PAULICK REPORT FORUM brought to you by Breeders’ Cup: BETFAIR HAS ITS SAY

by | 11.17.2010 | 12:48am

By Ray Paulick

When the exchange wagering giant Betfair entered the U.S. market through its $50-million purchase of TVG in January 2009, it was only a matter of time before the company would push for legalization of this popular yet controversial form of player vs. player online betting featuring low takeout or commissions. Exchange wagering legislation first advanced in New Jersey earlier this year, but last week's introduction of an amendment to California Assembly Bill 2414 authorizing the licensing of exchange wagering companies by the California Horse Racing Board is a more significant step. AB-2414 also includes language increasing takeout on traditional pari-mutuel bets like exactas, trifectas and superfectas. That amendment was pushed by racetracks and horse owners.


Stephen Burn, the president of TVG and Betfair's global director of horseracing, discusses the legislation and some of the controversies surrounding exchange wagering in this week's Paulick Report Forum. Burn, who oversees TVG and Betfair's worldwide horseracing interests from TVG's headquarters in Los Angeles, has been with the company since 2003. Prior to joining Betfair, he worked in TV for ten years and was executive producer of Channel 4 Racing in the UK, the country's leading terrestrial broadcaster of the sport.

What impact do you believe exchange wagering would have on American racing and breeding?

A positive impact. Exchange wagering is not a silver bullet to provide a solution to all the challenges of the industry, but it is a useful and innovative tool offering a real opportunity to attract a new type of bettor and to win back players who have moved offshore or who have left the sport. It seems as though racing has focused on assistance or subsidies from other sorts of gambling, and while that's understandable we think it is important for racing to find new ways to draw interest to and generate revenues from its own product. Exchange wagering is one of the few successful innovations that is proven to help racing draw new interest and generate revenues from the racing product itself.

There are concerns that exchange wagering with its low commissions would cannibalize existing pari-mutuel pools. What does Betfair's internal tracking say about the demographics of exchange bettors vs. the traditional horseplayer or punter?  Are they horseracing fans or online traders?

I understand the concerns, but the evidence we've seen from countries where Betfair operates suggests the concerns will not be born out. In the UK, for example, the state-owned pari-mutuel operator (Tote) has seen dramatic rises in its turnover since Betfair's inception–52% growth. If we are ever licensed in the U.S., our intention is to sit the exchange alongside the high-margin pari-mutuel products and cross-sell those products to exchange players. Doing this has introduced numerous new bettors to tote betting in the UK who would otherwise not have engaged with the product. Earlier this month, Betfair accounted for more than 40% of all new money bet into the nationwide Tote pool on a “pick six” bet, boosting that pool to an all-time record.


Typically, Betfair attracts a much younger customer than the traditional pari-mutuel products–only 19% of our racing customers are over age 50–but our expectation is that we will be able to find a way for the two products to complement each other rather than compete. After all, Betfair owns TVG and has a significant interest in ADW revenues and wants to see them grow too. We believe an exchange is one way of helping those markets attract new players. One of the unique qualities of the exchange is its ability to appeal to skilled horseplayers and casual fans but also sophisticated financial day traders who see the benefits of competitive pricing and true value odds. Those types are not engaged with the pari-mutuel product today.


But, in saying all that, if the racing industry and its regulators do not like what they see, if and when an exchange is out there then they have full veto rights – under the proposed California legislation – to turn exchange wagering off. We have to find the right pricing model for the industry here because ultimately the long-term success of any exchange is dependent on the long-term success of the sport. I believe that means the operator being prepared to take a little but often in return for making sure a fair return goes to those providing the product and to the players.

People like former British Horseracing Board chairman Peter Savill and France Gallop executive Louis Romanet, and racing associations around the world have criticized betting exchanges or tried to prevent them from getting a foothold because they believe the exchanges do not contribute enough—10% of gross profits from the 5% commissions–to the tracks and horsemen. Do you have any facts to discount this position?

The 10% of gross profits figure you refer to I presume is reference to what we pay in the UK. We are required, by statute, to pay that figure in the UK just like every other betting operator, on revenues from customers based in the UK. However, we go beyond what most other betting operators do and also ensure that money goes directly back to the sport from customers outside the UK betting on British horseracing product. We are the only major betting company to do this and paying an international voluntary contribution to the sport reinforces our commitment to it. Additionally, we are the second biggest sponsor of UK horseracing with only the Tote – which is obliged to put all of its profits back into racing – contributing more.


Louis Romanet used to run a state-owned monopoly in France, the PMU, and his comments about betting exchanges and all other betting operators other than PMU should be seen in that light. The French liked the status quo of not allowing any competition and only allowing their citizens to bet on a product with large take outs guaranteeing high revenues for the operator and poor value for the customer. We believe that model is out-dated.


But, in any case, the commercial terms of how an exchange might operate in the U.S. will be defined in concert with the racetracks and horsemen.  That is the model that has been proposed in California. If the pending bill that would authorize exchange wagering passes, exchange wagering still cannot take place until there is a contract in place with the applicable racetracks and horsemen specifying the return to racing from exchange wagering. If they are not satisfied, the exchange wagering will not be available. Despite this significant risk, Betfair is prepared to take a leap of faith and build a betting exchange unique to the U.S. market at a cost of millions of dollars in the expectation that mutually acceptable terms can be reached.  We are not proposing to bring the same model that operates in the UK into California.

Did Betfair strategically wait until the last minute to have the exchange wagering amendment added to Assembly Bill 2414 in California in order to avoid public comment on the issue? If not, why was the amendment added so late in the legislative session?

Betfair did not wait until the last minute to do anything. We have been working all year with forward thinkers in California racing and our involvement was kick-started at a meeting in Sacramento way back in February. At that meeting were the chair and representatives of the California Horse Racing Board, the owners, trainers, tracks and fairs as well as other interested parties. Throughout, we have continued to work with racing in the state to try and work through the political process and at each step we have done what we were asked to do by those driving the legislation forward. In addition to multiple meetings and conversations, the first draft of the bill was circulated widely to the racing industry in April and each subsequent draft was also circulated widely within the industry. Those who are expressing opposition have had the language and been in discussions on this matter for some time and for them to say anything other than that is disingenuous and doesn't ring true.


AB-2414 is a bold piece of legislation that allows racing to try and put its own house in order without requiring the politicians to do it for us. The exchange element of the bill is simply an enabling piece of legislation that empowers racing and potentially gives it another tool to go to war with. We would welcome the opportunity to provide that tool but have no interest in doing so if the financial terms are not acceptable to the industry and to the customer.

Why put this piece of legislation together with one increasing takeout on exotic bets and supported by the Thoroughbred Owners of California? It's my understanding TOC is neutral on the exchange issue but still supports the bill because owners are desperate for purse revenue.

My assumption is that the legislature seeks to craft consensus legislation and this bill is supported by almost all participants within the California racing industry. Unfortunately, in a democratic society it is difficult to get everybody to support a consensus bill, but every effort to do so has been made. We worked closely with the TOC to ensure that sufficient safeguards to protect the interests of horsemen were included in the bill. It was an in-depth process, but we agreed with them that horsemen having a firm seat at the table to craft the business model is essential to the success of the exchange wagering product. We also worked closely with the racing associations and fairs to ensure an equal level of comfort. In fact, should this bill be enacted, Magna, which is against it, will receive the same rights as all of the other racing associations and fairs.


We also recognize the purse money crisis in California racing and support the need to immediately increase purse revenue for California horsemen that AB-2414 provides.

One of the more interesting components of exchange wagering is “in-race” betting. From a technology standpoint, considering that there are delays in transmission because of the industry's use of satellite technology to broadcast races, how can Betfair make that happen with certainty that no “past posting” takes place?

