Tuesday, December 16, 2008

HANA2.0 - Sell Itunes, Not Albums

Seth Godin is a marketing writer, and a good one. What makes him stand out (what makes him a “Purple Cow” to use a Godinism) is that he is a ‘new’ economy business and marketing guy. He has been promoting his new book, Tribes, and does so via the blogs and so on. The interweb stuff. Originally posted on 26th story, a new media blog (and linked first via raceday360) was this question and Seth’s answer:

What's the most important lesson the book publishing industry can learn from the music industry?

The market doesn't care a whit about maintaining your industry. The lesson from Napster and iTunes is that there's even MORE music than there was before. What got hurt was Tower and the guys in the suits and the unlimited budgets for groupies and drugs. The music will keep coming. Same thing is true with books. So you can decide to hassle your readers (oh, I mean your customers) and you can decide that a book on a Kindle [note - internet reading page] SHOULD cost $15 because it replaces a $15 book, and if you do, we (the readers) will just walk away. Or, you could say, "if books on the Kindle were $1, perhaps we could create a vast audience of people who buy books like candy, all the time, and read more and don't pirate stuff cause it's convenient and cheap..." I'm a pessimist that the book industry will learn from music. How are you betting?

Hmm. Let’s change a few words in that to equate it with racing, k?

“The lesson from ADW and the internet is that there's even MORE opportunities to see racing than there was before.”

I played a race at Sunland this year, in fact several races. I do not even know where Sunland is. ADW’s like Youbet or Twinspires bring racing into the 21st century and allow us access. Just as Itunes brought new artists to the fore and will end up growing music to an otherwise unreceptive or unwilling audience, this will end up growing racing, if we do it right. In my opinion, we are not funding this enough to grow racing along the tail. To take more money from it, or to limit its access with infighting or archaic rules that were written before the Internet was even invented defeats its purpose entirely. Companies lose when they do things like that in 2008. The companies who win, embrace, invest, market and price their product accordingly.

Next up:
“So you can decide to hassle your bettors (oh, I mean your customers) and you can decide that a bet on a Youbet SHOULD cost $15 because it replaces a $15 bet at the track, and if you do, we (the bettors) will just walk away. Or, you could say, "if bets on Youbet were $1, perhaps we could create a vast audience of new bettors who like betting horses all the time, and don't play other games like poker instead cause it's convenient and cheap..."

Self explanatory of course. The economies of scale that the internet has brought us is amazing. You can buy a stock on a foreign exchange with the click of a mouse for $9 and it resulted in stock trading exploding with moms, pops and whomever buying stocks from their laptops. Ten years ago you would have had to pay $300 for the same trade, perhaps. If Ameritrade charged regular in-house prices over the internet, customers would walk away. In racing we seem to think this rule of Internet business does not apply to us. The marginal cost of an internet bet is negligible - yet we want to price it like we are delivering it at a 1950 racetrack, because after the sock hop there is nothing to do but go to the track. Just as customers will not give you $15 for a book online, he/she will not pay $15 for a bet online. And guess what? With competition, and traffic, and kids and work and all the modern encumbrances, he sure as hell ain’t heading to the track to do it. It is found money lost.

5000 people can read a book online for $1 and give us $5000. 5000 people can make a bet online for $1 and give us $5000. Neither of those two groups will be going to the bookstore, or the track and doing the same for $15. We seem to think zero revenue instead of $5000 revenue and potential new fans is a viable business model.

His last line: “I'm a pessimist that the racing industry will learn from music. How are you betting?”

I don’t think racing is quite there yet to learn from music, or poker, or anything that has grown on the web. Heck, we are currently shutting out internet signals. We don’t show live video on our track websites. We charge people to look at a PDF file, where after looking at it they will give us 21.8% of their money through takeout. We have some groups trying to take more money for purses instead of reinvesting it in the internet medium as a long-term growth strategy. We clearly have a long, long way to go.

I have saved his first line for last: “The market doesn't care a whit about maintaining your industry.”

This is true in the outside world. But it is not true in racing and that is the painfully ironic thing. We customers care about maintaining this industry. We might be the only customers of any industry known to man who care that much. Yet we seem to be treated as a nuisance, with companies and groups charging high prices and fighting for higher ones in an internet world, making us leave the game we love to play; and maybe even worse, not attracting any new fans in numbers to a wonderful sport to replace us.

It is very difficult to be a fan in a sport that seemingly does not want to help itself. All most of us have left is a glimmering hope for a brighter day.

It is no secret that bettors have been telling us we have not delivered what they want, at the right price. Supply and Demand in an internet world is a very neat thing. They always tell you what price is right. Racing must do the same thing; or the future will look like the recent past.

This article was reprinted here with permission.


Anonymous said...

I understand your points and agree in principle, but as a person who does my betting primarily at the tracks, I would feel like a sucker if (when) people who sit at home betting are in the same pool as me but paying a significantly lower takeout. With a book the difference is more understandable-the publisher has to make and distribute the thing, and the buyer is getting an actual physical article.
A general lowering of takeouts would be the best solution, but sadly not one likely in the near future, as tracks seem to generally be moving in the opposite direction. I guess I'll just have to get a laptop and take it to the track.

Anonymous said...

I dont think that it is too big a deal Kevin. Most tracks and/or companies offer a players card. That could easily be your account at the on track betting machines.

Membership has its privileges, so they say. Except at the track or online for everyday players! Everyone pays the same price - a high one.

Dave Markant said...

A prototype for racing information distribution has already been built USING iTunes. There's no need to replicate iTunes, just use it as is.
You can see the prototype I've created by going to iTunes and subscribing to a podcast named Tampa Bay Downs. This is a document podcast, not audio or video. Over the last few months I've been posting prototype educational past performances for races at TAM as an experiment and find it works very nicely for automatic distribution of racing information.

HANA said...


Very nice! If you want to do something for the Pool Party on Tuesday, let us know.