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Sunday, February 13, 2011

Dave Schwartz - "A Call to Arms in California"

Dave Schwartz is a charter member of HANA and has been a successful vendor of handicapping software and training materials for the horseplayer since 1991. His website and blog is at http://thehorsehandicappingauthority.com/. He submitted this opinion piece to us this weekend, and we print it in its entirety below.


There is a battle waging in California right now between the tracks, the horsemen groups, the regulator and the horseplayer.

Oh, you won’t see it billed as having anything to do with the horseplayer, but make no mistake; it is all about the player. And by “horseplayer” I mean YOU!

The ultimate result of this battle in California will affect players everywhere, not just Santa Anita, Golden Gate and other California ovals.

For those of you who have not been following closely, California racing is in trouble. Track management and horsemen said they needed more revenue in order to increase purses, the end result being to improve the “entertainment value” of the product. That product definitely needs improvement because short, uncompetitive fields just cannot be called a “quality” product.

So, when the track decided that they needed more money for purses where did they turn?

They turned to the horse player, of course. As they always do. They raised the takeout!

A little history lesson is in order 

Before the days of simulcasting, life was simpler. Back then the local track was the only option. Players had only the one track and eight or nine races to consider each day. Tracks were making money hand over fist because they had a captive audience.

Those of you who are old enough to remember the days before simulcasting can recall how different it was back then. Remember how you looked forward to a trip to Las Vegas? It meant for a week or so you could play any track you wanted. It was total immersion; heaven for a horseplayer.

Then simulcasting came along and every race track was like a Las Vegas race book: just about every track was available.

Then the world changed again and you could bet from home via the internet. Now we’re talking! We were really in heaven! No more parking or admission costs and you always had a reserved seat at home. Wherever your computer is situated at home was way nicer than the turf club. A great hot dog and beer was now at grocery store prices instead of $8 or more.

Internet wagering was both good and bad news for the track. The good news was that the track’s effective market was now national or even international. The even better news was that without leaving home or office, one could make a few bets during the lunch hour or just after dinner without disrupting the activities of the day.
The bad news was that the track no longer had a captive audience; the player was free, no longer trapped in his local circuit. This is when the world began to change for the race tracks.

Back to the Battle

Let us concentrate for a moment on the “bad news for the tracks” part for a moment.

When the player was no longer held captive by the local track, the tracks should have begun courting the player. They didn’t. I believe that the player was considered a “constant” in the financial equations employed by the tracks.

I believe it was assumed that the players’ money would always be there, no matter what choices were made by track management, horsemen, etc. It was seen as a permanent and perpetually renewable resource to be drawn from no matter what changes were made to the game.

So, if the track needed more money – no problem! I can imagine a track executive saying, “We’ll just raise the take a little. After all, we’re the only game in town.”

What they seem to have missed is that they are no longer the only game in town. Heck, with internet betting going as strong as it is they’re not even the only track in town.

Read the above paragraph again. Understand that they got to thinking this way because it used to be true, but has not been true for almost 2 decades.

Back to California

California's history has always been to protect its race tracks before it protects the patrons of racing. While California was quick to allow its signal to be broadcast out of state, residents of California were not permitted to bet on out-of-state tracks except at the track. In other words, if you lived in another state you could bet any track from home, but if you lived in California you could only bet California.

Even now, California residents are typically excluded from receiving rebates through ADW's.

My point in this that California racing has always bent over backwards to protect the interests of the tracks and horsemen at the direct expense of the horse player.

California horsemen have again and again referred to their product as an "entertainment product." We have heard that horse players are simply supposed to accept the fact that racing is entertainment, just like going to the movies, and paying for entertainment is just how it's done.

I suggest that the drop in handle at Santa Anita and Golden Gate is a result of catering to "entertainment" players. When you go to a movie you bring $20-$40, not multi-hundreds or thousands. The entertainment players will, by their very nature, be small players.

Welcome to Bunker Hill 

It is not that Santa Anita (or the state of California, for that matter) is really very different than any other track. But for a few recently converted, customer-friendly tracks, the underlying attitude of stakeholders (TOC, CHRB, Tracks) is really not much different from the prevailing attitude at tracks all across the country. Need to build a new grandstand? Raise the take. The horsemen are complaining that they aren't making enough money? No problem. Just take a little more from the bettor; he won't miss it. Need to raise purses? Well, the horseplayer just has to understand that it is his responsibility to pay for the needs of racing.

In my opinion, Santa Anita is the "Bunker Hill" of horse racing. That is, it is the first battle to be waged in the “War of the Take.” Ironically, the battle is truly being waged between stakeholders and simple business reality. You cannot overcharge, abuse and ignore the customer indefinitely without paying a price. The price paid is usually bankruptcy.

I am sure that the rest of the nation’s track managers are watching The Battle of Santa Anita closely. What happens at Santa Anita in the coming months should be an eye opening wake-up call for the rest of the country.

I truly do not wish ill to racing in California nor to Santa Anita. I am a big fan! I spent many wonderful days at Santa Anita, enjoying the Clydesdales, Trevor Denman, and of course top-quality racing. I hope to do so again, but doubt that I will find more than memories and a few new condominiums there in a few years.

Can California Racing Be Saved?

Carl Shapiro and Hal Varian, in their book, Information Rules: A Strategic Guide to the Network Economy, speak of businesses spiraling upwards quickly when in growth mode and spiraling downwards just as quickly when in decline. They build the case for the spiraling process going ever faster once it begins.

To me this conjures an image of a whirlpool. Someone caught in the whirlpool can extricate themselves relatively easily as long as they begin their escape before moving too close to the center.

An immediate change of direction for Santa Anita management is the only way for them to escape their ultimate fate. Things simply will not get better on the path they have chosen! The longer they wait the greater the risk that whatever changes they make our too little, too late.

One problem that management will need to address is who actually runs the show: track management or the horsemen? All over the country tracks are in dire straits financially. At the center of many of these problems are the horsemen, who have demanded that they get paid first, even if the track hemorrhages huge amounts of money in doing so. It is much like a labor union choosing to see a company bankrupt before making any concessions.

These are hard times for everyone – the track owners, the horsemen and the players. The ship is fast taking on water and the lifeboats are a bit rickety. If anyone gets into the lifeboat with a me-first attitude, nobody will stay afloat for very long.

There is a silver lining in all this for the horseplayer: If California racing holds fast to the same policies and fails, a clear message will be sent to the rest of the industry: change or perish.

2 comments:

Indulto said...

A very clear message from a newly-found voice that we'll hopefully hear more of in the future.

Anonymous said...

Dave Schwartz:

Excellent Article, Thank you.

Roger Way