10 Ways to Fix Horseracing

One of the great ironies of racing is that the people in charge seem to be the only ones who don’t have the answer to “how to fix horseracing,” at least according to social media. Ask any serious racing fan and you’ll get a “slew” of suggestions on improving the sport. So here goes with my best shot at revitalizing horseracing, in no particular order.

1.Simplify the betting menu and you can drop the take and keep revenues constant or increasing. The question for the racing authorities is simple: how much will adding bets increase handle? If a player brings $200 to the track, will increasing the potential number of pools increase handle or revenue or is he just going to spend his $200 either way? The well known formula for gambling revenue is

Gaming Revenue = Volume x House Advantage

In the case of horse racing volume equals handle and house advantage equals the take. In very simple terms either you have to increase volume or increase the house advantage while keeping volume the same to increase revenue. But, as has been shown in numerous studies, raising the take has the effect of lowering the volume. So the less enlightened jurisdictions raise the take again and lose even more volume.

The ideal for horseplayers is to raise the volume while reducing the house advantage. This gives the good horseplayer a better advantage, while maintaining revenue for the house, a win-win. The problem is it is much harder to do when you have a Cheesecake Factory sized betting menu. Even if a track drops the take on a win bet, they may not realize a net gain in revenue unless people pull out of the other pools, usually pools with a higher take

My hypothesis? Reduce the number of betting pools and if the track does it right, (1) they’ll increase the volume in the remaining pools enough to increase total volume AND (2) increase the churn because people will be experiencing more collections. Increase the volume and you can drop the take and still keep revenue constant. In my opinion the two things have to be done coincidentally.

The fact is that the so-called jackpot bets, like the Pick-6 create little churn. Horseracing is not the lottery, and they are never going to be able to compete with the lottery. How do you compete against walking into a 7-11, saying quick pick and handing a clerk $2 for a chance to win a few hundred million?

If our $200 a day bettor decides to get into the Pick-6, he won’t be able to cover very many of the combinations (assuming there are 8 horses in each race, that’s 262,144 combinations) and he won’t be in a pool where the track picks up the churn. The track will get their percentage of the $200, the guy loses, and starts wondering what he’s doing at the track. Without some sort of addiction, nobody is going to play a game where they are mainly donating their money.

Here is my suggestion for a betting menu:

  • Win betting every race;
  • Exactas on every race, and no quinellas;
  • Combine the place and show pools into a single pool, but pay to the first three spots. This may also cut back on negative pools;
  • The take on win, place/show, and exactas would not exceed 14%;
  • Trifectas only on races with at least eight starters and superfectas only on races with at least nine starters, and the minimum bet is $1. No 50 cent or 10 cent bets. Lowering the minimums not only dilutes the prices, but it encourages people with no business betting into those pools to switch from the pools where they have a better chance of winning;
  • A maximum of five Daily Doubles, three Pick-3’s, one Pick-4, one Pick-5 and one Pick-6 a day, with a minimum bet of $1 on everything but the Pick-6 where the minimum would be at least $2, if not $3. At the very least, you’ll keep the undercapitalized out of the Pick-5 and Pick-6 pools. I used to know a lot of serious Pick-4 players who gave up the bet when it went to a fifty cent minimum. Yes, tracks can get more small bettors into the pool, but if it comes at the expense of the bigger players, the tracks are basically shooting themselves in the foot. The arithmetic is simple. 10,000 bets at 50 cents is less revenue than 6,000 bets at $1. Same for the superfecta. 100,000 bets at 10 cents is less than 11,000 bets at $1. Small tracks, at the least, figured out years ago that dropping the minimums doesn’t increase the volume. And when you hit a big superfecta it can be one of those life-changing collections.
  • Stagger the bets so there are not more than two horizontal exotics on a respective race. So Race 1 might be Daily Double/Pick-5, Race 2 — Pick-3, Race 3 — Daily Double/Pick-4, Race 4 — Pick 3/Pick-6, and so on.  This focuses the exotic money;
  • No take percentage on the combination/exotic bets should exceed 22.5%, and even that sounds like it should be lower.

And that’s it. Enough exotics to keep the professional player happy, but a focus on the bets the lower capitalized players can win. Increase churn, increase volume, lower percentage, and at least revenue neutral.