Betfair has the most sophisticated audit trail of any wagering company and we would welcome the opportunity to bring that technology to the United States. Of course, we will only do so if the racing regulators are comfortable that all customers have a level playing field.

Are you surprised by the organized efforts of CDI and MI Developments to block the bill or by criticism, from me and others, that we need more dialogue on the issue before moving forward with legislation?

No, I am not surprised. The two companies you mention, understandably, have the interests of their shareholders at heart and not California racing. Both own businesses that directly compete with TVG in the ADW space and I believe they see the possible arrival of a betting exchange as being a threat to their market share. As for criticism elsewhere, I hope that when people take time to read the bill and see the safeguards built into it they will come to understand that the time for dialogue is once the legislation has been passed and not prior to its passing. AB-2414 explicitly provides that applicable racetracks and horsemen must agree to the business model before exchange wagering can occur.

Since you've come to the U.S. to run TVG and Betfair's international horse racing division, what has surprised you the most about American racing? What do you think distinguishes us—in a good or bad way—from racing in the UK and Europe?

The factionalism and fear that is eating away at the heart of American racing is what has surprised me the most. It's upsetting to see because there is absolutely no need for it. US racing is an amazing, exhilarating and life-affirming product at its best and there is no reason for those days to be behind us. The passion and enthusiasm the genuine horse fans have for the sport is great to see. We need to find a way for all that is good about racing to be conveyed to a younger generation than those of us who typically occupy the seats or place wagers.


I don't believe the sport, in the long-term, should be depending on slots or limited betting products to guarantee its future. Racing here has an opportunity to embrace innovation and we would like to use TVG and anything Betfair can do to help with that innovation.

Obviously our industry has some serious challenges. What are some of the steps you think we need to take to meet those challenges?

I am such a new boy in town that any remarks I make have to be seen in that context. Much better minds than mine will have better answers to that question and I am in no position to offer anything other than a personal opinion.


First and foremost, I would start to think about the customers more. The customers to me are the folks who go to the track and wager on the sport but also those people who do that from home too. They are also the owners and others who put the sport on for our benefit and it is all those constituencies that we need to serve. It isn't easy to satisfy everybody but that doesn't mean it isn't worth a shot.


We need to look at new ways of marketing and start speaking to people in ways that the younger generation can understand. We have a number of articulate and passionate people who are great at selling racing but we don't give them the right channels to do that to a modern audience.


Putting on good quality product when the public want to see it and to bet on it is key as well and working with TV companies and other media outlets to determine how best to get the sport in front of people is absolutely key to our future success.


I certainly don't have all the answers but I do work for a company that does have a TV channel, a first-class ADW product and a world-class betting exchange. We'd like the opportunity to play our part in returning racing to a place that captures the public imagination and has people wanting to engage with us.

Copyright © 2010, Blenheim Publishing, LLC

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  • Read the bill. There are safeguards in there on various issues. You’d have to trust their tracking technology, for sure. Specifically, what other checks would people like to see?

  • Caleb B

    Ray, why not ask Mr. Burns why the US industry should not do this themselves. Why should we watch potential profits and value from exchange wagering go to them? Why does the US industry not pursue this themselves? There are other exchange companies out there besides Betfair!!!

  • Caleb B – I don’t think its Mr Burns you should be asking. Ask the question of prospective innovators/entrepreneurs in the US.

  • Rick

    I’m with Caleb. Racing can develop exchange betting on its own and make sure the lion’s share of the takeout goes back to the industry. Betfair or any other “prospective innovators/entrepreneurs” will want a large share of the profits.

  • Craig

    If betting exchanges are going to beome part of the betting landscape in the US then the industry owner groups need to find a way to work together and build the betting exchange for the industry where 100% of all profits generated are returned to the sport. Stop letting outside companies siphon the betting profits out of the industry for their own shareholders.
    The pricing model would then be close to the current return from ADW companies for the racdtracks and purse account so the worry about money shifting out of the parimutuel pools should not be a concern to horsmen. Alongside the betting exchange the Owner groups could also own their own ADW system and also put all of the profits from this back into the purse accounts at the racetracks. Eliminate the middle man who is taking those profits and giving it to their shareholders.

    The industry owner groups need to strep up now and compete with the ADW companies for a share of the handle. Almost 100% of handle will shift to the ADW system within 10 to 20 years. It is like a company starting their own cell phone company 10 years ago. What a brilliant idea that would have been. Those who stayed in the land line business are continuing to see a contraction in their market and they have struggled to make profits over that time. It will be the same in the parimutuel business.

  • takethat

    Re “Racing can develop exchange betting”

    The NYOTB has a monopoly on horse race betting in NY and still loses money. In theory the government could step into any industry as a ‘non-profit’ and keep the margin. In practice we know that politics, corruption and laziness utterly destroy this premise. It’s why the Soviet Union collapsed and the NYOTB is bankrupt.

  • #3 Caroline Betts responds:

    Caleb B – I don’t think its Mr Burns you should be asking.

    Ask the question of prospective innovators/entrepreneurs in the US.

    _______________________

    Where are they?

    Apparently hiding behind the parimutuel toteboard in the infield for the past 4 decades.

    “Innovation” clearly has not been the forte’ of American wagering companies.

  • #5 Craig, according to this

    “We have been working all year with forward thinkers in California racing and our involvement was kick-started at a meeting in Sacramento way back in February. At that meeting were the chair and representatives of the California Horse Racing Board, the owners, trainers, tracks and fairs as well as other interested parties.”

    they’ve had their chance in California to do that, and failed to seize the opportunity.

  • Hmmm

    “However, we go beyond what most other betting operators do and also ensure that money goes directly back to the sport from customers outside the UK betting on British horseracing product. We are the only major betting company to do this and paying an international voluntary contribution to the sport reinforces our commitment to it. ”

    BetFair is not paying US tracks and Horsemen on exchange wagering on US races by Innternational players. Why should we now believe what they say, they have been poaching our product for years with no compensation…

  • Caleb B

    Caroline Betts Says:
    August 24th, 2010 at 11:27 am

    #5 Craig, according to this

    “We have been working all year with forward thinkers in California racing and our involvement was kick-started at a meeting in Sacramento way back in February. At that meeting were the chair and representatives of the California Horse Racing Board, the owners, trainers, tracks and fairs as well as other interested parties.”

    they’ve had their chance in California to do that, and failed to seize the opportunity.
    ***********************************
    Caroline when you see Mr. Burns at the water cooler later tell him you’re doing all you can to sway the ugly masses to his way of thinking. I don’t think he’ll fire you just yet.

  • Caleb B

    akethat Says:
    August 24th, 2010 at 11:13 am

    Re “Racing can develop exchange betting”

    The NYOTB has a monopoly on horse race betting in NY and still loses money. In theory the government could step into any industry as a ‘non-profit’ and keep the margin. In practice we know that politics, corruption and laziness utterly destroy this premise. It’s why the Soviet Union collapsed and the NYOTB
    *****************************************
    No one is saying the Government should run this. That would be like asking a one term Senator famous for voting “present” to run the United States. Ha ha!!

    A group of owners, trainers, tracks all together or a subset with the principle beneficiary being purses and industry initiatives (marketing, tv, backstretch improvements).

  • Whoa Now!!!!!

    Caroline,

    Mr. Burns’ claim of total and continued transparency from the outset with ALL industry factions is not true. Not even close. But that’s politics.

    However, why would anyone in business accept a deal where its terms and conditions are not spelled out? If Betfair is going to pay 0.5% to the tracks and purses, why don’t they say so. That is peanuts and would surely be rejected. They resist any pressure on their pricing model because, as everyone in the industry knows, RAISING TAKEOUT IS BAD. Betfair loves this bill. It raises takeout elsewhere and allows it to maintain its pricing model while resisting any pressure to modify it upward.

