Why Alienate the Customer?

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Three years ago, before the Resorts World Casino at Aqueduct racetrack opened, maiden 2-year-olds were running for purses of $45,000. Last Sunday, thanks to the revenue from the slot machines at the New York track and casino that began operations in December 2011, 2-year-old maidens competed for a $75,000 purse. The $45,000 winner’s share was equal to what the entire purse was in 2010.

That 56 percent increase doesn’t mean New York horsemen have an embarrassment of riches when it comes to purse money. Owners will continue to lose money. However, purses in some claiming races led to what one trainer said was a “feeding frenzy” at the claim box and was identified by a task force as a potential cause for the rash of breakdowns that occurred at Aqueduct during the first winter meeting in the slot machine era. Purses in claiming races were subsequently adjusted so that the potential rewards for running a horse of questionable soundness did not obscure the risk of endangering that horse’s life for a quick payoff.

How long will this gravy train go on?

Owners and trainers (as well as breeders) in Canada were blindsided when the Ontario government pulled the plush casino carpeting out from under their feet. There is stirring in the Pennsylvania legislature to raid the Race Horse Development Fund in order to keep the racing commission afloat, as traditional funding from pari-mutuel wagering has plummeted.

The New York Racing Association executive team and board of trustees already are beginning to act as if revenue from the Aqueduct casino will be a short-term phenomenon. That’s prudent thinking. A proposed 2014 budget separates the struggling racing operations from the gaming side of NYRA’s business, projecting a modest operating surplus next year where there were losses in this and previous years.

There are cost reductions in some areas to offset unavoidable increases on such things as union labor, but NYRA’s proposed budget also projects revenue growth on wagering through an ADW surcharge and a higher export simulcast signal fee, along with increases in parking, admission fees, and box seats.

Attendance at New York tracks is declining, and revenue from wagering on NYRA races is down for the first nine months of 2013. Conventional wisdom would say raising prices when sales are falling sends the wrong message to your customers.

John Hendrickson, a non-voting special advisor to the NYRA board, agrees.

“I understand the dilemma they’re in,” Hendrickson told the Saratogian newspaper earlier this week. “I understand what they’re trying to do. But NYRA should not be trying to balance the budget on the back of its patrons. We want to attract more fans, not alienate them.”

Hendrickson, husband of Saratoga icon Marylou Whitney, worked tirelessly last summer to promote the 150th Saratoga celebration, but even with that ongoing season-long promotion, attendance fell at the historic spa in upstate New York. Raising prices on those customers doesn’t sound like a sure-fire strategy to increase attendance in 2014.

Nowhere in the proposed budget was a reduction in takeout discussed, something Hendrickson told the Saratogian he would like to see.

“That would give fans more money, so they’d bet more, which would make more money for NYRA,” Hendrickson said. “Let’s reward our customers, not punish them.”

Admission to NYRA tracks is considered a bargain by some, including board member Charles Wait who said the proposed $5 grandstand and $8 clubhouse admission (up from $3 and $5, respectively) is far less than a ticket to Yankee Stadium. And there are other racetracks around the country that charge more for entry than NYRA does at Belmont and Saratoga. (Aqueduct has free admission now because of the casino.)

Even though purse levels have nothing to do with operations, the proposal to increase admission costs while purses are soaring seems particularly tone deaf.

The influx of casino revenue to purses is supposed to improve the racing product that fans bet on, yet the most recent numbers released by NYRA show a decline in average field size from 8.5 horses per races to 8.1. That means the product is getting worse, not better, even with the additional purse money.

There is so much upside to what New York racing can be. NYRA and the horsemen who supply the product have – at least for the short-term – a strong and predictable cash flow from the casino at Aqueduct. Next year, slot machines are expected to supply $58 million in purses and $55 million in net revenue to NYRA. In the face of those numbers, do NYRA and horsemen really want to risk alienating their customers by increasing the cost of going to the track and betting on horses?

