5 January 2010

If You Want Horse Racing To Grow You Need To Market Winning Horseplayers

R2Racing has a very good post up "Positioning Racing Perhaps For The First Time." The author of the post asks racing to try top down marketing with a simple message: "Horse racing is a game ……. and you will have the time of your life playing it."

I agree with the main points being made in the article, but the reality is that marketing horse racing will not work to attract a substantial amount of new horseplayers until there is a real reason for players to flock to the game.

Horse racing is a thinking persons game, and this fact is something that can be used as part of the marketing campaign. However other thinking games exist, and they don't cost nearly as much when it comes to giving the thinker the opportunity for victory. I don't know for sure, but I get the same euphoric fix winning a poker hand on the last card, as I do winning a Fantasy Football league, as I do catching an exactor at Tampa Bay Downs. I even get a feeling of satisfaction playing free games on the internet, where winning means just winning and has no financial rewards whatsoever.

Horse racing needs winning horseplayers, and it needs to market them along with the new reality (hopefully) that the game can be beaten with a combination of luck and skill.

This type of marketing scheme has been proven very successful in growing online poker and Betfair. Every young person wants to be that online poker player who wound up moving out of their parent's basement and into a mansion, thanks to being one of the best. And what young person wouldn't want to gamble successfully for a living?

Of course, there have been a lot more losers created by this form of marketing but that is the growth component, something dreadfully lacking in horse racing today. But as long as the carrot is there dangling in front of the player, where perhaps just a little more patience, knowledge and luck can turn a loser into a winner, the player's entertainment needs become fulfilled as an offshoot, and there is nothing wrong with horse racing getting more of the public's entertainment dollars.

The main deterrent to growth is undeniably the track takeout. For the horseplayer, the game has become much more difficult to beat than ever before (and it was hardly a game that could be beat in the past either, though there was a shot).

A Quick History
From the 1930's to the 1960's horse racing was much more mainstream. In many instances, it was the only place one could legally bet outside of Las Vegas. It was part of the cinema and then TV. Many movies and TV shows had references or were about about horse racing. Not that it was all a rosy portrayal, it was a mixture of either/or larceny and getting wealthy (with luck and knowledge).

Stands were packed. The main reasons being, it was the only game in town, it was inexpensive to play (there were only 8 races, and few if any exotics, so players were very likely to leave with cash in their pockets, enough to play the next day, and many left the track with more money than they came in with, even a couple of times a week sometimes), and there was a carrot: The game was perceived to be beatable. There was the legend of Pittsburgh Phil and others, along with the idea that inside info could actually help one make a huge score (a $2500 score in the 60's could get one enough money for the down payment on a home that today is worth $400,000).

By the late 60's to the early 80's handicapping books became popular. Real life stories like Andrew Beyer's My $50,000 Year At That Races, and new books based on empirical statistics like William Quirin's Winning At The Races became must reads for anyone serious enough to try to beat the game. Nowadays if Beyer's were to put out a book about actually winning, it would have to be called, My $50,000 Year At The Races After Receiving $100,000 In Rebates, and Quirin's book would have to be renamed Breaking Even At The Races If You Are Exceptionally Lucky.

Here is a telling quote from Richard Eng's book Horse Racing For Dummies: "Here's the skinny on getting shut out; in the long run, you save money." The statement is very true, more true today than it was in the 70's. You can't make that statement if you have even a chance to win long term.

So what happened? When did the possibility to win all but vanish? It really didn't take all that long, and it was mainly due to competition. First from lotteries starting in the 70's, and then slots and casinos in the 90's. Horse racing didn't even try to compete or lose their culture of entitlement perspective. In Toronto, the Blue Jays hurt Woodbine and Greenwood a lot in the mid to late 70's.

Most businesses can identify their customers and do everything they can to attract them. Not horse racing. Their customers it seems has always been execs and horsemen. Their customers of course, are the horseplayers. When business gets slower due to competition, the first thing a business does to attract customers, is LOWER PRICING. That is Economics 101.

