You arrogant ass. You’ve killed us.

     – Andrei Bonovia in The Hunt for Red October to Captain Tupolev.

A Twitter topic that is sure to stimulate discussion is the obliviousness of tracks and ADW’s. I think oblivious is the right description because the alternatives are to conclude they are either incompetent, arrogant or purposely ignoring problems, and I simply don’t want to believe that is the case. I’ll point out a few things that are seriously hurting the game.

Odds Manipulation

On May 21, 2012, one (or more) bettors manipulated the pool in the fifth race at Thistledown Racetrack, pulling off a pretty neat betting coup. The favorite, Eye Look the Part, was a 1-5 favorite in the win pool until 30 seconds before the close of betting, ultimately winding up at 5-1. What the manipulators did was bet $15,000 on every horse, except Eye Look the Part, through Lien Games, a legal ADW in North Dakota. This maneuver drove the other starters down to around 9-2. The manipulators then bet a large amount using Euro Off-Track, a service based on the Isle of Man, and one that does not pool bets with the tracks in the United States, instead running a separate pool that pays track odds.

On a typical Monday Thistledown expects to handle $9,000 in the WPS pools, but in the 5th race the pool was $128,010.

The Thistledown Racing Secretary said, “Our people did everything correctly. The wagers were not illegal. Thistledown verified the money had been transferred into the race pool before approving the payoffs.”

Yes, that is what the bettors wanted to hear. It’s perfectly legal to manipulate a pool. How about showing a little disgust at this reprehensible behavior?

I don’t know all the racing rules in Ohio, but to be fair I expect there is some language that requires tracks to pay off on all legal bets once a result has been declared official. Even so, the high road would have been to simply refund all bets on the race, calling it a non-event for betting purposes. The manipulators would not have made a dime, and I really believe the bettors would have supported the decision. Euro Off-Track apparently cancelled the associated accounts, but that is not the point, especially if the manipulators collected first. The track and ADW  had no incentive to make a refund regardless of the rules, because whatever percentage Lien Games or Thistledown was getting, it was a lot bigger number at $128,000 as opposed to $9,000. The greedy betting brokers were willing to essentially send the message that they have no scruples when it comes to their share of the pie. Arrogant? Powerless? Idiocy? You can decide.

Two years later, on Sunday August 17, 2014 in the fifth race, Missjeanlouise was a 1-2 favorite until about midway through the race when the tote board flashed 3-1. The rest of the horses also dramatically changed odds so that every other starter settled between 3-1 and 5-1. For example, the outless longshot Dusty Lily dropped from 35-1 to 9-2.

It wasn’t quite the pool manipulation from 2012 – the average WPS pool was only $14,000 that day – but the 5th race had a pool of over $45,000. Someone put $4,000 on each of the five starters not named Missjeanlouise through – that’s right – Lien Games in North Dakota.

It certainly looks like a case of fool me once, shame on you, fool me twice it’s because I learned nothing. The Ohio State Racing Commission had two years to fix this problem, including working with Lien Games to try to keep pool manipulation from happening through their hub. They could have adopted a rule that said in the case of obvious pool manipulation, bets may be cancelled, although horses could still be paid their purse money.

North Dakota said all the right things. We’ll work with Ohio, we’ll develop methods to prevent odds manipulation in the future. I’d feel a little better if it wasn’t the second time the manipulators used the same ADW and picked on the same track. It takes a lot of faith to believe THIS time they’ll get it right. It’s a week from 2015. Software is pretty sophisticated. It shouldn’t be tough to find pool manipulators BEFORE a race is official.

This sort of thing hurts racing in inestimable ways. Every group that thinks the game is dirty is handed confirmation, not because an unscrupulous few try to manipulate pools, but because the racing commissions have looked completely impotent against them. If you aren’t smart enough to identify pool manipulators, I’d argue you aren’t smart enough to manage racing.

Track Take and Rebates

I shouldn’t have to talk much about track take, but there are jurisdictions that still insist on gouging betters on some combination bets. It’s not unusual for tracks to snag around 25% for trifectas and superfectas, but Pennsylvania takes it to a new level. At Penn National the take on trifectas is 31% and superfectas 30%. Parx is almost as bad with 30% on both the trifecta and superfecta.