It’s not as if those customers don’t have other options.

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  • JoeJoe

    On top of the fact that NY trainers charge anywhere from $90-$105/day, plus: high vet fees, blacksmith, dentist, various other fees when your horse actually runs, etc. NYRA is the ONLY track that I know of that charges owners a one time per year Workmans Comp fee of near $900. I run horses in PA, WVA and MD and do not pay ANY Workmans Comp fees. On top of the new high ticket prices for grandstand and clubhouse, a glass of iced tea costs $8 and a bottle of corona costs $12. Most of the time the seating/box areas are dirty (bird poo all over); chairs are ricketty, betting machines often fail and rarely a customer service agent is nearby; toss in the outrageous takeout, why would anyone want to go to Belmont or wager at any NYRA track? Here is another pet peeve, I fund my betting card daily so I don’t have to go to the windows; however, if you don’t immediately go to the window and cash out after the last race, the clerks are either gone or say they already closed out their registers. You are then redirected downstairs to the simulcast area to get your $. This happened once at Saratoga and I asked a manager for help. There were 10 windows open where bet takers were counting their $ to close out. He asked me what I wanted., and I politely said, I would like my money withdrawn. He said any of the girls could do that. Once I said I was told to talk to you, one of the tellers miraculously said she could help me. (after of course she rolled her eyes in disgust)

  • Steve

    “Nowhere in the proposed budget was a reduction in takeout discussed” it speaks volumes about NYRA and the horsemen.
    .
    And why not use some of that slot money and make past performances FREE. This would increase handle,yes?

    • Kris

      Steve,
      You’re making some sense here, and the folks that run NYRA can’t have any of that!

  • Richard C

    Spin things around and around & it all remains the same – kicking railbirds in the teeth is rule number one in the racing game.

  • Andrew A.

    The funny thing is that most of the people making these asinine decisions are very well paid and/or very wealthy, and as Horse Racing continues its decline they don’t have to worry. They have a bankroll to fall back on. The other 99.9% of people working in the industry who deserve much better will just be collateral damage from bad decision after bad decision.

    There needs to be some sort of immediate and devastating action (maybe a boycott) to
    shut one major jurisdiction completely down. It would only take one week
    of handle being down 40% to get some immediate changes.

    • kyle

      We do need some kind of action. My gut tells me a more targeted action would work better in NewYork than a general boycott. I just think it would be easier to garner support and get the word out if the target was a certain day, or certain races or pools. If that was impact full , it then might be easier to expand.

  • Old Timer

    “NYRA show a decline in average field size from 8.5 horses per races to
    8.1. That means the product is getting worse, not better, even with the
    additional purse money.”

    A decrease in avg starters per race doesn’t have a direct correlation to the quality of the field diminishing i.e. product getting worse. Actually it could be a increase in quality having a decrease in the competitors ascertaining a positive risk reward situation and thereby not entering, thus decreasing field size. I would prefer to wager on an 8 horse field of equally strong horses then 12 with so so PP’s. Last time I checked the GI’s, II’s, and III’s many times had smaller fields even with quality horses entered. Does this mean the product is worse? Not that I have ever heard, unless it gets down to something like 3 or 4 horses, then people complain, and for good reason.

    8 horses per race is a strong number, and is acceptable to many wagerers, large and small, as a nice field size to risk their money on.

    Now with the increase in attending the races, increasing the amount to go to races for the common person who doesn’t go on a daily basis, may make some sense. For the person who goes daily or weekly, there should be some way of “grandfathering” them in at the previous rate (heck give them a discount!) for coming and being dedicated racing fans and bettors. Reward, dare I say rebate, the consistency not punish it.

    • betterthannothing

      “A decrease in avg starters per race doesn’t have a direct correlation to
      the quality of the field diminishing i.e. product getting worse…”

      Excellent point Old Timer, thank you.

