Friday, July 13, 2007

The Approach Is Only Thing Wrong With Racing’s Product

Is there something wrong with racings product?

Thats the message Churchill Downs president Bob Evans sent to all of racing in a speech he made before the Kentucky Farm Managers organization earlier this week.

Is Evans right?

Without equivocation, we think the answers are yes, no, and this view doesnt go far enough.

Racings critics think theres no excitement in watching a bunch of brown horses running in circles around an oval. On its face, theyre not wrong.

But scratch just below the surface, as loyal fans do, and nothing is farther from the truth.
Observations that watching horses run around in circles indicates a clear misunderstanding of the sports nuances. In that context racing has itself to blame for doing such an awful job educating potential fans.

And nowhere does that manifest itself worse than when the sport is presented on television.

Racing broadcasts have tried without apparent success to present racing as a game, a puzzle to be figured out.

In the past, racing has partnered with one past performances disseminator in an attempt to sell the racing product. If anything, it winds up being a better commercial for the past performance company than it is for the game.

By using several data sources to reach a consensus, viewers could begin to learn about racing strategy. From pace analysis flows a conceptualized view of how a race could be run, and how different tactics might influence the final result.

The education process for potential fans shouldnt be dumbed down. Whoever gets it, gets it. Whoever doesnt, has no inclination to learn and wont. Contrary to the stereotype when racing was the only gambling game in town, todays most successful handicappers are highly educated and upwardly mobile.

Forget mass marketing to attract potential fans. Racing needs fans and gamblers with the mental acuity and wherewithal to get and stay engaged. What it needs is old school snob appeal.

Racing isnt a game that will ever attract a wide audience. The trick then becomes to attract the right audience, not the attention-deficit crowd that follows Paris Hiltons every move. Racing doesnt want or need fans that are highly likely to move on when presented with the next big thing.

Evans thinks theres too much racing but thats not a new theory. Last year in the U.S. 7,375 racing dates offered almost 52,000 races with handle of $280,000 per race. Everywhere else, 117,000 races attracted handle of $780,000 per. Actually, those 51,688 races are 35 percent fewer than in 1990, another of the games many enigmas.

Fewer racing dates and presumably clever condition-book writing helped produce larger fields; nearly eight in the U.S as opposed to 10 at foreign venues. Evans correctly argues that 10 starters attracting $780,000 in handle is an economic model that would keep tracks flourishing.

Evans also thinks we need to produce more horses for fewer races since the number of starts per horse is down 20 percent since 1990. What he failed to mention to the Kentucky Farm Managers is that the industry needs to breed strength and stamina back into the thoroughbred, too.

Too much racing isnt necessarily a bad thing. Too much racing can provide the kind of diversity that allows small market, second tier tracks to survive. Diversity is important for gamblers, too, especially horseplayers.

Many horseplayers actually prefer pedestrian mid-week fare to the tough big races on weekends. They reason the worse the quality, the greater the number of throw-outs. Ill bet the majority of racetrack executives would be shocked to learn thats the way many of their customers think.

Evans pointed to a Churchill Downs promotion, a contest to pick the Derby winner, the choices logged via text messaging. Churchill received over 90,000 messages after running only four contest promos. The fair assumption is that CDI reached a younger, tech savvy audience, a good thing.

What is needed is more of this kind of outside the box thinking.

Racing engages the vast majority of its audience through wagering via the participatory process of handicapping. What could be better than the latest technology servicing this data driven game to attract a younger audience? But, again, racing talks but doesnt actually embrace technology.

Tracks still dont get together to make a concerted effort to invest in software that would transmit betting information instantaneously. How can players have confidence in the overall integrity of the betting pools when odds continue to change as the horses reach the three-eighths pole?

Theres nothing wrong with racing's product, only with the way its presented to current and future customers. Nascar isnt popular because there are only 76 major races as opposed to racings thousands; its popular because it does a better job.

For instance, has anyone thought of pooling racings resources to buy those same full-page advertising supplements like the car folks do in all the local papers?

