Racing Ideas Flow More Like A Trickle

by | 09.06.2013 | 10:29am

Was going through my morning Twitter feed (feel free to follow me at @raypaulick) when I came across this gem from the folks at @Mental_Floss: “Why do our best ideas come to us in the shower?”

While I don't want to delve into the personal bathing habits of people in the horse racing industry, it occurred to me that some executives might try showering a bit more often. Frankly, there has not been a stampede of good ideas lately.

Fred Pope pulled out his upside-down business model drum and began it beating it again yesterday, and some of us may agree with his belief that if the only people making money in the racing biz are the ADWs and OTBs, then maybe they're not paying enough for the product they're selling.

But aside from Pope, where are the ideas coming from?

It's nice to see a track like Penn National develop a low-takeout Pick 4 bet in conjunction with the New York Racing Association. There's some upside to that. And came up with a unique Jackpot 5 wager a few weeks ago that, if successful, will be good for parent Churchill Downs Inc.'s bottom line.

But who else out there is doing more than fighting over scraps from a pari-mutuel buffet that is less appealing to the general public than it has been in – dare I say – a lifetime?

Strangely enough, some horseplayers in California are. The customers.

I may not agree with their tactics (they are threatening a boycott and, in fact, their proposals are listed at the website, but at least they have some suggestions that might help reverse a trend that began a decade ago when the total amount wagered on North American Thoroughbred racing peaked at $15.9 billion and has tumbled and tumbled and tumbled. At year's end it will be in the vicinity of $11.5 billion – a loss of $4 billion.

That's a 27% decline in a once-thriving business.

At the same time, the number of North American races has fallen, from 60,891 to about 51,000 – a decline of 16%. The loss in betting dollars is far outpacing the decline in product offered. Less is not more.

I hope officials in California and elsewhere read what the horseplayers are suggesting.

Then go take a shower and think about it.

  • Stanley inman

    Bravo Andrew
    Like Sgt. Jerico ‘action’ Jackson
    Putting a flamethrower on em and askin
    “how do you like your ribs”
    Reporting for duty

    • Andrew A.

      Join the party Stanley. We need a tsunami to get it done.

  • Carl Wash

    I am surprised that you are giving Andy the time of day because he is the last person that I want representing the horse player. Also there are many issues in horse racing before one should even think about takeout.. A level playing field, or even the perception of a level playing field, will bring people back to the game who are tired of seeing cheaters get slapped on the wrist (or in the case of Dutrow, bank millions in purses while appealing his suspension). Other items like a uniform drug policy, a NATIONAL stakes schedule would help. Only then would address takeout, however it surprises me that takeout remains so high in jurisdictions that rely on slot machines as their main source of revenue. If it is the main source of revenue, why not lower the takeout? However, as long as horse racing is rampant with cheats and crooks, takeout could be 5% and horse racing won’t survive (even in its current form)

    • Andrew A.

      That’s why we are for 24 hour surveillance and for uniformed testing and penalties. If you’re gonna post why not use your real name.

      Do you like the low takeout P5? Guess where it came from?

      By the way Carl why don’t you lead the way and stop knocking those that are trying to change things for the better?

      • betterthannothing

        Andrew, are you for 24-hour surveillance before each race or constant 24/7 surveillance of competitive horses, at least 3 weeks to post, to really help prevent cheating (and horse abuse)?

        • Andrew A.

          I know we need more backstretch surveillance. I’m talking about having a camera in each stall of any horse entered to race.

          I am no expert on how it should be done or for how long so I’ll leave it to the experts to figure out the best way to do it.

          • LongTimeEconomist

            Why not just bring them to one official barn 24 hours before as they do in Japan?

          • Andrew A.

            Fine with me. Make it so.

          • nu-fan

            Camera surveillance is not difficult. If you have the chance, ask your local department or grocery store to see what kind of camera surveillance they have. One of the former companies that I have worked for had cameras everywhere and these were able to zoom in and out as well as record conversations. By the way, I didn’t find it intrusive. Some may, but I figure that if a person isn’t doing something unethical, it doesn’t matter. It was also, for me, a safety factor for some situations where I had to deal with a “difficult” person or situation. These cameras, also, went to storage so that they could be retrieved, if needed. For racetracks to not have this is extremely odd. When there is money on the line, there will be those who will try to manipulate their odds of making as much as they can.

          • Andrew A.

            Great points.

    • LongTimeEconomist

      Who’s Andy?

  • Roger

    I hope their is meaningful dialogue this time. Andy and friends introduced the low takeout P-5 a few years ago. Del Mar’s 2013 meet that just concluded handled $20,693,187 on the P-5 alone which is significant given Del Mar mutuel pools were UP a total of $14,853,355 from the previous meet.

  • Old Timer

    I’ll agree with the lowering of takeout Andrew, not so sure about breaking to the nickel though.

    I would like to see more info on the breakage aspect. Right now who gets the breakage? You mention tracks, but does another group get the breakage? I know in some states it goes to benefit the backside workers. If thats the case, I wouldn’t be able to support what you see being a little bump for the player, because it’ may be a HUGE negative impact on the lowest paid worker on the track.

    Needless to say I’m a unequivocal supporter of the ones who get the horses to go in a circle everyday for our enjoyment. Not saying players are not important!

    Also I’m glad your group isn’t asking to break to the penny…considering there is a national push to even remove it from circulation lol.

    • Andrew A.

      Yes, backside workers do get benefits from it. What I’m saying is that first of all we only want it on WPS and that represents a little under 30% of total handle. Secondly the revenue derived will be shifted from breakage to takeout. The Industry needs to make the backstretch workers whole from the extra revenue derived from the takeout. I believe they will end up getting more than they get now.

  • c bea

    Fred Pope is wrong in his mantra of ADWs and OTBs being the only ones making money. The ADWs on average pay the highest rates for signals of anyone. Save for Churchill and their high volume platform Velocity Wagering and Twinspires. And offshore site Elite Turf club.

    The tracks have been doing a good job increasing rates over the past few years. Fred needs to update his facts.

    As to ideas for racing some of the Social Gaming organizations are doing some interesting things. But part of the problem with new ideas in Racing is that they’re quickly consumed by the powers that be, who are often threatened by changes to the status quo, and squash them. Sort of like alternative energy engines that are often consumed by the big oil companies. The ideas never see the light of day!

    • Sal Carcia

      What is being protected? The oil companies have billions in profits to protect. Racing should be in a state where it is open to try new things in order to grow the business. It’s strange.

  • PTP

    Andy et al,
    I have read through the recommendations and I think you guys did a great job.
    The suggestions are reasonable and make sense. You are not promising the world, nor are you saying this WILL happen, but you are offering out ways to help make the sport more customer friendly. If that occurs you might find there’s something wacky that happens: You get more customers!
    Most people in the sport who are critical of it just ask tracks and horsemen groups to try. Try something and give it some time. If it doesn’t work, try something else. I think Henry Ford invented 1000 things before he made his mark. We may have to try a few things too.
    Anyhow, just wanted to say I think the recommendations and how you are going about them are quite reasonable and interesting.

    • Sal Carcia

      “We may have to try a few things too.” Yes. It’s hard to predict what might be the catalyst for racing to become a thriving industry again. I am not saying anything about survival. Racing will survive. By trying things we might hit on something big. The player group’s (that Andy’s part of) suggestions are all reasonable and they deserve a chance

  • fb0252

    came to me in the shower this morning–how about advertising the sport?

  • Fred A. Pope

    I don’t want to offend my good friend Ray, but his mention of me and ADW’s and OTB’s above relate to my original Upside-down Model in 2008. Yesterday’s Letter to NYRA contains thinking from the new Upside-down Model 2.0

    Back in 2008, ADW’s margins were bigger. They were paying host tracks 4-7% and doing their thing with margins of higher than 10%. It was too good to be true for them. Today, the more popular tracks are playing the ADW’s against each other and getting 9-10%, reducing the margins for rebates and merchandizing. I would expect ADW margins will continue to shrink, so from tracks like NYRA and Keeneland, the ADW’s will be lucky to net 5%.

    A 5% commission is what lotteries pay gas stations to punch in the numbers and take their bets. Last year, the lotteries paid their bet takers, the gas stations, $4 billion. Not bad. Racetracks could have used the lottery model and the sport would have done what everyone expected from national distribution, gone through the roof. Instead the sport went, you know, upside-down.

