Thursday, June 30, 2011

Not Your Father’s Saratoga Press Briefing

SARATOGA SPRINGS, NY, June 29, 2011--I don’t normally feel sorry for executives who earn a half million dollars per year because their health insurance premiums cost $400 a month, especially when they are working at their dream job.

As anyone who works at their hobby already knows, just because you like what you’re doing doesn’t mean it’s not hard work. And when you’re the face of the New York Racing Association, expected to man up every time something goes awry, there’s nothing glamorous or easy about it.

Even before admitting “I made a mistake,” it wasn’t difficult to have empathy for NYRA President Charlie Hayward at the press briefing annually conducted on the last Monday of the month preceding the opening of the Saratoga racing season.

The normally glib Hayward was anything but this week, his tone measured, deliberate. This year’s welcome to the Saratoga racing season wouldn’t be business as usual. Even the usually benevolent local media were fresh out of softballs when the Q and A session began.

Hayward’s opening remarks were upbeat as he noted the positive momentum in NYRA’s recent fiscal fortunes: All sources handle on the Belmont Stakes was up 10 percent, the only Triple Crown track to experience any growth this year.

Then came an announcement that the 15 percent increase in net revenue was attributable to improved business spurred by the closure of New York City OTB.

That, coupled with the advent of its new “off track” facility, the Belmont Café on the grounds of Belmont Park, with projected handle of $75 million would make the facility the largest “OTB” in the state.

And finally how, after acquiring public access Channel 71 in the wake of NYC-OTB’s closure and creating the new “NYRA Television Network,” the volume of its phone business increased nearly 500 percent as 10,000 new accounts were opened while live attendance increased 53%.

But then, in words penned by the author of a New York State of Mind, Billy Joel, a summer in Highland Falls, or Saratoga for that matter, will be always what our situations hand us; either sadness or euphoria.

And so it turned out that NYRA failed to make timely provisions to deal with the increased volume, necessitating a quick fix via a collaboration with, Churchill Downs’ advance deposit wagering company in Oregon.

[Correction made July 1]***While the State Racing & Wagering Board eventually and reluctantly gave its approval to the TwinSpires deal, the refusal to divulge proposed salary increases for its top management was part of an inadequate accounting of why the company would lose $11 million this year.

The final straw for the state was Hayward’s failure to show before the Franchise Oversight Board, NYRA’s Chief Counsel and CFO appearing instead. Whether the omission was deliberate or unavoidable, it wasn‘t well received. It wasn’t the kind of tone a new franchisee should set a month before it opens the world’s most visibly successful extended race meet.

And so came the public apology to Robert Megna, Gov. Andrew Cuomo’s Budget Director, and what seemed a gratuitous tip of the cap to the SRWB for allowing orphaned OTB bettors to instantly sign up and fund their new NYRA Rewards accounts, and for permitting the video streaming of all tracks throughout the state. The public mending of fences had begun.

In a letter to the FOB chairman on the Friday prior to the press conference, Hayward disclosed the salaries of its executives and promised to cooperate with the board on a long term financial plan.

Shortly thereafter, Hayward then threw himself on the mercy of the court of public opinion by refusing to reveal the salaries publicly, saying the FOB was free to do so if it wished.

He also invited interested parties to watch a four-hour video of the meeting on the Division of Budget website or read the 41-page report which NYRA’s Media Director would make available; all you had to do was ask.

But then Hayward made some good points of his own, the NYRA President explaining how the association pays the highest parimutuel tax in the country to the state, twice that of runnerup California.

The seminar continued as attendees learned that NYRA’s reconstituted Board of Directors has 11 new members appointed by the state’s political leaders and how that Board approved the unpopular 2010 salary increases by a margin of 24-1 before noting that the same Board unanimously approved the 2011 budget.

Hayward was also correct to indicate that a sizable portion of last year’s $17.2 million operating losses was the result of NYC-OTB going out of business before it could pay the NYRA any of the $28 million it owed the association.

But there wasn’t much sympathy to be gleaned there since the NYRA has itself been forgiven hundreds of millions in state indebtedness at various intervals since its inception in 1955.

Hayward certainly earned his considerable salary on Monday and showed a measure of contriteness in the process. Hopefully, he and his organization has learned something from all this. The two sides will either learn to swim together or sink separately. Good faith is a two-way street.

Written by John Pricci

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Friday, May 27, 2011

Socrates: There is only one good; knowledge, and one evil, ignorance.

SARATOGA SPRINGS, NY, May 26, 2011--It is often said that a little knowledge is a dangerous thing. Whenever I hear that, I think as compared to what: The sweet oblivion of no knowledge at all, or that knowledge is power?

And if knowledge is power, how exactly does one develop paralysis by analysis? This becomes relevant when considering an issue that’s been a hot item in racing chat rooms this week.

Regarding the NBC Preakness telecast, fans have been remarking that while analyst Donna Brothers comments on a horse’s appearance were instructive, they came too late to help bettors looking to make an informed wager.

