2 March 2008

Stronach Is No Visionary: Magna's Future In Doubt

Magna Entertainment has announced that there "ability to continue as a going concern is in substantial doubt," when reporting their 4th quarter losses of $43 million.
I don't mean to pick on Frank Stronach. His heart was in the right place when he started Magna Entertainment. He had visions of stands of wall to wall horseplayers in the tracks his company owned. He realizes how great a game horse racing is and he wanted more people to realize it too.
Problem is that he didn't realize what gets people into the stands. He invested millions into beautifying his race tracks. Sure, a race track with a nice landscape is cool to look at, but people come back because they think they have a reasonable chance to win. That is the bottom line, and this fact is missed by Stronach just as it is missed by David Willmot, the Grand Poobah at Woodbine Entertainment Group (WEG).

Stronach had a huge opportunity to become the saviour of horse racing. He had the infrastructure in which to do it: a betting network coupled with a bunch of tracks which his company owned. He just doesn't get the horseplayer or potential horseplayer, and now with his age getting up there, it is probably too late for him to do the right thing.

Horseplayers Rarely Complain About Track Takeouts

I'm wondering if this is why racing execs don't get it. Horseplayers who are really cognizant of takeouts and the affect on bankrolls and longevity sometimes complain, but mostly they find other avenues to bet (rebate shops or Betfair), or find other things to bet on to get more bang for the buck (blackjack, NFL, online poker, etc.)
The gamblers who aren't hip when it comes to track takeout don't complain of course, they just go broke faster, they don't bring friends to the track, in fact they hide their betting from everyone, and they get disillusioned enough so that they are less likely to put new money into their accounts or go to the tracks altogether.

The Game Has Changed Tremendously In The Past 20 Years

I've mentioned this before many times before. 20 plus years ago when there was no simulcasting going on, horse racing was the only game in town, and for the most part, you had to be live at the track to make a bet. There was only 9 races to bet on, there wasn't a triactor every race, there were no slots (lots of sucker money was still available for a savvy bettor to take advantage of as there was very little competition at all: no internet poker for example), and takeouts were lower than today (slightly).
Now you have less suckers, and you can bet 60 races a day if you have the bankroll to do so. It is more similar to slots (9% average takeout) and even blackjack (with their 1.5% house advantage). Try raising takeout of slots or blackjack (making a tie go to the house), and you'll see nothing but empty chairs. This isn't brain surgery, but the "rocket scientists" at Magna and WEG fail to realize it.

What Stronach Should Have Done

Stronach should have dropped track takeouts at all his tracks to a maximum of 15% for every type of bet. Immediately he would have seen handle on his package of tracks go up, and it would only get better as time went by as word of mouth turned some moderate losers into winners. Other tracks would eventually be forced to cut their takes to compete. While this was happening, more and more people would become attracted to the game of horse racing. Regular players would start bringing friends to the track, and churning of accounts would be up dramatically.

Stronach should have taken Canadians as clients. I'm not trying to be self serving here. OK just a little, but WEG is a huge organization who thinks or at least wants it's patrons to think that they are a monopoly.
WEG would try their illegal collusive tactics to begin with, but Frank could have said "go fly a kite, I don't need to put Woodbine on my available tracks to bet, and I don't care if you carry my tracks either." In fact, Stronach could afford to say no all other content. Bettors would be lined up to set up accounts with Magna's Xpress Bet.
WEG would be forced to drop their takeouts. In the end, the racing industry would prosper immensely.

Personally, I'd be happy to give WEG all my action if they dropped their takeout to 15% maximum on everything or gave me an 8% rebate on exotics, a 5% rebate on win and place (I never bet show), and paid out exactly what the foreign race track pays to its on-track customers. For example, Tampa Bay has a takeout of around 20% on triactors right now, but if you bet through WEG, WEG marks up the the takeout to their MINIMUM of 25%. The horseplayer gets shafted (less money than they deserve for being keen enough to bet on the right ticket).

The Power of Rebates

To date this year, I've bet 8 times more than I would have had I received no rebate. No kidding. It all has to do with rebates. Nothing less, nothing more.
I haven't put a dime through WEG's HPI this year, but I do appreciate their free replay service. LOL
Maybe I'll put in a couple of hundred bucks into my account there to play 20 cent supers and Win 4's for action when Woodbine comes back. Maybe I won't. I know one thing, I'm doing track variants for different tracks right now. Tracks where I have a chance to win thanks to rebates.


