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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Friday, April 15, 2011

The Hall of Fame Envelope, Please

SARATOGA SPRINGS, NY, April 14, 2011--The last time I went public with my Hall of Fame ballot it caused quite a stir with many of the HRI regulars. I expect that this year will be no different.

Here’s how the Hall of Fame voting works. On the ballot are 10 names that can be deemed worthy of entrance into the pantheon, seven humans and three equines.

Voters can select as many, or as few, of the 10 nominees as they want, all 10 if they‘re so inclined. But only the four top vote getters can be inducted into the Hall of Fame in August.

I can make a case for nine of the 10, but since only the top four vote getters will gain entrance, I narrowed my list down so as not to compromise the chances of those I believe most worthy.

Tried as I might to whittle the list down to four, I went with five after eliminating all the equines--it’s not like the horses are on pins and needles in their stalls waiting to hear the news.

Eventually, Open Mind, Safely Kept and Sky Beauty are likely to gain entrance, if not through the voting process then via the Historic Review Committee, defined on the National Museum of Racing and Hall of Fame website as a “special circumstance.”

The 10 nominees for 2011, listed alphabetically, are: Calvin Borel, Garrett Gomez, Jerry Hollendorfer, Gary Jones, Safely Kept, Sky Beauty, Alex Solis, John Velazquez and Robert Wheeler. Ultimately, I voted for five horsemen.

In terms of this exercise, the only disclaimer is that I have voted for Robert Wheeler more than once. Since he has not gained admission thus far, I decided to wait until next year, or await the judgment of the Historic Reviewers.

When the Hall of Fame biographies were prepared earlier this year, Calvin Borel had won with 4,815 of his 32,379. As many mounts as he normally accepts on any given card, 15 percent efficiency is a worthy win rate.

But it was his third Kentucky Derby victory with Super Saver in a four-year span that seals the deal. Can anyone disagree that Borel’s athleticism, judgment, daring and timing likely was the difference between victory and defeat in any of those three wins?

If Borel fails to gain admission to the Hall, I don’t know how I could possibly explain the slight to future generations. On a aesthetic level, he’s been one of the few bright spots in what’s been a very difficult decade for the sport. While some will disagree, to me this was a no-brainer.

I voted for Garrett Gomez because he owns Hall of Fame talent and his career appears nowhere near the slowing-down stage. This after overcoming personal demons that have stopped lesser men in their tracks.

His timing, decision making and strength are his best attributes, enabling him to compile statistics that are enviable and rare. To wit:

His 3,435 winners from 19,818 mounts yields a strong win percentage of .17. As for his reputation as a “money rider,” his purse earnings of $176.9 million is $63 million more than Borel’s despite 12,500 fewer opportunities, which is fairly astounding.

Gomez owns the single-year record of 76 stakes wins, established in 2007. He’s won 12 Breeders’ Cups, including the 2010 Classic on Blame, of course. His win percentage in graded stakes is a very rare .20, which includes 19 Grade 1 scores in the past two years.

I will tolerate no characterizing of Jerry Hollandorfer as being simply a big fish in a small pond: You would think that at least one trainer would have interrupted his 37 straight training titles at Bay Meadows, or his 32 straight at Golden Gate Fields.

Besides, any criticism along those lines should have been dispelled for his work with last year’s three-year-old filly champion, Blind Luck, five cross-country trips and all. Hollendorfer upset last year’s Breeders’ Cup Dirt Mile with Dakota Phone and engineered a 6-for-6 campaign with ill-fated Tuscan Evening.

Long before the advent of huge mega-stables, Hollendorfer hovered around his career win percentage of .24, an incredible mark over a sustained period, saddling 5,863 winners from 24,768 entrants.

Hollendorfer has finished in the top 10 in nationwide wins for 24 consecutive years through 2010, 12 times in the top 10 on the earnings list. He’s saddled 192 stakes-winning horses, including 84 (15 percent efficiency) at the graded level. He deserves to be in the company of many of the game’s all-time great horsemen.

I have also voted for Gary Jones before and did so again this year. Winning at an 18.5 percent rate for his career on the highly competitive Southern California circuit is a Hall of Fame accomplishment, not to mention his 15 individual meet titles.

In all, Jones won 102 graded stakes--also an 18 percent rate--among his 233 stakes victories, doing so with 104 individual horses.

Jones has won Grade 1s across the country with every manner of horse, from two-year-old colts to older stakes mares and geldings.

While developing and conditioning such talented mares as Kostromo and Meafara, Jones is best known and remembered for his work with two males; the redoubtable Best Pal and the great champion, Turkoman.

If John Velazquez is not a first round Hall of Famer then I don’t know who else it would be--Borel and Gomez notwithstanding, of course.

Velazquez is batting 18 percent for a career which began in 1990, which seems other worldly when you’ve had more than 25,000 rides.

