22 November 2011

Horse Racing Missed Out Big Time: Is It Too Late?

I watched CNN yesterday morning, and caught a story about the Full Tilt Poker disaster. I know the story is all about the problems facing Full Tilt players who have balances with the suspended company, however one bit of info resonated with me in a large way: 8% of US players make a living playing poker. And that 8% represents 35,000 players. Quick math, and you wind up with almost 4.4 million online poker players.

Here is the clip:

In horse racing there is no discussion, no figures, no studies on how many people make a living at the game. The old line is that 2% of Horseplayers beat the game long term(and this line goes back to the 1960's when collective takeout was much lower and there was oodles of dummy money in the pools).

Nowadays, 2% would be way way way too high, and the industry knows it. The industry also knows that the only long term winners are those who get rebates (and yet there are numbskull racetrack execs who state that rebates are bad for the game).

Horse racing is stuck when it comes to marketing. They can't market the game as a way to make a living, like poker can (even though poker doesn't actually go out and say it, word of mouth and the internet is all poker needs).

I believe that even if the amount of long term winners in horse racing was 2.5% or so, racing would be flourishing, and newbies would be attracted in large quantities. Horse racing has the extra hurdle in that the learning curve is much steeper than poker's learning curve. However, I also believe that horse racing would have much more broader appeal if the game was perceived as beatable.

Horse racing handle doesn't grow despite The Secretariat Movie, Zenyatta, exposure on a multitude of TV shows, and even prohibition on US poker players. There is something wrong. Just like with US congress these days, the system is broken. Even if you throw the bums on the street (the high end racing execs), the system is still broken. The system needs a complete overhaul, and racetracks need restraining orders from the racing execs and horsemen groups who believe that growth is getting a higher bigger piece of a shrinking pie.

And to the horse racing execs who believe rebates are a bad thing, THINK!!!!

Even if a $50 a day bettor gets an extra $2 or $3 bucks the next day, that player is still in the game one day more than he or she would have in many cases. The longer they are in the game, the more likely they are to keep horse racing in their head and the more likely they are to expose others to horse racing (friends, sons, daughters, coworkers, etc.).

However, horse racing execs and racing jurisdictions do almost everything possible to knock these people out of the game.

First, you have States that make it impossible to rebate because they charge a fee on every bet made within the State. Some as high as 10%.

Then you have some tracks and signal distribution companies that limit content, some tied in with ADWs, (so they attempt to limit the content of competing ADWS). If a track isn't available at a Horseplayers favorite ADW, the result is that it sours racing's every day customers. Sure, some may come over to the ADW with more content, but the result is racing ends up losing more aggregate customers in the long term.

And then there is Texas, who has written into law that internet horse race betting is amongst Texas residents is now illegal. At first I thought the horsemen groups were stupid enough to think it would bring more people to the track (and they would get more money from it in theory...in actuality, it will kill horse racing in Texas as Horseplayers will become less and less interested, and follow less even if they were used to going to the track a few days a week, the fact it is now illegal to wager when they can't make it to the track will cause them to just give up...the same thing happened in Arizona 4 years ago. HINT Yavapai is bankrupt and for sale). It turns out that the one to blame is probably Presidential candidate Rick Perry. When horse racing is dead in Texas within the next five years, try to remember his name.

Texas has 8% of the US population. Sure, part of the population is very religious, but there are many gamblers in Texas too. And tracks are sporadic. Nationwide handle could drop 5-6% thanks to the new law.

And now you have Kentucky looking to charge ADW customers an extra fee for bets made by Kentucky residents. This will result in lower rebates for all Kentucky residents which will hurt handle even more.

So racing is chasing away Horseplayers who already know its a bad bet to begin with. Tremendous logic. And the ones with all the power are the ones who are looking to get a bigger slice from a shrinking pie.

REALITY: ADWs and rebates (as long as takeout rates remain above 12%), and exchange wagering represent racing's only chance at growth going forward. We need visible winners to attract poker players and other potential young gamblers. Horse racing needs to understand and embrace this fact. But racing seems bent on increasing the cost to the rebated player while also limiting distribution.

EQUINOMETRY (Horse Racing For Intelligent Horseplayers) has some great posts about takeout and handle.

There is even a post about the growth of handle in Fort Erie's Pick 4 pool thanks to a reduced track takeout.

Jen Morrison is rightfully pissed at the lack of transparency in horse racing when it comes to information available to the betting public. Her focus was the complete form reversal by Flip Of The Coin last week at Woodbine.

For Canadian TV viewers, there is documentary on OMNITV Friday morning at 9 EST called For The Love Of Horses. It is all about the Attard family. I missed it on Sunday because Sunday is my horse racing break night (Animation Domination, yeah baby!!!!....that and I haven't figured out how to record on Blue Ray yet).

One more thing. Back to Full Tilt Poker and their "not a Ponzi scheme plea." Sorry, but the funds were not segregated (they weren't required to be segregated but that is besides the point), and at the time the plug was pulled, there was not nearly enough cash to pay the customers, yet the owners were pulling funds out that really represented possible future profits...uh, I'm going with Ponzi scheme. They are not a bank that has enough cash on hand to meet daily withdrawals with the rest invested more or less, but they acted like a bank without the collateral.

In the gambling world, that is no no. ADWs based in Oregon, for example, must segregate gambling funds. That is the way it should be. Too bad that isn't enough (nor should it be) to attract poker players to horse racing....again, VISIBLE WINNERS, VISIBLE WINNERS, VISIBLE WINNERS....


The Market Examiner said...

Really interesting post, there's a lot horse racing can learn from poker for sure - including (in the UK) bookies allowing winners to stay on their books (some hope I guess!). But yes if more and more people proved that horse racing can be beatable then it would only help to grow the industry going forward.

The whole Full Tilt thing is unbelievable. Actually had a few $ in their myself, was my site of choice, but nothing to get worried about - although all those little amounts stack up I'm sure.

Anonymous said...

I can't believe they charge for pps.They should be sent to every person who want's it via email first thing in the morning.