Pennsylvania as much as any state doesn’t care about pool size. The vast majority of their gambling revenues are associated with the casinos, and it isn’t rare to see the pool size LESS THAN the purse. Casinos subsidizing racing is common, and in Pennsylvania the horsemen feel certain the state will never sever the tie between horseracing and casino betting. You know, just like Massachusetts gave the casino franchise in Boston to the Wynn group that never promised a continuation of racing instead of the Foxwoods group that promised to keep Suffolk alive.

The Horseplayers Association (HANA) has tried to create pressure by organizing players boycotts, but it is hard to convince millions of what are essentially independent contractors to all move together in the same direction.

Study after study has shown that decreases in handle are directly related to increases in take. How racing commissions and track management can operate against their own best interest is as mysterious as some DaVinci Code-like novel.

That’s only half the problem. Even with the 25% “normal” take on trifectas, whales betting through rebate operations can be offered as much as 17%. I’ve written about The Killer Whales http://halveyonhorseracing.com/?s=Killer+Whales and the damage they do, but the states are inarguably complicit here.

If I’m betting $5 million a year on trifectas and I’m a 12% loser, I can still make $250,000 profit for a year. The take kills all but the best bettors, and having to compete against big money players getting huge rebates is making the game almost unplayable. Hey racetracks, IT’S PARI-MUTUEL. It’s not like football where the amount bet doesn’t change the payoff. In an NFL game f you bet $5 or $5,000, you get 10 to 11 odds. Horse bettors are forced to figure out a way to win starting out 15-25% in the hole due to the take. Let me pass this message along to track management. IT’S REALLY, REALLY HARD TO CONSISTENTLY MAKE MONEY WITH A BIG TAKE.

Tracks have little incentive to raise the signal cost to the point where whales start pulling out of the pools. Tracks are agnostic about everything other than pool size because the more bet the more they make, even if it means eventually tracks will only be left with whales betting against each other as they push more and more small-time fans out of the game. Tracks WANT the whales, and perhaps they even believe they NEED the whales. Good luck surviving while you try to compete for the small number of plus-sized bettors out there. It is not like casino gaming where the whales have no impact on payouts. You still get 3-2 on your blackjack no matter how much the whales are betting. Casinos can and do cater to both the seniors sitting at the penny slots and the Phil Ivey’s who bet (and apparently win) millions.

It is also doesn’t make sense for tracks to offer a rebate like the ADW’s. Rational economic behavior indicates they should charge no more than they need to cover costs (with a reasonable profit for those tracks that are not non-profit corporations). Rather than offer rebates, if costs went down, they would just drop the take. But still, how can they compete against ADWs that offer money back to their customers? If racing wants to work on a big problem, whales, signal cost and rebates has to be pretty high on the to-do list.

Answer Your Tweets and Emails

This came up because a few people have mentioned to me not getting responses from ADWs and the regular complaints about one of the NYRA public handicappers.

I’ve only had a couple of “problem” people on Twitter, but 99.9% of the people I’ve interacted with are pretty reasonable folks.  When I hear about people who have been blocked by one of NYRA’s public faces and I know those people to be not only rational and informed players but big supporters of NYRA, it represents the epitome of arrogance. How in the world can a circuit treat good customers like irritants? If you are smart enough and sophisticated enough to become a public handicapper for the biggest circuit in the country, you have to be able to handle all sorts of people.

Nobody should have to tolerate abusive people, but like any good performer, you recognize they inevitably and occasionally show up, 99.9% of the audience doesn’t like them any more than you do, and there are clever ways of handling them without being abusive yourself. A thousand people who like and respect you offsets the one that doesn’t. If you are a public figure and you think you need to block someone, be sure it is a person the rest of us would block in your position.