Have racetracks made a real effort to service existing customers by providing the latest betting information for informed decision making, as if tracks dont have a vested interest in the fiscal health of its customers?

Have the tracks done a good enough job lobbying their state houses for permission to do what other businesses do when income stagnates, such as lowering the cost of the product?

Supply-side economics dictates there is a price at which supply and demand meet to optimize profits. Shouldnt racetracks, like other businesses, be allowed to test its pricing structure to find that level, unencumbered by inflexible and arcane legislation?

Innovation comes out of competition, Evans said, referring to the likely failure of a handful of modern racetracks to survive.

All Evans and other track executives and state governments need do is look within the borders of the Commonwealth of Kentucky to see what one new track executive, Ron Geary of Ellis Park, did; instituting a new Pick Four wager with a four percent takeout.

On a small scale, this innovation already is beginning to show dividends. Last year, the bet averaged a mere $18,000 daily. On Wednesday, $36,000 was bet into the Ellis Pick Four.

In the long term, price will prove more important than product. As for the product, its fine just the way it is.

Written by John Pricci

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Thursday, July 05, 2007

Horseplayers Unite; Ellis Park Starts A Betting Revolution

Horseplayers love to complain then do nothing about it. Thats their nature. Or at least thats the way it was until July 4th when two of them just might have started a revolution within the racing industry.

If a grand experiment takes root and gets the support of horseplayers everywhere, wagering on horse races will become the best gamble in the world, bar none.

Independence Day was opening day at Ellis Park, a second-tier track with a first-tier attitude when it comes to catering to its base; the two-dollar bettor. Over 7,100 fans, second largest in track history, welcomed racing back to its Kentucky summer home.

What are the chances that an opening day success will portend how a moribund industry might revitalize itself?

The Triple Crown, Breeders Cup, Saratoga and Del Mar notwithstanding, racing is a sport where fans participate with their wagering dollars 11 other months of the year. Winning and losing money is the way fans keep score.

There is only one immutable rule when it comes to wagering: the deleterious effect of parimutuel takeout on horseplayers.

Two such players, one a professional bettor and handicapper, the other the most talented track-owning handicapper in the world, united to make a difference. What they created was a new spin on a popular established wager.

For the first time ever, horseplayers now have a positive expectation on their investment. The bet is the universally popular Pick Four. The spin is a four percent takeout. To repeat, a four percent takeout!
The seed for this idea was first planted during Derby week of 2006 at the Wynn Las Vegas on the occasion of the first Equiform seminar for well healed horseplayers. Equiform is a New York based company that generates performance figures.

A dozen horseplayers converged for a weekend seminar hosted by Equiform founder Cary Fotias and myself. One of the attendees was Ron Geary, who had an idea that he could turn Ellis Park into a kind of Saratoga of Kentucky. He put his money where his idea was. Some background:

In 1990, Geary, a bankruptcy specialist, was brought in to turn around the Louisville-based ResCare, a company with annual earnings of $60 million and 1,500 employees. When Geary recently retired as president and CEO, ResCare had 40,000 employees with annual earnings of $1.5 billion and is traded on NASDAQ.

Geary is still ResCares Chairman of the Board but now has time to devote his energy and turn-around skills to his first passion; horse racing. Last year, Geary bought Ellis from Churchill Downs Inc. In less than a year his grand experiment is to see whether a second-tier track can influence an entire industry with a single bet.

Takeout is a passionate subject for Fotias, who has given presentations on the subject all of the country as one of the original members of the NTRAs Players panel. Having graduated with an MBA in finance from Indiana University, Fotias has spent the last 16 years crafting his figures and betting on the races. But until Geary came along, he wasnt able to find a willing accomplice.

Geary, meanwhile, is a native hardboot who graduated from the University of Kentucky, where a statistics professor conducted field trips to nearby Keeneland to show his class how this whole supply-side economics thing works. Clearly, he learned those lessons well.

But its his career as a weekend handicapping phenomenon that sets Geary apart. Hes qualified as a finalist in the DRF/NTRA Handicappers Challenge in each of the last three years, the only time hes attempted to qualify. While never winning the championship, he is one of a handful to secure a Top 20 finish on two occasions.

