29 April 2009

If I Ran Woodbine

What Woodbine Needs To Do To Grow Horse Racing

1. Reduce Takeouts/Give Every Account Bettor Larger Rebates

This is the number one issue when it comes to growing the game. I have to say, I have done a lot of thinking and rethinking on this issue, and I'm now in the rebate camp more than I am in the reduced takeout camp.

The reason is that on big days like the Queen's Plate and also when you factor in the corporate dining room crowd, there is no reason not to keep takeout at higher levels for the patrons, who are not likely to come back that often if at all again. These are entertainment dollars the racetracks only have one shot at. Might as well get as much out of these customers as they can and as quickly as they can. Higher payouts for these people won't mean a thing as to whether they come back or not.

I don't think Woodbine should have one of the highest collective takeouts in the industry either. They need to reduce triactors and other exotic bets to 25% maximum so that they don't lose those betting simulcast or through ADWs in the USA.

They also need to payout what US tracks payout on exotics that have lower takeout rates. It is completely offensive when a gambler sees that he or she received 93.5% of the payout that was posted in Tampa Bay for a Win3 hit through HPI, for example. It is inexcusable, and borderline criminal.

Now getting back to the issue of rebating. HPI is almost a monopoly when it comes to Canadians betting on horse racing with a Canadian based server. There really should be no reason for someone who wants to bet on the ponies to have to bet elsewhere. I'm certain that all gamblers would be most comfortable dealing with a company that is regulated by our government. The problem is that HPI fails to compete for most gamblers who are price sensitive. They have an opportunity to capture almost all the money they are losing to offshore houses.

I recently saw the account of a horseplayer who bet over $80,000 in March alone (He started with a $400 deposit). He would rather have supported the industry in Ontario, but he bet through a foreign ADW instead (one where the money bet made it to the actual betting pools), because he received an average rebate of around 6.5%. Does anyone blame him? How many more gamblers like him exist in Ontario?

The bigger question is how much would a gambler like this churn with a 1% rebate (that Woodbine offers to most players in their home market) or no rebate at all? His answer was that he estimates he would bet a tenth of that if he didn't get wiped out too quickly (which would probably happen).

I don't want this to be a case to only rebate potential big players either. I know that today's $2 bettor is tomorrow's $100 bettor. But the only way that is going to happen is if the $2 bettor sees a light at the end of the tunnel. I strongly believe that all players should get the same rebate if they choose to open up an online account.

Bettors only have so much to lose gambling during a certain period of time (3 months to a year, for example). They may not understand the impact of takeout or rebates, but they will realize (maybe even subconsciously) whether they lose quickly or slowly in general when betting certain games. For example, slot operators know not to up the house rake over 10% because beyond that, players get discouraged by losing too fast. The key to getting players to focus on horse racing is to allow them to last longer, and this can be satisfied by daily rebates.

Lets say a person bets $150 one day and has a zero account balance at the end of the day. A 7% rebate gives that player $10 in the account for the next betting day. Sure, the player may just bet the 10 bucks and if it is gone, they are gone for a bit. But chances are that the bettor will do some handicapping, some research, just because they know the 10 bucks is there. In other words, they are more likely to play on days they wouldn't have before, and they are more likely to go to the well in order to play the other races that were handicapped for the new day. The rebate has put the hook in the players mouth.

Churn (thanks to rebates or lower takeouts) definitely helps by letting players last longer. If players last longer, their friends and family might just get involved too. It only makes sense that if someone devotes more time to handicapping, those in that person's immediate universe are likely to wind up showing interest or will wind up being forced to become interested. Also, if a bettor lasts longer, they are likely to forget about other forms of gambling, so the track has the opportunity to get all the players gambling dough.

But the main thing that will bring new blood into the track, is that thanks to a lower cost to gamble, there is now a chance that if you are good enough and lucky enough, you might actually beat the game, and when this happens, others people will hear about it and many will give it a try. This has worked with online Poker, and it works with Betfair.

Word of mouth ( by newly created horseplayers who win) is a powerful marketing tool, especially in today's internet age. But right now the internet is killing horse racing because those who investigate know that betting without rebate or into high takeouts is just plain idiocy.

But now for the problem Woodbine has at this time:

Even if they were to love my advice here (and why wouldn't they?), the contracts with horsemen have to be rewritten. This plan would be unfair to Woodbine. Let me explain with an example.
Lets say that Woodbine averages 22% on a bet, where 11% goes to horsemen, 9% goes to the track, and 2% goes to the taxman, etc. Now lets say that one million is bet. Under my plan, Woodbine would rebate $70,000, and that money would eventually be bet back (it would take approximately $400,000 plus in bets to dwindle that so that the original rebated money is actually lost by the collective bettors (when factoring that rebates will continue).

Even though the $70,000 will eventually be lost by players, the horsemen will get another $40,000 from Woodbine's original rebate. The horsemen will receive approximately 14%, while the track winds up with only 6% of the initial million bet when the dust clears.