    • Joshua Bauman

      The problem stems from declining crop sizes. We’re down about 10,000 foals per year, that’s 26,500 from 36,500. That’s a big part of the field size problem.

  • Manny Marquez

    Final sentence says it all.

    “It’s not as if those customers don’t have other options”.

    Santa Anita and (the soon to be closed) Hollywood Park can certainly attest to this.

  • Josh S

    (Aqueduct has free admission now because of the casino.) That sums it all up. Casinos are for profit and don’t charge admission. What is our disconnect in this business that tells us when times are tough raise the following; takeout, admission, parking, concessions. This industry’s level of dysfunction rivals the government

  • fb0252

    What would happen if they cut purses in half, used the money for marketing and advertising, and raised purses back up when there was sufficient revenue to do so?

    • betterthannothing

      Racing can’t market itself effectively as long as it is toxic. Protecting horses on and off track would go a long way to repair the damage and earn the trust and support the industry needs.

  • Jttf

    Hendrickson is so far ahead of the horsemen. Horsemen are unable to understand economics. Horsemen think of the racing fan as an enemy. Horsemen don’t care about the health of the horse or rewarding the fan. Save your money, because the economy is going to get worse. Say goodbye to horse racing.

  • Tinky

    Hmmm…notice any similarities?

    – purses are bigger than ever (in a few places)!

    – auctions prices are setting records!

    – handle and attendance decline.

    ***

    – real estate is soaring (in a few places)!

    – the stock market is soaring!

    – the average American works harder for less money, if he/she can find a job.

  • Tinky

    Hmmm…notice any similarities?

    – purses are soaring (in a few places)!

    – records are falling at Thoroughbred auctions!

    – handle and attendance decline

    *****

    – real estate is soaring (in a few places)!

    – the stock market is soaring, and records are falling at art and car auctions!

    – the average American is working harder for less money, and must pay higher fees/taxes

  • me

    There is stirring in the Pennsylvania legislature to raid the Race Horse Development Fund in order to keep the racing commission afloat, as traditional funding from pari-mutuel wagering has plummeted
    -It is indeed a fact, as the 10% fee charged to the ADW’s in PA to support the salaries of the racing commission.. That is why I was knocked off of Mutuelsonline.. Thus I no longer wager on horseracing.
    I have also written to my State Senators and Congressmen/women to reduce the money for horseracing from the slots. Think of the poor, the sick, children and the Veterans. Most agree except a few rural ones.
    Greed isnt GOOD, it destroys. PA. racing was handed a golden wand, but decided to sell it. Lets run $2,500 claimers at PN again. Back then the people still came., especially on a Sunday day card.

    • Leinster Believer

      Legal ADW’s in PA don’t have the 10% fee charged. You can wager with PABets.com if you are in appropriate ZIP Code. There is even a nice bet $150 get $150 sign up offer now: https://pabets.tvg.com/page/fall13bonus?srccode=TVGW&promocode=PA150&icn=Autumn125

      • me

        We had a call last night and found out more information on changes that are affecting the customer in places like Pennsylvania.

        Recently, both Pennsylvania and New York decided to follow in the footsteps of states like Virginia by implementing “source market fee.” For those of you who may not know, source market fee is a “tax” on the state’s residents who play horses through an ADW or a rebate shop.

        Here are some answers from a racing insider that has been following this. We pass along this person’s opinion for you here:

        Q: What happened in Pennsylvania? Why did a state with such a massive slots subsidy for racing decide to implement a source market fee?

        A. My understanding is that despite a massive slots subsidy (hundreds of millions of dollars) the Pennsylvania Horse Racing Commission was operating at a deficit – I’m told about $5 million this year.

        Rather than allow money from the slots subsidy to be used to fund the Racing Commission, the Pennsylvania horsemen instead lobbied the State Senate and demanded a 10% tax on ADWs and rebate shops.