    My letter to NYRA was because things have changed. It is a new Situation Analysis where unlike 1978, they are not in a closed distribution system anymore. They now have alternatives. They can get more from off-track bets on their races.

    But, NYRA has to decide what business they are in now. They are the leading producer of live racing, however, they have departments that work as bet-takers and they are exploiting other producers of live racing. That’s the part they must address. NYRA needs to focus on live racing.

    Taking bets on other tracks races is a service to your customers. It should favor the host track, or at the very least, be a split. If tracks received 50% of the takeout on their races from off-track bets, nine out of ten tracks would have a future in racing that is much brighter than it is today.

    The value of live racing content is about to grow, after thirty years of being held down by bet takers at other tracks, ADW’s, casinos and OTB’s.

    Tracks who have profited from the upside-down model are now seeing their customers watching their monitors, but betting on the phone with an ADW. Those tracks need to get ahead of the curve, pick up the phone and ask the popular tracks to redo their off-track agreement. 50-50. Nine out of ten will become net exporters if they receive half of the takeout on their races.

    Then host tracks would invest in ideas for live racing.

    • PTP

      Hi Fred,
      How have overall handles been since the signal fee squeeze since 2008? Has racing been growing?
      If so, I think you are onto something with this new NYRA signal fee squeeze.

      • Fred A. Pope

        Bout the same as home prices.

        • PTP

          Hi Fred,

          Are you comparing a gambling game to home prices? With respect, if you are serious, you do not understand those of us who gamble on a daily basis.


          • kyle

            He’s blaming the recession. Here’s the difference, in order to sell houses owners had to reduce prices. In other words, they recognized market forces. Racing thinks it exists outside of such forces.

          • Cangamble

            There was a record amount bet on the Super Bowl last year in Vegas. NFL bettors must be oblivious to housing prices, unlike racetrack gamblers.

          • Walt Gekko

            Absolutely. It’s one reason why the NFL is the 800-pound gorilla of sports that it is now. The problem is, many people in racing still go back to when the sport along with baseball and boxing were the kingpins, and neither college football nor the NFL were anywhere close in popularity to what they are today.

    • Walt Gekko

      Excellent points Fred!

  • Don Reed

    Went up to Saratoga. Saw the new CEO. Was reminded of his complete lack of connection to racing before the headhunters took him off the scrapheap. Went to bet.

  • c bea

    NYRA is the most difficult signal for a new outlet to be approved to wager on. No surprise that NYRA’s handle suffers. They have no culture of business development and growth of their product.

  • Andrew A.

    There goes Carl lying again. All Ray has to do is contact Mary to find the truth.

  • Walt Gekko

    Just look at what I write on what needs to be done with the sport. When I bring up things like being more flexible with scheduling for example, all the traditionalists and others looking to protect how things are for them often get upset. When I write what I do, I’m looking at the best overall interests of the sport and also looking at the fact we have a generation in “the milennials” who are the most demanding of any generation ever who in my view are going to likely going to take racing kicking and screaming into “their era” and force the kind of changes I have mentioned for years in some cases. This is something the sport is going to have to realize if it is going to survive.

  • Ben van den Brink

    How about the numbers from horses running in an race. In comparation to the betting. Everyone knows that 6-7 horsefields are not attracting much betting turnover, while 10-11 horsefields are dooiing great. So an decline in the numbers from races, could be an turning point.

  • jttf

    i would love to give my ideas to the horse racing industry. but the large horse racing companies do not want to listen to my ideas. i have 3 ideas that would expand new ways to enjoy the horse racing world in a whole new way. one idea would get more people interested in the large horse auctions and create more television shows. all i ask is for a 3 percent share in the profit. but these big companies are not interested.

  • David

    Insofar as wagering virtually all involved think within the pari-mutuel box – new gimmicks, lower takes gets all the attention and the core issue gets nary a mention. The main problem is the
    adage of “you can’t beat the horses” turns out to be right; worse is younger, more astute generations get it real fast. The whole pari-mutuel paradigm needs reform with the expressed purpose of spreading returns among a wider group of players. As to non-wagering ideas, says here there’s been tons of purposeful things put on a table that is so dysfunctional there is no way most could be implemented.

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