Sunday, December 15, 2013

Turning Fans into Horseplayers

Players' Expectation and Random Selections in WPS pools
One of the hurdles the industry faces in converting the first time track visitor and new would be racing fan into a long term horseplayer is the severity of the negative gambling experience imprinted during those first few track visits.

How bad is it (really?)

If WPS takeout is 16% you might think the novice horseplayer, who doesn't know a thing about betting horses, and whose selections therefore might realistically be no better or no worse than random picks, should have an expected return no worse than 84 cents per each $1.00 wagered (1.00 minus the takeout percentage) right?

You might intuitively think that - but you'd be wrong.

Believe it or not, the true long term mathematical expectation of horse race bettors who make the equivalent of random selections in WPS pools is a net loss approaching 25 cents per each $1.00 wagered.

That's approximately 1.5 times worse than the percentage net loss most of us might intuitively think results from a 16 percent takeout rate!

Below is a cut and paste of some numbers pulled from my calendar year 2013 database. The database includes every thoroughbred race run in North America during calendar year 2013 from Jan 01, 2013 current through a few days ago Dec 08, 2013.

The top part of the data readout shows what would have happened to the player unfortunate enough to have bet $2.00 to WPS on every starter in every race during the time period covered by the database (approx 350k starters in all.)

The ROI numbers towards the bottom of the WPS columns reflect the return for each $1.00 wagered: Net losses bordering on minus 25 percent for WPS bets.

Data Window Settings:
Connected to: C:\JCapper\exe\JCapper2.mdb
999 Divisor  Odds Cap: None

      WHERE [DATE] >= #01-01-2013#
      AND [DATE] <= #12-31-2013#

Data Summary          Win         Place          Show
Mutuel Totals   529184.70     529707.00     531006.60
Bet            -699134.00    -699134.00    -699134.00
P/L            -169949.30    -169427.00    -168127.40

Wins                45440         90386        131813
Plays              349567        349567        349567
PCT                 .1300         .2586         .3771

ROI                0.7569        0.7577        0.7595
Avg Mut             11.65          5.86          4.03

Next up, the second part of the above sample with the data broken out by odds rank with no attempt to break ties:

By: Odds Rank

Rank       P/L        Bet        Roi    Wins   Plays     Pct     Impact
 1   -14901.00   93348.00     0.8404   17228   46674   .3691     2.8396  
 2   -15208.70   88526.00     0.8282    9642   44263   .2178     1.6758  
 3   -18372.90   88404.00     0.7922    6540   44202   .1480     1.1382  
 4   -18563.50   88650.00     0.7906    4681   44325   .1056     0.8124  
 5   -22870.40   87296.00     0.7380    3078   43648   .0705     0.5425  
 6   -22460.60   81236.00     0.7235    2034   40618   .0501     0.3852  
 7   -20465.90   65288.00     0.6865    1155   32644   .0354     0.2722  
 8   -14106.40   46530.00     0.6968     616   23265   .0265     0.2037  
 9   -10315.90   30140.00     0.6577     294   15070   .0195     0.1501  
10    -8129.40   17866.00     0.5450     110    8933   .0123     0.0947  
11    -2351.20    7388.00     0.6818      46    3694   .0125     0.0958  
12    -1884.80    3616.00     0.4788      13    1808   .0072     0.0553  
13     -245.60     578.00     0.5751       2     289   .0069     0.0532  
14      -63.00     258.00     0.7558       1     129   .0078     0.0596  
15       -2.00       2.00     0.0000       0       1   .0000     0.0000  
16       -2.00       2.00     0.0000       0       1   .0000     0.0000  
17       -2.00       2.00     0.0000       0       1   .0000     0.0000  
18       -2.00       2.00     0.0000       0       1   .0000     0.0000  
19+      -2.00       2.00     0.0000       0       1   .0000     0.0000  

This part of the data sample shows the favorite-longshot bias and hints at why horse racing might be at least attractive to some players from a viable gambling standpoint.