    I personally would like to see exchange betting but not under these vague and indeterminate conditions. And whats the big deal??? They can bring back the bill in the next legislative session once they have spelled out everything and received the support of the entire racing industry.

  • Jerry Jam

    …………………………………………ECONOMICS 101………………………………………………………

    EXCHANGE WAGERING = Takes Money out of the Pari-mutuel pools

    Less Money = Less Purses

    Less Purses = Less Horses and Owners

    Less Horses and Owners = Less Races

    Less Races = Fewer Tracks

    Fewer Tracks = Fewer Jobs

    Fewer Jobs = Wagering on other tracks and the end for CA horseracing.

    GO AHEAD AND SUPPORT AB 2414 AND YOU WILL GET YOUR WISH TO DESTROY CA HORSERACING THANKS TO BRACKPOOL, FRAVEL, BETFAIR, ETAL AND THEIR GREAT BETTING EXCHANGE IDEA!!!!

    Jerry Jam

    P.S. Do you think Betfair is paying anyone $$$$$$$$$$$$$$$$ for their assistance with this legislation??? I wonder who???

  • FunnyCideOver

    Mr. Burns: The two companies you mention, understandably, have the interests of their shareholders at heart and not California racing.

    ————————-

    Burns has the nerve to say this about Stronach and all of us who oppose Betfair?

    I’m sure that Burns’ bank account isn’t what Burns is most concerned with, and they’ll offer their platform for costs, with California racing getting all the profits.

    Right, Mr. Burns?

  • Ken Woodall

    ” working with TV companies and other media outlets to determine how best to get the sport in front of people is absolutely key to our future success.” they sound like the only rational promoters and marketers in racing until the above line! They are box thinkers just like the rest! There are 2 alreadt TVG, HRTV but gangstas are just flipping past them. Do they or anyone else in the “sport” know that the majority of income from USA pro sports is from non- betting TV Sponsorships, but also even more from merchandising? All the backward caps you see are worn by G’s who buy and wear them only because their Bros wear them. Many YG’s I know, unlike OG’s, never watch the games or pay attention to the sport, and most only want mechandise in black and/or white as a bonding thing!
    Racing has to GO OUT and grab people who already like going places including other betting and sports venues. Any promotion or Major marketing attempt to the general public will has to be connected to the only thing about racing the GP knows about- the KY Derby! Calling “Kentucky Derby Qualifier” races “Triple Crown Preps” is a total waste of time when trying to bring in the General Pubic!
    Perception, looks, name is all important. Betfair was a bone to appease the fastest organizing sector of racing- the horseplayer!
    CHRB members Harris (Tiznow), Moss (Z), along with Stronach (awesome Again) will directly benefit as big horseowners from both the BC abd the progressive betting tax. But with exchanfes they all lose power.

  • Hi Caleb – that’s an interesting and amusing theory you have about my employer. I’m a bit too busy to visit any water coolers this afternoon, but thanks for the kind thought. I’ll check back here later, however…

    Whoa now – I don’t think he claimed that (total and continued transparency from the outset). He did specifically claim that there was a meeting at the outset of Betfair’s involvement with a certain set of industry participants including tracks. Is that true or not?

    If it is, and if those industry participants didn’t want Betfair to run the show, they had their opportunity to say so, monitor developments closely and insist on additional provisions, or come up with an alternative plan. Del Mar, TOC and I think CTT all support the bill. I can only assume they’ve read it.

  • Callie

    Mr. Burns is like a breath of fresh air compared to the usual pablum from Magna and friends.

    Caleb — you made a great point. Why wouldn’t US racing interests do this themselves? They can’t. Not smart or well capitalized enough and now Betfair is way out in front. If Churchill and Magna had this technology, they wouldn’t be calling this a “bookie bill>’ they’d be telling you why it will save racing.

  • Jerry – Econ 101 does not say any of those things I’m afraid. Econ 101 says higher prices at the track than on close substitutes does those things.

  • AS

    Ray,

    Dont give these guys the platform they desire. Sure, its news, but detrimental to the industry that supports your website.

    Exchange wagering will never happen in the US. Certainly not until the UIGEA is flipped. With Obama sailing on hist last tack, and Barney blundering all over the chances are dim.

    Go write about something good for the industry Ray.

  • Whoa Now!!!!!

    Caroline,

    It is not true. Period. Substantively, they appeared on the scene out of nowhere and at the last minute. The proof of this is that they tried to minimize this maneuver by saying it is only an “enabling” statute. They may have whispered something to their mole on the CHRB (guess who???) in April who, in turn, might have made a glancing remark to the industry at that time, but the meat and potatoes just arrived. You will have to take my word on this point.

    To correct your statement, the industry has nothing against Betfair per se. They can run it if the distribution is fair. Right now, one half of one percent is not fair. And all the while Betfair hopes that takeout rises in the other sectors so they become more firmly entrenched with their “pressure-resistant” pricing model. Why doesn’t Mr. Burns tell us that they will hike the takeout on exchange betting in order to satisfy the tracks and owners? The answer is because low takeout is the most attractive aspect of their model.

  • Betfair is one of just a handful of recent global startups that have a private valuation of over $1 billion. They handle more transactions than all of the major European indicies combined.

    The level of investment and technological expertise it needs to be run successfully is far beyond what the US racing industry could hope to foster and encourage itself (just look at the technology behind the tote pools and Equibase).

    I’ve used Betfair, using the web interface and through it’s API, for exchange betting and betting through the Irish and UK Tote pools when those markets interested me.

    I agree with Mr. Burn’s statement, “The factionalism and fear that is eating away at the heart of American racing is what has surprised me the most”.

    However this fear isn’t held by the everyday horseplayer and fan, they are ready for something new. Instead it is those in charge who have to be dragged kicking-and-screaming into the 21st century. With their future and power uncertain, they just want things to remain as-is, regardless of the long-term repercussions.

  • Whoa now – very interesting, but can someone (Mr. Burns?) please show me actual proof one way or the other? Where/when was the meeting supposedly held? Record of participants and content?

    An FYI for Jerry to clarify: you should pick an alternative econ course. Maybe one that covers dynamic trade theory; that might say SOME of those things. But beware – it still might not say that they were all negative outcomes. Efficiency gains through increased competition, pushing the technological frontier, positive technological spillovers, and all that good stuff. Or you could go to the marketing department.

  • takethat

    “The factionalism and fear that is eating away at the heart of American racing is what has surprised me the most”.

    The age profile of the American horse players & so called ‘horsemen’ has a lot to do with it. Why should they care about the long term future of the sport? Their only concern is the here & now. Any impediment to what they are doing already – however much it is failing – is greeted with a barrage of
    criticism.

  • NAFTA

    Developing the software would not be difficult nor outlandishly expensive, and Betfair isn’t the only one with exchange software. The industry could approach a competitor like BetDaq or hell, even an offshore like eHorse that already has exchange betting and license their software if they really wanted to. This industry does not need Betfair and any exchange should absolutely, positively be industry controlled. But the question is, who would run it?

  • Caleb B

    NAFTA Says:
    August 24th, 2010 at 1:50 pm

    Developing the software would not be difficult nor outlandishly expensive, and Betfair isn’t the only one with exchange software. The industry could approach a competitor like BetDaq or hell, even an offshore like eHorse that already has exchange betting and license their software if they really wanted to. This industry does not need Betfair and any exchange should absolutely, positively be industry controlled. But the question is, who would run it?
    ************************************************
    I agree that the industry should look at other providers and not feel pressure from the smoke and mirrors of Betfair.

