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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Thursday, June 21, 2007

A Second Open Letter to New York Governor Eliot Spitzer

Dear Gov. Spitzer,

Im a little confused about this new plan to cut the racing baby in half. I fear I am not alone. Perhaps youre a little unsure yourself. Am I wrong in assuming that the latest trial balloon launched to gauge the reaction of parties tethered to New York racing hasnt worked because, instead of satisfying as many groups as possible, it served to unite those with objections?

As stated in our last letter, we know this about New York politics: When we try to please everyone we please no one. And now, with the Legislature in recess, weve run out of racetrack. Whatever the solution, its odds-on it wont happen by the time the current franchise expires. While you ponder the solution, heres some background you might find helpful.

Racing is a niche sport--if niche is defined by total annual U.S. handle of $15 billion. New York racing is responsible for $2.7 billion of that handle, making the product the industrys leader. Simulcasting comprises 85 percent of the $15-billion, and the percentage grows every day. The international market is ready to explode.

So the product matters. It cannot be overstated that a sufficient amount of VLT revenue must be earmarked for purses and capital improvements; not simply to maintain but to solidify New Yorks preeminent position.

Racing is a niche in New York only if you consider the states huge agri-business and 40,000 jobs to be of little or no consequence. But cultural fabric matters, too. Reiterating, New York without its industry-leading thoroughbred sport would be like major league baseball without the Yankees, the NFL without the Giants, the NHL without the Rangers and the NBA without the Knicks.

What confuses me is that your latest proposal has Aqueduct remaining as a VLT-facility-only with the remaining land sold off to satisfy NYRAs debt. There would be no VLTs for Belmont Park. Originally you proposed to shut Aqueduct, sell all the land, and build an entertainment destination with VLTs at Belmont. If I were so inclined, Id rather drive or ride the Long Island Railroad to Belmont than take the A train to Aqueduct. But I prefer a little thinking with my gaming; thats just me.

As far as who would run the gaming-only operation, does this mean that the Excelsior group must compete all over again with the Empire and Capital Play organizations? That doesnt seem right but its your call.

Now you realize that Empire gets its strength from out of state organizations that recently banded together in an attempt to corner the betting-platform market, right? Why would Churchill Downs and Magna suddenly turn altruistic when it comes to doing whats best for New York?

Capital Play? They conduct themselves as representing the best elements of Australian racing. Do your people realize theyre little more than a betting platform that happens to be based in Australia?

Beyond equitable revenue sharing between the casino and racing interests that would guarantee not only racings survival but its stature going forward, none of your proposals address the off-track betting situation.

Weve all seen what happens when on-track and off-track interests work at cross purposes. Fixing New York racing must include the resolution of a system that creates senseless competition through duplication. There must be a way to fix this and assure the states counties their cut.

Your own past performances indicate that you believe in reforming troubled industries through changes in operational procedures and management or by rewriting bylaws and reconstituting boards. Clearly, the NYRA board as presently constructed could use some house-cleaning.

On their watch, NYRAs former president was allowed to resign before the culture of corruption investigation embarrassed him, or worse, and hes currently receiving $7,000 a month in benefits. His successor subsequently was sent packing with $500,000 in his kick.

All this while two mid-level executives were scapegoated and sent to jail and two other loyal employees had their reputations permanently tarnished and still remain in legal limbo, denied their right to a swift and speedy trial. To paraphrase the fictional Willy Cicci, the family has a lot of buffers, governor.

But please be careful not to overload the board with appointments who know little or nothing of racing, i.e., anyone not in the racing business in this state.

If Aqueduct were eliminated, many changes would be needed for Belmont to work as a stand-alone downstate facility. You would need five different surfaces over which to race and train; a spring/summer/fall surface, a winterized track, two turf courses (or two enlarged into one very wide course) and a year-round training track. And thats before the heating bill gets paid.

Of course, there exists a separate training track at Belmont. But I was thinking of the 550 head now stabled at Aqueduct. Where would they train, or live? If perhaps you or your advisers were thinking of Saratoga as a possible solution, think again. With burgeoning growth of the town and region comes a growing dearth of affordable housing. The additional stall space provided by the Oklahoma training facility is already in use to maintain quality.

This year, however, Saratoga lost much of its off-season horse population because trainers of good-horse stables from Kentucky and California that come to New York for its cache have remained behind because the artificial surfaces there are safer and more consistent for training. The quicker an artificial surface is installed at Oklahoma, the better. Without it, the Saratoga boarding experience eventually will become irrelevant as an eight-month facility.

Ill allow your appointed staffers to advise you on how disparate franchise holders, one for gaming and one for racing, would share revenue. Safeguards for racings continued growth must be put in place. One need only visit the backstretch of the Saratoga Gaming and Raceway to see what happens when VLT operators continue to invest in their gaming facilities while ignoring the racetrack that allowed them to operate in the first place. The stalls are a disgrace.

So, please, Governor, take these things into account. I know you want to find as much new revenue as possible, preferably upfront. You owe that to all New Yorkers. But a major industry and prominent taxpayer that provides jobs and priceless prestige has been waiting five years for help. If dividing the baby is what it takes, do it. In a perfect world reasonable people could make it work.


John R. Pricci

Written by John Pricci

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