Note that win rate and roi (or player's expectation) varies with the odds.

The player who makes a serious go at studying the past performance records of horses will discover that horses have both positive attributes and negative attributes in their records. Positive attributes incrementally increase the likelihood of strong placings. Conversely, negative attributes result in incrementally worsened placings. Of course, the betting public realizes this and a high percentage of those attributes (as collectively seen by the crowd) are reflected in the odds.

I don't think there's any question that the newbie would be horseplayer faces a steep uphill climb. But most of us assume the hill to be climbed is 1.00 minus the takeout rate. (As you can see from the above numbers that is clearly not the case.)

In my mind getting people out to the track by itself isn't going to cut it.

The real question as I see it is this:

How do you create a good enough GAMBLING EXPERIENCE for the new would be horseplayer to make them want to come back for more?... A LOT MORE? (Enough to where the "fan" turns into a horseplayer?)

In my mind the most probable way the new would be race goer gets converted from a casual fan into a horseplayer is the same transformation process most of us underwent ourselves.

How I Became a Horseplayer
Speaking from personal experience and strictly for myself, 30 plus years ago when I first began looking at horse racing data:

I studied some data and noticed certain things in the data suggesting a realistic shot at break even play and beyond. And because of that I made the shift from "fan" to horseplayer. For me that conversion process did not happen overnight. It took about two years.

I'd like to point out that had I not seen anything early on in the data to suggest break even play was even possible I never would have taken up betting horses in a serious way. My first early visits to the track were at Turf Paradise back in 1981-1982. I initially began going to the races with a group of about a dozen friends who - one by one - dropped out by attending less and less frequently.

By 1984 I realized I was the ONLY one left from my original group. Everyone else had stopped going.

Oh, I'm still in touch with many from that same group. We've gone on many a camping trip, have gotten together for ski weekends in Utah and Tahoe, trips to Las Vegas, have rented beach houses in San Diego, etc., but largely as a direct result of the negative gambling experience imprinted on them - no one from that same group other than myself has expressed even the slightest bit of interest in a day spent betting on horses.

The game was different back then. In my opinion things were easier for the would be horseplayer.

When I first started betting horses in a serious way there were still crowds of people at the track - and many among that crowd were there for a good time... Hell, I remember being in my 20's and striking up conversations with LOTS of people whose betting was based on birthdays and phone numbers. (Good luck finding people at the races doing that today.)

The numbers in the above data sample paint a realistic picture as to the severity of the negative gambling experience faced by the new would be horseplayer.

Keep in mind the above data is WPS only. (FYI, it's worse for exotics... MUCH WORSE.)

I would be curious about the transformation process any of you underwent during your own conversions from "fan" to horseplayer. (Feel free to drop me a line at

Racing's Long Term Handle Trend
According to statistics at The Jockey Club website, North American thoroughbred handle peaked at $15.9 billion back in 2003. The trend has been down sharply ever since.

If the long term handle trend in North America over the past 10 years or so wasn't off by one third or more (not adjusted for inflation) I wouldn't be writing about takeout.

However, I think the long term downward handle trend is alarming. I also think it's crystal clear that insisting on takeout rates that create net losses bordering on minus 25 percent for bettors making random selections in WPS pools plays a big big part in shaping that trend.

According to economic studies commissioned by The Jockey Club we've stopped creating enough new horseplayers to replace the ones who are leaving the game each year. (The last one that I read says the net loss now averages 4% per year.)

The crowd attending the races when I first started going isn't there anymore. And as was so eloquently pointed out by one poster in a thread at in this post about getting people out to the track

"Guys don't worry about it.........nobody new is coming"

How Many Zeroes?
Today you still have that same crowd, the 20 and 30 somethings I used to see at the track - only now they are in the casino - where instead of minus 25 percent for WPS they are betting on games of chance where the prize payout percentages offered are significantly higher.

