HANA2.0 - Embrace Change

Change.

A word that our business seems to enjoy about as much as death and taxes. But like those two things, change is inevitable. In our new series called HANA2.0 we are going to be looking at the Internet wagering landscape both here and abroad and what we can do to grow our game. In HANA's last press release the industry was asked to implement an Internet Wagering Task Force. HANA believes it is time for change.

"We are not being smart," said Platt. "It's 2008. People know about the Internet. They want easy access, convenience, and lower prices. Companies like EBay, Amazon, and E-Trade figured it out and have boomed as a result. Anybody can buy or sell 1000 shares of stock for just eight bucks - at home before picking up the kids at daycare. We buy stuff on EBay for pennies on the dollar in commission. We buy books at a discount prices with free shipping in the middle of the night at sites like Amazon."

To start us off, as part one of the series, let us have a simple look at the Internet landscape, and how we tend to try to stop its progress, by protecting the monopoly (the one that does not exist any longer), or by fighting over the pie.

In the UK in the year 2000 the Bookmakers who had been existence in essentially the same medium for centuries had to face a new competitor - the Internet. The response from them in their lobbying and otherwise was predictable - ask for the competition to be taxed, or banned.

I came across a story at a probability site, that was written during this time. The whole article is good, as it details betting economics and Internet wagering in a new world, but one slice of it I found hits the core.

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.

We have seen similar in North America on Internet wagering, ever since the early part of the 2000's. We were frightened that our "slice of the monopoly pie" will go away. We have tried to block it, tried to stop it and fought about it. We are scared that this is "something new" and we will have to change.

What if we instead said this: “This Internet thing is interesting. Ebay is going crazy with people trading goods…… if we play our cards right, price our game right for this new medium and offer it to everyone in a fresh way, we can be an Ebay for horse racing.”

What if we said that.

What if we chose to embrace a new technology, make a solid pricing and distribution plan, convince government what it can do for them and racing, and what it can do for the North American gambling economy.

This is what our industry faces today. We have executives - from horseman groups and tracks - who are clinging to the obsolete realities of yesterday. We have states that have banned Internet wagering on horse racing, like Arizona. We are governed by a simulcasting act that was written in 1978, before the Internet was invented. We have executives that think if we allow less access, people will go to the track again, like it is 1955. They have not kept up with the times. Our customers have told us that there is a "shift in the marketplace." Offshore wagering, online poker and betting exchanges are not going away; they are here to stay. As the writer above stated “market forces could not be resisted.”

We do have some Internet wagering in racing and that is good, but we are still trying to sell Studebakers to a market that wants a Smart Car. We find ourselves, once again, behind the times.

The Internet, and online gaming is this industry’s automobile and it is our future. It is simply the most important invention that gambling has ever seen. We can choose to be a part of it and work it the right way, or we can choose to cling to the past.

If we choose the latter, HANA thinks racing is clearly in serious trouble.

Next up: Part II, where we will look at online stock trading, and how it changed a tightly knit old-school business forever.

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