I’ll pass along my best advice. Nobody is too small. And you never know if the person you blocked in a petty snit, or you are too good to answer will one day be important to YOUR success. You’re a public figure. You already know you can’t please everyone, no matter how hard you try. Don’t let the haters bother you so much, and figure out which people appreciate you and make sure they keep appreciating you. It’s good for you, it’s good for NYRA and it’s good for your fans.

Same with the ADWs. If someone has a problem and they ask about it in a respectful way, respond quickly and with an equal amount of respect, whether the person bets $100 a month or $100 a race. There are always options.

Track Improvements

I’ve written about this during the year, but it’s worth reminding tracks.

• I’ve had high-def on my TV for ten years. Having high-def TVs at the track, or sending an HD signal to people betting at ADWs is not some new fangled innovation. It’s catching up with where you should have been five years ago. And stop being so parochial and only making it available to people who bet through your hub. You’re vending a product and you’ll sell more if you offer a better product at a better price than the next track.
• There should be enough public seating for everyone who would rather bet the $5 than hand it to the person at the admissions booth. You want to pay extra for a special seat in the clubhouse, great. But just because you don’t shouldn’t mean you have to stand up for four and a half hours.
• There should be enough betting machines and tellers windows so nobody has to wait more than a minute or two to make a bet, even close to post time. Getting in a line with five minutes to post and not getting your bet in should horrify racetracks. They just lost whatever the take was on your action. If you are track management and you just said, they should get in line earlier, drop me a note and I’ll be happy to chat with you about missing the point.
• If you aren’t already doing it, on track racing programs with past performances should be subsidized, just like a lot of ADWs do. Trust me, you’ll get it back in the extra action it can generate. Knowledgeable bettors are willing to risk money. People who are guessing won’t be quite as willing to part with the Benjamins. Racing Forms are up to $7.50. It’s simply too much if you aren’t a serious bettor. With parking, admission, Racing Form and Timeform, the nut at SAR is close to $20 a day BEFORE food and drink. If you think that is no problem, once again I’ll go with oblivious.
• Every track should have wi-fi. Again, this isn’t Buck Rogers stuff, it’s just catching up to where you should have been five years ago. Timeform U.S. openly touts the beauty of being able to open your tablet and have hundreds of pages of past performance available on the screen. DRF touts its Formulator program as being able to put together data analysis on the spot. Why should I not be able to use those tools on a whim at the track?
• I love going to Saratoga, not just because I grew up there and broke my pari-mutuel maiden there, but because the place is a party with plenty of food and drink options. Every track should have real restaurants, even if they aren’t four star. They should have bars that people would come to even if they weren’t at a track, and they should stay open until the track closes at the end of the simulcast day. Show baseball or football games or whatever sport happens to be on  TV. If someone comes out because they don’t have to miss their team play and they make a bet, the track is ahead. Even if they are only drinking top shelf liquor and not playing the ponies you are ahead. If you have places that would be destinations if they were out there in the real world, perhaps people that normally wouldn’t make their way out to the track would show up.
• While I’m thinking about it, a restaurant in a strip mall that was charging $9 for a frozen hamburger on an institutional bun with a plastic packet of ketchup and frozen french fries along with a $5 diet soda that goes for $1.29 at 7-11 would go out of business in a month. Actually, they’d never be able to find a bank willing to give them a loan. Admittedly we’re all captive, but does that mean you have to gouge us like workers in a company town? I could stomach (no pun intended) paying $9 for a burger made fresh with quality beef and french fries I watched you slice, and even though it would cost you more, I’ll bet you’d sell a lot more of them. Otherwise I’m stuffing myself before I go to the track and waiting until after I get out to eat again.
• If you cannot identify your best customers (read that largest bettors) within one week of starting a race meet, you should be replaced as general manager. And once you do you should decide how you are going to treat them better than the average twice-a-year player. If someone tells you it’s not fair, tell them that fairness is treating special anyone who bets ten times the average per person handle.
• Listen to every suggestion and thank whoever offered it. If it is a silly suggestion have a laugh privately in your office after the races. If not, figure out how to implement it.
• Finally, race tracks are inherently better than casinos from a betting perspective and everyone knows this. The two reasons why casinos flourish is that (1) the skill level to play most games (slots being the best example) is minimal; and (2) the action is fast. Players get caught up in it. Tracks need to do a lot more promotions related to the betting aspect of the game. Sure, that bobblehead of Fourstardave is great to add to my collection of cheap, useless crap I’ve picked up from Saratoga over the years, but is that the best way to spend your promotional budget? How about this idea. Print the comprehensive Saratoga statistics book and give that away the first weekend. It can’t be that much more expensive than the bobblehead/poster/umbrella/lunch bag you were planning on giving away and it will actually help people to bet, not to mention getting them into the track. If you can’t convince people that they should be parting with their money at the track instead of slots-a-plenty, it’s time to start thinking outside the box. Instead, tracks are selling out to the casino companies as a way to inject dollars into purses. This only works until the market is saturated and as they found out in places like Delaware, it is no guarantee of profit. Racetracks need to start thinking like this:

