Monday, July 15, 2013

Racing Can Learn Something From Advance Deposit Wagering

The following article originally appeared in Harness Racing Update in their "Brush and Crush column.  This article is reprinted with their permission.

I think Nick Salvi of the Big M loves writing press releases. And lately, he has a lot to write about.
The Meadowlands handle has been fantastic this meet, and it shows few signs of slowing down. Almost each week there is a release trumpeting the handle for an evening, and rightfully so; if the Meadowlands is on its way back, for gosh sakes tell people.

A couple of weeks ago a funny thing happened, though. Sure there was the usual Salvi release talking about another $3 million dollar night at the Big M, but out popped another press release, this time from Yonkers.

“$1 Million Plus Handle on Tuesday” the headline screamed.

It seems someone out there wants people to know that Yonkers has been doing some good things, too.
Further, on the heels of the Jeff Gural interview published at several industry websites where he mentioned he offered some incentive to large players if they take a dip into the Meadowlands pools, another Yonkers story came out. This one about giving rebates to players who play Yonkers, and a new betting deal with Ebet. The hopes, of course, are to increase handle.

This competition is good for Yonkers, and it’s good for the Meadowlands. It’s also good for harness racing, because one of the biggest knocks on the sport is pool size. When handle is increased, pool size goes up. This allows harness racing to benefit not only by selling themselves to thoroughbred players who need pool size to wager, but also to existing harness bettors who want to increase their volume.

This represents a new way of thinking for harness racing. For many years the benchmarks for success was not the betting handle, but was the racing product itself. If you had nice stakes races you were a good track. If you got a slots deal with the government, you were the bomb. If you got people out on a Saturday – no matter if they bet any money or not – you were doing great things.

In my time following racing I have never heard of a track owner giving an incentive to an executive or manager that’s related to handle. 

“If we hit $800,000 in average handle this year Tom, your bonus will be big!”

“If you hit $1 million this year Tom, your bonus will be bigger”

This industry tends to complain about ADW companies “stealing our customers”, but if you look at the ADW structure, and culture, incentivizing handle growth is exactly what they’ve been doing for years. 

An ADW owner, large or small, does not make money if he or she get a slots contract, if the box is filled, or if they offer a free gym bag. They make more money if their handle goes up, because they get a percentage of each dollar wagered. If they get Bill from Brooklyn to bet $100,000 a year, they may make $4,000. If they get him to bet $200,000 a year, they make $8,000. $8000 is greater than $4,000, so they try their best to get Bill to change his ways as a player.

With 20% takeouts an ADW owner who pays, say, 10% for a signal, and has operating expenses of 3% of handle, can keep 7% for him or herself as profit. That’s great, but 7% of a small number is not overly worthwhile. They need more volume. To get that volume they incentivize their players with lower takeout, player rewards and innovations like conditional wagering, or watching 4 track video’s at the same time. They also try to help their clients win, by offering free handicapping tools, like Pacefigures or Thorograph.

This is why innovations have occurred in computer wagering at such a quick pace and also why rebating has emerged.  These companies reinvest their profits into the player to get them to bet more.
The result has not been surprising. If you give a player 5% back at the end of the day, and help him or her win, they have extra money in their account, and they rebet it. Much more than that, however, is this 5% can turn a losing player who gets tired of reloading and thinking about poker, into a break even player. A break even player thinks he can beat the game, and he plays more, and concentrates on racing more.

What ADW’s recognized early on, is that it’s not only big players this works well with. It’s small players too.

I received an email from a smaller player who discovered a rebating ADW for the first time.  He had played racing for years and stopped because he was losing too much money trying to beat the massive takeout, but he decided to give it one more shot playing from home.  He wrote:
I registered for the account and I must say I am impressed. I like the smaller tracks like Monticello and Northville. I even tried a place ticket on a 3-1 greyhound. The best yet, though, is that I started with $100, betting frivolously and stupid, I blew it all, but the next day I had 23 dollars in my account. Then last night I got the $23 all the way back up to $100 (and then blew it all again). But anyway,  I managed to bet about $700. Now they throw $35 back in my account! I'm back to the slow grind.

This is a customer who played racing for years and found he had no shot to beat the game. In the old days he would lose the $100 and go home from the track.  The track would make their $18 or so on his wagering and that’s that. With the ADW owner incentivizing him to play more, he bet over $700 on his initial $100 load and he was still in the game.

I love what Yonkers and the Meadowlands are doing. They’re following what online wagering providers have been doing for years – trying to up their handle. It’s about time they did.

Monday, July 8, 2013

Schoolers, First Time Geldings, & Much More: Not In a Program Near You

The following was published in Harness Racing Update and is reprinted with permission.

Pete from Brooklyn goes to work from 9 to 5, gets 32.4% taken from the tax man or various other fees, pays the mortgage, throws $40 in the kids’ college fund, and after all that, he pops $100 from his paycheck in the wallet to actually do something fun for himself.

When Pete and others like him head to the track with that $100, they sure are up against it. Some tracks have 30% takeouts, others have short fields where they have no chance at making any money. Sometimes there’s something funny going on (thankfully this happens much less than in the old days). Sometimes their trotter breaks in what seems like thousands of feet behind the gate, and racing happily takes their money.