In fact, pricing started to go up, because racetracks in their infinite wisdom started to increase the wagering types offered every race at much higher takeout rates in most cases. Sure, existing players wanted a chance at bigger scores, and what did they care about takeout? Most players, even today have no clue about how it affects them.

But it does affect them. The game got too expensive to play every day. More players went home broke more often, they spent less time handicapping and watching races, or taking their families to the track (growth potential was dead). They stopped looking forward to the next day of racing. And most importantly, they started to figure out that the game was not beatable by anyone they knew.

This wasn't all. Back in the 70's, maybe one in four at the track bought a Racing Form. The pools were filled with lots of dumb money, players just picking names and numbers off the program, or betting the favorite because it was favorite. Competition took care of these people who lost very quickly at the track and were willing and eager to waste their dough on lotteries and then lotteries and slots.

And if the higher collective takeout rate wasn't enough, horseplayers by the late 80's were now being seduced by having other tracks available to them. All this really did, was make it so the existing bettor could lose their money even faster than before. It didn't create new money to be lost. It had the opposite affect, as more people than ever before became discouraged, even if they didn't know the exact reason (which was a higher collective takeout and more available races each day which made it very probable that players would go home broke). They stopped bringing their friends and family and they talked less and less about horse racing.

And then the biggest kick in the groin for bettors who were either beating the game or coming close came right around 1990. Beyer figures showed up in the Racing Form, virtually taking away one of the most profitable and consistent angles in horse racing (speed handicapping using track variants). The playing field was equaled, and horses who ran 1:12 on a dead track running against horse who ran 1:10:0 on a fast track would now pay $8 instead of $15 to win.

Finally though, opportunity came along which caused some growth (but could have caused enormous growth), and that was phone and internet betting. Now, horseplayers could bet races from their home or work. For awhile, existing horseplayers could now play countless races as day without traveling up to 50 miles or more to go to a track.

It did add more money from existing players for at least the short run, but it didn't create more players, or at least not very many.

If they would have had a 10% takeout along with phone betting and internet betting, horse racing would have exploded like Betfair and online poker did.

There is just no incentive for new players to start betting horses today. First, almost every bettor looks at some sort of past performances, speed figures, or has a computer program that spews out all this information. The dumb money is bye bye. Now it is good thinkers versus great thinkers. And for what? The ability to pretty much guarantee that you will lose, and lose a lot if you play a lot.

Secondly, it takes years to learn the nuances of the game, from trainers to jockeys to what speed figures mean, etc. Nobody learns how to read a Racing Form in a short period of time.

So how can racing grow, or is it just going to stay flat or die? That is up to the racing industry. Right now, winners do exist, but the industry treats them like should be in an undisclosed bunker somewhere in Area 51. Why? Because these are the players who receive rebates. You know rebate? That ugly word that racing execs don't want the masses to know about.

If you bet enough money and you start asking the right people enough questions, you could get the average takeout reduced to something like 10 or 12%, and sometimes even less.

So do rebates create more players? Yes and no. They can bring back players who were betting offshore and not in actual pools, and they allow horseplayers to last longer which might get family members and friends involved but not to a great extent because newbies don't normally get rebates. Rebates probably have stopped many players from throwing in the towel too. But horse racing will not publish the fact that the only significant winners these days receive rebates, because that would mean they would have to admit their game is vastly overpriced.

Another reason why rebates is a dirty word is because of horsemen who collectively live for the short term. It is not just the racing execs to blame here. The horsemen, instead of embracing the idea that winning horseplayers are needed for growth, whine that if there is their is money left over to rebate, their track is selling the signal fee too low. And guess what? Today, signal fees are on the rise and what that means is that there is less money left to rebate. So racing is starting to kill the only potential growth component they have.

Remember, by giving less rebates, the player getting them will become disenchanted quicker. Horse racing will begin to lose their biggest bettors, and again, this will not create new players, it will just cause the pie to shrink even further.

OK, so rebates most likely won't get embraced. What is left?

The only way to grow racing is to create winners that racing can talk about, and that will only happen if takeout rates are cut to 10-12% everywhere. Smaller takeout cuts will create some growth (anytime players last longer they will expose the game to more people), but if racing wants significant growth they need a few winners who are out there in everyone's face.

