solution was to always take more of a shrinking pie. I never saw how they tried to actually grow the game.They may not be raising the takeout per se, but they are raising it on ADWS and any places they give kickbacks which will hurt handle long term.

    • Sal Carcia

      Yes, your example clearer shows the validity of PTP’s point. The ultimate priority is on bringing in new customers. I still think the distribution agreements need some fixing.

  • Guest

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    • Don Reed

      Winner of the 2013 Todd Pletcher Succinctness Award.

  • ITP

    Two things remain constant…..Fred Pope wanting to slice up a shrinking pie in a way the pie will instantly become smaller and someway, somehow mentioning that tracks sell their signal for 3%.

    Easy fix here….If NYRA raised the takeout to 50% and charged 40% for their signal, they would become solvent again.

    • PTP

      The “3%” is a ruse to get at people’s rawest emotions. You can’t say “pirates” and “crooks” when you use 10%-12%, like a lot are actually paying for top signals.

      PTP

  • LongTimeEconomist

    Some of us have been saying this for almost 30 years, but the major tracks have never been willing and/or able to implement it. Any rational explanation why?

    • Fred A. Pope

      The short answer is tracks believe the customer belongs to them. Thus, who takes the bet is more important than who produces the show. The old bookmaker mentality.

      When it all started in the 80′s, the IHA mandated a closed distribution system, so the major host tracks had no alternative distribution. They were sitting ducks. The small tracks realized their power and created a buyers’ market. In 2000, when ADW’s were allowed, the major tracks should have dealt with the IHA then. Today, they have alternatives, but none have figured it out.

      But, you asked for a rational explanation. Sorry.

      • LongTimeEconomist

        Also, Fred, tracks thought that fees received from other tracks were all new money that they would not have received otherwise. And some lesser tracks (Suffolk, for one) would offer their signal for as little as 1% to get it into tracks were substantial betting was being done. Eventually, they were all just carving up the same pie, with the added expenses of simulcasting.

        And, the advent of multi-horse bets attracted bettors to tracks with large fields, even of cheap horses, a change from historical betting patterns.

        The rush for more revenues led to selling signals to locations that didn’t have live racing and its expense, which has since grown into the real problem.

  • PTP

    Hi Fred,

    I am just speaking generically. “ADW pirates” goes together like the “Captain and Tenille” or “Paulick and Cummings”

    PTP

    • Fred A. Pope

      ADW’s are cherry-picking good tracks and paying good fees. The problem there is when Twin Spires buys them all up and the host tracks have just one buyer. Bad situation.

      Right now, with more than 50% of all off-track still at tracks, these old agreements are the problem. They are the ones paying nothing to the hosts.

      Said another way, it will be easier to get 5 points from tracks than five more points from ADW’s.

      • Simulcast Economist

        You’re forgetting something. After these guests sites pay host fees, state taxes, county taxes, city taxes, breed funds, purses…etc…etc. this “20%” you mention dwindles down CONSIDERABLY. The guest tracks end up making somewhere around 8% or less that is used to pay overhead (labor, tote service, insurance) as well as the up keep on the brick and mortar facility.
        If you raise the host fee these other entities are not going to take less than what they are getting now so then you have only the guest site taking the hit. Until everybody shares in the increase in host fees this will never work.

  • Tinky

    Something just occurred to me: Fred has engaged his critics on this comment thread to a FAR greater degree than almost any other guest contributor to the PR (in fact most remain mute). Whether one agrees with his position or not, he deserves PLENTY of credit for that.

    • Sal Carcia

      Agree. Barry Irwin also engages with the posters on this forum. It’s refreshing.