Even if his main client is the prolific Todd Pletcher, career earnings of over $241-million is nearly as much as Borel and Gomez combined. In a short 21-year career, he’s already fourth on the all-time list.

He has partnered with seven champions, and this excludes major horses such as Quality Road and Lemon Drop Kid, to recall just two. Through last year, he’s won 617 stakes races, including 413 graded events, both categories at an 18 percent clip.

In the last five years, Johnny Velazquez won 43 Grade 1s, 12 in 2010. His greatest attribute on a daily basis is an almost steadfast refusal to beat himself. He’s probably the least cussed-out jockey in racing history.

The best position rider since Hall of Famer Jerry Bailey, Velazquez instinctively knows when to push the button and is seldom out-finished. Perhaps when you ride for Pletcher and are mentored by the great Angel Cordero Jr., this is as it should be.

Only good wishes for these great practitioners of the sport.

Written by John Pricci

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Friday, April 01, 2011

Eastern Elitist? I’ve Been Called Worse

HALLANDALE BEACH, FLA., March 31, 2011--I can’t decide whether my old school is showing or whether it’s just that infamous elitist Eastern media bias that‘s showing. Truth be told, it’s probably a little of both.

I didn’t think it was quite the time for my annual anti-earnings-rule Kentucky Derby qualifier rant, but events have dictated that at least I acknowledge what‘s been happening thus far.

Since HRI has been in existence the past four year, I have posited a plan for ensuring that the most talented three-year-olds find themselves in the Louisville starting gate on May’s first Saturday.

So, of course, I must be an elitist. After all, who doesn’t want to see, listed alphabetically, Animal Kingdom, Decisive Moment, Master of Hounds, Pants On Fire and Twice the Appeal duke it out on May 7?

Parenthetically, if you lined all these horses up on a neutral dirt site, I’d make Elite Alex, a winner of absolutely nothing this year, a lukewarm favorite. Then I’d bet my money.

Now please don’t go calling or e-mailing the connections of these perfectly fine Thoroughbreds to ask: Did you read how that guy knocked your horse? I don’t knock horses. Like most fans, I just like some horses better than others.
My prejudice is that I have more respect for those horses, owners and trainers that have pointed for races that the great horses of the past have participated in, races run at tracks such as Aqueduct, Gulfstream Park, Oaklawn Park and Santa Anita.

Of course, Keeneland should have been on this list and it would have been. But that was pre-Polytrack. Keeneland is still a great place to leg up for future engagements but either you can or cannot run on dirt.

In terms of Derby form, and not a sales catalogue, a victory in the storied, Grade 1 Blue Grass has become meaningless.

Sorry but I have to be an ugly American on this one. The rest of the world can have its synthetic surfaces. (I can hear the laptops and smart phones humming already).

So it’s the time-honored preps that get my Derby juices flowing, not those from slots-fueled Grade 3 venues offering obscene purses to attract the occasional good horse from big outfits with a capably middling three-year-old in search of black type and a big payday without needing to put a single hoof into the deep end of the pool.

We’re not playing favorites here. We wish we were in a position to benefit from one agenda or another.

It’s just that time-honored tradition, or any other way one cares to characterize racing lore, is what defines American Thoroughbred history; medication, legal or otherwise, notwithstanding.

No one has to explain the greatness of the ‘27 Yankees or Lombardi’s Packers or Russell’s Celtics or Seabiscuit to any fan serious about sports.

OK, you might have to educate the past and present instant-gratification generation of fans how to look for nuances, otherwise how would they recognize true greatness when they see it?

You mean LeBron James isn't the greatest basketball player who ever lived?

Wouldn’t it be nice if even Mr. Casual Racing Fan actually heard of most of the horses before turning on their televisions on the first Saturday in May? These preps, such as Sunday’s talent laden Florida Derby field, have the ability to create memorable four-legged rivalries?

Of course, you’d need the races to be shown on television to accomplish that.

At some later date, we’ll reprise our ideas for making the criteria used to determine the Derby field a more meaningful barometer, one that possibly could help build that illusive racing following among sports fans the industry covets.

Those horses singled out above, with the exception of Elite Alex, of course, are in the Derby field already if their connections deem it so.

And those states enumerated above have yet to run, in chronological order beginning Sunday afternoon, the Florida Derby, Wood Memorial, Santa Anita Derby and Arkansas Derby.

Clearly, the three-year-olds considered by most every polling organization to be America’s best will be fighting for only the remaining 15 slots in the gate, even before the biggest preps have been run.

If you’re good with that, fine. As most scoundrels say when they revert to reasons other than the use of good, old fashioned common sense, this is still America.

I’m fine with America. But as far as the process by which Thoroughbreds qualify for America’s signature horse race, it has very little to do with proven class.

A 20-horse field is not about safety or determining “the best horse” in a more truly run horse race. It’s about betting handle, and I think that stinks.

Written by John Pricci

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