Tuesday, September 26, 2017

Finally, a Win

Like any horseplayer, I’m very pleased that IRS regulations regarding income tax reporting and mandated withholdings finally has been amended to reflect modern horse wagering reality.

Of course, the lengthy wait could have been averted had legislators asked the advice of industry stakeholders, any industry stakeholder, from the start.

But the industry itself must share culpability. Why? Because whenever it goes to Washington or into statehouses, it doesn’t speak with one voice. Considering that many tracks still do a bad job coordinating post times, this was, admittedly, more complex.

Conclusively, common sense has been applied to the 300-1 payoff provision, reflecting the amount wagered into a pool where potential boxcar payoffs are the rule rather than the exception. The good news is that there will be a lot fewer “signers” at every level.

Today if you made a simple $1 Trifecta box of three horses, a cost of $6, a $602 payoff does not reach the 300-1 mandate for reporting those winnings in the IRS. The new provision, finally, takes into account the sum total of the “investment.”

Of course, this change benefits wagering 1-percenters who bet much more money than it does the average player/fan. This is a huge boon to bettors who invest $2,000 chasing a Pick Six carryover pool, one that wins and pays $20,000.

The $18,000 score made above is the equivalent of betting on a 9-1 winning horse straight. A nice hit, sure, but by definition hardly a windfall.

In another context, allowing bettors to keep more of their winnings helps all stakeholders just as, say, lowering the parimutuel takeout would.

This is, for legislators who may be reading this, is what’s called churn. Human gambling nature being what it is, the more winning players get back the more they bet in return. When this is allowed to play out over time, it works. Revenues eventually increase.

The dichotomy is that it’s OK if gamblers are made to cool their heels but bet-takers don’t have to be as patient, allotting time to allow the process to do what it always has done; create more business. Generally, racetracks have taken a one-meet-and-done position.

In a statement released Tuesday, the change in regulations is expected to increase the amount wagered on U.S. pari-mutuel racing by as much as 10 percent annually, at this juncture about $1 billion per year.

At first blush this estimate seems more hopeful than real, but were willing to take a wait and see stance. If wishes were horses, the hope is that we’re wrong and that the estimators prove, well, estimable.

Parenthetically, if only this could have been coupled with the elimination of breakage, those pennies from every payoff that hurts bettors at every level every day, especially the little bettor that needs to grind out profits. But I digress.

The official regulations will be published in Wednesday’s edition of the Federal Register and scheduled to go into effect Thursday if bet-takers can make it happen. Figure that all will get their accounting acts together ASAP.

Obviously, two words can sum up why all bet-takers should hurry their preparations forward: Breeders’ Cup.

Breeders’ Cup event days serve dual purposes; one is to crown potential champions, the other is to generate huge handle which benefits everyone who happens to be tethered to the industry, most especially the player.

Value will be available most everywhere on November 3rd and 4th at Del Mar and betting venues everywhere. Pool size is the result of large fields, competitive racing and heightened interest. The two days of Breeders’ Cup provides all that and more.

None of this would have happened without the considerable efforts of the National Thoroughbred Racing Association. The NTRA is the industry’s marketing arm and deserves props for eventually getting the job done.

Common sense dictates that this should have been a sprint. Instead, making this kind of progress, like everything else in this game, turns out to be a marathon. Meanwhile, we should be happy to celebrate winning for a change.

OK. What’s next?

Written by John Pricci

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Tuesday, September 19, 2017

The Accidental Stakes Race

I made a gentlemen’s bet with TJ on Saturday and lost. I assured him that he’d probably get an email from the NTRA on Sunday announcing the guests who would appear on a national teleconference advancing the newly minted Grade 1 Pennsylvania Derby.

Alas, no email was forthcoming, and neither was there the oft-presented Tuesday teleconference before major racing events. Saturday is the day Pennsylvania Thoroughbred fans look forward to every year.

Maybe somebody dropped a dime to the industry’s public relations organ that Jorge Navarro, aka “the juice man,” was about to drop the name Game Over into the Penn Derby entry box.

Or maybe they wanted to save the industry further advancement if tomorrow, Wednesday, the New Jersey Racing Commission ups the punishment ante for Navarro and his foul-mouthed owner, Randal Gindi, fined $5,000 by New Jersey stewards.

But the Pennsylvania Derby? With apologies to Sidney Carroll and Robert Rossen, who adapted Walter Tevis’s The Hustler to the silver screen: “This is Pennsylvania, mister. Ever heard of Fast Murray Rojas?”