Remo Williams: “Chiun, you are incredible.”                                                       Chiun: “No, I am better than that.”                                                                           (from the movie, Remo Williams: The Adventure Begins)

Racing Commissions

I used to work for state governors. I can personally attest that they care about every interest in their state and they want to see those interests, and the citizens, prosper. They believe the people have an absolute right to competent government.They make appointments to literally hundreds of boards and commissions. They cannot know every single person that is recommended for appointment by the staff people who vet them, but they can demand that anyone appointed to the racing commission be free of conflicts of interest and have real experience and qualifications. “I like horses” or “I worked on your campaign” are not sufficient to qualify a person to sit on the Commission. I haven’t gone through every person on every commission, but I have gone through commission membership in a few states, and I can tell you that based on the available biographies, a scary percentage are not what I would term qualified to be making rules and adjudicating violations. The other side of that is they often cede enormous power to the Commission staff, or allow the staff to exert enormous influence over the final decision. Some of the problems I cited above are directly the result of part-time, unpaid, marginally qualified political appointees being in charge. That absolutely has to change.

That is enough for this week. If you managed to read this far in the blog, you are either a close relative or someone with world-class perseverance. In any case, thank you. I’ll have my Christmas message out for Thursday morning and I promise it will be a lot more upbeat.

Another successful Arizona Symposium on Racing and Gaming concluded last week. By successful I mean they got through the entire agenda, more or less on schedule. There are a number of insightful people who have great perspective on racing’s problems, but in racing things change at a glacial pace. We’re great at talking about what ails racing; we aren’t nearly as adept at fixing it.

First, I’m tired of hearing about Hong Kong. Hong Kong has huge fields. They handle $11 million per race. Their handle has increased 47% since 2006. They have the greatest drug policy in the universe. Why can’t we all be more like Hong Kong?

I’ll give you a few reasons. The have two racetracks. North America has well over 100 if you include harness tracks. Hong Kong has one authority running the whole show. North America is a hodgepodge of state and provincial commissions run by people who were appointed and not necessarily for their expertise in making and enforcing racing rules. Hong Kong has 83 racing days a year. North America has that in a half a month in August. Hong Kong has a virtual monopoly on gambling. The nearest casinos are in Macao, an hour away by ferry. The Hong Kong Jockey Club controls the lottery. They control sports betting. There is no hometown football or basketball or baseball to distract the racing fan. 80% of residents have been to the track, and 20% characterize themselves as regulars. It’s like America in the 1920’s when racing topped sports attendance by far.

Horses based in Hong Kong start an average of 7.4 times a year. That’s comparable to higher quality horses in North America. Why can horses be pampered the way they are in Hong Kong? The purses. Average earnings per horse are a little over $78,000, which means most horses more than pay for their upkeep. If you wanted to own a string of horses and were told you were all but guaranteed to make money, you think the number of owners and horses being bred might go up?

The Hong Kong Jockey Club is effectively a self-perpetuating not-for-profit corporation, much like NYRA or Keeneland, but unlike the for-profit Churchill Downs or the Stronach tracks. Unlike North American tracks the HKJC is the alpha and the omega. It puts on the races, owns the facilities, employs just about everyone in the business except for horse owners and trainers (even the grooms and hotwalkers are HKJC employees), runs the vast network of OTBs and phone and online wagering, and is its own regulator, setting the rules, running the testing laboratory and meting out punishments. How does that sound all you fans of due process?

