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Wednesday, September 30, 2009

Prize Payouts

I was contacted by a friend a couple of weeks ago who needed some help. She is running a charity night and wanted me to run a table for something called "Crown & Anchor". What the he^# is that, I have no idea; I play horses. After a little searching I find out that is it a dice game, where specially made dice have symbols on them. After a dice roll, if one symbol that you pick comes up you get paid even money, if two, you get two to one, if three, you get paid three to one. The takeout on the game is 7.9%.

Flipping to racing, I see a post from Bill on Paceadvantage.com regarding the payoffs at Delaware Park yesterday:

1 $4.20
2 $3.40
3 $2.60
4 $2.60
5 $3.00
6 $4.80
7 $4.80
8 $2.80
9 $6.40
10 $3.40

Getting three symbols at Crown & Anchor pays more than any horse paid all day at DEL - and at a 7.9% rake.

One of racings edges on other forms of gambling is our prize payouts. With the above card at DEL (which is not isolated to only there) I think that is something that we better work harder on.

Monday, September 28, 2009

Marketing Summit - You Can Beat a Race But You Can't Beat the Races

This week the NTRA Marketing Summit is being held in Las Vegas. This event is for insiders to discuss how to market horse racing. A noble pursuit, yes, but will it make a difference?

Vic Zast opines that no, it won't. I tend to think he has a point, solely for this statement, "the sport shouldn’t spend one penny more in trying to bring people back until it develops features and benefits that some stranger wants."

To gamblers, racings tag-line is "you can beat a race, but you can't beat the races." Hmmm, so that seems to tell them, "please come to the track, spend a pile of money, and expect to lose with vicious takeouts." Marketing ice to an eskimo might be easier, considering that the people who we are trying to get to look at us can play a football game at a cheap rake, and grind some scratch, among other things.

To the general public on the other hand, our message seems to be, "come to the track, pay to get in, pay for a past performance line that you probably won't understand, sit outside and watch horses you don't know, with people you don't know, wait a half hour between races, and maybe enjoy a $3 coffee and $4 hot dog while you wait. Oh, and if you don't want to wait around, head into the simulcast area where there is 47 events going off at the same time, exactly like the one you are watching here."

Wow, sign me up.

One of the hardest things to market is a game or product with a negative stigma attached. People have been to the races, millions upon millions of them. People have bet the races, millions upon millions of them. It is not like we are springing something new on them. They came, they saw, they did not like it; and after knowing what it is about, they came back in smaller and smaller numbers.

Completely overhauling a business that has preconceived notions attached can be done, but it is extremely rare. Those who have done it have done so with tremendous vision, and a little serendipity. A few decades ago Honda made only motorbikes - and damn good ones. Thinking they could use their good name and engineering prowess to expand, they decided to move into carmaking. It was a complete dud. The potential customers in Japan had their preconceived notion that Honda made bikes, not cars, and they wanted nothing to do with them. The stigma attached to the Honda brand overcame everything else. Moving the market overseas to America was the only way this new vision could become a success and that they did. The US market was not married to the notion that Honda could not make a car because they make bikes. They had the ingrained notion that Japanese technology made good stuff and they wanted Honda cars because of that. The rest is history.

Vic writes, "No amount of advertising, sales promotion or public relations will convince disinterested people to like horse racing" and he does make a strong point. Sure they might come for big days, or for a festival, or so on. In fact, I agree that racing should be doing quite a bit more for big days and admission based events (as opined here). But these folks rarely become long-term fans. I think it is because we have fundamental problems in racing and until we fix those problems, a little bit of flash, a little make-up and a new shirt and tie won't do much good at all. Customers are smart and informed and hoodwinking them does more harm than good.

As for bettors of other sports, well what more evidence do we need than Betfair? Oodles of folks are playing betfair for racing because they are offering something that they want - a good interface, excellent customer service, fun, excitement, and low takeout. Betfair took the racing product, flipped it over, threw it around, and changed it. Old, boring, slow, impossible to win at? No way, sister; not there. It took a complete revamping of the brand to get people interested in racing again, and it worked.