“Sorry Pete, it’s part of the game. See you next week, I hope.”

Breaking trotters, high rakes, short fields and many of the big issues are not immediately fixable. They might never be fixable. But there are things that can be fixed that will help the customer experience, if we put our minds to it.

Over the last several years we’ve seen more and more horses win off 30 day breaks in their schedule, or off longer layoffs (Bob Pandolfo wrote a column about the change recently in the DRF).  It’s not like it was in the 1980’s or 1990’s where you’d see a four week break and the horse was an auto-pitch because he needed a tightener. Nor is it an automatic throw out seeing a trotter come off a 4th by 4 qualifier two weeks ago, with six seconds to drop to be competitive.

Times have changed. But once again, as times change, the industry doesn’t.

What’s happened in harness racing with layoffs is not magic, nor is it a sinister plot to mess around with its customers. Horse’s still need to be trained to race at race speeds, they need to be ready and fit, they need to be qualified to win off a layoff. What is different is that it has become a practice in harness racing to “school” horse’s between starts, at race speeds most times, and in company, just like a qualifier. That 158.2 reported qualifier on March 16th, was followed by an unreported 155.3 scorcher a week later.  For the horse’s March 31st race, he’s ready, despite the line being unreported.

Before the Meadowlands Pace, twitter and the industry press was abuzz that Sweet Lou schooled (or trained) in 149. It wasn’t reported, so no one knows for sure, but that was the scuttlebutt. I guess we should figure as handicappers that Ronnie Burke would do something like that going into a $600,000 race to have Lou ready, so maybe that’s just fine.

However, what about the other times it is not reported, or times we need that information. Say when a $15,000 claimer has been off a month, with no qualifier. He wins by five and Pete from Brooklyn says “what just happened?”

We may have seen this in the Breeders Crown elimination for three year old colts this past fall at Woodbine.

Panther Hanover raced on September 8th and won in 149.1. Then it seems he had several issues. He was off 35 days and entered October 13th in an overnight, but was scratched sick. He was then entered 7 days later in the Breeders Crown elimination.

Unbelievably (the late Tom Ainslie would have trouble figuring this out), off a vet scratch and 42 days between starts, he was on green from the get-go and came second in 149.4.

What happened?

No one knows for sure I guess, but on a chat board after the race I read the colt “schooled” really fast the week before his elim. It was also noted driver Jody Jamieson, who took some flack from bettors for sitting behind Panther Hanover with the very-fast Warrawee Needy, was in the same schooler and knew the horse was ready. That might’ve explained why he sat the two hole.

The horse was 12-1 and a trip handicapper’s nightmare, so if the above was true, Pete from Brooklyn was out of the loop.

No matter if this chat board rumor was valid or not (it really doesn’t matter either way), James Dean, Sylvain Filion, Jim Carr and Jody Jamieson did nothing wrong – and I want that made perfectly clear. They, in fact, did everything right from a training and tactical driving perspective based on the knowledge it appears they had at hand. They didn’t fail Pete from Brooklyn in the least by doing their jobs right, harness racing failed Pete from Brooklyn by not doing its job right.  

Saying “Pete should’ve known he was ready or he would not have been in the box” is not a response, it’s an excuse. Any decent handicapper could’ve easily expected a tightener, trying to get 5th to qualify for the final, not a front end scorch with a horse off 40+ days and a vet scratch.

When I ask myself tough racing questions like the above, I think “what would Hong Kong Racing and Bill Nader do in a situation like this.” Hong Kong, as most people know, takes things pretty seriously when it comes to wagering. Vet reports aren’t “none of anyone’s business”, they are published in the racing form and on the HKJC website. Penalties are not minor or hidden, they are published in the newspaper. “Schooling” races are unreported works, and they’d take that seriously too. I would wager they’d have a policy in place about workouts, and if a trainer tried to pull a fast one by ignoring said policy, he would be on a boat to Thailand in the morning.

While an industry response to this article in North America might be “how  do we find a way to publish these unrecorded workouts in the past performances; it’s impossible”, Hong Kong would be asking “how do we not find a way to publish an unrecorded workout in our past performances; we have to make it possible”. There are only a few words different in those two sentences, but they are an important few words for our customers. One is a dodge, the other shows respect for a customers’ hard-earned betting bankroll.

Figuring out logistically how things like schoolers, or first time geldings, or vet work, or fifty other things our customers complain about are recorded and published is not an easy task. It certainly is well above my pay grade. But when we ask ourselves “how do we make the game of handicapping better for Pete from Brooklyn” we might stumble upon a solution that does make it better for Pete from Brooklyn. And I think we can all agree that harness racing needs more Pete’s from Brooklyn, not fewer.

Wednesday, July 3, 2013

Yonkers Swims Against the Current

Last April, the best horses, trainers and drivers currently racing in North America were assembled for a sparkling race card at Yonkers. The Levy and Matchmaker finals were on tap, and other fast class divisions and overnights were also carded.  Adding even more to the excitement, the Meadowlands, where most of the handle in the US goes, was off on a one week break, eliminating any real competition for horseplayers.