Now before an NBC spokesman spins this into “we put on a show for the general sports fan and not racing insiders or gamblers,” there’s no reason why the type of knowledge imparted by Brothers cannot be addressed by the industry.

It should be of no consequence whether or not any network thinks it has an obligation to supply this kind of information in a more timely fashion, if at all.

The idea is to help sports fans--whether they be loyal or casual in nature--by any media necessary. Given recent declining handle figures, it’s apparent that many of racing’s most dedicated enthusiasts are mad as hell and have decided not to pay attention anymore.

Racing always has done a woeful job in educating its fans which, given the scenarios above, falls into either the oblivion category of no knowledge at all, or the danger that studying long is studying wrong.

During the run-up to Kentucky Derby, Uncle Mo owner Mike Repole opined that full disclosure can do more harm than good since even racing’s most dedicated fans lack the sophistication needed to evaluate the physiology of any particular horse.

I can’t say I totally disagree. Horses lie as often as trainers do--sorry, couldn’t resist--in that their actions can belie their performance. But, at minimum, in the absence of full disclosure can come more disclosure.

Brothers spoke to two aspects of appearance; weight and profuse sweating.

With regard to the latter, “washing out” is most often a bad trait because it indicates nervous anxiety whereby the animal expends all its energy pre-race. But it can also be a sign that perhaps bad things are starting to happen internally. Maybe a horse is beginning to develop ulcers, many do. That's why they sell a lot of ulcer products on the backside.

For some horses, sweat can be like a boxer getting ready for a match, needing to warm up, to get good and loose. Horses that wash out and run well might not perform up to its potential if one day it comes out dry as a bone.

The opposite trait is true also. Some animals by nature are “non-sweaters” and only perform at their best in cooler climates. They must change venues from, say, Florida to somewhere in the Northeast, where temperatures are more moderate.

Brothers also referred to Mucho Macho Man’s apparent weight loss since the Derby, which apparently must have been an eleventh hour development.

It certainly was too late to help bettors adjust to the situation, just as a similar announcement about Super Saver last year also came too late to help. But don’t blame the talented Brothers. In this context, she speaks only when directed to.

A horseman friend stabled at Belmont Park, who I trust implicitly, told me that in Macho Man’s gallops the week after the Derby, he had high energy and looked better physically than when seen in Florida this winter.

The following week he breezed a half-mile then shipped to Pimlico. Maybe that breeze turned out to be too much? Horses are like strawberries and can spoil quickly counseled the great Hall of Famer Charlie Whittingham.

At the post draw Wednesday night, I spoke with a relaxed and very confident Kathy Ritvo. But perhaps the racing gods invoked the Whittingham rule and things changed in a finger snap, just like that?

Assessing body language with regard to profuse sweating can be a tricky read. You have to know the individual intimately. By all accounts, trainer Dale Romans and jockey Jesus Castanon were not overly concerned by Shackleford’s pre-race appearance. They knew it was just Shackleford being Shackleford.

However, weight loss is never a good development. You hear horsemen refer to healthy horses all the time which “carried their flesh well,” “haven’t lost any weight,” “put on weight since its last race,” etc., etc.

At dog tracks, a whole handicapping cottage industry developed around weight gain or loss and that information is carried in the official track program. Dogs apparently have an optimum weight that often produces the best results.

Many horsemen, such as Jim Bond in Saratoga, has a horse scale at his private barn which he uses consistently to tell him what his horses may or may not need with respect to maintaining condition. Back in the day, Greentree stable had a scale outside its Belmont Park barn and horses were weighed once a week.

There is no good reason why a horse scale cannot be put in place at a holding barn to weigh horses before they race. Previous running weights can be included in the past performance data.

Raceday weights can be announced during the post parade for on-site fans. The same information can be disseminated via the track’s closed circuit system to service simulcast players. Let the fans decide whether or not that information is pertinent.

Where to fit this information in the past performances? That’s easy. Place it right in between the name of a runner’s attending veterinarian and the tongue-tie information.

Maybe it’s the industry and not the fans who need educating.

Written by John Pricci

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Friday, April 29, 2011

Exchanges Are Just Another Way to Bet: Discuss

ELMONT, NY, April 28, 2011--Some interesting data was set forth in a conference call this week regarding the future of exchange wagering in the United States. Unfortunately, clarity regarding if and how this all might be accomplished and implemented were in short supply.

But that can happen when the data you’re mining is two years old and when the study is funded by the company--commissioned by the TVG racing network, owned and operated by Betfair, the extremely successful betting exchange based in Great Britain--that wants a share of America’s horse betting market.

For those unfamiliar with the concept, a brief primer: A betting exchange is not the same as traditional parimutuel betting at racetracks or bet shops, where all wagers are pooled and the odds determined by the amount of money bet on each horse.

At a wagering exchange, one bettor is paired with another having a difference of opinion. Eventually, they agree on a set of odds they determine themselves and the payoff is made at those fixed odds.

