Friday, September 12, 2014

What’s the Better Bet: Horses or Sports?

SARATOGA SPRINGS, NY, September 12, 2014---Our friends next door in the Garden State New have been making wagering news of late.

What with New Jersey’s fiscal crisis and recent credit downgrade, Governor Chris Christie, coincidentally or not, has decided to roll the dice—those that remain—on sports betting.

Legalizing marijuana would have been far more profitable and probably would have a better chance to be ignored when it comes to the enforcement of federal law.

But the sports leagues lobby is very strong and they are against legalized gambling. The leagues cite the “integrity of the competition” and they correctly figure that the courts will favor the power of corporations over the power to the people.

"Ignoring federal law, rather than working to reform federal standards, is counter to our democratic traditions and inconsistent with the Constitutional values,” Christie wrote when he vetoed proposed sports gambling legislation.

Of course, he’s really no different from most pols. Doesn’t it always work like this? You’re for something until you’re against it but now you’re for it again.

We’re sure legislators from all over the U.S. are shocked to learn there’s gambling going on in the sports world. The hypocrisy from all levels of government to the leagues themselves is as astounding as it is predictable.

For about a month, my local radio sports station, WOFX-980 AM, has been running ads about fantasy football, to the effect that “you don’t have to wait until season’s end to see if you won because there’s a new cash contest every week.”

I guess the authorities figure it’s just like betting on the horses, only with people.

How these ads are not banned from the public airwaves I don't know. Advertisers can call it what they wish; a contest, a pool, a lottery. But what it is is illegal gambling, pure and simple.

Since racing is in straits more dire than most businesses, its institutions will accept financial support from most any source: As of this week you can refer to the race as the DraftKings Breeders’ Cup Filly & Mare Sprint.

That might be a good thing for the Breeders’ Cup bottom line but what it does for the industry as a whole is a dubious proposition.

Who knows, however? Maybe the “competition gap” between sports betting and playing the horses, in terms of takeout, is starting to narrow.

Back in the day when you walked to the candy store or street corner looking for the local bookie, making a bet was pretty straightforward and the takeout was negligible.

For every $5 bet, the wager would cost $5.50, the 10% rake was the cost of doing business. If you won, however, the takeout was zero. If you went 11-10 for the week, all else being equal, you made a small profit.

But now, with a lot of sports betting online, you have to pay a little for the privilege. Rather than moving lines on a hot team to balance their books like the bookmaker did, bet-takers now demand a higher rate if you want action.

If I wanted to take the Cowboys +3.5 points this Sunday, as Marc Lawrence suggests, the price is -115.

Not wanting to get caught in the “middle,” bet-takers are balancing their books by making bettors pay a premium for the hot side.

But that’s still a bargain when compared to a blended parimutuel rate of 20%. If horseplayers, who obviously enjoy the handicapping process, leave the game, betting on sports is a tempting option.

No game of chance is easy but betting on sports teams is easier, given that there are two choices: Team A or Team B; Over or Under.

Meadowlands To Offer Super Hi-5 Jackpot with 8% Takeout

Beginning November 14, pending regulatory approval, The Meadowlands will offer a Super High-5 Jackpot wager with a $.20 cent minimum on the last race of each card.

Eight percent takeout is an industry low and is comparable to the rake from VLTs. The track will seed the first Jackpot Super Hi-5 pool with $10,000.

As opposed to most “jackpot carryover” pools, the Meadowlands will distribute 75% of the pool to multiple winners each day and carry over 25% to the next day’s pool.

This, too, is an industry low jackpot distribution takeout rate and should create some interest because more money will be paid out nightly and the 20-Cent minimum makes the wager affordable for most players.

Per usual, the entire pool will be distributed should there be a single winner. Given the minimum and relatively low take on this type of expensive wager, it would take a super-chaotic result for there to be a lone winner.

Should there be no winners of Super Hi-5, the entire pool is carried over to the next day. There is no provision for picking the first four horses in correct order. The mandatory payout is Hambletonian Day next August.

I might have played the Thoroughbred version of this bet once or twice. It’s not the degree of difficulty--which is daunting--but it’s the high cost due to a $1 minimum to kept me away, another example of how racing caters disproportionately to a small group of high-volume bettors.

Chaotic results coupled with high costs makes the bet unattractive and generally is better for the track’s bottom line than it is for the handful of winning bettors in the near term.

So if tracks believe that they are doing bettors or themselves a favor in the long term they are mistaken.

Unless and until takeout is lowered significantly in the straight pools, the industry never will be able to increase handle significantly over a sustained period.

Low minimum bets coupled with low super-exotics takeout is the equivalent of parimutuel crack-cocaine. For player and racetrack, these bets are good for the occasional score but poor if the goal is long-range fiscal health.

Tap the horseplayer out at a faster rate and suddenly the Cowboys plus 3 ½ at minus-115 begins to look a lot more attractive.

Written by John Pricci

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Monday, September 08, 2014

We’re Not Guests, We’re Customers

SARATOGA SPRINGS, NY, September 8, 2014--I’m a Bill Shanklin fan and have been for some time. A creative Lexington-based marketer, some of the more inventive ideas I have encountered in this business seems to have originated with him.

