Sunday, August 1, 2010

If HANA Was Bo Derek

As most know California racing this week, with the hopes of curing their ills, are looking at raising their prices, by adding it as an addendum to bill 2414. The collective gasp from the horseplayer and business community was heard around racing: "Who raises prices when business is down?" It seems they are out of ideas for growing the sport in the Golden State. So, we at HANA decided what we would do if we were a CHRB board member, and wrote it down. Our provisions are to do one thing and one thing only: grow handles in California - in effect, the opposite of what a takeout hike does.

Here is our addendum to bill 2414.

Suggested Amendments to AB 2414:

Each of these suggestions is designed to help California’s Tracks and Horsemen supplement purses by enacting long term solutions for growing handle and generating new fan interest in racing by increasing the reach and exposure of the racing product to the general public.

1. ELMINATE BREAKAGE on ALL Pari-mutuel Wagers made on all races at all California tracks.

Break to the nearest PENNY instead of the current nearest TEN CENTS.

The objective of this provision is to create player interest in the game by increasing prize payouts and CHURN – a concept that has proven itself successful in the State Lottery market space wherever it has been tried.

Did you know that earlier this year (in April) the California State Lottery generated a cash windfall for the State of California by increasing prize payouts on its scratchers games?

2. ELIMINATE the Current 6.5% Retention Cap on ADW wagers generated within the State of California.

The objective behind this provision is twofold:

1. To provide economic incentive for ADWs (which can be operated jointly by tracks and horsemen [see below]) to actively market thoroughbred racing to California residents in such a way as to GROW HANDLE and GENERATE NEW FAN INTEREST IN RACING by increasing the reach and exposure of the racing product to the general public.

2. To enable tracks and horsemen to COMPETE with existing ADWs for new customer business [see 3 below.]

Note: The Fall 2009 HANA Survey, The Cummings Report, and other industry funded economic studies all indicate that ADWs are able to win new customer business by offering the racing customer facets not being offered by tracks such as: convenience and innovation.

ADWs currently do this by offering: rebates and cash incentives, free handicapping contests, free past performances and statistical reports, high quality live streaming video and video replays, improved/innovative online wagering interfaces, customizable reports that enable the customer to see detail about his or her wagering performance, etc.

These and other INNOVATIONS are what successful ADWs are doing to win and retain new customer business (whose handle sometimes grows exponentially once given access to better pricing and innovation/tools.)

Note: Under present California State Law, price sensitive players located in California have no options for obtaining rebates and cash incentives other than to bet offshore where their money does not find its way into the pari-mutuel pools.

Money wagered offshore and outside the pools does nothing to supplement purses.

HANA, through player interviews, estimates that the amount of US and Canadian thoroughbred racing handle wagered offshore (and out of the pari-mutuel pools) runs into the BILLIONS of DOLLARS each year.

Eliminating the 6.5% ADW Retention Cap would enable California’s thoroughbred racing industry to begin capturing at least a percentage of that lost handle (which it has no hope of capturing while the 6.5% ADW Cap is in place.)


The objective behind this provision is twofold:

1. Provide a way for California’s Tracks and Horsemen to supplement purses in a substantial way.

2. Provide a way for California’s Tracks and Horsemen to GROW HANDLE and GENERATE NEW FAN INTEREST IN RACING by increasing the reach and exposure of the racing product to the general public.

Under this provision:

1. With the 6.5 percent ADW retention cap removed, a California Track/Horsemen operated ADW would find itself in a favorable position (with a competitive price advantage) relative to existing ADWs because tracks historically sell their signals to each other at a lower signal fee/wholesale price than tracks sell their signals to third party ADWs.

2. California tracks and horsemen would be able to realize revenue wagered through their own California Track/Horsemen operated ADW exactly the same as if the customer’s wager had been placed on track. This gives them a larger share of revenue than if the customer wager had been placed through a third party ADW or (worse) if the wager had been placed offshore.

3. It would be up to the tracks and horsemen to satisfy customer needs and wants through innovation [see above] to win and retain new customer business.

If they are able to do that, this provision gives them a realistic way to grow their racing product and fan base and provides a way for tracks and horsemen to supplement purses in a substantial way.


The objective behind this provision is to enable California’s tracks and horsemen to deliver something their customers sorely want: FULL CARD SIMULCASTING.

HANA, through player interviews, has discovered that many players will not wager on track because of the current restriction on the number of out of state races that are simulcast each day. Instead, they stay home and wager through third party ADWs. Worse, many of them wager offshore where their handle remains outside of the pari-mutuel pools and does nothing to supplement purses.