The built in house edge for roulette is 5.26%. I'll use that for example purposes because roulette is generally considered to be one of the worst gambling games you can play in a casino. If you study the layout of a roulette table, you'll quickly realize it's those two 'zeroes' that create the house edge and make roulette the bad gamble that it is.

Q. How many 'zeroes' do you have to add to a roulette wheel to turn roulette into the equivalent of what a newbie horse bettor faces? (Where random WPS selections produce long term net losses bordering on minus 25 percent?)

A. Believe it or not you have to add TEN ADDITIONAL ZEROES - until the layout itself has TWELVE ZEROES ON IT! – in order to turn roulette into the equivalent gamble (net losses of minus 25 percent) faced by a horse bettor making random WPS selections at 16 percent takeout!

TWELVE zeroes! (Mull that over for a few minutes until it sinks in.)

No one in their right mind is going to spend any serious amount of time immersed in study trying to develop a system to beat a roulette wheel with TWELVE freaking zeroes on it. (Can we at least agree on that much?)

While I agree that "marketing" can and will get new "fans" out to the track...

How can anyone in their right mind think that takeout isn't a huge part of the problem?...

That "marketing" alone is all it takes to convert "fans" into horseplayers?...

When what we are marketing, from a prize payout standpoint, is a gamble equivalent to a roulette table with twelve freaking zeroes on it?

I humbly submit to you the idea that no amount of marketing will ever be successful selling THAT.

In my mind the only way to convert first time race goers into long term horseplayers is to give them a realistic sense they can win.

How do we do that (with a straight face) given the above numbers?

Jeff Platt
President, HANA



Anonymous said...

This is exactly why a takeout increase to help the sport survive is in order.

Guys like Mike Pegram, Bob Baffert, Fred Pope, Ed Derosa, etc. who have either said takeout doesn't matter or raising takeout won't hurt are 100% correct.

If people are still betting into a roulette wheel with 12 zeros on it, why would they stop if they made it 15 zeros?

HANA said...

Who needs pretty horses going around in a circle? We put on the show and we've got a roulette table with 15 zeroes on it!

Anonymous said...

Of course, in all seriousness, those extra zeroes do account for a lot of racing's financial ills.

Sal Carcia said...

In a parimutuel pool, the better players always put the casual players at a disadvantage. But when the handle of the better players jumps from 4% To 20% of the total, it doesn't go unnoticed by the casual players.

This is why we are seeing the casual players diverting their monies into betting pools that they perceive are shielded from the better players. It happens in poker too. When a professional player comes to the table, the casual players leave.

Anonymous said...

You're still not thinking correctly!

It is a given that the data illustrates the major hurdle faced by the new track attendee.

But only morons are connecting the "long term handle trend in North America" to "takeout". "Takeout" has been the same over "the past 10 years or so", and thus it cannot be any part of the difference (between 2003 and 2013).

And anybody well-versed in 8th grade math can derive the fact that, where it concerns the would-be new track attendee, you clowns ARE the problem.

Getting back to roulette:

Were these all spots on a roulette table, with roulette takeout the same over 10 years, you and these other thimble brains would not have any combined negative effect on newcomers (not) entering the game...

...the data up above would not show any ROI difference between #2 and #13, and nothing about your very (collective) existence would be keeping newcomers from showing up and sticking around in contrast to the indisputable case in the present horse racing scenario.

Your laughable solution to all this is to help yourselves while the gullible among track operators waste precious time listening to you (only because nobody else is around at all, after your combined negative impact on the whole racing picture) instead of acting in just the opposite directions for the betterment of all things racing.

It is precisely because track operators had (and have) no concept of what their brain-dead choreography would do to horse racing, that you and others of your ilk have put horse racing into the death spiral it presently endures.

Now most of us can at least appreciate the tradition of putting yourselves first, but to try to pretend there is numerical sense to support your cluelessness is insulting to these other people dumb enough to think you understand the big picture.

Anonymous said...

Well there you have it. An accurate depiction of how tracks and horsemen see their customers.