This is altogether ironic since the term parimutuel, deriving from the French meaning “between us,” takes it out of the hands of the entire population and turns it into a one-on-one wagering proposition. This takes “between us“ to a whole new level.

Exchange betting, a stock exchange played with racehorses, can take many forms through the creation of completely new wagers. It is meant to attract tech savvy young people who might be familiar with money markets and soybeans but are unfamiliar with Thoroughbreds.

For instance, a betting exchange could allow for intra-race wagering to be conducted, i.e., while a race is being run. Bettors could also wager on horses to win or lose, or some other proposition entirely.

With exchange wagering, bettors act like traders, swapping horses between themselves, agreeing on a bet at a mutually set fixed price. The exchange-betting company then extracts a small percentage from the winning bettor, anywhere from two percent to five depending on the bettor’s level of play.

This compares to a blended 21 percent parimutuel takeout rate at American facilities nationwide. So you can see what has the U.S. parimutuel industry so concerned.

Still, the states of New Jersey and California have already authorized exchanges pending agreements between all parties. This attempt to increase business begs another question: Won't betting exchanges cannibalize traditional parimutuel pools? The answer seems obvious but it's not that simple.

Given current figures, the contribution Betfair would make to the American racing industry would be miniscule. Further, the report contends cannibalization will be minimal due to the creation “parallel markets” that are natural extensions of the betting exchange.

In brief, parallel markets work when one player takes a “short position” on the exchange and a “long position” on the same horse in a pari-mutuels. It is possible for bettors to lock-in profits without risk which increases liquidity of both pools.

An adept bettor skilled at making his own odds line and can successfully predict which direction the parimutuel odds will go, can be a successful trader by, e.g., betting against a horse listed at 2-1 on the exchange but betting on the same horse at 4-1 in the parimutuel pool..

“Exchange betting is an important option,” said Eugene Christiansen, perhaps this country’s most recognized authority on gambling whose company has long been the racing industry’s go-to researcher on matters pertaining to wagering.

“The consumer has been asking for lower prices for a long time but the bettor is the forgotten man. He wants lower prices but what he gets is a tee shirt. The [betting model] has been extremely successful in Great Britain and Australia. [These jurisdictions] have experienced increases incremental to all markets.”

The study offered that betting exchanges did not have an adverse impact on the horse racing industry in Great Britain and Australia, and that similar good results should be expected here.

“Exchange betting can rejuvenate Thoroughbred racing’s consumer base,” Christiansen’s report concluded. “The data suggests that exchange betting can stimulate new interest and generate new revenue.”

There are a number of problems with the study in addition to data from 2009 and limited in its sphere to Great Britain, including what effects the emergence of Betfair has had on purses and national betting handle.

Critics claim that the exchange has indeed cannibalized betting handle, resulting in lower purses. In the U.K., Betfair pays a tax levied by a state board and contributes approximately 10 percent of its handle to the racing industry.

The Christiansen report made no provision for comparing data influencing the two models since those numbers are publicly unavailable--some say conveniently--making the comparison of exchanges to pari-mutuels in this country virtually impossible.

Resultantly, the report could not provide an estimate for the amount of U.S. handle would be cannibalized which, by extension, cannot determine how ancillary revenues would be effected.

According to Christiansen, an analysis of the impact of exchange betting was not possible because Betfair was yet to decide the level of compensation it would pay the America’s racing industry. Given current realities in the U.K. it would to be a significantly higher percentage than is paid elsewhere.

Everyone knows racing must breathe life into the best wagering game man ever developed, even if today's population doesn’t care or even know anything about it. It has not kept up with competition from casinos or offshore bet shops taking action on sports and horse racing.

But the most glaring issue that the report failed to address in any meaningful way is the concern that the industry and bettors have with respect to betting on horses to lose. All are concerned that this is an aid to those insiders inclined to cheat.

In addition to a horsemen’s boycott over purses in the U.K., which speaks to the cannibalization issue, there is a scandal involving an owner betting horses to lose after getting inside information from six jockeys allegedly paid five-thousand pounds per race.

However, this "problem" can be reconciled via the use of a proven, trustworthy bet company; computer technology able to uncover unusual betting patterns, and having racing officials act like those in Hong Kong who question riders for using unusual strategy even without suspicion of foul play. Proactive stewards instead of traffic cops looking for lane violations.

Do that or put up a million other propositions that will create liquidity in the exchange and pari-mutuel markets, such as horse-to-horse matchups based on one horse finishing ahead of another, regardless if it wins or loses.

By paying their fair share of handle to the racing industry, exchanges could be the engine for future growth. The idea of betting exchanges should not be dismissed out of hand. In fact, to the contrary.

Only the next time a study is commissioned by anyone involved in racing, let’s bring data to bear that cuts both ways. To that end, Christiansen said that he would welcome an opportunity to fashion a report on the subject commissioned by the racing industry. I’m sure he would, as long as the industry doesn’t arrive empty-handed.

Written by John Pricci

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