  • Bryan Langlois (ShelterDoc)

    I agree that bringing fans back to the track and making the product marketable are some top priorities for the new management team at NYRA. I was at the fan forum that was held in Saratoga the last week of August, and some of the ideas mentioned by Kay and some others I think have some merit. However, I was most concerned with two facts about that forum. The first was that it was very sparsely attended in my opinion, and the second was that, at age 35, I appeared to be one of the youngest people there by about 10 years. Both very disturbing for the future in my opinion. I am very curious to see if Mr. Kays idea of condensing the available seating areas at Belmont to all be within 150 yards or so of the finish line will have the desired effect. I think he will find that the demographic of patron at the down state tracks is slightly different from Saratoga and its more family orientate atmosphere.
    Doing what is suggested here is certainly possible, but like all things, it has to be bought into on a large scale or it will backfire. I’m not sure the buy in from everyone will be there.
    Getting more people to come out and enjoy a day at the track is something that is really going to be hard to do if there is not national buy in. I bring up again that tracks and their managements need to drop the greed, drop the egos, and bring back a series like the ACRS from the early 1990′s. Tweak the program so that it coincides with the Breeders Cup Classic being the last race in the series and let Breeders Cup work on marketing it from the beginning of the year. The Win and Your In races are a good start, but it needs to have a bigger draw. Make it a point based system and the biggest point getter at the end of the year gets a prize of 5 million dollars or something like that. However, to be eligible for the prize, you must have raced in at least 70% of the races in the series and raced in the Breeders Cup Classic. Perhaps add an extra bonus for owners of horses that danced every dance. Of course for any of this to work, you would have to get the tracks to agree to alter their stakes races so that the stakes are not competing with one another.
    Im not an economist nor understand much of any of the splits or percentages that are involved in all of what is being proposed here, so I won’t even try to comment on them. However, I do notice trends and cause and effect. All I do know is that when NYRA really dropped its takeout years ago, handle went up and the organization benefited. Of course no one will see it really being that simple…but I think it is.

  • PTP

    Hello,

    I didn’t miss the point he is making.

    And distributors often make more than creators, like in book sales. However, that’s not even the point.

    Mr. Pope is talking about charging tracks a higher fee, and those tracks put on live racing as well. Money bet on track or at their OTB system is split 50/50 with horseman for purses and the tracks to put on the races.

    Taking money from a creator of the product, to give another creator of the product more money, does not grow racing. It shuffles the deck chairs on the Titanic.

    PTP

    • brussellky

      “Taking money from a creator of the product, to give another creator of the product more money, does not grow racing. It shuffles the deck chairs on the Titanic.”

      I re-read all his posts and I could not find where he advocated taking anything from any creator (I assume you are referring to the host track and horsemen). He wants, specifically, NYRA to charge more for their signal to OTB’s, other tracks and ADW’s which will produce more revenue for NYRA and their horsemen.

      I completely agree with him. It is irrational, particularly, that small ADWs with virtually nothing invested are making 2-3 times what NYRA makes on each bet.

      • PTP

        Hello,

        Taking a bigger slice of handle from Woodbine, is taking money away from Woodbine. Woodbine, or any other track, splits the revenue generated by NYRA handle 50/50. They are a creator of the product.

        PTP

        • Old Timer

          I think you both may be on the same page, but different chapter.

          PTP I’m with you in that taking from another track operator makes no sense. Track to Track money is a good thing for racing all around, the little tracks keep going, and not a huge cost to the large one, and still produce fans in the process, i.e. NYRA is creating fans, but inderctly by allowing the signal to be sold at a low cost to another track.

          My issue is the non content producing otb’s (unless owned by a track), adw’s (unless owned by track and thats questionable like Twinspires), dog tracks, jai lia (sic), off shores, etc. They need to be pumping in a ton more to the tracks/horsemen to produce better quality content. Right now they just seem to suck out money, especially the rebators.

          • Old Timer

            different paragraph, darned analogy tripped me up!

        • brussellky

          But the point is that Woodbine customers bet more on NYRA races than the reverse so Woodbine is making a lot more money off NYRA than NYRA is making off Woodbine. Even with a fee increase, Woodbine will still make much more off NYRA than NYRA does off them. It sounds like you are advocating racetrack/ADW socialism although I will concede that the fees charged to other brick and mortar tracks should probably be lower than those charged to ADWs.