This time, however, I think he missed the mark. Oh, he’s correct when he posits that racing needs to cultivate the horseplayer but, if takeout is the issue, his focus is on the wrong type of player.

His idea of the ideal target, the whale, has no incentive to see takeout lowered since the high rates in place ultimately fuel his rebates.

If takeouts were lowered across the board, increased participation would affect the nigh-volume bettor in a more meaningful way because “square money” would be back in play.

Fresh betting capital would allow the deep-pocketed player to make up for smaller rebates because his expertise and bankroll leverage could buy more big-payout pools, especially fueled by carryovers.

Lower takeout, in addition to keeping active players liquid longer, would give way to marketing campaigns that attract new bettors who don’t mind mixing a little intellect with their action.

But until the current customer base is maintained and new ones are created, added liquidity won’t happen, and whales will begin to cannibalize each other, a process already underway.

As this trend continues and grows, when the whale’s perceived edge becomes smaller and smaller, they’ll move on to the next big gambling scheme.

In his most recent piece, Shanklin discussed the nuance of language and how that language affects marketing strategy. And there’s one new PR buzzword that insults my intelligence as it should yours. That word is “guest.”

I’m almost certain the term guest was first used at the “old Meadowlands,” but in this era the phenomenon has spread everywhere throughout the industry so that many marketing campaigns are built around the nuanced term.

Empirically, no intelligent individuals are buying into the message.

A “guest” often enters familiar premises by bringing a bottle of wine or a box of expensive cookies to express appreciation to the host for his invitation and hospitality.

But the guest doesn’t enter this domicile with an almost-certain expectation that he will leave with less money in his pocket than when he entered.

The racing industry is in the gambling/entertainment business. Horse races are the show, and are there many places on the planet that provide such Grade 1 people watching? When there are people in the building, the electricity is palpable, the place exciting.

For this experience, fans/bettors are charged a fee to participate; parking, admission, and a scorecard to differentiate one player from another notwithstanding. Further, for every five betting dollars spent, one goes for taxes.

This is what happens to customers, not guests. Of course, there is also some expectation that fans could leave the building with more betting money than when they arrived.

However, when I win I’m taking your money; when you win you’re taking mine. That always happens in games of chance; somebody wins, somebody loses. Either way, it’s betting money, not guest money that fuels the process and gives life to an industry.

But those dollars don’t go to those who actually put on the show; they only share proceeds from the winners and losers. But the house--at least 99 and 44/100s percent of the time—always wins.

So it’s the betting customer, not a guest, who provides the revenue needed to make all the mares go.

And choosing from this population of occasional and inveterate bettors, even casual fans who might watch horse races four times a year, bet sometime. They need to bet more of the time—and have their friends do the same.

It’s the player who bets his money regularly--whether he is a weekend or event warrior, or the daily online player sitting on a couch--who is racing’s MVP.

The use of nuanced language is indicative of how racetrack executives regard fans and market their wares. This calls for a hook. Television does that with pretty pictures and myriad human interest stories about the human and equine practitioners.

But after yet another month of downward economic indicators, and with fewer “guests” on the horizon in the coming months, rank-and-file bettors are the group that badly needs targeting and not the handful of large-volume players, whatever their considerable contribution to the betting pie.

As the handicapping/betting process continues to be more data driven, and players become more sophisticated, winning will become more difficult than it already is—and that’s plenty difficult.

When only “experts” remain, they eventually will take their algorithms and move on to the next big pasture lined with green. For them, money is not the prime motivator, it’s the only motivator.

What needs growing is the pie, that pool of rank-and-file weekend warriors and online bettors. And no one will become part of this fabric until they’re first introduced to a racetrack and treated like the valued consumers they are.

These customers pay for the privilege of walking into a wagering space with all its ancillary expenses. The industry needs to provide them with a clean, comfortable facility and not be price-gouge them for ordinary--or even good—fare and services.

Like bettors, today’s customers want value. Don’t welcome them, or newbies, into your house by tell how much their status as guests are appreciated. As long as they are, like me, spending and betting their money, they’re patrons, not guests.

Don’t tell us; show us you appreciate our spending discretionary income and betting dollars at your facility and you can do that by creating more of us.

Now that would be an “experience” worth “sharing.”

Written by John Pricci

Comments (29)


Thursday, August 14, 2014

A Sport in Conflict with Itself: Policing vs Promoting

SARATOGA SPRINGS, NY, August 13, 2014--The approach that can help insure racing’s survival might have been outlined two years ago when Travis Tygart, the CEO and Counsel to the United States Anti-Doping Agency, was invited to speak at the annual Jockey Club Round Table conference here.

That day Tygart’s message reached many of the industry’s most influential stakeholders and, intertwined with Senate investigations into a spate of equine injuries and fatalities, the idea of federal regulation was introduced.

What everybody thought they knew then, and still believes, is that federal legislation can’t work because individual states control racing’s rules and regulations and there’s no realistic chance that the status quo would ever change.

Horsemen’s groups cite the progress being made on the medication front. Matters like these take time, they say. The issue is highly charged and has become political as proponents and opponents have dug in their heels.