Oh yes, and the grooms who work for the HKJC (and not the trainers), are earning $5,000 a month, plus their cuts of purse money, and they don’t have to tend to more than three horses. I know some trainers who would be happy clearing that amount every month. That whole situation has to be an intersting dynamic. Oh, and when the government comes to collect its share of the taxes, the maximum they get is 15%.

We’re not Hong Kong, and we’re not going to ever be Hong Kong. The Hong Kong model works because there is one central authority and everybody buys into it. They don’t have to worry about filling races. They are running 830 or so races a year, so if the average field size is 12 horses and the horses run their average of 7.4 races a year, arithmetically 1,400 horses could get them through a season. Even at Arapahoe Park they would need 4-600 horses to get through two weeks of racing. I also expect if 1,400 horses could get us through the entire racing season, being drug free wouldn’t be nearly the challenge it is today. On the other hand, if you can keep the rest of the 10,000+ horses we need to keep racing going in a summer season race-capable without medication, unlocking the secret of the universe prior to the Big Bang should be child’s play.

So enough of Hong Kong. That tangent on Hong Kong spun on a little longer than I thought it would.

Back to the Racing Symposium.

Robert Evans the CEO and President at Churchill Downs listed his five reasons to be optimistic about the future of racing. Number one was the expansion of “alternative gaming” at tracks. This sounds a little bit like dating someone else because your current partner is a little stale. I get that in the short term the injection is like a B-12 shot, but what happens when the gaming people do what they did in Iowa and say they are tired of essentially burning money subsidizing racing, in this case the greyhound tracks?

Second was that balance sheets are improving because operations emerging from bankruptcy are shedding debt and are being bought by stronger, casino companies. I can tell you based on the Colorado experience that the casino companies hope to use the tracks to expand their gaming operations, and if that doesn’t happen, racing can be dropped like a bad habit. It’s not a bad thing, but it only works as long as the casino companies don’t see racing as a drag.

Evans was proud of how Churchill is using technology to increase handle. I think high def feeds are a nice feature for tracks and ADW’s but I hope that’s not the best you’ve got to try to suck my money in (disclosure: I won’t bet Churchill or on Twin Spires since they’ve raised their take to cover executive salaries).

Fourth was an emphasis on quality racing. Yes, the Kentucky Derby, the Travers and the Breeders Cup generate huge handle, but how many more of those days can we squeeze in without adding lower quality horses? The Kentucky Derby already has 20 starters, and every year there are five or six that have absolutely no chance and are running just so their owners can claim a Derby starter. More quality racing is a great idea, but we need to quickly move beyond ideas to collaboration and implementation. When half of the creme de la creme  of horses in America are trying to win a race at Saratoga in August, what’s left for the other few dozen tracks?

Finally was the offer of innovation, which given the slide Evans used, seems to be stuff that has already been tried with some success, like expanding the meeting at Saratoga, although his suggestion of exchange wagering would in fact be a great innovation.

The reality of the presentation was that it was a rehash of the same problems with most of the “solutions” things that are already being tried while racing continues to decline. Innovation is not finally adopting technology I’ve had on my TV for 10 years.

Ray Paulick argued in a recent editorial that tracks must come to grips with the idea that there are too many racing days, and this leads to smaller field size which in turn leads to smaller handle. Jennifer Owen, an Australian racing consultant said her research shows that if you can increase the average field size in the U.S. from the current 7.86 per race to 10 horses per race, you could increase handle by 43%. In this calculation, Ms. Owen projects that if a track went from10 races a day to eight, redistributing the starters from the two cancelled races across the remaining races, handle would go from say, $5 million to $7 million. Unfortunately, all I have are the summary articles and not her actual calculations, but I’m guessing she used the same calculus that CHRB and Churchill Downs did when they calculated raising the take would result in higher revenues. How did that work out anyway? If she argued that the PER RACE average would go up by 43% I could buy it, but cancelling two races and seeing daily handle rise by that much assumes a lot of people yanking a slot handle (I know, you push a button these days) must be shifting over to racing. The handle on a given day cannot be greater than the total amount people are willing to bet, and perhaps it is the case that bettors have money in their pockets they are not pulling out because of field size, but 43% sounds like a pretty difficult number to embrace. Still, the point is well taken. Short fields suck from a pari-mutuel perspective.