        That’s how Pennsylvania’s 10% source market fee came about and I see some problems with that:

        Despite popular belief by many in racing to the contrary, ADWs and rebate shops don’t have enough room margin wise to absorb the tax themselves. So they are forced to make some hard choices.

        They will either: Pass the tax on to the customer by cutting rebates in an amount equal to the tax. Or worse, many ADWs have simply decided to stop doing business in Pennsylvania altogether.

        Q: What’s the feedback been like from the horseplayer community?

        A: Within the past week Pennsylvania horseplayers began receiving letters and emails from ADWs and rebate shops notifying them their accounts are being closed.

        -This is what happened to me…thus without the rebates from LEGAL USA based adw’s, am done.
        -Thx for the link, will check out TVG.

      • Jeffrey J.

        My suspicion is that the customer felt the impact of the 10% surcharge when he lost his access to meaningful rebates. Many serious horseplayers balk at the idea of playing on the ‘big 3′ because they fail to compete on price. Admittedly, a site like TVG or Twinspires (which I use in addition to a site that offers meaningful rebates) offers additional value in the form of live programming, past performances, and occasional track-specific promotions. However, the underlying problem is that horse-racing charges too much, especially on exotics. When my favorite ADW is shut down (I am convinced the racing industry will do what it has in other states), I will promptly leave the game. The opportunity cost of playing is too high without incentives.

  • stixnstones42

    Funny how the folks voting to raise admission fees all have free annual passes…..

  • Drewy

    As one of my favorite retail analysts, Howard Davidowitz, said regarding JC Penny and Ron Johnson’s fair deal initiative alienating its former customers, “the customer is everything”. NYRA is about to go down the tube just like JCP.

    • Lefty_Orioles_Fan

      Now there’s an analogy, I never thought I would see.
      The downfall of JCP, Ron Johnson, and Horse Racing.
      That’s too funny!
      Plus, you heard Governor Cuomo, he really isn’t a a big fan of Aqueduct.
      Hollywood Park is closing, which is a shame in my opinion.
      The problem is you need to bring back the fans somehow. A lot of people like card playing and the slots. As for me I can’t stand either. I like horse racing the best, because I like seeing something that no one else sees. Makes my ego feel good when a long shot comes in! =P You really can’t do that with a slot machine.

  • Eric Kalet

    “…board member Charles Wait who said the proposed $5 grandstand and $8
    clubhouse admission (up from $3 and $5, respectively) is far less than a
    ticket to Yankee Stadium.” Ok so the average ticket price for Yankee games is $51.55 + parking and food. Yes, Wait is right, admission to Belmont and Saratoga is certainly a “bargain” IF all one is to do at these places is spread out a blanket, have a picnic and WATCH (no gambling) a few races…then I agree 100%! BUT we all know that people go to the races, eat there (need $ for that) and gamble (need a bankroll for that). Food is not exactly “reasonably priced (i.e. $4.50 bottle water – a case of 24 costs less at a local supermarket). Last I heard, there is no gambling at Yankee Stadium…

    • Matt D.

      Eric, in essence what Mr. Wait (a banker) said was this. The New York Yankees have SIGNED 25 players to contracts worth hundreds of millions of dollars. In order to off-set SOME of these costs (thank goodness for tv contracts) they have passed it onto their paying customers (hence, the avg. ticket price of 51.55). The NYRA has GIVEN 17 board members contracts worth more than three million dollars. In order to off-set ALL of these costs we have decided to pass it onto our loyal paying customers.

      • John G. Veitch

        As a Saratogian I’m incensed Wait made that remark!

    • kyle

      It always cracks me up when these guys make comparisons between horse racing and professional sports. They may as well say, “Hey, the average mortgage runs about $2000 per month or $60 dollars a day. You’re at the track for 5 hours. So, 12 bucks seems fair for admission .” Either analogy is (un) equally apt.