At Fotiass suggestion, Geary began putting the pieces in place for a Pick Four wager with a four percent takeout at his new racetrack. Parenthetically, the normal withholding on this wager at the majority of American racetracks is 25 percent.

Together, the handicapping tandem correctly reasoned they had little to lose. Last year, the Ellis Park Pick Four handled $18,000 daily, next to nothing. After a decision was made to try this experiment, Geary won the cooperation of horsemen and the Commonwealth to lower the take.

Each understood, too, the enormous upside potential. All that remained was the cooperation of simulcast outlets. Of course, that was the area of great difficulty in achieving cooperation. Too many racing entities dont understand supply side economics. They think churn is something you did with butter.

But finally even unsophisticated bet-takers began to fall into line and the great experiment was on. The wager is available at most of the 1,100 outlets nationwide serviced by the Churchill Downs network.

Parenthetically, if the Ellis Park signal is unavailable, demand it from your neighborhood simulcastor. If you cant support an idea aimed to help you win, what will remain is staring mindlessly into a VLT because everyone should reap what they sew.

The Pick Four pool at Ellis opening day was $19,975, nearly 10 percent higher than last years average without benefit of pre-publicity and against major top-tier competition. Maybe there is, after all, something to the economic notion that a free market will determine the point at which supply meets demand to maximize profits.

The winners of the Pick Four races paid $9, 4.80, 6.60 and 37.00, respectively. A straight $2 parlay would have returned $1,318. The winning $2 Pick Four paid $10,858, roughly 800 percent higher despite the fact the bet is offered in 50-cent denominations. Digest that for a moment.

Heres another way of looking at the wager. Unlike betting to win, the parimutuel takeout, about 17 percent in many major jurisdictions, is extracted each time a win bet is placed. In inter-race wagers like the daily double or Pick Four, takeout is extracted once.

This makes the effective takeout rate on the Ellis Park Pick Four one percent per race. Now, if your handicapping is skilled enough to safely eliminate one 30-1 shot per race (on balance, a 30-1 has about a three percent chance to win), you have an expected positive return of two percent per race or eight percent for entire sequence. Think of it as free money.

Now how does that stack up against the 50 percent withheld by your states lottery?

Horseplayers must support this bet to send a message to an industry that only talks a good game. If 2,000 high-rolling off-shore bettors wagered only $200 into the Ellis Pick Four, daily handle on the bet would reach $400,000. If 20,000 $2-bettors wagered $20 into the pool whenever they went racing, potentially giving them 40 combinations at 50-cents each, were back at $400,000.

In the Pick Six pool at Hollywood Park last Monday, horseplayers spent $7.5 million chasing a $3.2 million carryover. The resulting $10.8 million Pick Six pool was the largest in North American history.

Were not talking Kentucky Derby or Breeders Cup here, just pedestrian week-day product. This total was amassed despite the much higher degree of difficulty, a 25 percent takeout, and a $2 minimum bet. Without a large bankroll, the majority of Pick Six players had little or no chance.

Not so the Pick Four, not now that one track is gambling that by making you happy and giving you a fair chance to beat the odds they can grow their own business. And send a message to the industry at the same time, that the horseplayer counts.

But unless bettors show that they really care and are willing to support a wager that gives them a real chance to win in the long term, horseplayers will have no one to blame but themselves.

Written by John Pricci

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Thursday, June 28, 2007

Retirement of Invasor Another Loss for Racing

Saratoga Springs, NY--...In thoroughbred racing, the term great is an adjective held in such high esteem that its often referred to as the G word. Its used sparingly, usually when remarkable performance meets historical achievement under extraordinary circumstance

Invasor, retired to stud last week after sustaining an injury, was a great racehorse.

Perhaps we jumped the gun back in March when we wrote that first paragraph, and Invasors body of work, in terms of historical perspective, is still relatively small. But his record is all that remains now.