Even if Navarro were not invited to participate at Parx, there could have been some embarrassing questions asked of the other trainers, owners or jockeys on a national hookup. The fact there was no presser enabled NTRA to luck out of a shameful situation.

Where the NTRA missed out was an opportunity to promote the country’s leading three-year-old filly, Abel Tasman, who will leave from post 9 beneath Mike Smith as an 8-5 early line choice to win the G1 Cotillion, which drew 11 fillies including a coupled entry.

But she won’t be the only California-based Bob Baffert-trained three-year-old on the plane. West Coast, arguable leader of the three-year-old colt division, is also an 8-5 early line choice in a race that looks as salty as the one West Coast won, Saratoga’s Derby of Midsummer.

Among West Coast’s nine rivals are beaten Haskell favorite Timeline (5-1), compromised at the start of that Grade 1 and involved in a contentious pace duel on a tiring Monmouth oval July 30. Previously, he was an undefeated in four starts including a pair of Grade 3s. Javier Castellano rides for Chad Brown.

In the stall next door is the blooming Outplay (12-1), who won Saratoga’s restricted Curlin Stakes at the Pa. Derby distance by nearly six impressive front-running lengths with Johnny Velasquez again in the boot for Todd Pletcher. But wait, there’s more.

Immediately to the favorite’s outside in slip #5 is Irap (3-1), significantly wide on both turns in the Travers and forced into making a premature move on the final turn. Irap finished third, beaten 5-1/2 lengths, and gets a two-pound weight pull from the favorite.

Add Irish War Cry, also hindered by the closer-friendly Monmouth surface, who chased the pace from close range after a troubled start while making a difficult turnback from the mile and a half Belmont Stakes in which he earned a lifetime best figure on many scales.

Baffert won this race with Bayern three years ago, Brown won last year’s renewal with ill-fated Connect, and Nick Zito, who won this race three times, has entered Giuseppe the Great (20-1), who starts from post 10 with Luis Saez, reuniting with the Jim Dandy runnerup.

We are a little surprised that Baffert chose to run back in four weeks when he could have prepped for the Classic at Santa Anita next month, but apparently decided he prefers a longer layup into the Breeders’ Cup that Saturday’s race provides.

Six weeks spacing has proven to be a boon to both the Pennsylvania Derby and Cotillion.

Neither West Coast nor his trainer need to carry a racetrack with them. The colt has won on four disparate surfaces while the filly, shipping in fresh, will attempt to win at a seventh venue, having won thrice out west, once at Churchill, Belmont and Saratoga in July.

While the G3 Gallant Bob, Saturday’s 9th race, is competitive per usual and an interesting start to a graded-stakes Pick 3, we’ll pass, as we never make it a habit to support Parx with its usurious takeout rates.

There are other attractive stakes on a well-stocked 13-race card but we will be avoid Parx, a good prep for shunning Keeneland's opener. With the exception of Saratoga horses-to-watch, we will not wager on any Keeneland feature, as appealing as those races may be. HRI supports the message behind the HANA boycott.

With contrition to Sonny Corleone, “they hit us, so we hit them back.”

Written by John Pricci

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Tuesday, September 12, 2017

The 15-30 Takeout Solution

If the clown in the White House can a make a deal with ineffectual Congressional Democrats, then surely racing’s stakeholders can compromise and find a solution to the parimutuel takeout problem.

The problem of course is that it’s too high. It’s just one of several issues why lifetime horseplayers are walking away from the game, and racing can ill-afford to lose any more old-schoolers who choose to walk away.

Takeout might not be right on the top of the list but it’s the kind of problem that’s fixable. Cost-cutting is never a bad thing; it’s promotable, gambling-centric and a way to lure young adults who prefer to mix some critical thinking with their gambling.

If do-able, a deal that helps all of racing’s stakeholders--from horseplayers of every stripe, to racetracks, to horsemen—is one that makes sense and long overdue.

This industry is one that does not work collectively because at once there as many agenda as there are racing jurisdictions. Lowering takeout won’t fix the drug problem or equine and human safety concerns but its good business.

Just as climate deniers are famously not scientists, I’m no mathematician. I leave that to better analytical minds than mine. So if someone wants to tweak the numbers that follow so that they make more sense and dollars, please have at it.

