26 August 2012

Transitional Report: Too Vague To Help The Industry Right Now

On Friday, the much anticipated Horse Racing Industry Transition Panel Interim Report finally was released. I skimmed through it on Friday, and read it again in much more detail this morning.

It is encouraging that the panel is very fact driven, though they are still missing a few pieces of the puzzle which I'll get to later on.

I think a lot of their realizations and conclusions regarding the industry's apathetic attitude towards growing a customer base and that slots revenues were earned without any meaningful earmarks are completely right on the money.

I do take exception with what I believe is a faulty premise, which is being used as the reason why they think the slots program shouldn't be reinstated, and that is that the revenues that went to the industry from slots were public funds (hence a subsidy). They also state that the main reason tracks and horsemen were given 20% was to stabilize the industry. That is only one third of the real reasons. The other two were that slots would cannibalize horse racing (one could argue that because of slots the ability of the industry to attract new Horseplayers over the last 14 years was hindered tremendously as well) and that racetracks would be an acceptable location for slot machines. Referendums on gambling almost always wind up against casinos and the government knew they could smoothly start making money without public uproar by locating slots at tracks. In fact, right now the OLG still believes that tracks are the most acceptable locations for slots as they are negotiating rent deals with many racetracks.

The problem I have with calling these funds public monies is that it is after tax dollars that are being lost by patrons. The OLG even called the money that went to tracks and horsemen "commissions" (see page six here). Much like variety and gas store owners get a commission for selling lottery tickets. Did you know that over $200 million is paid out in commissions to those who sell tickets in Ontario each year? And to throw another curve ball at the panel: Do store owners have prerequisites on how to spend their commissions? Are those dollars received public monies too?

The panel is wrong when stating racing would die out completely if the government sticks to only handing out $50 million over the next three years. Ontario could sustain one thoroughbred track and a couple of harness tracks, whether it is Woodbine, Mohawk, and Western Fair, or if Woodbine decides to exit, Fort Erie, Western Fair and either Rideau Carleton or Flamboro Downs. Wagering, if focused on three tracks would be significant enough to carry three Ontario racetracks, and one would expect to see full fields and lengthy schedules. However, 20-30,000 jobs would be gone, and that is horrible public policy even by the worst dictatorship government.

I'm with the panel, $50 million is not nearly enough to give horse racing an opportunity to become self sufficient and save most of the full time jobs.

I think the panel underestimated economic impact because money that goes to horsemen, track employees, etc. go into the local economies and could make the difference whether places like hardware shops and restaurants make a profit or not.

Another thing the panel missed the boat on is that most owners lose money. Less tracks, less horses, less race dates means less owners. Owners do get the majority of purse monies, but by the time they pay the jockey, trainer and vet, they wind up going into their own pocket. This is actually another funding source that the panel overlooked. It is important because much of this mad money might be invested offshore or in investments that have low multiplier effects associated with them. If someone earns 40k a year, all the after tax money is going into the local economy for the most part, but for someone making $150k a year, well that money could get locked into long term investments or again, go outside of Ontario.

Another problem with the report is that it states the SAR program should end, but that another source of subsidy needs to be established, or even a "new" partnership when it comes to sports betting should come about. What makes being a partner in sports betting any different that being a partner is slots? Slots can't be your partner, but a sports book can? Sounds like something Jackie Mason could do a skit about.

And another thing that irks me is that the panel failed to discuss the OLG's plan to privatize going forward and compare it to the SAR program. Are the profits that the new operators going to make "public funds?" Will they have to be accountable to the government regarding these profits? I think not. It appears that public funds will now become casino operator profits. Should this be a major focal point as to whether the slots at racetracks program should end? We obviously cannot trust the government (very faulty, as Dwight Duncan insists there are only 5,000 industry jobs) or OLG numbers, as much as changed since they were put together in March (ie a slam dunk casino in Toronto).