          • PTP

            Hello,

            If you look at the effects of that move on the customers, you will see why this will work against the horseplayer. A signal fee hike will have an effect. Woodbine, and others, will not stand pat.

            PTP

          • Stanley inman

            “…woodbine and others will not stand pat…”
            Of course not
            they will have to get out and
            Compete
            if they want to survive

    • Stanley inman

      “…taking money from a creator …to give to another creator of the produce”

      This strategy (regulation) was to ensure small tracks like
      River Downs, etc would not die
      Everyone expected they could not compete with tracks
      Like Nyra, Keeneland etc.
      In the new world of simulcasting back then
      All the tracks saw “free money”
      And bought in
      Sounds like today with slots
      Essentially their belief was to remove
      Competition, our favorite strategy that continues to fail us.
      Pope’s idea assumes competition for product
      Contrary to our industry’s DNA
      Which is why most don’t get it

  • Wynn

    First of all, NYRA is not making 5%, their going rate for the majority of ADW’s is 9%. Now, the great state of New York is going to take an additional 5% on all New York residents (and 5% of everything else they bet), so between NYRA and the state, who basically owns and operates NYRA), they are getting 14%. Secondly, the whole concept of raising takeout to solve fiscal problems is so wrong that it is hard to imagine somebody is still suggesting it. Anybody who doesn’t think so is going to get a good glimpse of reality when this so called source market fee of 5% (it’s clearly an unconstitutional tax) goes into effect. If it is accepted by the industry and spreads to the other states, it will have a negative impact on handles in this country for decades….so why not throw another 1% in there for good measure, and raise the takeout, too. It will solve everything.

    • Fred A. Pope

      First, most of the money bet off-track on NYRA’s races are made at racetracks, and they pay 3-5%. Yes, ADW’s pay a higher fee.

      Second, I specifically said takeout rates are not involved.

      • ryanc

        Fred, I appreciate your letter. you may feel like you are taking crazy pills when you read some of the responses and arguments against you. You must remember, however, that many of the supposed comments are made by people associated with the ADWs you are talking about. they go to great lengths to make sure no one finds out how badly they are corrupting what is supposed to be pari-mutuel betting. if people saw the numbers and knew how much money flows from the on track or non-rebated bettor, to those ADWs, they would RUN from horse racing. other countries are learning that this rebating will quickly kill the industry. but here the corruption runs very deep. anything you say against rebates and those large ADWs will be attacked.

  • Don Reed

    I always enjoy Fred Pope’s articles featured on the PR, and hope he’ll continue to needle the drones who run the racing industry.

  • fb0252

    My Q: when will i see some horse racing adds on Yahoo Chess beside those on-line poker adds?

  • Steve

    Letter to NYRA: Time to Lower the takeout!

  • Indulto

    The biggest favor NYRA could do itself IMO would be to support the formation
    of a Federally mandated National Horse Racing Commission (NHRC) with the power
    to resolve conflicts, normalize practices, and guarantee cooperation among
    tracks in all states. It doesn’t have to be operated by the Federal Government,
    but it would require legislation to implement uniform state government
    treatment of both live racing and on-line participation by residents of all
    states.

    A significant untapped market for new racing fans are residents of states
    who are currently prevented from playing on-line, ADW reform would start with
    the way these new customers are treated including the establishment of a level
    playing field that implements equally low effective takeout for all
    participants of each pari-mutuel pool.

    The balancing of signal pricing, takeout, purses, and operating costs with
    respect to handle, field size, and other factors, should be performed with the
    goal of achieving long-term stability of the Game across States — without
    subsidizing some favored subsets of horseplayers, horsemen, and/or breeders at
    the expense of their competition.

    • Hamish

      What you say makes good common sense, but is anybody, or should i say are “the right folks” listening?