And the wheels of politics grind very slowly, if and when they grind at all.

So now it is two years later, reform hasn’t come, and neither has significant progress been made unless you believe that having nine of 38 states implement a two-tier drug classification is a big step forward, or that 12 of those 38 have state veterinarians dispensing raceday Lasix.

And what is one to make of the fact that only six of the 38 have adopted new penalty guidelines for multiple medication violators, or that a mere five—and this excludes New York, California, Kentucky and Florida—have adopted all phases of the National Uniform Medication Program?

This Sunday, Jockey Club chairman Ogden Mills Phipps reiterated what everybody knows should be done but won’t because of economics and expediency:

“Our horsemen and our customers all deserve a level playing field with uniform rules and clean competition,” Phipps said. “We need the National Uniform Medication Program to be implemented in every racing state and we need uniformity of rules and greatly improved lab standards.

“We need a penalty structure that is strong enough to be a meaningful deterrent — not one that would allow a trainer to amass literally dozens of violations over the course of his career and continue training. And we need to eliminate the use of all drugs on race day.”

At the National Museum of Racing the following morning, Tygart returned to Saratoga for an informational meeting as a guest of the Water, Hay, Oats Alliance, WHOA, a grassroots organization of prominent owner-breeders.

The gathering wanted to hear what Tygart had to say and were looking for guidance as how to best implement a strategy that would keep horseracing viable as a sport and an industry going forward.

Tygart said that USADA could assist the racing industry if all factions would push for federal legislation authorizing the agency to handle equine drug testing and enforcement--based on guidelines the industry would provide.

“We’re here for the right reasons or we wouldn’t be here otherwise,” Tygart said. “We’re not here to promote the sport or grow revenue for it. We’re here to protect the rights of the participants.

“Our interest is in a clean sport. Yesterday was a big moment and racing should be proud of what the Jockey Club has done [in requesting enabling federal legislation]. I’m honored to be here to help. The vision of USADA is as guardian of the life values learned through true sport.”

Part of the opponent’s disinformation campaign is that USADA involvement equates to a federal takeover. “When USADA was founded in October, 2000, the best thing we did was to hand off the testing to independent organizations,” said Tygart. “That’s how the Olympics dealt with their drug issues in the late 1990s.”

“There are three components to uniformity, independent policies and enforcement: Enabling legislation authorizing USADA to handle equine drug testing and enforcement; funding, because you can’t afford not to if you want to grow the pie, and the model--what does the process look like?”

In 1999, USADA had evidence that cyclist Lance Armstrong was using an EPO gel but had no test for the substance. Five years later a test was developed. They analyzed a frozen sample and concluded that the EPO levels found in Armstrong did not happen naturally.

“There were gross variations of blood values,” he explained. “The chances were 100 percent that these changes did not happen naturally and that the EPO was entirely synthetic.”

The Agency was instrumental in the Balco case, too, which Tygart also prosecuted. Ultimately, Tony Bosch’s admitted on “60 Minutes” that if tests hadn’t proved ball players were using Human Growth Hormone, his company would still be distributing it.

Alex Rodriguez was among the players caught when testers enhanced the HGH detection process. “HGH was difficult to detect. There was only a 72-hour window or users would test negative. Later, a new test had a 21-day window.”

That’s why out-of-competition testing is so important as a deterrent. “Whistle blowers play an important role,’ Tygart said, “and that’s why independence is so important.” If there is no accountability, [competitors] will join the cheaters. That’s just the way it is.”

“The problem could be solved quickly. The lack of out-of-competition testing is a big problem. Under USADA 67% of the tests was out-of-competition. In racing, it’s less than one percent.” This technique has been instrumental in detecting HGH, insulin growth factors, EPO and derivatives thereof, steroid cycling therapy, and Testosterone.

Athletes won’t go to their sport’s regulators to complain for fear of recrimination. Cyclist David Zabriskie was the whistle blower that helped take down Armstrong, telling USADA his coaches told him that “if you don’t use these drugs you won’t be allowed to compete.

“In cycling, athletes who didn’t cheat made it happen. It’s a difficult talk [to have],” Tygart admitted. “Following appearances on television after the PETA video, I got a number of e-mails from potential whistle blowers.” Tygart would not specify how many.

With USADA’s oversight, five athletes failed to make the 2012 Olympic team because performance enhancers were detected. “What’s the point of winning a medal that you’d have to give back later?”

Tygart is willing to help horse racing because he has grown to love the sport. He is not quick to say yes to any request made by a sports league. The NFL came to the Agency in the early 2000s for help with its drug culture issues, a problem analogous to racing’s.

USADA advised the NFL that their athletes should not be allowed to use medication on game day. When the league refused, the Agency walked away. “We can’t help a sport that doesn’t want to clean itself up.” Tygart believes there should be no medications, including Lasix, allowed on raceday.

If USADA had the authority to perform equine drug testing, it would develop rules with industry input, not make them unilaterally. Said Tygart: "Legislation obviously is the best route because it [would allow] for a top-down approach.”

Written by John Pricci

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