The panel also doesn't realize that the HIP program, the way it is set up now, it detrimental to growing a customer base. Reason being, it is a percentage of the handle currently. It needs to be a percentage of the takeout commission instead. The reason why takeout decreases aren't tested in Ontario is because of the current set up, and in order for horse racing to compete with other forms of gambling and experience customer base growth, takeout rates need to drop, probably significantly.

Unfortunately, although there is a compelling argument to reverse the slots at racetrack program decision, and reimplement it with much needed earmarks, the government is unlikely to reverse things now. The problem right now is that even though there are probably very good legal reasons to go after the government, and some are still being pursued like MPP Lisa McLeod taking the case to the Auditor General, or the Ombudsman's possible recommendations when they come out, the horse racing industry can't afford to wait any longer. The industry needs to work with the government in order to have even a slight chance at transitioning. But getting the industry to work together with the government will most probably more difficult than herding cats in 15 separate locations around the world at the exact same time.

The report that came out should have at least hinted at how many dollars would be needed to sustain the industry. In light of the financial vagueness, I see no point in having the September Sales for either harness or thoroughbreds. The right thing to do is to move the sales to November or December.

Next piece will be on where to go from here.

Check out Pull The Pocket's take on the Interim Report.

Also check out A View From The Grandstand's take.

24 August 2012

Cancellations And Pool Manipulation

Last night in the 6th race at Emerald Downs there was a sudden drop in odds on number 2, Lonely and Free, from around 13-1 to 1-9. It appears that a $10,000 win (correction: it was a $100,000 wager) bet did the trick. The seven, Zippin E., was the prohibitive favorite from the time the odds opened to around 3 or 4 minutes to post (might have been 5 or 6 minutes to post) when the big wager on the two was made. The exactor pools, and the place and show pools on the two horse were reflective of a medium long shot.

The large bet wasn't pulled until the horses were in the gate. This had to lead to many other ticket cancellations. Who wants 1-9 on a long shot? And by looking at the final pool numbers, it is pretty clear that the two wound up taking a higher percentage of place money instead. The 1-9 scared off any other new bettors on the two except in exactors and probably triactors for when the bet was cancelled and the race went off, Lonely and Free went off at 52-1, though he was probably around 12-1 or so in exotics.

The thing is, the horse almost won, leading throughout the race, only to get caught by the number 4 horse in the last few strides. The winner, Have N A Wild Time, went off at 6.5-1, but wound up paying more to place than the two, who went off at 52-1.

Was this manipulation intentional? Well, you have to figure that if someone is placing a $5,000 or higher wager, they are going to try to make sure they buy the right ticket at the right track, whether the wager was made online or at racetrack or simulcast center. Also, the fact that the bettor had $10,000 either on them or in their betting account leads one to believe that the bettor was a sophisticated Horseplayer (this is assuming it was one person and one wager). However, keeping the wager in until the last moment was risky in case the cancellation couldn't be made in time.

Whatever the intent, whether it was a mistake or manipulation, this type of thing flies in the face of the integrity of the game and can turn bettors off. Unless a teller made a mistake, you can't blame the bet taker unless it is a known repeat offender, this kind of "mistake" can happen at any track or through any ADW or simulcast center.

So what is the solution? Stop cancellations? I don't think so. Real mistakes do happen, and tellers need to be protected. As long as cancellations are allowed for certain instances, cancellations have to be available to all.

How about this? On any win, place, or show wager of $100 or greater, or any exactor or double wager with a $10 base or greater, allow 90 seconds to cancel whether it is on track or online. And to avoid any temptation to manipulate, these wagers do not show up in the pools until the 90 seconds are up or the bell rings to end betting, whichever comes first.

I realize that this gets us away from real time odds even more, as late odd fluctuations are already upsetting to many Horseplayers, but it might actually lead to less fluctuation, as big bettors using robotic programming to wager as late as possible will have less real time info to make decisions, which means they will have to speculate stressing other factors than current odds. I do believe they'll still wager the same amounts they do today, they will just be more creative and will probably spread out their wagers more.