  • http://www.femalejockeys.com&www.slickpic.com/u/mariaremedio chrisforbes

    Fred a Pope I agree with what you posted. Racetracks don’t do much to promote themselves whether it be a free bertting voucher givaways, meet and greet traines/jockeys, have contests where he/she gets their picture taken in the winner’sw circle. Just try to bring new fans into the sport and not on just big days of racing
    chris

  • Sal Carcia

    I think the underlying resistance to Fred’s idea is really about the possibillty of rebates going away, if the signal fees are raised. If that’s the case, then why not have a debate on that rather than a discussion about new customers? Maybe, new customers is part of it, but I sense it’s really more about the loss of rebates. Rebates are a painful subject, but it cannot continued to be ignored.

    • Fred A. Pope

      Sal, early in my marketing career I worked for an oil company. I am very familiar with price competition and how gasoline markets are made unstable and then stabilized. Those retailers who drop the price gas to gain business are on a short leash. They can only go as low as their margin of profit. The producers never allow the price to fall below the costs of production, or at least the cost of production plus the profit they desire.

      The host tracks have four elements of marketing to play with: Their product, price, distribution and marketing communications. The decision on price competition, including rebates and incentives, should be with the producers, the host tracks. That way small tracks with less quality racing can compete with larger tracks.

      What you never want to happen is for retailers (bet takers) to have enough margin to take the price lower than the cost of production.

      That’s been the story of racing since off-track was implemented. Once again, the tracks did this to themselves, for a lot of reasons that no longer apply.

      NYRA is the leading producer of live racing. They can move the market through the use of technology and partnerships with like minded producers. But, just like oil companies, they need to do it the right way.

      • Sal Carcia

        That is very clear. You should send that along to Chris Kay as well. I sense this is exactly the way he is thinking about it.

        • Indulto

          Why, then, is NYRA proceeding with its own ADW upgrade rather than implement a common platform for all “like-minded producers?”

          I thought I heard CFO Stover say something to the effect that — for some period — NYRA attracted 20% of the handle nationwide despite presenting 1% of the total race cards; figures that would seem to confirm that NYRA is indeed “the leading producer of live racing,” but is obviously leaving the bulk of the potential profits to “bet takers.”

          I doubt NYRA can significantly increase its share of the pie all by itself.

          • Hamish

            Perhaps “implementing a common platform for all like-minded producers” is step 2 after upgrades are made to existing making the NYRA ADW easily combined with others if appropriate?

          • Don Reed

            IND: Hope you’re doing well and had some fun at Saratoga this year.

          • Fred A. Pope

            Their commitment to a $20 million simulcast facility is the reason I wrote the letter. I agree, a cooperative platform solves so many problems.

            One big problem is Settlements. NY OTB demonstrated why you need a central system to protect the revenue and the integrity of the bet.

            What I’m suggesting won’t change their share of the market, just give them what they should have for their product.

          • Indulto

            FP,
            Excellent points, and good job with the letter.

            The pie I was referring to was revenue from the market share. Growth in the market share will be a function of racing product quality as well as wagering innovation and equal treatment of participants in every pari-mutuel pool regardless of how final effective takeout is determined.

  • Fred A. Pope

    Some of the post here take the tracks to task for the dismal product offered to bettors and fans. I agree, but I don’t think they understand why tracks stopped caring about the races they produce.

    When all wagering was on-track, the racing secretaries packaged the best race cards they could put together because that was the track’s only source of money. Attendance and wagering required a good enough product to get people out of their homes to watch and wager.

    Racing secretaries worked with the marketing department and probably laid awake at night because what they produced decided whether the track made or lost money. Having someone lay awake at night is a good thing.

    Today no racing secretaries have to worry about the race card, because what they produce has little to do with the track’s profit or loss. 90% of the wagering on their product is off-track and the amount they receive is less than what it cost to produce the races.

    For those without slots, the tracks’ profit and loss is based upon their imported races, where they win or lose based upon what the racing secretary at NYRA, or other popular tracks put together.

    The problem is the popular tracks aren’t making money on their races, because all the other tracks keep the price to the host too low.

    As off-track wagering grew, racing revenue became more and more artificial. Those who produced the popular races got less and those who preyed on them got more. It has been a complete failure.