Under this provision:

California’s tracks and horsemen would be given the ability to increase on track attendance and wagering handle by (better) reaching a demographic of the customer base they are not reaching now.


The objective of this provision is to provide a way for tracks to better market the racing product to the end customer by:

1. Giving the tracks the ability to learn about customer needs and wants through tracking customer spending habits.

Example: Customer walks up to a mutuel window or betting machine, swipes card, and places bet. As this event is repeated over and over again thousands of times by (hopefully) thousands of customers: a data trail is created enabling the track to better market the racing product to the end customer.

Tracks will actually know who their customers are (name and address) and what they do and don't do. Tracks can mail them a coupon when they haven't been around for awhile. They can be invited to specific events tailored just for "people like them." Tracks can test things out and actually measure their impact directly, across different demographics. This is basically how successful companies work - through the measurability of things, etc.

2. Bestowing the end customer with innovations such as convenience and player rewards. Player Rewards Cards would be tied to the player’s CA Track/Horsemen ADW account [see above] and would be loadable just like a debit card.

Example: Customer walks up to a betting window, swipes card, hands the mutuel clerk cash, which is added to the customer’s account balance on the spot.

As the customer swipes the card and places bets throughout the course of the day, and as he or she reaches pre-established handle thresholds, the customer qualifies for rebates and/or cash rewards. Each night, a computer routine would automatically add earned rebates and/or cash rewards to the customer’s account balance.

At any time, the customer would have the ability to walk up to a mutuel window, swipe the card, present identification, and make a cash withdrawal from his or her account.

This provision, combined with Provision 4 [above] allowing for Full Card Simulcasting, enables tracks and horsemen to better market to widely different customer demographics/market segments where they are failing now.

This provision would also enable tracks and horsemen to offer significant ON TRACK rebates and cash rewards to high volume bettors who seldom frequent the track given the racing industry’s current marketing efforts.

When you give a horseplayer a cash reward, he or she does not place the money in a sock. He or she rebets it. California needs players to feel welcome, with a chance to win, and have a chance to get hooked on the wonderful game of horse racing. Cash rewards help us achieve this goal.

Thanks for reading.


Anonymous said...

The CHRB does a lot of things to keep players away from the track. I know a large player that has been ruled off of the track because of a judgement against him from a vet. The matter is under dispute. He is now a stay at home player betting with a rebate shop. I can understand why they would not license someone , but to keep a player away from the track when no violations have been made is ridiculous. I don't know if he would ever come back to the track again. This is just another case of wanting to play God, instead of realizing there are legal processes that are available.

Anonymous said...

Until tracks quit gouging the customer they will never increase handle or attendance, why go to the track and pay for parking, admission, program, form, way overpriced drinks and food, and gas to get there and back and traffic, when I can sit in my living room and bet any race anywhere instead of being restricted to what the track wants me to play, I save 50.00 that i can bet by staying home.

Anonymous said...

As someone who doesn't live in CA, nor play their races often, I don't really have a dog in the fight, but HANA should have put a little more effort into this.

1) Good idea (nation-wide even), but where does that money go now? Does the State get it? The Tracks? The Horsemen? Where it currently goes will have a big negative impact on revenue to someone and you'll have to make the case for how it's going to be replaced.

2) Good idea. Protectionism is always bad. Unfortunately, you've set up the possibility of protectionism in one of your other ideas below.

3)Well, there are two tracks that already have ADWs (Santa Anita and Del Mar) and there are no restrictions in the current rules prohibiting anyone from applying for a license. The CHRB doesn't need to do anything for this to happen. From a player's perspective, there is a significant risk that an 'industry owned' ADW would allow the tracks and horsemen to act in a non-competitive way, thus reducing benefits to horseplayers.

4) This is probably the single dumbest thing the CHRB has done (other than synthetic surfaces) and should be eliminated immediately. There is no rational excuse for track and OTB locations not being able to compete with other licensees in the State. The law was put in before the advent of ADWs in CA to protect (guess who) the horsemen, and just wasn't updated when the ADW laws were implemented.

5) Since I'm not a CA resident I'm not sure, but didn't the Golden State Rewards program die? If so, it obviously didn't work all that well.

Anonymous said...

Overpriced food, pop, and watered down coffee. WHo in their right mind goes to the track. better to stay home and bet outside CA. The CHRB is feckless and their leaders are political appointees with no agenda other than their own to enrich themselves directly and/or indirectly. some do not know which end of the horse is its mouth.