What must happen is that the horsemen have to realize for the good of the game, and for the potential growth that will come, rebates to players need to be split in the same manner it is split by bet. This way, Woodbine receives its fair share......the way it should be.

Minor to this, the existing contract that gives horsemen an additional 2% on all bets except 4% on triactors needs to be changed as a percentage of the total takeout not the total amount bet. This way, triactor takeouts can be reduced so that Woodbine doesn't lose out disproportionately.

2. Drugs Drugs Drugs

I think that if more bettors cared about horse racing, the pressure to reduce the amount of drugs allowed would increase immensely. Right now, not enough people care.

I would only allow 4 or 5 drugs to be approved. Lasix would be one that I would either eliminate or give in much more reduced amounts. Not only do studies show that Lasix doesn't do what it is supposed to do, it also masks other drugs.

Any trainer batting at 18% or more (per 100 starts) is most likely using something illegal or something that isn't being tested for. I think that if high percentage trainers were put in detention more readily (just for suspicion), there would be a lot less 18% trainers on the grounds.

Not allowing horses to ship in more than 48 hours before a race, would also throw a major curve ball at cheating trainers who are not only hurting the game from the bettors point of view, but also from the owners point of view (especially new potential owners).

Anyone nailed with a positive would get half a year minimum, and I would consider getting the courts involved. It always boggles my mind how cheating trainers aren't actually defrauding the betting public and defrauding other owners and trainers as well (by denying those who play by the rules much of the purse monies in many instances). Would the possibility of jail deter cheaters? I say give it a try and find out.

3. Quit Protecting and Deterring Horses From Being Claimed

One of the best ways to grow the game is to get new owners involved. New owners often get started by partnership. Instead of one owner showing up at the track, you wind up with 3 owners, some of their relatives and friends as well. Many of these people are potential owners as well, and for sure, they are potential bettors, and maybe potential long term bettors.

Almost every new owner comes into the game via the claim game. It is pretty tough to tell a newbie owner to go to a sales, by a yearling, and then probably wait a year or two before the horse is ready to run, if the horse makes it. In the meantime, the newbie gets to send checks monthly with no possibility of any return for quite some time.

The way it works is that a trainer or current owner gets a friend involved in a smaller way with a race ready horse, usually by claiming this horse. If things become fun and/or profitable, the new owner buys more horses, and may get other friends involved in ownership.

Many times, these owners wind up with a mare at the end of the year that they decide to breed. Also, depending on how good the year was, the newbie owner may decide to go to the sales and take a shot on a potential Stakes winner.

In other words, they get involved in breeding after they try the racing game. No matter how much breeders want it to be the other way around, it just doesn't happen that way.

Unfortunately, the rules that exist today in Ontario are in place so as to cater to the way the breeders want things to be. And the result is that it is chasing potential owners away.

I spoke to one the other day. Someone who has owned horses in Ontario for quite some time. He is not interested now in claiming an Ontario bred, because once claimed, Ontario breds do not run for full purses. In fact, he now isn't even looking to claim anything.

Ontario bred horses that are claimed should run for full purses again.

Another related point is that when owners are on the lookout, they are also more inclined to bet as well, because they are doing some handicapping.

So not only is this guy not going to claim the usual 4 or 5 horses he claims a year, he winds up losing interest in the game completely, and that means he won't show up at the year end sales either. No chance.

The B Allowance and Maiden races need to go as well. If a horse can't compete in an A protected race, it is a claimer. It should be offered to the public. I'd rather see maiden 60,000 or 80,000 races or 60,000 non winners of two, rather than B races, where true value is thrown out the door. The more horses that run for a sale tag, the more horses that will get claimed. But the way it is now is a curve ball is thrown at the capital market of buying and selling horses.

I would also add more money to the purse money of lower end claiming races and take a little off the allowance and high claimer's purse money to make up for it. This way more owners will come closer to making money and of course, come closer to breaking even, which will most likely entice them to buy more horses and even wind up at the year end sales.

4. Ontario Bred Claiming Races

Why Ontario hasn't started running Ontario bred claiming races is also beyond me. It is a no-brainer to increase the value of all Ontario bred horses. If Ontario breds can run against lesser competition and for a greater purse, more people will be inclined to spend more money at sales because they know they have a possible out if the horse doesn't make it in the allowance ranks. Owners will be looking to buy Ontario, and this will create a bigger demand for all Ontario breds.
If the price of the cheapest Ontario horse goes up, the price of all Ontario breds go up as well.

5. Start A Betting Exchange

Compete for the same market Betfair has, using the exact same commissions. Not only for horse racing but online Poker and sports betting as well. Split the proceeds with the horsemen, and don't forget to take international bettors.

Personally, I think the only real future harness racing in Ontario has right now is if harness races were put on an international exchange. And if the thoroughbreds don't clean up their act very soon, that will be their only real future too, as the industry is losing more players each day, because it fails to compete in the least, with other low priced forms of gambling.

