Saving Santa Anita

Things are getting serious in Southern California.

Frank Stronach has sent Tim Ritvo to Santa Anita to save that track from potential demise.  For those who aren’t familiar with Ritvo, he has been the The Stronach Group’s Chief Operating Officer of the Racing Division since June 2012. He’s seen as uniquely qualified because he has been a jockey, trainer, and a racetrack executive, someone who can act as a bridge between the blue collar people who make the track go – the trainers, stable workers, and jockeys – and the corporate guys, people who Ritvo referred to as “guys with MBAs and lawyers who don’t know the first thing about racing.”

I don’t know about you, but it sounds to me like he zeroed in on the first really big problem — guys running the track who might understand the business end of things, but don’t really understand horseracing. From the anecdotal evidence, Santa Anita seems to have found more than its share of track administrators, including the stewards, who can’t seem to help but regularly incur the ire of various stakeholder groups. While Ritvo is kind to the existing management personnel in public, he must have heard the regular criticisms of them, and I’d say it’s time for him to have some frank discussions in private.

But Ritvo expresses the real motivation to get everybody on the same page –  the fact that Stronach owns a half billion dollar property that doesn’t return even 4-5%. Reading between the lines, at some point either Santa Anita becomes economically viable as a racetrack property, or Stronach either sells it (and if someone buys it, I don’t know why anyone would think they could do a better job of running a horseracing facility) or redevelops it. And while Ritvo doesn’t come right out and say it, horseracing in California is in as precarious  a position as it has ever been in. If all the players didn’t see the urgency before, unless Ritvo succeeds in a big way, they may be looking at a new place of employment/recreation in the near future.

To his credit Ritvo expressed an understanding of the importance of the bettors to the success of racing. Ritvo understands that without the bettors, there is no racing, but I’m not sure he understands exactly who his customers are and what they really want. Ritvo suggested that bettors want two main things: lots of options and field size. He went so far as to say field size was more important than   the quality of the racing. That’s an interesting perspective, but one I can understand. A 12-horse state-bred maiden field should be ripe for some major prices.

I’ve expressed my opinion on both those issues. For me, the issue in racing is not that there are too few betting options available to bettors. In fact, there are far too many bets on each event at most tracks. The second race at the NYRA tracks has win, place, show, exacta, quinella, trifecta, superfecta, daily double, pick-3,  and pick-4. It’s also the second leg of the pick-5. That’s 10 different pools in which to place your money. A bettor with some capitalization might get into a few of them, but how well can your $200 a day guy cover combinations in the more complicated verticals and for how many races? And that doesn’t even count the pick-6 that will be coming up two or three races later. Of course the more bettors get into the complicated verticals, the less they will be in the higher churn pools, the less they will win, and the less they will spend their gambling dollar at the track, and I would think that should be a big deal to a track looking to maximize revenues.

I get it. You line up 10 random people at the track and you’ll get 10 different favorite bets, and so the people running the racetrack believe they are obligated to offer as many of those bets as they can on a respective race. Based on horseracing board discussions, there are arguments to be made on both sides, and I’d certainly be willing to defer to any definitive study on whether the Cheesecake Factory sized betting menu is superior to a smorgasbord focused heavier on the higher churn bets. But I still think you can have the complicated verticals, just fewer of them.

The other issue is the size of the minimum bets. It’s blasphemy to say so, but I don’t favor 10 cent minimums on superfectas or 50 cent minimums on trifectas or the pick-3/4/5. There is no self interest. I simply believe the higher minimums will push people into the higher churn pools where they have a better chance of success and a better chance of staying in the game. I’ve heard the argument on the flip side – if they didn’t have the low minimums the modestly capitalized bettors wouldn’t be able to get into those pools, but raising the minimums is a bit like castor oil used to be for kids – it’s for their own good.

I’m reminded of the Andrew Beyer book, My $50,000 Year at the Races. That’s how much Beyer made essentially betting win and exacta, and that kind of potential would exist 40 years later if those pools were sized as if it was 1977. The horseplayer who is as much gambler as investor is going to struggle having to grind through a month with an expectation to make as much as he dreams he could with one sweet pick-5 win.