    Some say its a zero sum game. That it doesn’t matter if River Downs for example, makes 15% and pays Hollywood Park 5%, the same total amount is wagered. Tell that to the thousands of people who depended upon Hollywood Park and lost their jobs or had to move.

    Money matters. Who gets the money matters. The only way a track will invest in live racing is to make money on their own product. Today track maintenance suffers, marketing is dead, infrastructure is failing and the track employees are facing a very uncertain future.

    Host tracks need to live and die based upon the race card they produce, not artificial funding. Taking bets on other tracks races isn’t any different than taking bets on casino games, neither has anything to do with producing a good live product for bettors and fans.

    For racing in America to have a future, the tracks need a cooperative wagering platform like the lotteries that delivers most of the wagering revenue direct to the producer. Then tracks will compete with each other and those who innovate and deliver a better product will win in the off-track marketplace. If tracks find independent companies produce better returns, they will use them.

  • Barry Irwin

    Fred is De Man. Period.

  • Hamish

    Keep an eye on the latest RFP for upgrades to the NYRA ADW system and the interested parties that respond. There are some real “players” in the world of betting pools and technologies out there that may wish to sit a bit closer to the NYRA.

  • kyle

    Can we get real? I play the races about 200 days per year. I make bets regularly on races from NYRA, Kentucky, So Cal, Florida, Monmouth, Fair Grounds and Woodbine. The handful of days I actually go to the track I go for reasons unrelated to gambling- that is: some value- added reason that may not actually be track related …like local night-life. When I’m at the track I bet through my ADW(s) on my iPad. This is the reality of playing the horses in 2013. Any solution to racing’s ills has to start with the recognition and acceptance of this reality. Trying to turn back the clock, trying to limit bettors’ choices, trying to imprison them in any limited cyber space will only hasten racing’s demise.

  • Walt Gekko

    For NYRA to become attractive to potential bidders like the state wants, a big thing that needs to be done first it to build its own off-track locations:

    NYRA actually I believe has the right to operate its own OTBs in NYC proper, so if NYCOTB comes back, it would likely be with NYRA operating it (especially since the state runs NYRA and it would enchance the value of NYRA to any potential private buyer). OTB-Restaurant-Sports Bar combos are needed, and as mentioned in the past, I would put them in areas in or near key tourist spots (i.e.: The South Street Seaport and Times Square plus the former OTB location on 48th Street across from Rockerfeller Plaza in Manhattan), key transportation hubs (i.e.: Penn Station, the old OTB location on Park Place near the Fulton Transportaton Center and the Atlantic Terminal in Brooklyn) and where OTBs were highly successful before (i.e.: The two in Chinatown (Manhattan) on Walker/Lafayette Streets and Chatam Square, the former of the two also next to a big subway hub at Canal Street). Those would be where I would target such places first, as that would be a gigantic step towards making NYRA attractive to a private outfit.

    That is only one thing of many that needs to change with NYRA, but this is probably the most important of them.

  • Sal Carcia

    PTP, I will immediately say that your first paragraph is absolutely true in my opinion and holds a greater priority in any discussion about the horseracing business. I need to think a little more about the rest of your post. :)

  • Sal Carcia

    PTP, in the music business the record companies always owned the customer. If the musicians bypassed them, they were toast. Today, companies like Apple own the customer and the musicians have to deal with another group. In both cases, the musicians have always depended on touring to make money.

    In horseracing, the question is who owns the customer? In the case of simulcasting at other tracks, it was the simo tracks that owned the customer. So, maybe the distribution splits made some sense.

    With respect to the ADWs, the host tracks owned the customer and the splits were way out of proportion. The ADWs are now in a stronger position. But, if NY racing chose an exclusive ADW, many of their customers would move to that ADW. The producer of the show still has a lot of control of the customer. In that case, I think there is still room for a fairer distribution.

  • Fred A. Pope

    Nobody owns the customer. The internet set them free.

  • Sal Carcia

    Tell that to Facebook.

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