Marketing writer Seth Godin in his book "Free Prize Inside", sums it up for us nicely.

"Your growth will come instead from the dissatisfied and unsatisfied. The dissatisfied know they want a solution, but are not happy with the solution they’ve got. The minute they find it, they’ll buy it. Yahoo’s best customers were not google’s first users. Nope. The happy Yahoo customers were not looking for a replacement. Google focused on dissatisfied web surfers - people who were online but were not blown away by what they had been using (and who wanted to be blown away).

The unsatisfied are the folks who do not even realize they have a problem that needs solving. That is why focus groups are often so useless. The people you really need to hear from are the great unwashed, the people who are not even looking at you. That is where you will find the customers you need when your current line becomes obsolete.

The problem is that management really likes those satisfied customers. The first question they’ll ask about any innovation is “Will our satisfied customers like it?” Of course, this is a silly question, because satisfied customers already like what you’ve got. The question you ought to ask first is, “Will people dissatisfied with what they are doing now embrace this, and, even better, will they tell the large number of unsatisfied people to go get it right away?”

I think the lesson we should all learn is that without a solid product to market, we might as well not market anything at all. We must work on fundamentally changing racing to make it an attractive 21st century gambling game, or a superior entertainment destination, before we throw money at it. The market - the dissatisfied, unsatisfied, or even the satisfied - sees right through anything else.

This piece is contributed from a HANA member with a career in internet marketing.

Thursday, September 24, 2009

Prescription for Racing - Thoroughbred Daily News Edition


Jeff was interviewed by Bill Finley, with industry folks like Bob Evans, Alex Waldrop and several others, for a comprehensive piece on a Prescription for Racing for the Thoroughbred Times.

It was a very good read and if you have not given it a whirl it is here. It takes a free registration to read it.

Tuesday, September 22, 2009

Slots, Slots and More Slots

This article is in response to Bill Farish's commentary, regarding Video Lottery Terminals (VLTs) in Kentucky.

First, why is everyone in the industry afraid to call them slot machines? It's probably for the same reason that the industry won't admit that the only reason racing has a significant popularity as a sport is because people can gamble on the outcome of the races.

Personally, I have no problem with racetracks getting slot machine licenses. I'm all for businesses making more money and also increasing entertainment options.

I do have several problems with the idea of VLTs only being allowed at racetracks.

Mr. Farish writes, "...the Republican Party should be standing up for Kentucky businesses, Kentucky jobs, and a free market environment that would allow Kentuckians to fairly compete with their out-of-state competitors."

I agree, but the Republican Party should be standing up for "all" Kentucky businesses -- not just those businesses with which Bill Farish, racetracks and horsemen have an interest. Is there a good reason why Joe's Bar and Grill and other small businesses can't have slots? I would like to own slot machines. As a small businessman I have always felt discriminated against. Why should only the largest corporations and the wealthiest families be awarded slot licenses?

My second problem with slot licenses is the way revenue is shared. Besides the state, why should only racetracks and horsemen be the direct beneficiaries of slot revenue? Why aren't Horseplayers rewarded with lower takeout at those tracks that have slots? If racetracks and Horsemen get windfall revenues from slots, then Horseplayers should also benefit by reduced takeout.

Not once does Mr. Farish mention the Horseplayer. Where would the Kentucky Racing Industry be without Horseplayers supporting them for the past 100 years?

Many academic studies have shown that slots cannabilize horse race wagering handle. Who gets hurt by smaller handles? Not racetracks. They make it up in slot revenue. Not horsemen. They are subsidized by slot revenue. Horseplayers get hurt. When the pari-mutuel pools are smaller Horseplayers have fewer wagering opportunities.

The only way to pump up the handle on racing when racetracks become racinos is to lower the takeout on horse race wagering.

The racing industry is more than horsemen and racetracks, it is also Horseplayers.