I was trying to see if Woodbine had any info about their ridiculously high track takeout on their website. Couldn't find a thing. But I did find their explanation of Common Pool Wagering in for of commonly asked Q's and A's. Check this one out:

Why might payoffs on some pools differ from that of the host?
Since some U.S. tracks have extraordinarily low takeout rates on some pools (e.g. Triactors, Superfectas) that do not accommodate the high mandatory deductions in Canada, WEG will use a minimum of 25% for the total takeout on these pools. This is a very common rate that is used by other U.S. tracks.

So they call any track that doesn't rip their customers off (all tracks rip them off, some not as bad as others) by charging a ludicrous 25%, has EXTRAORDINARILY LOW takeouts. HAHAHAHAHAHA Too funny. How stupid does WEG think horseplayers are?

Lets look at their takeouts and examine their "high mandatory deductions:"

Woodbine Takeout Percentages (including mandatory deductions):

Win/Place/Show - 16.95%
Exactor & Daily Double - 20.5%
Triactor - 28.30%
Win 4 - 25%
All others - 26.3%

Mandatory Deductions:

Horsepeople receive a further 2% on all wagers except 4% on triactor wagering.

The Ontario Provincial Government retains 0.5% on all bets placed in Ontario.

The Canadian Government (through a revolving fund cost recovery basis) retains 0.8%
On all wagers placed in Canada for provision of drug control, photo-finish, video patrol
And audit services.

The only difference between flat bets and exactors, and triactors as far as mandatory deductions go is the extra 2% horse people receive, yet their win takeout is around 17% while exactors have a 20% takeout. So what is the justification for having to raise Tampa Bay's takeout to 25% again? Other than to take more money from their beloved client base (and therefore give the player less money to bet back) so as to discourage the bettors even more?


Harnesslink.com has started a brand new blog devoted to harness racing articles from all over. Check out Harness Racing Blog.

Pull The Pocket links a must read article about the testimony of NTRA's Alexander Waldrop's lacking testimony at the recent "Drugs in Sports: Compromising the Health of Athletes and Undermining the Integrity of Competition" hearing in Washington DC on February 27th. Pull The Pocket of course adds his usual two cents. Well worth reading.


Colins Ghost said...

And don't forget about that fact the availability of HRTV is very limited. If Frank wants to get more people betting he should be giving away HRTV. Yet another example of the industry shooting itself in the foot.

Anonymous said...

Just like the other Kevin, I tend to think the division between HRTV and TVG is a major factor in limiting the ability to bring in more horseplayers. I can't get HRTV without cancelling my Directv, which is both expensive and would result in the loss of my beloved NFL Sunday Ticket. :)

I'm totally on board with the decrease in track takeout idea. I think the DRF would help spread the word about it if/when they were to do it (I recall Andy Beyer even writing about Laurel's two-week experiment with it last year).

One other thing I'm really on a kick about lately is that we need to rethink what time of day racing occurs. I'm so sick of being shut-out Monday through Friday because all the racing occurrs while I'm stuck at work. Push the post times back a few hours. At least let me have a chance to play a late pick 4. Is that too much to ask from my local tracks? I've just never understood why most weekday racing occurs at a time when only retired folks, people that are unemployed, or folks that are playing hookie can partake in.

Excellent post, by the way.

Anonymous said...

In Canada, we get HPITV. They have a fairly good schedule and show both HRTV and TVG tracks.
It is difficult to broadcast more than 5 tracks at once anyway, so choices always have to be made.
I'm more adamant of being allowed to bet than having access to watch on TV (there is always the internet).
As far as post times go, on weekdays,I never had a problem being able to make phone or computer bets in my life. I guess it depends on the job you have. But usually the more you make, the more freedom you have. I can't see someone being able to afford to play every day in most cases if their job won't allow them to play from work, especially with all the technologies available today.
I know there are exceptions though, but there are also alternatives when it comes to betting. I'm in the Eastern Time Zone, you have California starting up no earlier than 3 est, Mountaineer at night, Charlestown, Penn, and Turfway doesn't start until 2:30. Turf Paradise runs late on Friday.
I guess it depends where you live and what tracks you like betting.

But again, track takeout is the big issue, the more you play and keep records, the more you will understand.