  • Big Red

    I just heard on NJ News that Gov. Christie passed legislation today to start charging admission and a “table game” seat charge at all casinos effective Dec. 25 to help increase revenues in A.C.
    Ok, consider this an early April Fools joke but what the NY “suits” are proposing is not a joke and will certainly help expedite the early demise of racing in NY state (including Saratoga).
    Enjoy the ridiculous purses while they last amigo.

  • David

    “The minimum stakes purse for the 2014 winter meet at Aqueduct Racetrack has been increased to $100,000 from $75,000, the New York Racing Association announced Dec. 4.”

    Yes, we have decided to use the money we get from sticking our grubby hands into the pockets of on-track (increased admission charges) and simulcast outlets (higher signal fees) so we can give more money to David Jacobsen and Rudy Rodriquez when they win five horse field stakes races with $10k claimers they took the week before, said new NYRA CEO Chris Kay.

    • Roisin

      Yes, and they (Jacobsen and Rodrigues and others) can continue to work their “miracles” with so many “elderly” track warriors as they descend in the ranks of the claiming game. I’m expecting to see Be Bullish start for Jacobson. I think he reclaimed the 8 year old earner of over $800,000. The old horse has been claimed and reclaimed so many times I’ve lost track !

  • C Hogan

    What happens when the casinos say they don’t want to put up anymore money on their money losing horse racing business. That will happen what then.

    • Chris Lowe

      Your question is rhetorical, right?

    • Big Red

      Did anyone notice yesterday when the Delaware casino’s asked for tax break (again) and the biggest laugh is that the horsemen are asking for a bigger slice of the slot pie!
      Are they kidding??????

  • Smokey Glacken

    Apparently there was some intelligence manifested at yesterday’s NYRA public meeting, which Michael Kay clearly lacks, by suggesting that a research firm conduct some research and assess how the racing fan might react to such price increases.

    Kay did the same thing a couple of weeks ago. The lamebrain announced scratches would reported to the Senior Vice-President of Racing Operations, rather than the Veterinary Department. Imagine, taking the decisions out of veterinarians/medical staff hands, about the health, and the ability of horses to race, and giving it to some guy sitting behind a desk, who’s trying to fill the starting gate with as many horses as he can? A few days later Kay did not even have the courage to retract his own announcement about the change, probably felt it would have made him look, and feel stupid. So, he made NYRA announce, that there would no change as to how scratch reporting would be done.

    • meme

      yep, almost sounds like Obamacare

  • 4Bellwether666

    The DA’s are trying real hard to “KILL IT” (“The Game”)…But that will “NEVER HAPPEN”!!!…BOOK THAT BABY!!!…

  • FastBernieB

    I happened to be near Woodbine last night and stopped in for the first 4 races. Parking and admission were free. The “crowd” consisted of a few hundred people. I was somewhat gratified that at the age of 65 I was still in the younger half of the group. I have no complaints about food or customer service as I did not purchase anything and the mutuels clerk said “thank you” as he took my money. Given that it was a December night just before the close of the season, there really was nothing unexpected. Hopefully Saturday or Sunday afternoon would have a better ambiance.
    My Points:
    The on track crowd is literally dying off. If I were 25, there was absolutely nothing that would have kept me at Woodbine last night after I walked in. (Heck – at 65 they only kept my attention for 4 races) I would have left and gone to a Sportsbar where I could bet a race or two while watching a game and having a few pops with friends. At 65, my chair and TV at home would be just fine.
    If there was an admission charge I would have driven right on by on principal alone. There was nothing provided that added any value to my experience so the price was right. I cashed a couple of tickets and my original $100 translated into over $300 in wagers so the free admission got Woodbine at least $50 extra in the till.
    Most people I know aren’t cheap but do understand and appreciate value. Free weekday admission and $2 beer draws me to TBD regularly in Feb and March and adds $500 to their handle. NYRA might want to look for ways to add value rather than follow their current direction.