2.Cut operating costs. This entails at least two things. One, getting rid of, or at least redesigning, cavernous plants that were built when 15,000 people would attend the races on the weekend. It makes no sense to maintain a huge facility that is all but empty except for two days during the season. Two, automating to the maximum extent possible. There is no reason I should have to wait in a line at the track to bet – ever. If I have a tablet, I should be able to connect to the track ADW and bet, and funding/unfunding my account is as simple as walking to a window. There should be plenty of self-service machines for those without a tablet, and they don’t have to be the big clunky sort. It’s 2017 for goodness sake. I’ve been to restaurants where you barely have to interact with the wait staff once you sit down and there is no waiting to order. Someone brings you water, there is a tablet at the table, you order, you slide your credit card, your meal shows up a few minutes later, and the staff does the obligatory checking on you. You can’t tell me you couldn’t do the same thing at the track. Yeah, there are a few old guys and a few neophytes that the track might have to coddle, but if we’re talking about new customers in the millennial age group, they will love the technology.

3.Make the track a destination for more than racing. Realistically, how do you justify a facility that is used by the public only part of the year for five or six hours a day? You’ve got to have additional revenue streams, and I don’t mean a casino or upping the prices for parking, admission and programs. In fact, general parking should be free, the grandstand admission should be $5 and you should get a $3 betting only voucher in return.

I was at the South Pointe Hotel and Casino recently. It’s on Las Vegas Boulevard,  but about seven miles from the wall-to-wall casino part of the strip, so it has to be relatively self-contained. It had 11 restaurants, a big multiplex movie theater, a large bowling alley, a bingo parlor, meeting rooms, a show room – you could stay there for three days and never get outside, which thinking about it is probably the point. Tracks should have a great sports bar, a nightclub, some good shopping – and I don’t mean just the gift shop – for those who might bring someone who isn’t quite as interested in the horses, good restaurants where you would be happy to stay after the races and eat dinner, recreational opportunities for the kids that are out of any area where people are betting – you get the idea. Design a destination that will generate traffic from morning until late at night. And if people show up for lunch or dinner and only bet a few bucks, that’s still more than the track would get if they never showed up in the first place.

In the right location, a conference center would be a good revenue source. The shops and restaurants should have separate outside entrances, and if you spend any money at one, your track admission is free. The track makes money on a lease, people have a reason to go to the track other than horseracing, and you can accommodate people who wouldn’t go to the track unless they could induce family/friends to come along. The track also becomes a year-round destination if it is designed right.

One last thing. We’re all used to paying a premium at a sporting event, but how about making the prices just a smidge above the normal street price.

4.Standardize the medication list and thresholds nationally. If you believe the anecdotal evidence, a lot of people believe chemical substances are rampant in racing. Whether or not that is your opinion, it makes no sense to have 37 different permissible medication lists and thresholds. Get every jurisdiction together, have them agree on the list and the thresholds, and trainers will not be able to complain about not being aware of differing thresholds between jurisdictions. Same threshold in Arizona as in Florida, same in Nebraska as in California. Between the HBPA, ARCI, and the NTRA, there are plenty of opportunities to convene and facilitate the meetings. There is no reason to usurp the authority of the states to enforce the thresholds, if that is at all a concern, but if there is interest standardizing enforcement, that  can also be put on the table.

We have been enforcing medication/drug standards the same way for decades. To expect a different result is absurd. There are two obvious issues. One is that most of the thresholds are less related to performance enhancement than you might think. The nature of most thresholds is to identify a level which a horse should be below after dosing a certain period before the race. In other words, it is the residual after metabolization. The threshold doesn’t necessarily mean a level above which there is performance enhancement. There are certain medications that have no performance enhancing effect beyond their therapeutic value. While it is fine to set the threshold for those medications and call a positive, it makes more sense to treat those violations as a traffic ticket rather than a felony, and the punishment would not involve retroactive disqualification from the finish position and purse. Like traffic tickets, an accumulation of violations within a specified period of time upgrades the punishment. There is no essential difference between the level of violation for a single positive for omeprazole (Prilosec) and clenbuterol (a bronchodilator) in most racing commission rules, yet abuse of the later can be performance enhancing. Would it really be bad for racing to treat therapeutics that have no real performance enhancing impact differently than therapeutics that have the potential for performance enhancement, and to even treat those differently than illegal substances?

Second, the vast majority of enforcement money is spent on catching violations after the fact. The key for racing would be to prevent a horse likely to test positive from ever entering the starting gate. And no, out of competition testing is hardly the answer for legal substances because testing a horse 48 hours out from a race and finding the presence of a legal therapeutic isn’t of much value, and that is what almost all the tests will show. The very few cases of finding something illegal a few days before a race – and that would be pretty much only anabolics or Class 1 substances – could get the harshest penalties, but that may not be sufficient justification for a costly OOC testing program.