As the deck is stacked now, the only horseplayers that catch any type of monetary break—one that still makes sense enough for them to continue playing the game--are the 1 percenters, the whales.

The math that follows is easy enough for me to understand: If you bet a million dollars a year, thoughtfully arbitrage your bets to break even, and get 8-to-10% on your money in the form of a rebate, that kind of return can support a family, even at today’s prices.

But that $80,000 to $100,000 is made at the expense of powerless rank-and-file players who can wager $500 per session and at the end of the day collect the dollar equivalent of bangles and beads.

A friend and grassroots activist made a suggestion that was thought provoking and makes sense. Think of takeout rates as the difference between a main course and dessert menu. Daily churners, the meat and potatoes guys, need help.

The bettors we’re talking about here are those who wager a couple of thousand dollars per week—every week, and receive the equivalent of shinier bangles and multi-stringed beads.

In its simplest terms, bet-takers won’t punish their best customers to help the serious middle-class players, fearing that takeout reductions will result in revenue reductions, which will happen in the short term. Their concerns are understandable.

But it takes time to convert added churn into higher revenue, and tracks have been unwilling to take haircuts for several years for their own long term growth and that will have a deleterious effect on the entire industry going forward.

So let the rank-and-file, the solid everyday churn player, meat-and-potatoes: The straight and duel multiple pools; daily doubles, exactas and quinellas.

Meanwhile, allow the whales, score-seekers, racetracks, ADWs, and the horsemen have their cake and eat it, too.

We’re aware of the catch, the reason this pipedream won’t happen: This entire industry is incapable of sitting down in one room and make a compact, a compromise; 38 racing jurisdictions sending one message to the states which give them license to operate.

Consider this: Drop the takeout on straight, place, show, exactas, doubles and quinellas to 15%. Simultaneously, increase the takeout on three-tiered and greater multiple wagers to 30%.

According to the HANA 2017 Track Ratings chart, average takeout on straight wagers at 64 North American racetracks is a quite high 17.25%. A 15% rake would increase payoffs by 13.01%.

The average cost of playing the Pick 4, considered by many the most popular horizontal wager especially given the number of guaranteed pools offered ubiquitously--as opposed to Pick 5 or Pick 6--is 22.28% at those same 64 tracks.

Raising the takeout on three-tiered and greater wagers to 30% represents a 25.7 percent increase which, with rounding, more than offsets “revenue losses” from the straight and two-tiered payouts.

The 15-30% solution—or whatever figure serve all stakeholders--accomplishes several goals. Everyday players who grind their money need bigger payoffs to survive by increasing churn; straight and two-tiered wagers are, simply stated, more winnable.

By returning more money to winning players, higher payoffs make the game an easier sell to thoughtful, upper scale Millennials. The 15% rate is still too high—10-12 percent probably is closer to optimal levels that GIVEN TIME, will increase revenue.

While 30 percent takeout from three-tiered and larger sequences makes bettors wince, the 25.8% increase will encourage most bettors to make less complicated, easier to win, churn-friendly wagers in straight and two-tiered pools.

This is especially true of exactas, by far the betting option of choice by a majority of players.

Since successful wagers in pools with three or more tiers requires a hearty capital investment, tracks and horsemen will be able to retain more handle revenue.

Promotionally—and there is a preponderance of multi-race, score-oriented advertising--betting precincts can offer higher rebates to everyone; per usual the biggest bettors would receive bigger rebates.

The rank-and-file would get a bigger share of rebate money too, providing bet takers put in language that guarantees them a bigger share of the new pie.

Since my personal handle represents a wide range, from a low of $25,000 per year to $50,000 or more, I personally prefer that Pick 5 takers would offer consolations, as is done at Gulfstream but not at NYRA tracks.

Big players and racetracks shun consolation pools, preferring perfect-only payouts that helps to generate carryovers and jackpots, resulting in higher handle both in terms of dollars and number of overall players jumping into those pools.

It follows that consolations probably should be eliminated in the new higher takeout multi-race world, except pf course in instances when no bettor completes a given sequence.

Admittedly, this approach is a little like trying to legislate morality; it gets a message across but doesn’t completely solve the problem.

But some sliding scale version of a takeout-decrease/takeout-increase/rebates-for-all process would be a good place to start. Even if sliding-scale-takeout rates based on degree of difficulty fails, at least horse-racing would be sending out a better message.

PLANTATION, FL, September 12, 2017

Written by John Pricci

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