    Betdaq has a good platform and should be seriously considered. As should other technologies.

    No one is opposed to exchange wagering (that I can see from these posts). What people are opposed to is Betfair’s monopoly and their ridiculously low payments to the industry.

    If I were a player I would also ask Betfair what protections there are against them or anyone else reverse engineering any players successful wagering/handicapping models. I’ve heard some rumors (not sure how true) but would it surprise anyone in this day an age if they were found to be copying successful players models and playing the exchange themselves with an offshore shadow team? It’s happened on the stock market before. It’s only smoke and mirrors from Betfair that has everyone thinking they’re so squeaky clean.

  • LJBroussard

    #20 Robin Howlett said, “I agree with Mr. Burn’s statement, ‘The factionalism and fear that is eating away at the heart of American racing is what has surprised me the most.’

    However this fear isn’t held by the everyday horseplayer and fan, they are ready for something new. Instead it is those in charge who have to be dragged kicking-and-screaming into the 21st century. With their future and power uncertain, they just want things to remain as-is, regardless of the long-term repercussions.”

    ****
    I agree with everyt’ing Robin Howlett said. The more involved I become, the more convinced I am that factions of demented, incestuous clowns are – even as we speak – sitting behind closed doors concocting ways to destroy racing before a new generation can step in and expose them for what they really are.

    Thanks for another important, informative article, Mr. Ray.

    Sincerely,
    Linda “Age Is A State Of Mind” Broussard Gracey

    PS: If one more frontsider with manicured pinkies at these surreal frontside-backside meeting we’re having down here says “higher quality horses” when what he MEANS is “same sound, solid working-class $10-25K horses running for better purses which makes the track look classier on TVG” – if I hear those words one more time, I shall be FORCED to engage in Conduct Unbecoming to Racing. (Other horsemen in the room will pass the hat to pay my fine or perhaps bail, believe it.)

  • Burn says: “Louis Romanet used to run a state-owned monopoly in France, the PMU, and his comments about betting exchanges and all other betting operators other than PMU should be seen in that light. The French liked the status quo of not allowing any competition and only allowing their citizens to bet on a product with large take outs guaranteeing high revenues for the operator and poor value for the customer. We believe that model is out-dated.”

    Yup, so out-dated that France is the only country in Europe where horse owners can have a hope of hell of breaking even. High purses because France kept exchange betting OUT. But Burn is out-dated, too; France now has allowed competition, but on a parimutuel basis only. The law here was specifically written to keep out betting exchanges after watching how Betfair decimated British racing.

  • tonyaz

    When does a wagering company speak for the public? I could careless really. I am done contributing money to a useless and guaranteed sport that will fail. This industry could careless about the horses and fans….the two most vital ingredients for success. No more blogs from me. Figure it out horse racing mecca…..I cannot wait until massive consolidation hits and all the internal powers find a new and improved way of cheating the horse and the fan. Good Luck. My money and time will go to another venue. Just as many other fans have continued to do. While your at it TVG, how about getting with Don King and setting up a Pay Per View! That will give you an idea of how many people really could careless if this sport fails.

  • PT

    It was good to read this. I am glad Ray got the other side.

    You do not have to understand exchange wagering or any item really, to form an opinion based on reading both sides. I have read the comments on this site for a couple days. The detractors who say “blood sucking leeches”, “cannabilze wagering” and so on are always asked for evidence of this. They can never find any.

    The CDI and Magna side runs an ad here about stopping the exchange part of the bill talking about “lost jobs”. What jobs? Where have they been lost with betfair in the market? What evidence?

    Then we have betfair being interviewed – he gives facts. a 52% jump in the tote in the UK etc.

    People with facts usually win an argument. Unfortunately or fortunately (whichever side of the fence you are on) Mr. Burn has them, and shares them.

    The other side? Not so much.

    That should tell us what we need to know about exchange wagering.

    PT

  • Jersey Josh

    Seems that some one out there knows who has been and will continue to get the extra envelope under the table…..NAME THEM. Stop saying this or that.

    Jerry Jam…NAME THEM! Why are you afraid to? Are they gonna toss you out? Blackballed?

    Please, we in this country love a good scam. Call these clowns out and find out whats what.

  • Jerry Jam

    ………………………………………………..HOW ABOUT THIS IDEA………………………….

    MAYBE BETFAIR SHOULD BUY A RACETRACK, HORSES, HIRE THE EMPLOYEEES AND SEE IF IT WORKS????? YEA RIGHT….

    …………………………………………………ONE FINAL THOUGH……………………………………………..

    IF THERE’S NO RACETRACK, WHO NEEDS A BETTING EXCHANGE?

    JERRY

  • Caleb B

    PT Says:
    August 24th, 2010 at 4:41 pm

    It was good to read this. I am glad Ray got the other side.

    You do not have to understand exchange wagering or any item really, to form an opinion based on reading both sides. I have read the comments on this site for a couple days. The detractors who say “blood sucking leeches”, “cannabilze wagering” and so on are always asked for evidence of this. They can never find any.

    The CDI and Magna side runs an ad here about stopping the exchange part of the bill talking about “lost jobs”. What jobs? Where have they been lost with betfair in the market? What evidence?

    Then we have betfair being interviewed – he gives facts. a 52% jump in the tote in the UK etc.

    People with facts usually win an argument. Unfortunately or fortunately (whichever side of the fence you are on) Mr. Burn has them, and shares them.

    The other side? Not so much.

    That should tell us what we need to know about exchange wagering.

    PT
    **********************************************
    PT

    Here are some facts

    Betfair offer .50% -1% to purses
    Fact racing is unsustainable at that level.

    52% jump in the UK tote from what to what? What happened to other traditional bookmaker business?

    Fact UK Levy is off 30% plus from it’s high. So for all Betfair’s success it hasn’t translated into a better industry has it? FACT

    Fact Betfair own no bricks n mortar tracks or OTBs.
    Fact Betfair own, breed, race, train no horses.
    Fact Betfair have profited for years offering US content they had no rights to and paid no money to the content rights holders.
    Fact only recently did they begin to pay the US industry for content and then at bird-feed prices. Del Mar received $30,000 for $25-$30 million in Betfair handle.
    Fact Betfair/TVG strong arm the tracks or extort them with the promise of TV time or loss thereof if they don’t play Betfair/TVG’s game.

    Shall I go on?

    No one has a problem with exchange wagering. The problem is with the pirate ship known as Betfair. Let’s have an exchange or two but let’s have it be industry owned and the industry be the direct primary beneficiary of it.

  • Funny Cide

    PT, how about we let Betfair operate but they have to charge the same takeout as the tracks, keeping 5% for them and the rest of the takeout goes back to the tracks?

    That’d be fair, yes?

  • PT

    Caleb,

    You are not doing yourself any favors here.

    How did Australia do this year compared to the US? How has Tasmania done compared to the US?

    30% loss in the UK on prize money? How about 20%. And why did the Jockey Club in the UK when asked why its down 20% say this is the reason: “it says it has been hit by bookies moving offshore to avoid paying the Horseracing Betting Levy on the right to take bets on British races.”

    Any mention of those people you call “blood suckers”. Betfair started and signed up a couple millon customers from 200-2005. The prize money was up and aI quote “racing has gone through a period of growth”. Did they just become bloodsuckers and the reason for any losses in 2007?

    If they are the reason why things are worse than a couple of years ago, would the Jockey Club not tell everyone?

    Have the 50,000 jobs that were predicted to be decimated in Australia come to fruition?

    Fear is not a policy, fear is for people who are devoid of policy.