Ray Paulick asks what needs to be done for stakeholders to see the light. Unfortunately, there aren’t a lot of suggestions floating around that would get those stakeholders to change directions. It may be a little more destructive, but the market will eventually sort this out. We’ll see more Suffolks and Hollywood Parks and Rockinghams until all that is left are the tracks that live because of slots or because their handle can sustain their existence.

As Buzz Lightyear said, to infinity and beyond.

December 19 marks the day Doug O’Neill’s suspension is finished and he’ll be back training his string. Welcome back, Doug. Racing is better with you participating.

Doug O’Neill would be the first to tell you that he’s made some mistakes, but I believe he’s worked as hard as any trainer to run a clean operation. I’ve talked extensively with Doug, with some of his owners, and the people who work with him. I haven’t found one who believes in anything less than running a totally clean operation. Doug even signed the petition to the CHRB asking for the installation of security cameras on the backstretch. That doesn’t sound like a guy with something to hide.

The current suspension was related to in incident in New York involving a positive test for Oxazepam on the horse Wind of Bosphorus. I won’t go into detail – you can read about the case in one of my earlier blogs – but the whole thing really underscored some of the problems with racing rules, especially the absolute insurers rule. We still don’t know how the Oxazepam got into the horse’s system, and ironically the one guy who wants to know the most is Doug O’Neill.

Before I launch into the rest of the blog, let me ask you to remember this. I firmly believe that a trainer who knowingly cheats in an effort to gain an advantage is reprehensible and should be dealt with harshly. I am not nor will I ever defend any dishonest trainer or jockey.

Twitter has been buzzing with opinions on trainers, and these days David Jacobson seems to be the most common target. He fits a lot of the criteria for garnering suspicion. He’s successful, seems to improve horses dramatically after a claim, and often races them hard until he drops them to a level low enough to induce another trainer to take them off his hands. The one thing Jacobson hasn’t done is have a horse test positive for seven years, despite being scrutinized microscopically by NYRA.

The list goes on. Bob Baffert had 7-11 horses expire suddenly, and although the CHRB could find no explanation that would put the blame on Baffert, the cloud still hangs over his head. Dick Dutrow is gone for ten years. Tom Amoss, one of the cleanest guys in racing, has had to spend a substantial sum fighting a positive in Indiana. When a trainer can’t comply with the rules when he tries as hard as as humanly possible to keep a horse honestly healthy and clean, you have to wonder if the issue is something other than the trainers.

It’s a common story in racing. Once a trainer is labelled as one who will use chemical means to get an edge, the stain is pretty much indelible. Once a trainer enjoys what some will label unnatural success, the cloud is inevitable. Just as Doug O’Neill and David Jacobson.

I’ve been looking at this issue for quite a while now. I’m far more convinced that the absolute insurers rule needs an update and it is not due process to have one body be judge, jury, appeals court and executioner. I’m convinced that racing commissions are no different than other rulemaking bodies, finding more and more ways for trainers to become lawbreakers, setting standards that may or may not get to the heart of racing’s real problems. I’m convinced that people like Dr. Rick Arthur, Joe Gorajec, and Chris Kay have become engorged with the power they’ve cultivated over the years, becoming almost imperial under the cloak of protecting racing from everyone but themselves.

In a highly publicized 1987 case, former labor secretary Ray Donovan was indicted and tried in New York for larceny and fraud in connection with a project to construct a new line for the New York City Subway. He was ultimately acquited and famously asked, “Now where do I go to get my reputation back?”

More than a few trainers are wondering the same thing.