By Cary Fotias

Welcome to HorseRaceInsider Guest Commentary. From time to time, you will read reactions from industry leaders, racing practitioners or, like today, commentary from a professional horseplayer.

The austere Jockey Club recently commissioned a study to delve into racing's current issues. Some industry professionals say everyone tethered to the Thoroughbred already know what the problems are. Here is the take of Cary Fotias, founder and president of Equiform, a performance figure data company based in New York City


The Jockey Club has done it again, Mr. Santayana. It has not learned from the past and, thus, is condemned to repeat the same mistakes. Rather than listen to the customer, The Jockey Club has commissioned yet another study. This one will be conducted by McKinsey & Company and will “examine the sport and where it would be over the next 10 years without change while providing recommendations to improve the short-term and long-term prospects of the industry.” The results of the study will be presented during the Jockey Club Round Table session in Saratoga this August.

The powers that run thoroughbred racing are clearly in denial. For over a decade, players have been complaining about high takeout rates, 40% super-trainers (illegal drugs), poor customer service, small fields, archaic withholding tax rules and the integrity of the wagering pools to name a few. The game is on life support now, and if no substantive changes are made in the next ten years, it will be all but dead. If McKinsey doesn’t reach that conclusion, they will not have earned their money.

In 2004, I was a member of the NTRA Players Panel that gave a presentation at the Handicapping Expo in Las Vegas. My topic was takeout rates and I received a rousing ovation when I stated that “thoroughbred racing will never prosper unless takeout rates are lowered dramatically”. Well, seven years later, rates haven’t really changed, and pari-mutuel handle has fallen off a cliff.

Of the 60 or so recommendations the panel made on a variety of issues, I believe one may have been enacted. You can see the whole report here.

It would be interesting to know if any members of the Jockey Club ever read our report. If they did, it appears they decided that our concerns were not very important. After all, just because the customers are unhappy doesn’t mean you should listen to their free advice. But if you pay a consulting firm a lot of money maybe it knows something better. This reminds me of what happened a few years back in the wake of a “scandal” at Aqueduct. Trumped-up charges by Elliot Spitzer led to NYRA paying a reported $3 million to Giuliani Partners to find out what any railbird could have told them. It was nothing more than using a high profile name for damage control.

In a story about the McKinsey study in the Bloodhorse, Jim Gagliano, president and chief operating officer of the Jockey Club stated “We know there are a lot of questions being asked right now and one of those key issues for me was takeout. As I was doing some research, I looked at the Pugh-Roberts report. What impressed me about the report was that it drew upon a wide-ranging group and it used a lot of sophisticated tools in its analysis and computer modeling to make predictions.” The Pugh-Roberts report, done in 1975, was the last time The Jockey Club commissioned a study of this type.

Are you kidding me, Jim? Thirty-six years later you’re going to do an analysis of takeout rates again? It’s just a key metric in your business model, but addressing it two or three times a century oughtta do, right?

The economics of takeout rates don’t really change. Try listening to guys like Maury Wolff, a member of the Players Panel who just happens to be an economist. Or how about running your game like a real business instead of a public utility? Try to free yourself from the chains of politicians and state racing commissions and allow the free market determine optimal takeout rates?

Only by working to centralize authority will the game realize its true potential. We’re tired of simulcast wars, un-coordinated post times between tracks and needing multiple ADW accounts to bet all the races we want. The centralization concept has been a blueprint for success for major sports leagues. While teams compete on the field, they cooperate off the field to promote the game and maximize profits. Racing needs to do the same by listening to the fan base and try giving them what they want.

Takeout rates aren’t the only reason our game is in serious decline. Several other factors have contributed to the loss of interest, but the price of the product, especially in a competitive gambling environment, is paramount. Yes, I said GAMBLING.

Without the betting and a chance to validate my opinion, I wouldn’t be playing the races every day as I do now. I would probably watch the Triple Crown races and the Breeders Cup on TV and maybe go to the track a couple times a year for the “entertainment value” that some misguided track executives think is more important than gambling.

