Tuesday, September 23, 2008

Punters Deserve Better Treatment: Mordin

This article is by British racing journalist, Nick Mordin. It was published in Racing Post Weekender.



In a former career I had the dubious distinction of being involved in one of the biggest disasters in marketing history. The advertising agency I worked for handled the Sinclair account at the time Sir Clive Sinclair decided to sink a large slice of his company’s resources into an electric car known as the ‘C4’.

Everyone in my department knew the C4 was headed for the rocks even before the media started making fun of it. The thing was so low to the ground it looked positively dangerous to drive. One of the art directors I worked with drew up a mock advert to highlight this. It showed a giant Euro lorry driving over a C4. The headline read ‘C4 and see God.’

I thought I’d never be within the blast radius of such a marketing massacre again. But last week’s announcement by Betfair that it was going to impose an additional 20% commission charge on some of its most successful punters proved me wrong.

Now let me state right here that I am a great admirer of Betfair. I think it’s wonderful that they’ve made low cost betting available to punters. It wasn’t so long ago that I devoted an entire article to extolling their virtues. Hell, I like them so much I’ve written for their website.

Knowing them as I do I can pretty much guarantee Betfair will reverse their new policy sooner rather than later. They’re not idiots. They know they’ll lose market share to their rivals if they don’t.

What interests me though is just how Betfair came to make such a horrendous blooper.

I think I know the answer. I believe that Betfair’s move stemmed from a gross misunderstanding of punters which is shared by many.

From what I’ve seen, the vast majority of decision makers in the racing and betting industries worldwide see punters as mugs and punish them when they aren't. In doing so they’re failing to understand what it is that motivates us to bet.

The truth is I and every other punter I know doesn’t bet because we have some sort of psychological disorder which compels us to gamble away our hard-earned money. Quite the contrary. We bet because we want to win.

I know, it’s a real shocker isn’t it. But it gets worse. Not only do we want to win, we’re also convinced from our own experience and that of others that if we work really hard we actually can win.

This is why we get angry when an organisation like Betfair takes action against punters who are long term winners. We may not be long term winners ourselves, but all of us aspire to be. So when you attack punters who are long term winners you’re attacking every punter by destroying the very thing which motivates us to bet in the first place.

Betfair are hardly alone in the kind of action they took last week. A couple of years ago the Hong Kong Jockey Club moved to exclude long term winners from the rebates they were offering to big punters. If you bet big into their Tote system they’ll kick back a fair percentage of what you bet as an incentive. Unless you win that is. Then you’ll get nothing.

Even the British Tote took action against consistent long term winners a while ago. And it’s almost certainly because of a system I wrote up in this column.

It all started right after I reported how a big punter in America known as ‘the mad bomber’was earning a fortune by exploiting the generous Tote place dividends paid on long odds on shots.

A smart team of UK punters employed a very clever variation on the mad bomber’s technique by making massive place bets on long odds on shots in flat races where three or more place dividends were paid. They only made a tiny loss on these bets because long odds on shots place on the flat over 90% of the time. Their profits came from the fact that their huge place bets on the odds on shots massively inflated the place dividends of every other runner in the race. As a result the team were able to get 10-1 or better about horses whose place odds should have been a fraction of that price.

The team apparently made thousands of pounds a week for a couple of months after I wrote my article. But then the Tote took action. They issued a press release accusing the team of ‘tote rigging’. And to stop them they cut their minimum place dividend to 70 pence - meaning that thenceforth punters could make a successful bet with them and actually lose 30 per cent of their stake.

The Tote reversed their action eventually. Nowadays I think their minimum place dividend is £1.02. So if you want to annoy the Tote and have the thousands of pounds needed to distort their place odds I say go ahead and use the mad bomber’s system. I’ll be rather interested to see how they react a second time around.

I should note that it’s not just betting exchanges and Tote systems which seem to treat winning customers as enemies. Bookmakers do it too. If you become a long term winner with a bookie I guarantee they’ll either refuse to take your bets or else force you to take the ‘starting price’ and then lay off part of your bet at the track to reduce the odds.

Indeed the very idea of the ‘starting price’ itself raises another major concern for me. As I see it, the whole concept of ‘starting price’ is just another example of punter abuse.

Tell me any other shop, other than a betting shop, where the owners have agreed to offer any product or service at exactly the same price as all other shops of the same type. There’s a term for that. It’s called price fixing. Nobody would put up with it in any other industry. Punters however are supposed to swallow it hook, line and sinker.

I understand why off course bookmakers feel they cannot compete on price with each other to the same extent as their on course counterparts. Their overheads equal something like 9% of the betting turnover they generate. So they’d make a loss if their gross profit margins were the same as the 3.5% to 5% enjoyed by on course bookmakers. But there is a way around this, and I’ve seen it in operation in South Africa

In South Africa off course bookmaking takes place in ‘Tattersalls Rooms’ situated in every major city and town. Scores of bookmakers share the cost of maintaining each of the Tattersalls Rooms and compete with each other in a big hall where punters can shop around amongst them for the best price. It’s a great system and creates something very close to the same atmosphere as the betting ring on a racecourse.

Another great advantage of the South African system is that the bookmakers are required to offer the odds they advertise for any horse to lose a significant sum of money. If you want to bet ten grand on a horse they’ve marked up at 2-1 they have to take the bet. Try doing that with your local high street bookmaker.

The British Tote system too could easily reduce its overheads and offer a far better deal to punters. When the first Tote system was introduced in France at the turn of the last century the Paris tracks that offered it took just 5% out of their betting pools. If they could make a good profit offering 5% commission with Victorian technology I don’t see why the British Tote can’t use modern computer technology to do the same.

Sadly, I don’t hold out much hope of a better deal for punters in Britain or anywhere else in the immediate future. The reason is that there’s a huge cultural divide between punters on the one hand and the betting and racing industries on the other.

The cause of this problem in my opinion is that far too few people in management positions in the racing and betting industries actually bet to any meaningful extent. A large percentage don’t even bet at all, or else they have their punting activity limited or stopped by their employers. As a result they just don’t see where we, their customers, are coming from.

If I had my way anyone who works for a racing or betting organisation would have 20% of their salary deposited into a betting account, and they wouldn’t be able to access any of it until they’d used it to make a bet. This would force them to see our point of view and understand our needs.

Until something like this is done those who provide betting systems or benefit from them are going to continue seeing most of their customers as mugs and their biggest customers as enemies.

Will this change anytime soon? I wouldn’t bet on it.

No comments: