Sunday, December 7, 2008

Can We Learn from a Postage Stamp?

Great Britain issued the world's first postage stamp, the "Penny Black", on May 1, 1840 in an attempt to fix their broken system of paid postage. There was not a standard rate for postage before the Penny Black. The price could vary depending on distance and the number of sheets of paper in the envelope. The rates were as much as a day's wages and since all mail was sent collect, many letters were returned unopened -- obviously a waste of time, energy and resources.

Members of Parliament could send mail for free. So members were hounded by their acquaintances to send letters on their behalf. Those without connections devised other schemes to subvert the system.

A British Schoolmaster, Sir Rowland Hill, urged Parliament to adopt the "Penny Postage" program. Penny Postage legislation was passed and for the first time postage was paid in advance. The cost was only one penny to send letters anywhere in the country. The program made sending mail affordable to nearly everyone. Businesses realized tremendous savings.

Like any revolutionary change that threatens the status-quo, officials balked at the idea and worried the new program would bankrupt the system. "How can we charge one penny for someone to send a letter, with all the costs of the system? How can we charge one penny for someone sending something five miles, and the same penny for someone sending something 500 miles?" The answer of course, was volume - if it was convenient and easy and made sense and millions of people used the system - the business would do just fine.

When the plan was put into place the result was twofold:

1) The number of unpaid letters dropped precipitously.


2) Revenue increased and the post office profited greatly under the new system.

Now, simply replace the British Parliament with the powers that be in the racing industry; replace the pre-Penny Black postage rates with the current takeout rates; replace postal system users with bettors and the outcome is the same -- subversion. The lack of any effort on the part of racing's governing bodies to address high takeout rates has caused horse race bettors to subvert the system by placing bets with unlicensed bookmakers. Until this issue is addressed and a plan put in place that will bring the transaction cost of placing a bet to a level that is deemed satisfactory by bettors, bets will continue to be placed with unlicensed bookmakers which have no benefit to the people who put on the show -- racetracks and horsemen.

HANA believes that we need a new and better system - one that is fresh, exciting and can bring millions of worldwide gamblers back to the wonderful game of racing. The current business model was built for a time when racing was a monopoly. Just like an electrical utility had to change rates when competition was forced upon it, and just like prohibition and other rules and laws that led to subversion had to be tweaked, so must racing. To help us get the word out we need you. Please sign up to HANA now. It is free, confidential and you will be lending a hand to help the game we all love.

In Part II we will continue the theme on Subversion and look at VLT/Slots and what we need to do regarding their adverse effect on overall handles. This piece was submitted by HANA VP John Swetye


Anonymous said...

An excellent analogy.

Unknown said...

John, I agree with you.

I live in Hawaii so I have no choice but to use an offshore account to do my wagering. I get a 6% weekly rebate on all my wagers. I would rather support the industry but the offshore site I use treats me like a king. So, if I were to move back to California, I'd have to debate on whether to keep the offshore account or open a new one stateside. I hope that someday all of the frustration we are dealing with today will be news of the past and that tracks nationwide will come together and implement the great ideas being discussed at HANA today.