    PT

    PT

  • Funny Cide

    Ray, how about putting on your Woodward cap? Burns claims that there has been substantial dialogue and copies of the drafts sent out widely through the industry. Is this true? If so, why did we only find out last week? Who in the industry, if anyone, is supporting Betfair on this?

  • PT

    FC: “PT, how about we let Betfair operate but they have to charge the same takeout as the tracks, keeping 5% for them and the rest of the takeout goes back to the tracks?

    That’d be fair, yes?”

    Hmmm, yah that would be great. They would have about seven people playing the exchange at those takeouts.

    It would make them like us – a business with no customers.

    PT

  • Funny Cide

    PT, so the bottom line to you is that you want to consume racing’s product without paying for it, have I got that right? Or do you really think .5% pays for it?

    Why don’t you ask yourself why they don’t own a track and use the Betfair model for their on-track wagering? It’s really easy to lowball to get people’s business when you don’t pay for the product.

  • Whoa Now!!!!!

    “Hmmm, yah that would be great. They would have about seven people playing the exchange at those takeouts…”

    Amen, PT. so now you see why Betfair loves this bill. raise the takeout everywhere else thus making their product the most attractive by far…………but, no way in hell are you going to mess with their pricing model because Betfair knows that if you RAISE TAKEOUT you go broke and so, if you raise the takeout on exchange betting nobody will bother.

    Betfair is swinging for the fences here. They just don’t want a piece of the action, they want it all. If this bill passes, they will get it.

  • stillriledup

    Betfair is thriving, they have more money than they know what to do with. Do you know why Betfair is rich? Because they GET IT. I don’t think California horse racing people should be up in arms that Betfair now has a presence in Calif. People are slow to embrace change, especially the horse racing industry and especially the horse racing industry in Cali. Betfair is rich because they know what they’re doing.

    Lets not fight new technology and new change. This betfair betting exchange in California will create TONS of new racing fans. Sure, in the beginning it may cannibalize the traditional wagering menu just a little bit, but for the most part, California thoroughbred interests have had a tough time attracting new customers. Lets attract new customers even if in the short run it hurts the traditional betting menu. These new customers will eventually migrate to wagering on bets that give them a chance to really exploit their racing knowledge, but we first have to get them in the door.

    Betfair’s betting exchange will get them in the door.

  • PT

    FC: “PT, so the bottom line to you is that you want to consume racing’s product without paying for it, have I got that right? Or do you really think .5% pays for it? ”

    – Joe and Bob play racing in the pools. They are taxed at 22%. They like Stronachs idea of a super, quadra, superfecta.
    – Bob and Pete wont play racing in the pools because the tag line in racing is “you can beat a race but you cant beat the races. After being tired of getting their head kicked in by the sport, they switched to poker in 2002.

    Joe and Bob are playing, but they are dying off. They bet 1000 at 22% takeout, so racing makes $220. Total revnue for racing is $220, because the other two have left racing.

    Bob and Pete now see there is something new.

    “Pete, we might be able to play racing again. Check this out, low takeout and a neat system”

    “Yes Bob, let’s give it a try”

    Bob and Pete bet big money in this new system, because of churn. They bet $4000.

    Betfair signs a check over for 1% of $4000, or $40.

    But there is a kicker. Now that Bob and Pete are following racing, they see the big Stronach superduper quadratfecta super and want to play it.

    They bet $400 in one at 22%, trying to get the big carryover.

    Revenue to racing: $88.

    So, without a mechanism at low cost, with a neat techno platform to attract customers who are not looking at us we have $220.

    With that mechanism attracting new money that have left, or are not looking at us, we still have the $220, but we added $40 in the exchange and $88 in the tote.

    Racing now has $348.

    Even better, some of that $348 is bet by people under the age of 50, unlike now.

    That in a nutshell, is why betfair has done some good things for racing in other jurisdictions, and why all the fear mongering is never proven correct.

    PT

  • south side

    American tracks should establishing their own exchange wagering platform instead of fighting it.

    Of course with the state of our outdated tote system in this country, I don’t trust them to police it. Betfair’s platform is light years ahead of the U.S. tote system.

  • Funny Cide

    Stillriledup, what Betfair gets is that as long as it doesn’t have to pay for the product, it can undercut the competition thereby getting the customers to put a billion in their bank account. You’re like the guy who buys shirts made in sweatshops because it’s cheaper and you think the guy who runs the sweatshop “gets it!”

    I assume the worst and this will pass but hopefully all the tracks won’t dare to contract with Betfair. Let Betfair buy a track and use Betfair for their own on-track wagering or better yet, put little computer-generated horses on their screens for the handicappers to bet on. It seems they’ll be perfectly happy with that alternative because they don’t care about the living, breathing animals and people who invest their lives for this sport.

  • patrick mcintyre

    As an enthusiastic horseplayer, I am dismayed by the proposed takeout hike. What the supporters of this tax increase are saying is illogical and counter-productive. The “logic” of the proposed tax hike is, “business is declining, customers are walking away in droves from our product… so let’s raise prices.” In the face of decreased demand it is nonsensical to raise prices. And yes, the casual two dollar better, doesn’t care about pari-mutual tax increases, but the folks who wager hundreds of thousands a year, do care. Because they know how the churn affects the bottom line.

    Secondly, California racing suffers immensely from short fields. Who wants to choose between a trio of valueless contenders at 2/1 in a five horse field? Why isn’t anyone discussing the wildly successful experiment at Monmouth, where field size was increased dramatically by implementing a 3 day race week?

    Finally, exchange betting, would revolutionize, and reinvigorate wagering handle- precisely because costs to the consumers (e.g. horseplayers) would be dramatically lowered. What sophisticated player in his right mind would not be motivated by a substantial reduction in takeout (let’s say from 15% to Betfair’s 5%.)

    In conclusion AB2414 is a mixed bag of the good and the bad. What’s bad is raising prices when demand is dying through pari-mutual tax increases, and what’s good is implementing new technologies that lower costs for the consumer-such as exchange betting.

    patmc

  • stillriledup

    Cider,

    You can’t blame betfair for ‘undercutting’ as you like to put it, you have to blame the current laws that permit such a situation to happen. If the racing industry didnt want Betfair to be able to use their product and ‘undercut’ them, they would say no.

    But, if the racing industry ‘permits’ Betfair to access their product, you can’t blame Betfair and you can’t blame the bettor who chooses betfair for his or her wagering needs.

  • Caleb B

    # south side Says:
    August 24th, 2010 at 6:17 pm

    American tracks should establishing their own exchange wagering platform instead of fighting it.

    Of course with the state of our outdated tote system in this country, I don’t trust them to police it. Betfair’s platform is light years ahead of the U.S. tote system.
    ******************************************************
    There are other technologies. Again I’m SUPPORTIVE of exchange wagering if the financial picture is handled to the industry’s primary benefit. And there are other good technologies and good providers out there. WE DO NOT HAVE TO ACCEPT Betfair at face value!! The industry should be exploring other providers so when Betfair comes knocking on the door Betfair knows that they need to play ball or they can get bent. The industry will have other positive options!!

    Betfair are the problem not exchange wagering.

  • Rick

    In a WSJ article Betfair CEO David Yu said:

    “On the surface we are very much a betting company, but what I see is a technology business. When I think about the business we wouldn’t be here today if it weren’t for the technology platform. Like other great internet businesses, whether it is Amazon.com Inc., eBay Inc. or Google, they all rely on their technology platform. Technology is at the core of this business.”

    If Betfair is a technology business and racing wants to use their technology, why not license it for a set fee?

    Microsoft is a technology company. People that want to use a computer don’t write their own operating system – they pay to license the OS from Microsoft or Apple. That’s what racing should do with Betfair or another technology company.

  • Rick

    I should also mention that business that want to use an OS don’t have to pay the bulk of their profits to Microsoft – just the licensing fee.

  • NAFTA

    You’re right, Rick, as has been mentioned, any kind of relationship with a technology provider for a betting exchange should be on a licensing basis where they receive a very small percentage of the commission, just like a tote company. Clearly, Betfair would resist this as they feel like they are the betting exchange market; they want the lion’s share of the commission. This is absurd. There’s no reason an industry-owned brand couldn’t be just as successful as Betfair in the U.S. market; Betfair’s marketing clout is not needed here. They do NOT own the concept of a betting exchange and there are other sites that offer the same product. And this is not like building an operating system; if the industry couldn’t come to an acceptable deal with an existing provider, it absolutely could develop its own at a fairly reasonable cost. Lots of starving developers out there. Sure, perhaps it would take some time to get to the level of complexity (especially on the security side) as Betfair’s, but there’s no reason it couldn’t be done. Best case to me would be a short-term licensing deal with an existing provider as the industry takes it time and makes plans to develop its own system exactly to needed specs. Long term, the industry should own the whole thing from A to B.

  • PT

    “There’s no reason an industry-owned brand couldn’t be just as successful as Betfair in the U.S. market”

    I think there is.

    Racing will run it.
    Takeout will be 15%
    Marketing spending will be almost zero
    and racing will run it

    Would you buy stock in it?

    JMO, but I have no faith in a business that if they just held inflation the last decade, handle would be $20B this year, instead of 10.

  • clem clemson

    A July 27, 2010 Reuters articel states that Befair is planning to go public in September 2010. In 2009 it had revenues of $500 million on 6 million transactions a day with 2.5 million users. Its EBITA (earnings before interest and taxes) is $65 million. It is advised by Goldman Sachs and Morgan Stanley. The two biggest players in the tech IPO space. BetFair’s business plan is to capture 80% of world-wide betting on all sports. The Founders seek to become Billionaires. Nothing about BetFair’s entry into California horseracing is good for California horseracing. BetFair only seeks to enhance its EBITA for the upcoming IPO. Why would the Legislature and CHRB ever allow BetFair a foothold here? Nothing good is offered by the alliance. Nothing good is proposed by Betfair to the California owners, trainers or racetracks.

  • Stephen Burn

    There are two many false claims being made about Betfair for me to respond to all of them, this evening. I will try and come back here tomorrow. However, specifically, it is simply not correct to say that Betfair takes bets on US racing now and makes no return to the sport. International customers are able to bet on US horseracing via Betfair.com (not available in the US) but only on tracks where we have an agreement with those track. Our customers can also watch US racing live. All tracks and relevant horsemen’s groups are receive revenues off the back of that wagering with commercial terms having been agreed with every operator.

    On a related but separate matter, it is balony to throw around daft numbers like 0.5% of revenues being what Betfair would pay back to racing. Does anyone really think that would do anybody any good? Without a successful, vibrant industry it doesn’t matter how good any exchange is. We have to find the right model for racing, for the fans and for the operator and that’s what we’ll do if given the chance.

    Racing or anyone else is perfectly entitled to build and operate thier own exchange but I think one or two people on here have little or no idea how an exchange operates, its complexities, payment processes, marketing and maintenance costs etc etc. I struggle to get various people in the racing industry to agree to the off time for various races so wouldn’t be confident of the industry uniting to operate an exchange or an ADW but if it did good luck to it. Customers should begiven the chance to wager on the best products and if racing is able to provide them then great, a rosie future lies ahead.

    Betfair does, by the way, own a number of horses and run them as racing clubs for our customers, we just don’t do that yet in the US because the exchange doesn’t have any US-based customers.

    People can get all hot and bothered and throw claims and counter claims around about Betfair but we have a strong track record of being good corporate citizens who want to operate in a regulated and legal environment. Above all else we look after our customers and we also believe we should pay a fair price for the racing product.

    Oh, and on the press articles alleging Betfair’s about to go public the same articles appeared earlier this year, in 2009, 2008, 2007 etc etc. One day, maybe they’ll be right but whether or not Betfair is a public or private company has nothing at all to do with AB2414 as that is about trying to do something for the good of California racing not Betfair of the other 40 or so betting exchanges out there.

  • stillriledup

    Mr Burn, you seem like a smart guy, i enjoyed your interview with Todd on TVG the other day. You are supporting a takeout raise in Cal of 2 or 3 percent. As i’m sure you are well aware, many studies have been done and to my knowledge, none of the studies say that a 23 percent takeout is the optimal pricing point.

    Do you disagree with all the studies that have said the optimal price of a bet is NOT 23 percent? Like i said, you’re a fairly intelligent guy, i can’t imagine that you really believe a takeout raise is good for the california racing industry.

  • Funny Cide

    Steven Burn, would your model work if you owned a racetrack and used Betfair’s platform for your on-track wagering? What would Betfair’s takeout have to be to make the track profitable?

  • Stephen Burn

    stillriledup, as a horseplayer I would accept that an increased take out of any kind would be unpalatable. However, as that same horseplayer, I want to see a healthy sport that has the chance of a long-term future and people with much more knowledge than me of California racing believe this will help the sport. It is worth noting that other states already have take outs that exceed California. In the UK, there is a healthy Tote industry and some of the most successful bets have a take out of 30%.
    To me, we should be looking at how to rebate price sensitive customers so that skilled horseplayers who put a lot of money into pools are given a loyalty bonus or rakeback. I struggle to understand why US racing is so willing to cooperate with offshore rebate shops that suck the life out of the sport. We should be exploring ways of bringing that business back onshore and, at the same time, rewarding regular players with rebates. It should be the operator that stands the price of those rebates and not the sport but they could only do that if working out the right pricing formula all round. Irrespective of what happens to AB2414, I hope that issue will be explored by the industry.
    Funny Cide, we don’t know how to run and operate racetracks and are primarily an online business with no plans to start running racecourses. We are happy to work with any track interested in talking to us to see if our technology can be utilised by them to operate more efficient and innovative betting products.
    Oh, and while I’m on, to answer another point – well, more of an attempted smear – Betfair has not been paying anyone in Sacramento or anywhere else in California to lobby for us other than the same professional lobbying firm that TVG has employed for many years.

  • bob Hope

    We have an interesting dichotomy here! It would be funny if it weren’t so perilously sinister!
    We have a cleverly calculated plan to take control of this industry in its crippled state of despair and intellectual bankruptcy! Burn has the usual articulate approach to what appears to be a very simple problem. He wins over many who love the sport by his statement “the factionalism and fear that is eating away at the heart of American racing is what has surprised me the most. It’s upsetting to see because there is absolutely no need for it. US racing is an amazing, exhilarating and life-affirming product at its best and there is no reason for those days to be behind us. The passion and enthusiasm the genuine horse fans have for the sport is great to see. We need to find a way for all that is good about racing to be conveyed to a younger generation than those of us who typically occupy the seats or place wagers.
    He is right about that and he knows the history of TVG’s clever business plan to disseminate (leak) U.S. racing signals thru its global network for free, with no return to the industry and with the blessing of the alphabets including CD, flagrantly violating contracts and millions of dollars in decoder boxes. Burn is disingenuous when he states that they have been working all year at this. Betfair marketed hard and was welcomed at every symposium, horsemens’ gathering for years and was rumored as being part of the Coutu connection for as long. At this point it is no contest! The groundwork has been methodically done. It is more than amazing that the problem never made the agendas of our sleepy hollow symposiums! But then again, I guess not!

  • Caleb B

    Mr. Burn,

    I applaud your plans for horse ownership here in the States. I’m sure many breeders will be happy to hear this. I’m not sure why TVG can’t do a few racing partnerships?