I imagine the hard part of my idea is to get the racetracks on board with it, and then get the tote companies to implement it. If it is too costly, you can just about forget about it.

One more thing, cancellations do not matter to the integrity of the game when it comes to blind pools like triactors, superfectas, Pick 3's, Pick 4's, etc. so they can be unlimited without any worry, and not subjected to time constraints. Late scratches having to do with a horse being used in a triactor or super by someone with a limited bankroll create a need to be able to cancel, so that another horse can be subbed in by the Horseplayer.

18 August 2012

Time To Change The Claiming Game

The new California rule that gives the new owner an out if the horse claimed is euthanized on the track just hits me as wrong, mainly because there might be occasions when a horse might be put down even though there is some ambiguity to the extent of the injury. In other words, it may not have been put down if the rule didn't exist, or if the claim wasn't made.

It got me thinking of a solution, and I think I've come up with one, not only one that will save the lives of some horses but one that will fire up the claiming game possibly bringing in new owners, something the game desperately needs.

Claiming races are very important. They allow horses to compete against their equals, and allows owners to either try to lose their horses or buy horses whom they think they can do well financially with in the future. The claiming element allows for racing partnerships to exist which means those with little racing background can get involved in the game for a commitment of a few thousand dollars. Some of these newbie owners wind up buying more horses, and even get into buying yearlings and even get involved in breeding (it happened to me, though I had a more than a little racing background).

New owners are likely to bring newbie friends and family to the track the odd time to see their horse run, again, this is good for growth, as new gamblers and owners can come out of it.

General claiming rules haven't changed much over time. Owners either talk themselves into claiming a horse with potential or a trainer talks the owner into a horse with potential to claim. The claim slip is dropped prior to 15 minutes to post time in most jurisdictions, and if you are the only claim in on the horse, or if you win a shake when 2 or more claims are in on the same horse, the horse becomes yours.

Technically you own the horse after the race is official, but in reality you bought the horse when the gate opened. This means that the purse money earned in the race goes to the former owner. It is really an odd way of doing things, if you think about it. In most instances in the real world, you own it when you buy it. Take stocks for example. I guess, you can compare the current system to buying a home in a fluctuating real estate market, the only difference being, the home doesn't have much of a chance to be worth nothing by the time the deal closes.

It is 2012, and Ebay is still hot. Why not change the claiming game to reflect the times and save the odd horse as well? My idea is to have an auction after the race is official. This could rejuvenate the claiming game and bring in a brand new clientele as well, as an auction would increase buyer confidence in a big way, because the new buyer is now buying in real time.

The way it would work is pretty simple, horses are still put in claiming races with the same tags that exist today, however, after the race, any of the horses can be "claimed" by auction. The owner has the option to place a minimum price on the horse below the claiming price or use the claiming price as the minimum bid. The old owner is not allowed to bid on their own horse, nor can the trainer of that horse.

For example, a conditioned non winner of two $10,000 claiming race is over. The winner ran hard and the time was decent. The second place finisher was only beaten a neck, but still has the non winner of two condition. The third place finisher was beaten another 3 lengths as the favorite. The rest of the field was back at least another 3 lengths.

The owner of the winner, knowing that the horse will have to go against non winners of three next time, and that the horse has a pretty high vet bill puts a minimum price of $7,500. Bidding starts, the horse goes for $9,000. The owner of the second place finisher really doesn't want to part with the horse because it is next to a cinch to win for $10,000-$20,000 next time out, so the bidding starts at $10,000. The horse sells for $14,000. The old owner is disappointed that he won't be in the picture next time out, but getting an extra $4,000 for the horse is acceptable. The third horse had good form but showed he belonged for $10,000 only. Because horses have to move up 25% of the auction price, in order for the new owner to run for $10,000, a price of more than $8,000 can't be paid. The old owner knows the first and second horse can't run in the same class race next time out, so he puts a minimum price of $9,000 on the horse. The horse doesn't sell.