The answer is two fold. There needs to be an automated record keeping system that shows exactly which medicines a horse has been given by amount and time. Those records should be available to the track medical director, who would have the power to flag anything suspect. The medical director could order testing if there is time, or recommend to the stewards that the horse be declared. If the trainer is shown to have followed all dosing and withdrawal requirements any subsequent positive moves into the traffic ticket category. If the trainer and vet have altered the records, they both lose their license for some period that makes an impact and the owner is ruled off the track for a similar period. Any honest owner would tell his trainer that real “cheating” will not be tolerated.

Vigilance and investigation before the fact can go a long way to avoiding post-race positives.

Punish any violation that show a real intent to gain a chemical advantage harshly, but don’t make as big a deal over violations that aren’t performance enhancing, or where trainers made every effort to comply.

5.Consistency in evaluating inquiries or objections. This would only apply in cases where there is potential for disqualification. In my opinion, it would be fine for the stewards to call an inquiry or for the jockey to object, but much like major league baseball, there should be a central location that makes the decision to disqualify or not. If MLB can handle 15 games a night, racing could handle simultaneous tracks running. This is as close as we can come to consistency across the country and should quiet most of the critics. Nobody can successfully make the argument that there is a substantial difference between adjudicating a foul in Maryland vs Florida or Illinois. The only thing we know is that the stewards in each jurisdiction can take the same foul and make three different decisions. You want credibility in racing – it starts with consistency and having a reliable system for making the right call.

And for the most part, the stewards still have most of their responsibilities for enforcing the other racing rules. No doubt they will be irritated with the change, but it’s best for the fans and best for racing.

6.Information should be free. That includes basic past performances and whatever other data the tracks want to provide. If you don’t think simulcast racing forms that sell for $7 or $8 on track don’t keep people out of the game, you don’t understand simple economics. I used to joke that between parking, clubhouse admission, racing form, and a Pepsi, I was down $20 at Saratoga before I made a bet. The “nut” is too high, and tracks need to recognize they’ll get a lot more people betting money at the track if they subsidize information. And it can only apply to people who are attending the races in person so that the tracks aren’t subsidizing other venues.

Ever see the supermarket ads where some food item is on sale for half price? We know the supermarket isn’t making money on the product – it’s what they call a loss leader – but the purpose is to get you into the store so you buy things where they are making money.

Sell the premium products – the serious players will still probably use them –  but make it so that if someone shows up at the track (or my attached sports bar) they can get enough free (or really cheap) information to make an informed selection.

7.Increase customer service. Let me ask a question. Do most of you believe your track or ADW treats you as you should be treated based on your action? While many states do not allow for rebates, they certainly allow comps. I actually witnessed an official at Saratoga seek out a valued player and ask him how many of that day’s giveaways he would need. A small thing, but something that made him feel special. Too many tracks make customers feel like the track is doing them a favor by allowing them to bet the races.

Customer service for new players should be easily obtainable as well. Free betting and handicapping seminars should occur throughout the day. There should be somebody available to help people with betting machines. There should be a customer service representative available throughout the racing day. And they shouldn’t have an attitude.

While I’m thinking about it, POST TIME MEANS POST TIME AND TRACKS SHOULD COORDINATE POST TIMES WITH OTHER TRACKS. And if we make the automation changes, there is no reason to have 35 minutes between posts. 20 minutes should work just fine.

The racetrack has enough crusty characters. The people who work there shouldn’t be among them.

8.Start catering to millennials. According to the Motley Fool,

  • Millennials find games like the current slot product uninteresting;
  • Millennial gamblers want to be engaged and empowered, and to exert some control over outcomes;
  • Millennials prefer night clubs to sitting at a gambling table;
  • Millennials are more interested in online gaming, poker and daily fantasy sports (DFS);
  • Millennials want skill-based games;
  • Millennials want experiences;
  • Millennials want to be social;
  • Millennials demand fairness.

The question is, why would they not be a lot more interested in horseracing? It can’t be that picking a fantasy team is orders of magnitude easier than coming up with a winner. You want daily action? No problem. Skill-based. Check that box. Exerting control? You make all the decisions.

So what could horseracing do to compete for millennials?

Most of the suggestions I’ve already made fall into that category, like dropping the take or giving away information for free or having it be an entertainment venue.  Millennials still go to Vegas, but for nightclubs and entertainment. Horseracing could learn something about adapting. Do you have to pay for fantasy sports statistics? Of course not. I’m not sure how to get the take low enough to compete with things like fantasy sports, but the race tracks can have the advantages of being social and providing experiences, something you can’t get if your only option is on line.