  • ryan driscoll

    8 dollar clubhouse admission at Lone Star Park, plus $17.00 for a box seat in a box that would seat about 3 comfortably and not six. I took a group of my neighbors two years ago on a Friday night. 10 guys, $250 for seating that we all couldn’t fit in to. Terrible racing and overpriced draft beer. The clubhouse was about 25% full (with other suckers). We had a great time, but have not been back because of the ridiculous pricing.
    Box Seats (Second Level): $17.00 per seat ($22.00 per seat on Big Event Days*)
    Finish Line Box Seats (Second Level): $27.00 per seat ($32.00 per seat on Big Event Days*)
    Counter Seats (Second Level): $13.00 per seat ($18.00 per seat on Big Event Days*)
    Terrace Carrels (Second Level): $19.00 per seat ($25.00 per seat on Big Event Days*)

  • NYhorseracing

    It’s simple NYRA doesn’t want you at the track. They would rather have you stay home and bet.

  • Guest

    Can we hire Ron Burgundy to promote horse racing?

  • Patricia Jones

    again racing needs fans you do not get them with no integrity and personal agenda’s perhaps the individuals promoting their own agenda’s would realize they are putting themselves out of business it would help even after being a fan for 60 yrs a time comes to move on people get tired of trying and consistently being ignored and failure being accepted instead of being changed listen to the fans

    • Nancy

      Patricia, you put it so well. Plus I have finally realized the horse comes last.

  • Lawrence Vaccarelli

    kay KNOWS NOTHING ABOUT RACING…that is all you have to know…hack put there by little andyc who justs gets his panties in a bunch over NYRA …..the fool really thinks he’s going to be president…lmao….well we have a lot of suckers in NY but little lizard andy isn’t going to be elected dog catcher by people outside of NY.

  • Lawrence Vaccarelli

    lower takeout increases earnings ..its proven..

  • Indulto

    Last time I attended Hollywood Park, it was $10 for Clubhouse Admission
    which included regular parking and a program. It was a bargain compared with
    the $7 grandstand admission. You got a clean place to sit at a table near
    simulcast monitors. Breathing was easier and you could actually hear the race
    calls in the smoke-free room.

    The programs included all tracks available, and free selection/analysis sheets with graphics were available for the major tracks. There was also a free speed/pace ratings sheet for Hollywood live racing. No one hassled you if you brought your own bottled water, but I never noticed people using computers there.

    I was never a big consumer of on-track food and beverage concessions, although I would have been had they offered hot fresh pizza, sub sandwiches, etc., at reasonable prices. Combos with beverages including beer should have sold well at any racetrack to young
    and old alike.

    The real problems, in my opinion, were 1) high takeout, 2) small fields, 3) total domination by leading trainers, 4) constant talk of performance enhancement drug use and questionable
    stewards’ decisions, and 5) diminishing attendance resulting in an empty facility with a more visible aging and/or hard-core presence.

    Hollywood closes for good at the end of this meet. NYRA should take note.

  • jazz mania

    Here in New Orleans at the Fair Grounds, Parking and admission is free. The racing card is generally the big disappointment. I play NY tracks (including Gulfstream’;-).

    My point is that ANY track serves as a betting window to the nation and beyond. NY should wake up !

  • JockeyAgent Lou

    There are so many low to no cost ways to improve the fan experience it frustrates me to see admission price increases without increases in the fan experience. Clean the place up, make it comfy and accessible and customer friendly and THEN consider lowering prices and lower takeout to drive up traffic. Works everywhere it has been tried. Worried about the infrequent bettor getting admission too cheaply then fine, shortsightedly soak them if you must but give loyal bettors a yearly pass at a discount to prevent them from discounting their betting to cover their new higher admission expenses. If you deal in good faith you will be amazed how faithful NYers will be. Cooperation among the entities is all it would take instead of hammering the very customers and taxpayers who keep the tracks and state in business. In a side note to Mr. Hendrickson, please count on me as a volunteer in any activity you engage in to enhance attendance. God bless America and the horses we rode across it !

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