Or maybe it isn't? Maybe racing is only horsemen and racetracks? Maybe Horseplayers are delusional if they think they figure into the equation? When have Horseplayers ever been treated with respect? It seems Horseplayers only matter when money can be extracted from them. And as soon as slots are legalized in Kentucky (which they will be), Horseplayers will matter even less.

But if I have any say over it, slots will be legal at more places than just racetracks and casinos.

This has been contributed by John Swetye, a long-time Connecticut horseplayer. For another view on KY Slots from a HANA member, try "If I was Kentucky Racing Czar", here.

Monday, September 21, 2009

HANA Welcomes Charlie Davis to the Board of Directors

We are happy to announce that Charlie Davis of Seattle, WA has been added to the HANA Board of Directors.

The duty of a HANA board member involves attending weekly meetings, championing new areas to expand the group, offering new ideas, member interaction, attending conferences as well as general duties. As board member Bill likes to say sometimes, "the pay is nothing, and you will probably get yelled at now and again". Despite that, Charlie agreed to help out. We are very fortunate to have him aboard.

Charlie, being a twenty-something horseplayer, brings a slightly different perspective to the HANA group, who have all been playing racing since they were old enough to bet. He has only been playing the races for five years, after being a sports bettor. We think that is a tremendous asset, as fresh new ideas from a newer generation is paramount to racings success, and it is a cornerstone of the HANA mission statement.

We thank Charlie very much for being a part of HANA.

Other notes:

Our quarterly newsletter is scheduled to be out soon, so keep an eye out for it in the inbox.

Board Members Dean, Theresia, Bill, and Mike should be at Keeneland for the week of October 9th to 16th or so. Please email if any of you would like to meet up.

Board Members Theresia and Cary Fotias should be at the BC at Santa Anita as well, so again, if any of you would like to meet, please get in touch.

As always, good luck at the windows; and thank you for reading.

Thursday, September 17, 2009

A Year Ago today.......

On September 17, 2008 the Horseplayers Association of North America was incorporated. As most know, borne slowly but surely in the summer of 2008 in the "war room" at Paceadvantage.com, with an hodge-podge of racing enthusiasts and bettors, the incorporation and structure was the first step in trying to get some organization to the group.

We would like to thank everyone who helped over the past year. They are far too numerous to mention. And to everyone who signed up and took a shot at a fledgling organization like HANA, our sincere thanks.

To racing itself we do owe some thanks - thanks for having an open mind with us. After a short feeling out period, racing executives, marketing people, racing media and many of the various organizations have dialogued, listened and invited us to participate in the sport, as an entity.

Over the next year we hope to participate more and more, with more and more members, to help move the racing game forward in a positive proactive way.

Thanks again to everyone who helped, gave us a chance, and continue to support HANA.

The HANA board

PS: Over the summer we have been working on several things on behalf of the horseplayer. We hope to have some news on those soon. In addition, our first ever member survey will hopefully be ready for prime time in the coming weeks. We want to hear from the cross section of HANA members so that we can plan what issues to tackle next, so we sincerely hope you participate!

Sunday, September 6, 2009

Takeout & Some Fat Cat Republicans

At HANA we study the data and try to come up with a worthwhile policy. Over the past year we have tried to present any data we find as plainly as we can. What we have discovered is that when the data speaks forcefully about something, almost without fail the industry tends to file it away, if it does not fit their preconceived notions, or biases.

In 1998 the University of Louisville came out with a comprehensive economic study of some of the factors that effect wagering. They looked at a few factors and how our customers react to them: Field size, size of purses, takeout reductions and number of races. What they found should not be surprising: A reduction of takeout results in the highest increase of handle (e=-2.3), followed by field size and number of races (e=~ 0.60) and coming in last was purse size (e=0.06).

So in a nutshell, if we place money into increasing purses from the mean it will have literally no effect on overall handles. If we place cash into field size and number of races it will have a small effect on handle. If we place cash into lowering takeout, it will result in a large hike in handle.