When tallied, $1,140,000 in purses were up for grabs, all in or near the largest metropolitan center on the Continent. The handle, however, was not many millions, it was just over $1 million dollars; less than the nightly purse.
This wasn’t surprising to me, or probably many of you. I don’t know one – not one – serious bettor who was looking forward to the Matchmaker and Levy finals. Some watched, like me, but none that I know of bet even one penny.

It’s been noted in articles by us on HRU, and on other sites like DRF Harness where Bob Pandolfo wrote about it here. : Half mile track racing has become an anachronism.
The reason handles do not approach mile track handles at Yonkers (or at other half mile tracks) is simply a case of choice.  Bettors are exactly the same as any consumer. If your company makes one type of ice cream, or cheese, or soft drinks, it’s best to add new flavors, packaging and more, because more choice means more sales. More betting interests, and chaos, means more handle.

This May the Kentucky Derby, with twenty betting choices, all with a perceived chance to win, will had more than $125 million in betting handle. Half mile tracks, at the other end of the spectrum, even with a $500,000 purse, can’t generate virtually any choice – beyond one or two entrants. Low handle follows.

Most, if not all, of this lack of choice comes from post bias. Here is an array of prices of the favorite at various posts on half mile versus five-eighths and mile racetracks, from 2011 to 2012 (Source: Ray Schell):

The favorite from the rail at a track like Yonkers is right around even money. For mile and five eighths tracks it’s almost $1.30 to the dollar – about 25 cents more. As the posts change we see the average odds change too. Posts one through seven on bigger tracks have about the same level for chalk, while on a half miler the blue bars sky to the moon.

This is reflected in the expected win value by post position, when standardized.

At Yonkers you are 42% more likely to win a race if you have the rail. At Grand River it’s 46%. At Flamboro Downs it’s 49%. From the outside the reverse occurs. You are about 125% less likely to win from the seven (or eight, where eight across) on average.

For mile tracks, like the Meadowlands, this post bias is mild. You are about 8% better drawing the rail, which is technically worse than post 6 where you are 10% better off than average. All posts are pretty fair.

If a horse is even money from the Meadowlands, he (in the absence of takeout) has a 50-50 shot to win, from the rail, or the seven post, and this gives all the other horses a 50% shot to win – the bettor still has choice. At Yonkers, this same even money shot has almost an eight in ten shot to win, standardized, which gives all the other horses a 20% chance to win, which is minuscule. 

Bettors are a smart lot. They look at those percentages and say “why would I bet such a place?” Even though a field size might say eight, it’s really much smaller than that.

You are probably saying “wow, inside posts are better on a half mile track, thanks Captain Obvious.” You’d be right, it is obvious. However, I don’t think the industry realizes just how bad this bias is in today’s speed game, and how much tracks like Yonkers are up against it when trying to attract horseplayers to bet their product. That Yonkers (and half mile track staples like Northfield) could even garner $1 million + in handle for a night – any night – is frankly fairly impressive.

For the industry as a whole this has vast implications. If a $1 million dollar handle night at a strong branded track like Yonkers with a million in purses, (with the Meadowlands taking the weekend off) is a ceiling, how is harness racing able to grow their customer base? Big races like the Levy should be watched, not avoided, if we ever hope to grow the sport. In addition, we all know how difficult it is to draw good pacers and trotters to half mile tracks even for good stakes like the Molson Pace or the Battle of Lake Erie.

What can be done to shake things up on a Levy stakes night to at least get bettors to think about playing your big race? With a little imagination, maybe a few things can help.

When the program was printed you’d be more than happy owning Razzle Dazzle (post one) or Versado (post two). They’d lead the merry-go-round for riches with post one 42% more likely to win, and post two not too far behind at 28%. That’s exactly what happened. If Foiled Again did not have a buddy in the race giving him a hole, he is likely first over the entire mile.  We saw a 56 half for almost a half a million dollars. Amazing.

What if the Levy had two semi-finals for $150,000 each in successive weeks where post positions were flipped, then a race off happened the following weekend? How about similar for the Matchmaker?

What if the finals have a staggered starting gate with a huge bend giving the outside horses a green light?

What if the final leg (after the rich semi-finals) was a mile and a half handicap, where you stagger a standing start like they do in New Zealand and Australia for some of their big races? With most of the money given away already it wouldn’t matter much to the horsemen and owners, but it could certainly draw some eyeballs (and betting dollars) with a unique and interesting Free For All final. It might be a must see betting event, as it would completely eliminate the post bias, and if you seed the pools maybe you’re onto something.

Half mile track racing is at a very distinct disadvantage, and no, as long as they exist post bias will never be completely solvable. If half mile tracks try to introduce more betting choice – more cheese, or ice cream - at least for big events like the Levy, they have a shot to gain some interest, and perhaps even more entries from horsemen wary of the bullrings. With a track like Yonkers, with all their purse money and the stars of the game filtering the entry box, imagination is needed; not just for Yonkers’ benefit, but for the entire sport.
This article previously appeared in Harness Racing Update and is reprinted with their permission.