Wednesday, July 16, 2008

ADW in 2008, Stagecoaches in 1888?

In 2006 most know that the Unlawful Internet Gambling Act was passed in the US. Racing seemed to be a big part of this (and were thankfully exempt!), but it appears the lessons that the offshore wagering sites taught us, which were a big part of their success, fell on deaf ears. Offshore 'pirates' have a few things in common as we all know: i) They offer lower takeouts ii) They offered all tracks in one account iii) They offered healthy signup bonuses iv) They offered a quick and easy way to deposit and withdraw from accounts. v) They innovated their betting interfaces to be very customer-centric.

In effect, they knew how to do business with an eager 21st century racing customer.

Almost everyone has heard of Betfair in the UK. They started with very few customers just eight short years ago. Now they have over 1 million. They have been allowed to compete while guided under laws and regulations that have been put in place to ensure growth. They have delivered to their UK customers, a product that is on par with the offshores. There are no "home market areas", there are sign up bonuses, there are low prices. Just like in the US, however, where we have many fighting over a shrinking pie, it was not always like that across the pond. From a good probability site I have read, there is a story about this phenomenon:

Horseless carriages (cars) were a neat invention. However despite the revolution that was going on they did not meet with universal approval. Horseless carriages were cumbersome contraptions and had been powered by steam engines as far back as the late 18th Century. They met great resistance based upon two key issues.

• Stagecoach owners were afraid that horseless carriages would mean the end of their business.
• The general public found that their horses were scared of the machines.
Rather than try to compete, stagecoach owners decided to cling to the existing state of affairs rather than identify that an irrevocable shift had occurred in transportation and their businesses.

Eventually, opponents to the horseless carriage succeeded in harassing experimenters and lobbying authorities and laws were passed forbidding the use of steam engines on roads. In England, stupidity triumphed when Parliament passed the Locomotive on Highways Act in 1865. Popularly referred to as the "Red Flag Law," it stipulated that all self-propelled vehicles on public highways be limited to a maximum speed of four miles per hour and be preceded by a man on foot carrying a red flag to warn oncoming horse-drawn vehicles. Although the law was amended in 1878, it still retained the speed limit and required two people to operate the vehicle and a third to go ahead at danger spots, like intersections, and give a warning. After eventually seeing sense the law was repealed in 1896 but not before other, more enterprising, countries had taken the advantage. Such laws were unknown in the United States and the rest as they say, is history.

I guess belief and understanding of the free market are two diametrically opposed forces certainly where vested interests are at play. Suffice to say that the UK and its attitude put paid, or at best, delayed the adoption one of the most important innovations of the recent times. This in turn delayed increased productivity and commerce. The government also lost out on the basis of the fact that failure to spot his shift meant new commerce did not generate new profits which did not generate tax income.

Market forces could not be resisted and eventually the UK lost initiative, suppressed economic development but eventually embraced the horseless carriage when it was obvious that it was actually a good idea.

In betting exchanges the UK has become a global leader in this new and exciting industry. Exchanges are a new paradigm and demonstrate destructive capitalism at its best. Without these break points in economic development we would not be using computers for fear of decimation of the pen and paper would we? Inevitably these break points cause short term distruption to business and tax revenues as the market adjusts to the new state of affairs. By over-regulating or attempting to punish the success of exchanges it could be possible to de-rail this progress. Progress that could lead global dominance by the UK in a new industry and one that could generate significant opportunities for UK PLC.

Despite my best efforts I don't see many members of parliament currently using horses in London. But they do appear to use horseless carriages a lot. If they want to see the country prosper and develop they should learn to embrace and encourage new ventures rather than penalise them. Failure to do so should see all members of parliament adopt a drive to abandon the horseless carriage and move back to horses, to drop computers and adopt the pen and paper. If you fail to allow those things to progress and shape the world as they have done in the past you will fail to let the innovations of today shape tomorrow.

Protecting our racing product is not a bad pursuit - it is our product, and our dollars pay for purses. However, are we not stifling innovation in North America by building stagecoaches, while our customers want cars? Should the racing industry get together and deliver the same way as offshores have, and encourage innovation and growth instead of fighting over a shrinking pie, like we see with the current ADW impasse? Should we learn to deliver our product better in the 21st century market, which seems to demand it?

The current way that ADW is being handled in North America is of great concern. We are building stagecoaches in an Internet world. Our customers want more, and if they do not get it, it is my opinion that they will not be a customer for long.

1 comment:

Twindouble said...

Historically change has been a tough pill to swallow. On the other hand today's modern societies adapt very quickly to change. As matter of fact most people are looking for that new and innovative product or service with great anticipation. Sure a lot good comes out of technology, growth and change but like anything else there's negative effects as well.

Sure the "horse" and carriage went by the wayside but racing is still about the "horse".
Those that are gun hoe for change lose site of that fact. Maybe the day will come when racing and wagering will be just a virtual experience. We can sit at home, be at the track and experience every aspect of the game.

We all can compete for number one jock, trainer, owner and top handicapper. Then all the tracks of the country can be demolished to make room for shopping centers, casinos, hotels or condos. That would be easy to do today even if those that own the property didn't want to sell. The local governments can just take it and give it to someone else.

The racing industry has to decide what is worth saving to maintain the historical traditions that I think are very important to preserve. The horse had an awful lot to do with where we are today. Just get in your car and think about the "horse power" you enjoy.

Yes, I would build an advertising campaign around the horse.

I don't know, maybe being a traditionalist when it comes to racing I'm fighting a losing battle. My final days could be spent watching race replays so I better stock up on them.

Thanks for an interesting post.