At 10-12% players will last. The longer they play the more likely they are to expose newbies to horse racing. By lasting longer they will end the day or week with hope (even though it might be the delusional hope for most that slot players have). Most will lose more than they already lose today, but the winners will be the carrot stick racing is sorely lacking today.

You can take all the technological advances and throw them down the drain. Without incentive to play (and horse racing makes its money from GAMBLING and it needs to attract more GAMBLERS) horse racing is simply spending techno dollars just to try to keep their existing customers happy, it causes zero growth, in fact, innovation makes it easier for existing customers to lose quicker, so I could easily argue that the way technology is being used in horse racing today, is actually creating negative growth, as existing players become discouraged faster.

The industry needs to get their collective head out of the sand and they need to stop pretending that there are other issues which are hindering growth. Once takeout is reduced, the other issues will be forced to correct themselves as well because there will be a huge horseplayer base demanding it. Wouldn't that be wonderful?


TitleTown Matt said...

Excellent read and right on the money as always, but the only people who care and are listening can't do anything about it and the people who can do something about it, don't care. I have become convinced that the track executives, horsemen, and breeders are just going to suck every last penny they can out of the sport until its completely dead. Unfortunately, that day is quickly approaching.

Mark said...

Track execs make their bonuses beating annual plans. There is no way they will risk their bonuses/jobs to take on experimental business plans that cut takeouts in half. The likelihood is that a reduced takeout business plan would probably take maybe up to 5 years before its full positive impact is felt. In the meantime, there would likely be fiscal pain, and it seems no one in racing wants to deal with that, so they take the easy way out and let the industry bleed out. What will likely happen is that over the next decade the industry will consolidate down to a few key tracks who will not run competing meets (Saratoga/Belmont/Churchill/Keeneland/Santa Anita/Del Mar) and then it will reach stability because there will be a much smaller supply of races for the remaining hardcore fans who refuse to care if they lose money each and every year.

bullring said...

Well said Mark.

For me, forget winning, I've given up.

I would just like my roll to last LONGER.

Steve Munday said...

This is a well stated argument that should seem obvious to the tracks and horsemen but for some reason isn't. Short-term myopia, or maybe just greed, is the problem.

Woulda been nice if slots subsidies were used to cut takeout to reasonable levels. Might have actually laid the foundation to grow the pool of players. Instead the pool of horseplayers is shrinking and they're too many slots-subsidized tracks for the bettors to support.

Great post!

Anonymous said...

Since discovering your blog 2 years ago, I have admired most of your posts. Today, you have posted tne most astute observations ever.

A side comment to how horsemen feel about their industry and by extension the bettors: Mr. XYZ (a very successful Ontario harness trainer/driver) when asked in a recent TV interview about his future in Harness racing,(which is on its deathbed in Ontario) was quoted as follows: "I want to make money for my family, as much and as fast as possible".

While excellent strategy for Mr. XYZ personally and for his family, does such a comment mean that horsemen have inside knowledge that the racing business is collapsing,is unsustainable, and thus resulting in an attitude of me first.

The_Knight_Sky said...

Cangamble wrote

Most businesses can identify their customers and do everything they can to attract them. Not horse racing. Their customers it seems has always been execs and horsemen.

Their customers of course, are the horseplayers. When business gets slower due to competition, the first thing a business does to attract customers, is LOWER PRICING. That is Economics 101.


Funny but true.
And I agree with a majority of the points made in this post.

The next thing we should explore is creating a revamped business model and a time frame for making it work. The handle was down in 2009 by 9.9% but the purses only diminished by 5.6%.
Even slots revenue could not stop the slide.

Enough with the temporary crutches and address the horse racing customers or racing jobs will be lost. That's a cinch.

Anonymous said...

horseracing can't compete with modern convenience gambling...you just don't have enough millionaires coming out of this game...are there any???

it's that simple...

Cangamble said...

Anon, there are some big winners on Betfair, as well as some whales and mini whales that make a good buck betting with rebates.