Somebody has to figure out what creates “fairness,” because the current regime has done little to convince even ardent supporters that it is a clean sport.

9.Racing, like casinos and fantasy sports, has to disengage from the state. They have to become a for profit business that pays taxes based on profits and not a percentage off the top. That would help them they drop the take enough to make a difference.

The state can continue to regulate racing, as they do other gambling ventures, but you have to allow the business to function as a business. They would negotiate with the jockeys and the horsemen, just like other sports do.

What other business pays tribute off the top before accounting for all the operating expenses? Sounds like the old protection racket, doesn’t it.

10.There has to be contraction in terms of the number of racetracks. All things considered, most jurisdictions would be happy to be OTB’s or ADW’s. There are two reasons why that would be a problem. First, there are enough national ADW’s that most of the betting revenue might never stay within the state. Second, horsemen have strong influence, and they will work hard to fund a breeding industry in the state. Without sufficient revenues from handle (and purses), the breeding industry doesn’t survive. Horsemen have also been very effective in convincing legislatures that the breeding industry contributes a significant amount to the state economy.

I understand that, and believe it is a legitimate concern on the part of horsemen. But it has been the case for years that the pool of horses is shrinking. Small fields are too often the rule. On a nine race day, we should have at least 80 horses or so. Last Sunday at AQU there were 62 entries for the nine races. That’s slightly less than seven horses per race. Under my proposal for a revised betting menu, three races would have been trifecta eligible, and only one race superfecta eligible. That is totally unacceptable.

One obvious way to increase field size is to reduce the number of tracks available for racing. This may also have a tangential positive effect. It could be easier to put healthier horses on the track and allow horses with health issues more time to recover.

Contraction doesn’t simply mean watching the smaller, class C tracks close. That is not the problem. They are either the last stop for the marginal racehorses, or playgrounds for the state breeders. No, contraction means eliminating some of the mid-level venues too.

The ultimate outcome should be two-fold: increasing the handle at the remaining tracks – by a lot I might add – and increasing field size.

Have you ever read The Tragedy of the Commons, a famous essay written by Garrett Hardin in 1968? Say you have a common grazing area for cattle and you have one cow and another grazer has one cow. You realize the grazing area has unused capacity, so you bring in a few more cows. Your competitor sees the same thing and he also adds cows. This goes on until there are so many cows they use up the entire grazing area and instead of having long term grazing land, the grazers will have to move to a different area.

Same thing in racing. Each jurisdiction only functions in its own best interest with little regard for the commons, in this case the industry as a whole. No state has a real incentive to give up racing as long as they are making money and the horsemen are happy. In fact, in some states, in order to run a simulcast operation there have to be a certain minimum number of racing days.

But in order for some states to make money they do things that deteriorate the game, like raising the take. It can be a vicious circle.

How do we create contraction?

  • Revenue sharing. The tracks that keep running have to help keep the tracks that shut down revenue whole so that they can fund breeding programs. If it works out, volume increases at the active tracks and there should be sufficient revenues to share.
  • For those states that have an active track there is no problem running races for state-breds. For the states that don’t have an active track, they can run an abbreviated meet for “state-breds only”  and some of the major stakes in an adjacent state. For example, when Colonial Downs closed, the Virginia Derby became the Commonwealth Derby and was run at Laurel.
  • The formula for getting the simulcast signal to states that gave up racing should be at a favorable rate.
  • States that lose tracks should pass rules that set up an in-state ADW and that require all bets originating in that state to go through that ADW or be placed at OTBs.
  • FOR ILLUSTRATIVE PURPOSES ONLY, here is a hypothetical list of tracks that would remain active. This would not include harness or quarterhorse tracks. Albuquerque, Arlington, Belmont, Canterbury, Churchill Downs, Del Mar, Emerald Downs, Fair Grounds, Golden Gate, Gulfstream, Keeneland, Kentucky Downs, Laurel, Louisiana Downs, Monmouth, Oaklawn, Sam Houston, Santa Anita, Saratoga, Sunland, Tampa Bay Downs, Thistledown, Turf Paradise.  You’ll notice a number of the tracks with attached casinos were left off the list, probably to the joy of the casino owners. 23 tracks nationwide.

There you have it. My proposal to save racing. Not the only ideas and maybe not even the best ideas, but a place to start debate.