As for the rest, some owner might just want to get rid of a horse and put price of $1,000. These horses can easily be bought by new owners looking to run for $5,000 or less if they think the horse could win for that next start.

One other thing this auctioning process will do is to prevent outfits from stealing. For bettors, they can make better inferences as to the wellness of a dropper, and will become more confident when making selections.

I believe that auctions after the race would bring more people to the track, mostly potential buyers. Trainers will required to make decisions on the horses action during the race, and even try to determine soundness by the way the horse jogs back to the unsaddling area. Trainers with good eyes will get more business.

I also think there is room to do both, keep the pre-race claiming (EBAY Buy It Now!) and also have the auction afterwards. Of course, if a horse is claimed, it is up to the new owner to put the horse in the auction or not. If claimed though, the new owner does not have the option to put down the horse to void the claim.

Speaking about voiding the claim, all auctioned horses get tested. If a positive occurs, the new owner has the option to void the claim as well as get compensated at a rate of $100 a day by the old owner. This could help deter those taking a chance on pre-race concoctions.

11 August 2012

Problem Gambler Lawsuits: No Wonder OLG Wants To Privatize

Michele Mandel wrote an article in the Toronto Sun that probably has the execs at the OLG cringing because of the timing. It has to do with a potential $3.5 Billion class action lawsuit on behalf of more than 11,000 problem gamblers who self excluded themselves yet were able to get by casino security and continue to feed their habit.

Now, I want to make something clear, I do realize that for some, gambling is an uncontrollable addiction much like drinking for some and biting nails for others. However, the liability should fall squarely on the individual gambler when it comes to their falling off the wagon. However, in the case of the OLG, because it is a branch of the government, they wound up going too far, and basically signed a check their butt couldn't cash. They put perfume on the fact they were gambling enablers by starting a self exclusion program that did put the onus on themselves to do impossible things in order to keep problem gamblers out of their gambling dens.

It is obvious that the way it was set up, the OLG was completely liable for problem gamblers who got through the front doors of casinos. Why? According to Mandel, they settled 9 lawsuits with an average payout of $167,000. This is a bad precedent when it comes to future lawsuits and especially the $3.5 Billion pending class action suit. If it is allowed to happen, it is very likely that the OLG will be forced to make a huge settlement.

The timing of this hitting the media might make the OLG's quest to find new operators very difficult. Even though technologies have improved, and self excluded gamblers have a much harder time getting into a casino today versus 5 years ago, the precedence set in Ontario may not be worth the risk of operating a casino. The OLG, by ridding itself of operator status is attempting to clear itself of future liabilities, but they will be forced to impose major sanctions against those operators who allow problem gamblers to slip through the cracks as their role to govern casinos will expand. The new operators will most likely take on the liability of future lawsuits, and even though they will argue that they did their best in keeping problem gamblers out, and that they, as private operators, shouldn't be held as responsible as a government operated casino should be, precedent is still precedent.

Rumour has it that things are not going swimmingly in the OLG's quest to find suitors to operate casinos. Political uncertainty, potential referendums, bad press, and tremendous backlash from the horse racing industry has turned Dwight Duncan's Golden Mile into a Sewage Plant.

Speaking of Duncan and his ruthless web of deceit, it appears that he did have a plan to put a casino at Ontario Place and misled (umm lied perhaps) when pulling the plug on the Ontario landmark. Duncan at the time probably "thought" it was a slam dunk, and probably promised some cronies that they were going to get very lucky.

I have to say that Dalton McGuinty and Dwight Duncan give me the creeps. I'm half tempted to move to Kitchener, just so I can vote against the Ontario Liberals in the upcoming by-election.