EDIT: I don't want to appear so down on harness racing but the reality is that harness racing will always lag behind thoroughbred racing. And right now, the thoroughbred industry continues its slow swirl down the toilet.

Thanks to Bill from HANA for putting together the most up to date and informative track takeout chart available anywhere. It is sortable, so you could click a heading like TRI Takeout and scroll down to find that Woodbine ranks 68th out of 71 tracks in that department. It also has a field size and pool size column. Great stuff.


Scott said...

competing exchanges won't work - it's like having two pari-mutuel pools on the same event. Liquidity is everything with exchanges. Far better off striking a deal with Betfair who have the infrastructure, the customer base (instantly 2 million customers who could bet on Canadian racing with maybe 10,000 in Canada) to bring to the table and the expertise rather than reinventing the wheel and being blown away. Over 40 exchanges have been set up to take on Betfair... and between them, they've probably claimed 5% of business in total. The vast majority have gone broke. Look at what happened in Australia, cut a deal early and move forward rather than wasting years developing an impossible model.

Cangamble said...

Scott, from a business perspective, I'm not sure if the cut the tracks could get from Betfair for partnering up would be worth the cannibalism that will go on with their own pools.
I understand your points about liquidity, but I think if the North American tracks got together and got into exchange betting, there could be tremendous growth in gambling because of it, and I think it is imperative that the tracks and the horsemen get the lion's share of the profits.

Anonymous said...

one factor you over looked besides giving the fan a bigger bang for their buck is the allocation of stalls ,why should some trainers get 40 to 50 stalls and some others get none if you add the number of horses the one horse trainers has you would get a suprise.The stall committee is a big joke, this year there are many empty stalls because these trainers lie about the number of horses they have . find a good solution to this stall promblem and you will find an increase in new owners , breeders will bred more and the prince in shinning armour will slay the dragon

jengersnap said...

Totally agree on the ON bred incentives. Coming from a similar, highly successful program (PA breds), I'd be far more inclined to claim, breed, race and promote provincial horses. I collected breeders awards off PA breds my husband foaled years after we stopped racing there. It's really a no brainer.

affirmedny said...

Monmouth has 15 percent take on the super. I hope the rest of the chart is accurate.

Cangamble said...

It is almost impossible to be 100% accurate with a track takeout chart these days. Tracks don't publish them. Bris and DRF try to keep up to date, amongst others.
Do you have any link to confirm that the super at Monmouth is 15%? We know Win4's are.

affirmedny said...

This is the closest I can find as they're not open yet: http://www.drf.com/data/samples/propicks.pdf

It's copied from an official proogram.
Look at page one and look at every race that has a super. They go out of their way to ADVERTISE the rate, which is the best in the country for a super. Which begs the question, why are they not overrun with super players if takeout is so important? THESE are the kind of races HANA should target for their members to bet. Support a track that's ALREADY doing the right thing....

Cangamble said...

That shows Meadowlands, which we already have at 15%. Though you are probably right because they are both Jersey tracks, I think we will still need more evidence, though I'll run it by HANA in the meantime.

Steve D said...

6. Get rid of Polytrack

Anonymous said...

Completely agree with you regarding the Ontario-breds and losing the bonuses when the horse gets claimed. Where's the incentive in that? Claim the horse, lose the bonus? If you want people to claim, make it worth our while!

bullring said...

I couldn't ever imagine playing the horses without getting a rebate of at least 5%. I hardly ever win money, but what it does is make my bankroll last A LOT longer. Such a simple concept.

Anonymous said...

Cangamble, what exactly do you mean when you say Ontario breds can't run for full purses again? Are you refering to running back in a claimer after being claimed?

Cangamble said...

The purse that is quoted for every race except Ontario sired races only pertains to Ontario bred horses that were never claimed. The purse these horses go for is 15% higher than foreign bred or out of province bred or Ontario bred horses that were claimed from 2008 on.

Cangamble said...

I want to add that I don't mind that Ontario breds run for higher totals in every race, but I have a huge problem where that benefit is taken away because the horse was claimed.
It is pretty ridiculous too in that one can buy an Ontario bred privately after the race, and not lose that benefit.

Scott said...

Cangamble - the cannibalism you are concerned about hasn't happened. In fact tote figures in Aus are going up because racing gets a higher profile, which brings in traders, arbers, scalpers etc. Betfair are also linked up with the tote (pari-mutuel) operations in Aus, Ireland and the UK - which allows its customers to bet into the pools, particularly boosting the exotic pools and those races where exchange liquidity is low or unstable. There's always a way, and most of the prophecies of doom havwe been blown away in reality...

A racing-industry exchange has one key problem - it only reaching racing fans. It's like broadcasting all the racing on subscription channels - you never cross the divide and reach out to the general public, and that's where you must grow the betting industry!

Exchanges are incredibly complex beasts - you need outside interest in them from people already using them, otherwise it will be everyone sitting back waiting for someone else to work out how this new-fangled contraption works :)