In response to high or increased takeout rates, many players are speaking with their pocketbooks and taking their action elsewhere. As a member of the Advisory Board of HANA (Horseplayers Association of North America), I urge you to join the cause. The boycott of California racing has had a demonstrable effect. The suits can spin it any way they want but they should finally be getting the message that “we’ve had enough and we’re not going to take it anymore.”

HANA (http://www.horseplayersassociation.com) is a great resource for players, and it’s a shame that, after a couple of years, it has only 2000 members. Nobody is going to fight this fight for us. Horseplayers are going to have to do it themselves. It’s an uphill battle for sure but it sure would nice to have 100,000 troops on the wagering front.

It was the Victorian poet Robert Browning who penned the phrase “less is more”. I’m sure that if Browning were around today he would say the same about the number of dates on the American racing calendar. With foal crops dwindling, mutual pools suffering a liquidity crisis, and racing secretaries scrambling to fill cards, it should be clear what needs to be done.

But it’s never easy in this industry. With all the different racing jurisdictions and their concomitant bureaucratic and political constituencies focused mainly on the short-term, the benefits of a shared self-sacrifice for the long-term are given short shrift. This is a BIG mistake. If a coordinated effort to cut dates by 30-50% was implemented, total handle would go up. You’d end up with fuller fields and much more money in each individual pool. This dynamic would be attractive to whales and minnows alike.

Whether betting at the track, a simulcast venue, or with an ADW by phone or over the Internet, a player is going to churn his bankroll whether he has 10 tracks to bet or 30. The difference is that by “concentrating the action” into fewer races, overall handle will go up due to more attractive betting opportunities resulting in increased action from larger players due to greater liquidity.

A few years ago, I was asked to give a presentation on behalf of New York horseplayers at the National Racing Museum in Saratoga. A committee was trying to decide which bidder should get the NYRA franchise and I was asked to speak about the concerns of players. I didn’t pull any punches. I said that no other industry treats its customers so poorly. Of course, how could it do otherwise - it doesn’t even know who they are. I’ve received free baseball caps and t-shirts on giveaway days but for the millions I’ve plowed through the windows over the years, I’ve never gotten so much as a cup of coffee (and I drink a lot of coffee). In NYRA’s defense it does have a rebate program now, a pleasant step in the right direction.

Customer service should be a priority. Making customers happy is fundamental for any business but racing has a knack for alienating them. How about a free Coke for the $2 bettors now and then? How about track executives walking through the grandstand to talk with their customers and get feedback? Everyone likes to fell appreciated for their business, but horseplayers have always been taken for granted.

Like many of us, I yearn for the days when there were decent crowds at the track. It heightens the whole experience and makes it more exciting when you hear that roar as the horses come down the stretch.

For many years, marketing executives have struggled to reverse the downward spiral in live attendance. All sorts of gimmicks have been tried with little or no success. Here’s one that actually might work. Anyone who bets on track will receive 5% back on any losing tickets bet at the host track that day. Just stick your losing tickets in an automated teller and receive a voucher for 5% of the total. After all, the track makes considerably more from “on-track” handle than ADW or simulcast handle. Now that would be a universal rebate for players of all bankrolls that would increase live churn and give people a reason to go back to the track.

Racing has done a poor job in exploiting new technologies. If the industry was really serious about attracting new blood and a younger demographic, it should concern itself less with post-race concerts and more with promoting a great gambling game over the Internet. Every track should have live streaming video of its races along with online tutorials and free past performances. Young people want action and plenty of it. And they want the convenience of a national betting platform that provides one-stop shopping using the Internet or their smart phones. For meaningful change to occur, the Byzantine simulcast regulations and ADW squabbles that currently frustrate bettors must be addressed.

The Jockey Club has used McKinsey & Company before. In 1991, it asked the firm to provide a national strategy to improve drug-testing practices. The study suggested that the national drug-testing system was due for drastic overhaul. While no immediate action was taken on the study’s recommendations, it did lead in 1998 to the creation of the Racing Integrity and Drug Testing Task Force.

If the Jockey Club waits another seven years to address present day problems, racing may not die but it surely will continue to fade away.