    Do you dispute your Betfair handle figures for Del Mar at $30 ish million? If that’s incorrect what’s the correct number?

    Do you dispute payment of $25-$30K to Del Mar for this Betfair handle? If it’s incorrect what’s the correct number? If this is correct does it not reflect a very paltry .10%? Do you think this is a reasonable number?

    Can you comment on penalties that big or successful players pay as a penalty “surcharge” to Betfair?

    Can you comment on rumors that if too successful you run successful players off or through either pay-offs or threats to turn off their play?

    Can you comment on rumors that Betfair deploy a shadow team offshore that mimic successful
    players trades in the exchange?

    Is Betfair willing to license their technology in direct partnership with the US industry as some have called for here? If not why not?

    Terms will certainly fluctuate track by track and State by State but what do you offer as a minimum payment % to US tracks and horsemen? .10% as you’ve done with Del Mar? You’ve indicated .50% is ridiculous, can Del Mar expect an increased payment from you as a result of your comments here?

  • Rick

    …”but I think one or two people on here have little or no idea how an exchange operates, its complexities, payment processes, marketing and maintenance costs etc etc” –Stephen Burn

    I know we are such simpletons.

  • Stephen Burn

    Caleb B, to talk about handle as far as an exchnage model is concenred is not relevant as it operates in a completelt different way than pari-mutuel betting. It is possinle to take $100 and trade it in such a way that the handle figure would be ten or a hundred times that but the money risked would only ever have been the original $100. Explaining how the model works is part of the ongoing challenge any would be operator will have when wanting to enter new markets.
    I am not at liberty to share Del Mar revenues, or anyone else’s, without permission from our respective partners. But, I assue you, we have an agreed business model with Del Mar for international wagering on their product but do not anticpate that same model being used in the US. Also, please keep in mind that there are other ways of retunring revenue to the tracks and horseman. For eg, we have given a significant sponsorship commitment to Del Mar that has helped guarantee this weekend’s Pacific Classic purse at $1m. In the UK, we invest heavily in race and other sponsorships and would welcome more of an opportunity to do that here in California and elsewhere. This year, we have already sponsored the United Nations, the Triple Tiara in New York and several other events.
    There are no big penalties for big or successful players on Betfair. We introduced a premium charge for people who take more out of the exchange ecosystem than it costs us to rbing in new people but the numbers of people affected by that are fewer than 0.5% of our active customer base. And, like everyone else, the people paying that charge have the option of taking thier business elsewhere if they don’t believe we are offering a competitively priced or beneficial service. I am pleased to report that despite a lot of criticism when the charge was initially introduced, affected customers do not appear to have left the exchange as many had predicted as they appear to appreciate the ongoing benefits betting with Betfair brings them.
    Betfair does not turn away winners or successful players. More than any other betting company in the world we welcome them. I have no idea where your ‘rumours’ originate on this and other points but the exact opposite of what you suggest is true.
    We do not deploy a shadow team to mimic successful player trades in the exchange or anywhere else. This would be entirely unethical. I am proud to admit that I work for a firm that prides itself on operating with absolute integirty. We have become the world’s busiest betting site because our customers have learnt that they can trust our practices, that thier money is secure and ring-fenced and that we only operate in regulated environemnts.
    Betfair is absolutely willing to license its technology to the US industry and would welcome the chance to do so.
    We have not discussed terms in details with tracks or horsemen but it is accepted by us that a fair price has to be paid for the product provided. If ultimately we, or anyone else, cannot agree terms that is acceptable to the sport but also to those betting on the sport, then an exchange has no future.
    I’m afraid duty calls and I won’t be around to respond to further queries but appreciate the interest shown and would be happy to address further questions as and when an opportunity arises. Thanks for the interest.
    Oh, and for the record, Bob Hope, TVG does not leak its signal around the world to anyone for free. I am not aware of us having any international arrangements of the kind suggested. Any signal distribution we are involved in guarantees a return to racing that is acceptable to racing. And my reference to ‘working hard all year’ related specifically to AB2414. I fully admit to us having been speaking to many people in the industry for a number of years but we have never been part of ‘the Coutu connection’ (I don’t even know what that is) or any other grouping.

  • Caleb B

    Mr. Burn,

    You hide behind BS rather than answer the pressing questions directly. A day will come when the bright light will shine on Betfair and all that you are.

    Interesting that you dodge and weave regarding payments to the industry. We all know for many many years you benefited off the back of the US industry with zero payments back. Only recently did you begin paying and then only the paltry amounts referenced.

    I have to hand it to you though, sponsorships provide the appearance of being a white knight savior helping the industry versus the more low key day in and day out payment for core content rights that help the bread and butter horsemen and horsewomen who own and breed the horses you profit off of. Less glamor in that.

    Like a wealthy drug lord Betfair throws dollars to the street periodically to maintain status and standing among the poor and disadvantaged never truly sharing the full wealth created by those you profit off of. “Oh thank you sir!”

  • bob Hope

    Stephen, we can appreciate your explanation of being a neophyte in the game and being spared previous dalliances with indiscretion but the politics of a new beginning doesn’t erase previous conduct! TVG ran horse racing signals through an unencrypted C band for years and kept every illegal(and legal) bookmaker alive with US signals. The industry fought hard; harnessed their indiscriminant sale of handicapping data; forced a change to running signals in the clear. The unpaid sale of signals continues through Dish and other networks throughout the world. Small potatoes in the scheme of things but we urge you to learn your history. Horse racing is based on it and past performance is vital to our future!

  • Whoa Now!!!

    “We have not discussed terms in details with tracks or horsemen but it is accepted by us that a fair price has to be paid for the product provided.”

    Mr. Burn, when talking about “the product provided” are you referring to the exchange wagering platform or the horses in the races?? I personally want to thank you for taking the time to respond on this website, but you were particularly vague about any inquiry into modification of your pricing model. Thus a couple more questions:

    1. Would Betfair consider RAISING its exchange takeout to, say, 10%? If not, why not?
    2. The new bill allows Betfair to take positions in the betting. You say above that Betfair does not use shadow entitities to bet. Does Betfair take wagering positions on its platform? Under what circumstances?

    I hope exchange wagering happens but not at these prices. Listening to Burn talk about raised takeout as being potentially positive is disingenuous. They don’t want THEIR pricing model touched in any way because they know RAISED TAKEOUT IS BAD FOR BUSINESS.

  • PT

    Well, some interesting news stories today.

    http://www.capitolweekly.net/article.php?_c=z31etaz62gp6wf&xid=z31ca453ek9v5x&done=.z31etaz62he6wf

    The Magna guys seemed to be for the exchange wagering before they were against the exchange wagering:

    “Kirk Breed, said that the exchange-betting concepts within the bill had been presented during at least three board meetings over the last several months, including the most recent meeting on August 19. “All of these items have been bought up,” Breed said. “All of the stakeholders were involved.” That includes Magna Entertainment, he said, now the key opponent of the bill.”

    And the dudes who are on the ‘blood sucking parasite, kill racing bandwagon’ are not happy with this in the article, I am guessing:

    “In fact, according to a Republican caucus analysis opposing the bill, between 1998, when exchange wagering was first allowed, and 2008, “purse revenues” went up 54 percent. Track attendance went up 10 percent, the number of horses in competition increased 19 percent, and the number of races jumped 26 percent. ”

    Interesting stuff.

  • clem clemson

    Mr. Burns writes that AB2414 is “about trying to do something good for California racing.” This statement is disingenuous and misguided.