I will concede two things. One track deciding to readjust the betting menu while others stay with the really low minimums will likely not work. For something like higher minimums and fewer pools per race to work it really has to be an industry wide effort. Two, I fully understand tracks aren’t going to change as long as they figure they can direct a significant part of the bettor’s bankroll to the higher take bets. Of course in California, they raised the take on exactas to the point where you are probably just as well betting the complex verticals. If Ritvo has any sense about how take affects handle, he’ll quickly petition to drop the exacta take to no more than 18%.

Field size is a trickier issue. It’s clear that too many five or six horse fields is a huge turn-off to bettors. But do we really want more 14 horse fields, especially if six of those horses are outless? Think about the Kentucky Derby. For the last three years I’ve been able to eliminate 8-10 horses, and I’ve only had one of my eliminations finish in the top three. Too many horses may be as bad as too few, especially if we’re talking about lower price maiden races with a lot of inexperienced runners. If you have a 14 horse race and you can toss seven runners, what advantage do you have? Then weigh that against the disadvantages.

I think the ideal number of starters is between 10 and 12. This provides plenty of combinations, doesn’t put too much pressure on the universe of horses in a respective price range to race often, and it limits the potential your horse will lose as a result of bad racing luck or post position.

Ritvo mentioned the potential for Santa Anita to go to a three day a week schedule. I believe what he is really saying is that we need contraction in the sport. Although Ritvo has said that the issue is not a horse shortage but an owner shortage, his solutions to the problem are at the moment somewhat up in the air. The only thing he’s really offered is that more people should become owners because it is a great game, but as the old saying goes, the way to make a small fortune in racing is to start with a large fortune. Until it becomes more affordable (your horse would have to earn $4-5,000 a month to keep your head above water at Santa Anita), or there are significant tax advantages, it’s not going to be easy to attract new owners.

I’ve opined that racing is a three-legged stool consisting of the owners, the trainers and the bettors. Take any leg away, or make any leg longer or shorter than the others, the stool collapses.

We all appreciate Ritvo calling out the bettors as being the base of the racing pyramid, but the reality is that for years they have been at the bottom of the Santa Anita hierarchy, with the owners and trainers ahead of them. When Ritvo was asked about changes, he said, “I’m going to be the guy that goes to the TOC (owners), the trainers’ association, the breeders.” Did you notice any group missing, as usual?

If Ritvo is serious, the bettors will have the same seat at the table as the owners and the horsemen. To this point the bettors have not been well organized. There is no real equivalent of the HBPA or the Thoroughbred Owners of California for horseplayers, although perhaps HANA comes closest. The problem with horseplayers is that they’ve never had to adopt a groupthink sort of philosophy.  It will be very tricky for Ritvo to figure out how to embrace the bettors as he goes through the process of revitalizing the track, and he does so at the risk of causing the trainers and owners to become agitated if pleasing the bettors means the owners and trainers get any less money.

Ritvo has made his opinion on the importance of the bettors and the importance of a reasonable take very public. At this point, if he breaks faith with the bettors and doesn’t metaphorically put his money where his mouth is, he may wind up losing the whole thing.

One last point. For a while now, improvements to the barn area at SA have been the subject of discussion. Ritvo said, “It takes a huge amount of investment to maintain it and to upgrade it, and there is [no return on investment]. It’s a long term play.”

In another case of reading between the lines, what Ritvo is saying is, don’t expect us to invest in the backside until we know we’re going to be around for many more years. But, the most important thing is that nobody better give the slightest consideration to having the bettors pay for this. If anything, money to redo the stable area should come out of purses, which if Ritvo makes the right moves should be able to stay at least at current levels  In other words, since Santa Anita gets a percentage of handle to fund purses, if Ritvo can increase handle, he can have his stable redevelopment fund out of the increased revenue, while trainers and owners won’t have to accept lower purses.

Ritvo is certainly talking the talk. Let’s see given all the barriers he’ll have to break through whether or not he’ll be able to walk the walk.