If horse racing's attitude is that they can't compete, then they just aren't viable, and might as well go under.

I know they can compete and be viable.

Anonymous said...

BetFair, BetFair, BetFair...

Lower Takeouts.

You guys have to get your heads out of the sand, gain some knowledge before making these posts.

Lower Takeouts:

Where do you think the funds come from to put on these races, pay staff and most importantly pay horsemen their purses? The Take Outs for God's sake. If purses have dropped at the current rates what will happen when take outs get lowered?

Go back 20-30 years before rebates, before simulcasting, before online wagering, everyone went to the track, paid for parking, paid for admission, paid for a single program and only watched 8-10 races and went home. The complaints then were the game was too slow and too expensive and it was dying. What happened, full card simulcasting, on line gaming, additional wager types, free parking, free admission, multiple track programs for the same price as one, free overnight sheets for you cheapo's that don't want to spend a dime. What happened, handle continued to fall. Also keep in mind a lot of that handle came from the streets as well. The young kid running numbers for the mob. What were the numbers; they were the daily Double results at the local track or some other combination of races results. The mob dropped tons of money to layoff or offset against their potential loses. Now days the state lottery has the number, I know because I no longer play with the local bookie but instead to the corner paper stand and bet my $ 400 or so a day on the daily number. That is money not going to the track.

Lowering takeouts will do nothing but extend your play - your play! It will not bring in new customers; it will drive away the whales who account for 2-3 billion of the 13.5 billion wagered this past year in the US. It will lower purses, it will result in layoffs of staff, it will result in higher program prices, paid parking and we will get back paid admission. The track is not a charity, except a few like Keeneland, Delmar and NYRA. The rest have to make money!


Give me a break! You guys have no clue! BetFair puts nothing or very little back to the track. Less that 2 % in some cases but most of the tracks they pay nothing to them. How do the horsemen earn purses from that? For the BetFair model to work in the pari-mutuel game they will need to charge more to the customer which will drive the customer away. Let alone one guy (or his company of employees) currently makes up 50 % or more of the volume in BetFair. He is suckering the others in and taking their money more often than not. He (his group) wagered over a billion dollars in the US market a few years back. He found better value once BetFair opened and move over half his play out of the US and into the BetFair platform. He MADE BetFair by providing them liquidity and thus attracting more players. At one point he accounted for over 80 % of their play. Most against himself with a long term goal of pulling suckers in like yourselves.

I don’t have the answers but I know from being in all aspects of this game, employee, management, groom, horse owner, player, ADW exec to big player concierge that lower take outs and BetFair are not our answers.

There simply are too many venues now available for the casual household dollar, slots, table games, lotteries, food joints, skiing, flat screens, hummers, Harley’s, laptops, iphones, etc. Racing is no longer the only item (it is not about the only game any more), yes item to spend that extra dollar on!

Give it up on the lower takeout and BetFair!

Cangamble said...

Anon, if existing players have their play extended, it means they are more likely to attract others in their universe to play as well. The more people exposed to horse racing, the more likely horse racing will grow. But there needs to be a carrot stick, and that can only happen with reduced pricing of the gambling product. Winners are needed to grow the game.

Bottom line anon, if what you say is true, racing has no future and the people who play are simply suckers. And that will be the case if nothing changes in the way of pricing.

There is such a thing as optimal takeout. And horse racing is way above that. They would make more money at 10-12% than they do now. And the purses will not suffer at all.

Yes, lotteries have taken away a lot of the dummy money, or the money of people who realized the game was unbeatable. Might as well blow your money on a lottery in an attempt to win millions since you are only going to lose it at the track because of the high takeouts.

Anonymous said...

i go to a racino and bet the offtrack...even within the walls of the racino...the track racing marketing is dismal...there are so many people on the slots...a little advertising over there wouldn't hurt...if this is happening all over north america...then racing at these establishments is in for a rough ride...

Anonymous said...

the future of racing is betting exchanges. this country must overcome its hangups about bookmaking and billions of tax revenue could be generated and the horse racing industry would be saved forever. how can anyone not see this??