The report states: ".... wagering would increase by only 6% if purse were doubled. This is a surprising finding considering the importance that is attached to the purse variable in all major policy decisions to increase the wagering in this industry."

This is not shocking, nor surprising. Massive purses increases in Ontario, at Penn National, Philly Park, Presque Ilse and many other slot rich tracks have done nothing to increase handles. In fact, handle has dove further than the congress's approval ratings.

So why when we read over and over again that if we have more money placed into purses all will be well? Why do we keep raising takeout rates instead of lowering them?

I think the answer is as plain as day. Each faction has their own wants, and will do everything to protect them, even if the data flies right into the face of their arguments. And most importantly, we don't have someone there to make decisions and give everyone one swift kick in the ass when they do that. Facts don't matter, money for their slice does.

In the 1960's the National Football League had some issues and that was television. Pete Rozelle, the commissioner, had to convince the owners that television was the way of the future and that the only way the sport could grow was to work out a collective plan to exploit it for the leagues gain. The owners were up in arms. At that time live gate was the major revenue driver for football. The owners, especially in small cities did not want to do this, fearing a loss of gate revenue.

Eventually Rozelle convinced these businessmen that the status-quo was not an option. The NFL was the first league to embrace television, creating NFL films, the Super Bowl and much more.

Fast forward several years. As television got bigger and bigger and the league and teams were making more and more money there were the inevitable problems. Up popped revenue sharing. Rozelle had to convince 30 or so folks that sharing TV revenue would be good for all.

It worked. Multi-billion dollar TV deals has made the NFL the most successful sport in the western world.

In the words of Art Modell, the then Cleveland Browns owner: Rozelle got "a bunch of fat cat republicans to become socialists".

Now let's think about this: How did a league worth millions upon millions with owners the ego the size of the federal deficit agree on something so large and fundamental to do what is right for everyone, not just a few? The easy answer is that they had a commissioner, and I think that is too easy.

Let's rewind to 1960, but apply some racing to it. Not only is there 25 or 30 owners of the AFL/NFL teams sitting around the table, but each team has a player group associated with it. The players all have a seat and there is not one, but one for each team. As well, let's say they control 50% of all the revenues.

Would they have been able to get together to do what is right? Not a chance.

My bet: The player organization in New York would vote "no" to television to protect their large salaries. The player organization in Green Bay would be mad at them, and not give an inch. The owners would throw their arms in the air and want to leave the madness. Rozelle would probably quit and send in an application to work for the NBA.

In 2009 players are signing ten million dollar contracts due to the forward thinking that went on in the 1960's. Without that forward thinking they would probably be making a million a year, if they were lucky.

In racing we keep slinging billions of slot money to purses and appeasing the masses, because it is easy. It is inconsequential that this has proven to be our death-knell. It is inconsequential that we already put 6% in handle to purses, while the UK places 0.99% into them, and are healthier than we are. The people who yell loudest win, and those who protect their self-interests win. Instead of lowering take and increasing handles, and making our sport more popular, we opt for the cash.

We have hundreds of acronym groups in racing. It is easier to appease, rather than lead. And that my friends is a disease that has infiltrated racing for a hundred years, and that is what we have to extinguish. If we do not, handles will be down even more in 2011 than they have this year and last, and brick by brick racing will fall further down in the sports and gambling conscience of the North American public.

Thursday, September 3, 2009

Fotias; Pulling No Punches

HANA board member Cary Fotias let fly (in his usual way) in a recent interview for the Saratogian.

Some snips:

"If you want this game to thrive, takeout is the number one issue. Without that, you are going nowhere.”

“You know what you should have? One number: 1-800-BET-HORSES! You’ve got way too many races and way too many tracks.

"We all know what’s going on, and the chemists are ahead of the testing labs. If you’re gonna juice horses, let us in on who is doing it. What is the ROI of the vets"

Fotias cited the example of Ellis Park, the small Kentucky track, that has 400 simulcasting agreements, as an example of the maize of relationships in racing.

More at link.