Eleven wins from 12 lifetime starts. A winner on three continents, he was Horse of the Year on the two in this hemisphere. A winner of the Uruguayan Triple Crown. Never defeated in a Grade or Group 1 race, nine in all. He was a margin horse, winning five South American starts by a combined 24 lengths, but also never lost a stretch battle. Adversity couldnt stop him, either.

What made Invasor great was his class, courage and athleticism.

He overcame a stumbling start and multiple stretch challenges before looking a late runner in the eye to win a Whitney. He was not deterred by a bobbling break, pronounced bias, the eventual 3-year-old champion, or the only handicap horse to ever sweep Californias storied Grade 1 trilogy and won a Breeders Cup Classic with his ears pricking.

In the Pimlico Special, his American debut, after having crossed the Atlantic twice, he altered course, lost three lengths when his rider dropped a reign, but re-rallied to beat one of the fastest horses in training. In the Suburban, he bobbled at the start, was soundly bumped, then dominated six rivals to win by almost five.

In his 2007 debut, he clipped heels entering the stretch, nearly fell, regained his stride, then displayed a brilliant turn of foot on the rail to bust the Donn Handicap wide open. Thats when, for me, he became a great horse.

Finally, in what would be his last start, he was used hard throughout at a considerable loss of ground and still won the Dubai World Cup. In defeating Discreet Cat, among others, he avenged his only defeat.

He was the best handicap horse I saw since Spectacular Bid, which Im sure will engender an Ann Coulter-like response from fans of the great Cigar. Its very difficult comparing horses from different eras for many reasons, but performance figures can be a useful measure.

I think Invasor was great, too, but Formal Gold and Ghostzapper were consistently faster, said Cary Fotias of Equiform and You could put Invasor with them on the intangibles, his innate ability and talent. But [everyone] knows how good Skip Away was and Formal Gold just killed him.

After working five furlongs in :59 2/5 at Belmont Park in preparation for his Suburban Handicap title defense this Saturday, a swelling was discovered which later proved to be a fracture at the top of the sesamoid bone in his right hind leg. While not life-threatening, the decision was made to retire him to Shadwell Farm in Kentucky.

But his issues might have started sooner. A veteran exercise rider from another barn told me during Belmont week that she didnt think Invasor was doing well. I referred to this conversation on the Capital OTB television network the following weekend.

His action looked terrible, the exercise rider said. He definitely has a problem somewhere.

Hes being pointed to the Suburban, I said.

Whens that? she asked.

End of the month.

I doubt hell make it, she concluded.

Make of this conversation what you will. The racetrack is a tough place, rife with jealousy. But this was a person with no axe to grind with Invasor or his connections. Indeed, they might not even know of each others existence.

Racing at the highest levels of the sport takes its toll more often than not. Todays successful thoroughbred also must travel extensively. Invasor crossed the Atlantic a total of four times. His last race was an enervating effort in the Dubai World Cup. That run followed the Donn, a race in which he nearly fell.

Either race could have been the beginning of the end of Invasors racing career. But the Dubai World Cup is a most demanding event held in a desert. It gets so hot in the United Arab Emirates that racing must be conducted at night. The race is so stressful that many American-based horses werent the same after competing in the World Cup.

And what are the chances Invasors connections would admit the problem surfaced in his last race? Owner Sheikh Hamdans brother, Sheikh Mohammed bin Rashid al Maktoum, owns Nad Al Sheba Race Course. The fallout from such negative publicity certainly wouldnt inspire other American owners to ship their horses Dubai, no matter how big the purse money.

But at least Sheikh Hamdan still has Invasor and he can look forward to racing, or selling, his offspring. And suddenly this years Breeders Cup Classic becomes only a great betting race instead of a showdown between a defending Horse of the Year and the three-year-old class of 2007 that would have pushed him to the limit again.

Make no mistake. The loss of Invasor to the breeding shed is a huge blow for the sport, one only exacerbated by the premature retirement of otherwise healthy thoroughbreds worth more at stud than on the racetrack. Even the great ones like Invasor

Written by John Pricci

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