    California racing does need help but its not going to receive it by increasing the take out and allowing BetFair to come in and start a betting exchange. The reason for this is multi-faceted. But certain facts are undeniable. Cal racing has been losing bettors because of short fields and inconsistent surfaces that no one can handicap with any confidence. This in turn results in lower ADW revenues to the track and starts a chain effect of negative consequences. A betting exchange would exacerbate this situation – not repair it or provide any additional support to the Cal tracks, horsemen or owners.

    Mr. Burn might mean well, but he’s a corporate spokesman and the corporation has a business plan that he is hired to execute upon. The business plan for BetFair is world domination of the betting signal and to go public. Mr. Burns cannot deny that and any attempt to do so makes his arguments look specious and self-serving.

  • All else aside, a truly classic line from California Republicans opposing the bill:

    “The analysis goes on to say the bill would create 15 new public sector union jobs, which it calls a “buy-off” to “big labor.”

  • Ken Woodall

    Not 1 word of the original bill is now in it! Bait and switch! From losing the BC to 2-3% increase in every pool every race!

    Quote on the LA takeout increase bill: “TOC adds, “that adopting this subsidy for night industry
    races and using increased takeout for this purpose sets a
    very poor precedent for day races. Horse racing in
    California is threatened by a combination of factors,

    AB 246 (Price) continued
    Page 7

    including competition from racing in other states, other
    forms of gaming within California, pressure from developers
    and race track bankruptcies. We need to be extremely
    thoughtful about any increase in takeout and make certain
    that related funds are used to support initiatives that
    improve the industry’s overall health.”

    So the TBred owners did not want LA increase (non-TBred), but wanted thei TBred increase! Talk about selfish greed!

  • Caleb B

    Brackpool is on Betfair’s payroll it appears. This deal is all but done! Thanks to pay-offs under the table dealings and back room negotiations.

    PT – I was at the CHRB meetings and this WAS NOT discussed at all of them. Perhaps I’ve been wrong about Jerry Jam all along! His disgust with CHRB is well founded it appears!

    California is about to lead us to the road to ruin!! Pinheads!! I’ll spit in Mr. Burn’s face the next time I see that pig!!

  • Caleb B

    My apologies that last comment was out of line.

  • Craig

    Betfair might have given the industry the kick it needs to generate its own revenue for the sport. If the industry started its own exchange and returned all money to the sport then they would be the only platform that the horsman would licence to conduct eschange wagering. Betfair would then not be able to get a licence to have an exchange and would have to be happy just being an ADW provider.
    Those exchanges who are not prepared to return all money to the sport will not be approved by the horsmen.
    If the industry does not take this opportunity it will result in the same pitiful return to racing that Simulcasting and ADW providers give back to the sport. Lets not allow the middleman to siphon even more money out of the sport.
    Let’s exploit the advantage we will have in this legislation not dwell on the negative. Exchange wagering will eventually come to US racing. The racetracks are afraid of it especially if the horsmen realize that they can use exchange wagering for thir benefit.

  • PT

    Noble thought Craig and it sounds great on paper. But in my opinion, you will not have one slightly important piece of the puzzle – customers.

    Racing has to realize this point: Betfair has enticed price sensitive customers to play racing again (and other sports; they could lose racing worldwide tomorrow and still have a huge company), and it is why they have customers.

    Do they not like money? If they did what people want here, they should charge a higher price. If it does not matter, then they should, because they will make more. They do not, because they know with a higher price they will lose all their customers.

    If racing runs an exchange, it will not have low takeout (every Tom, Dick, Harry and Jane will want more and more of a slice because that is what we people in racing do ….. we see it on this very thread), so it will have high takeout and it will simply have no customers.

    It reminds me of that group of employees awhile back at Wal Mart in New England somewhere who tried to buy the franchise because if they charged higher prices they could get a higher wage. Of course, if they charge higher prices at their Wal Mart, no one will shop there and they will go bankrupt.

    Racing has a very hard time understanding a concept that you, me and everyone here is common sense in other businesses. It is a huge reason why handles are half of what they were only a dozen years ago. The saddest part of it for me, is that we continue to make the same mistakes over and over again, and argue amongst ourselves wondering why things are not getting better.

  • Craig

    The takout on parimutuel handle is not the real issue. There is still billions bet on North American racing and takeout is similar in all other racing jurisdictions. The issue is where the takeout goes depending on who books the bet. The ADW companies have found a way to funnel the majority of the takeout into their own pocket, the industry’s fault when the IHA was passed many years ago. It is essentially a welfare system for the smaller tracks that the ADW companies used to their own benefit. They found a way to siphon money into their own pockets.
    Fixing the IHA will be very difficult so lets take advantage of a new betting method to benefit the industry and the gambler. If 5% is the rate that needs to be charged then so be it. I think that in time as Betfair becomes a more mature company they will start to raise their rates. They are still growing and want more bettors to become exchange customers so they are keeping the rate low while they grow.
    It can be done right by the industry if structured properly in the first place.

  • PT

    “The issue is where the takeout goes depending on who books the bet. The ADW companies have found a way to funnel the majority of the takeout into their own pocket, the industry’s fault when the IHA was passed many years ago. ”

    That’s the issue for some people I am certain. However, I think they are missing the real issue.

    The real issue, in my opinion, is that gross handle has dropped from what would have been about $20b this year, to $10b which it will be.

    If the IHA was better off and current ADW handle (about 20% of total wagering) gave back 12% to tracks and purses instead of 6% we would still be getting our ass kicked.

    Without bettors betting, no matter what slice goes into what pot where, my adequan bills, feed bills and all the rest cause me to lose more money than I did last year.

    We need to worry less about if we get 10% of something or 8% of something.

    The days of battling over slices of a shrinking pie should finally go where they belong – in the garbage bin.

  • stillriledup

    Mr Burn, thank you for your response to my question. I understand your long term thinking as far as what the horseplayer should be feeling. I just think the problem is that with the takeout being so high, most of these players won’t even be around to see the health of the sport grow into something great. I can’t imagine that there are too many businesses that are thriving who are raising prices into this economy. Take a look at a place like In and Out burger. You can go there and get a meal for like 5 dollars. Hamburger, fries and a coke is like 5 bucks total. This is cheap for today’s standards and its cheap for what you get. Everyone knows the product is delicious and its hard to get somethin that tastes great and fills you up for 5 bucks today. This is why In and out’s lines are wrapped around the door day and night 7 days a week.

    Think of other really successful businesses in the country and most of them are operating on a small profit margin but making huge bucks by volume.

    I think that most horseplayers don’t really care about long term health of the sport because in a few weeks, they could theoretically be playing poker or betting sports and never return to racing because racing took all their money. Players care about one thing, their next bet. Racing higher ups have to worry about long term health but players just want to win their next bet and get good value while doing so.

    As far as Del Mar raising takeout, its not the same as other places only because of volume. Del Mar does higher volume than a smaller track so Del Mar can pass on the savings to their customers. Places like Costco can pass on savings to their customers because they sell a lot of stuff while 7-11 is charging more because they don’t sell as much stuff. The small track doesnt’ sell as many bets as DMR, therefore they have to charge more to bet.

    Thanks again for blogging with the fans, we do really appreciate it even though a few of us are giving you a hard time!

  • Sol

    It is always good to have both sides of the arguments and they are both well represented here. There seems to be a great deal of dispute about the facts. If my point is redundant than I apologize. In both jurisdictions where Exchange betting is allowed, bookmaking is legal. The Exchange did not go head to head with the tracks but rather the bookmakers, whom they decimated. They will not be able to cannibalize the bookmakers here because that business is almost extinct. If no new blood is being brought in than it will be the tracks that get hurt. I would rather surf for my own odds rather than have to take last click and have 20% taken off the top. I don’t know why, but it jumps out at me that this kind of place would be a haven for illegal bookmaking operations and money launderers. But I guess I’m a minority of 1.

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