Monthly Archives: June 2014

Opinions, Stories and Reporting

Players Boycott at Churchill Seems to be Working

Churchill Downs recently announced they are increasing the takeout on both the win/place/show pools and the exotic wagering pools. In an amazing show of irritation, Jeff Platt, Lenny Moon and others formed www.playersboycott.org, asking players to not only stop betting Churchill Downs, but the CDHN owned tracks (Arlington, Fairgrounds, and Calder) and to not use the TwinSpires betting site.

All I can say is wow! It only took 150 years to finally get pissed off enough to exercise the power of betting public. But better late than never.

There is no doubt that in the hierarchy of racing, players are on the lowest rung of the ladder, well behind the state, horse breeders, owners and trainers, and track management. I’m not including jockeys and backstretch workers because they might actually be treated worse than horseplayers. The greatest impetus to the players’ boycott seems to be a startling 340% increase in executive compensation from 2012 to 2013. Churchill essentially concluded that they had to pay executives $19.7 million more even knowing they needed $8 million more in revenues for purse increases. I’m not saying the executives don’t work hard, but if your boss came to you and said, I’m cutting your pay so I can get a raise, I’m pretty sure some sort of revolt would be discussed. And in essence, that is what they are doing. Asking the bettors to fund increases in salaries and purses.

I don’t know what they might have asked the owners and the trainers to kick in, but if I were a betting man (wait, I am a betting man), I’d wager the last thing on their list of options was additional entry or stall fees. Think about it for a minute. Who exactly is the customer at the race track? For every disgruntled punter who screws up enough energy to let management know how he feels, there are scores of owners and trainers who are griping daily. True story. I once witnessed a group of trainers confront a track general manager, and when they didn’t seem to be making headway, decided that a punch in the head could more clearly make the point. Amazingly, they got what they wanted. I don’t recommend trying the punch in the head approach unless you have a hankering to eat baloney and white bread sandwiches three times a day at the local hoosegow. Trainers and owners are like the Empire compared to the average Luke Skywalker horseplayer when it comes to management’s ear. When the tracks try to cater to horseplayers, it is usually by giving away bobbleheads or a foil lined thermo-lunch bag. Don’t take this as ungratefulness, but the only people who show up for the bobblehead are people who think they’ll be able to sell it on ebay or people who can’t resist a freebie. Saratoga is famous for its Sunday giveaways, and plenty of people show up, buy six admissions, grab six t-shirts or mugs or whatever, and leave without ever betting a nickel. If you want to make a regular happy, how about a comped comfy seat on Breeder’s Cup day as a reward for showing up every day and being 1% of your total handle.

One of these blogs I’ll talk about the history of Churchill Downs, a track that somehow stumbled and bumbled through its first half century by regularly flirting with bankruptcy, and its irascible founder, Meriwether Lewis Clark, Jr . But that is for another day.

Which brings me to the state. Is there a business other than gambling that pays its “taxes” before calculating its profit, and with no chance of a “refund” if it loses money? As Vito Corleone noted, “A lawyer with his briefcase can steal more than a hundred men with guns.” Think what a whole statehouse full of them might do.

Bettors are also expected to pay for state breeding programs. Every state with horseracing designates a percentage of the takeout for the breeders’ fund for horses bred in that state, ostensibly to promote breeding and racing. The concept is to create an economic stimulus to breeding horses in that particular state. I’ll rant a bit more on this topic in a later blog, but I have real questions about the forced relationship between bettors and breeders.

It feels like there is a hierarchy of middle men taking their cut from the same, no the only, piece of pie out there. The pari-mutuel bettor. The only analogy I can think of is the old protection racket. Pay us and we’ll let you keep betting horses, and if it gets to be too much…well, too bad.

When I first started writing for Horseplayer Magazine I did a rant where I told this story. I was at the driving range hitting some balls and who should decide he also needed to work on his swing but the track general manager. In an occurrence that at least made you wonder about the reality of divine intervention, it started to rain and the two of us found ourselves waiting out the weather in the nearby shelter. We got to talking and I said something like, “and how about that 25% take on the exotics?” He said, “I know. That’s the maximum amount the state lets us take.” Truly a case of one person zigging while the other person is zagging.

Back to the players’ boycott. It seems to be working. As of June 22, 2014 average  field size is down 0.62 starters per race. (-8.13%). If you exclude Kentucky Derby and Kentucky Oaks days, total handle is down $45.6 Million (-26.90%),  handle per race is down $111,316 (-21.68%), and average handle per day is down $1,424,385 (-26.90%).

I’m going to weigh in on the side of the players boycott, mainly because it’s about time horseplayers got noticed. But I’m also going to say, even if Churchill rescinds the increase, it doesn’t solve the underlying problem. The current model hasn’t worked for decades and the problems of live racing have only been exacerbated by universal off track wagering, rebates and state laws crafted either by owners or track management in their own best interest.

So what do you think? If you were the czar of racing, what would you do to bring the sport all the way into the 21st century?

Opinions

The Killer Whales

Fellow Denverite Derek Simon, blogging for www.twinspires.com, wrote an interesting piece about horse racing whales, those ultra-big money bettors. He seemed to make three important points. First, whales are not necessarily good handicappers. The second point was that whales survive by wagering large amounts of money often. So if a whale bets an average of $250,000 a week for 50 weeks out of the year, and sees a 2% return, he finishes the year $250,000 to the good. Now that amount is a good year for most people, but it seems like a lot of risk for a fairly small reward. You still have to be a 2% winner, assuming there are no intervening factors. Of course if making money was that easy, a lot more people would be whales. The third point is questionable – whales limit their play to the larger tracks and leave the action at smaller venues to the minnows. It doesn’t get much smaller than Arapahoe Park, and I’ve seen plenty of whale sized bets there. Same for Turf Paradise, Tampa Bay Downs, Mountaineer Park and a host of other small tracks. Simply put, 5% is 5% is 5% whether it is at Santa Anita on Breeder’s Cup day or Turf Paradise on a Tuesday in February, and a bettor is guaranteed at least 5% return on a winning ticket. Why would you avoid betting at Turf Paradise because you felt limited to, say, $10,000 bets? In fact, I might argue that at some of the smaller tracks the certainty factor is even higher than at larger tracks. Don’t laugh, but there are people I know who specialize in crushing Arabian and mule races at tracks like Delaware, Retama, Arapahoe Park and Pleasanton and are deliriously happy with a cold $7.40 trifecta, which by the way pays $7.40 because they have a substantial percentage of the pool. Ask any Wall Street investor if he’d take 5-2 on a 90% shot. The conclusion of the blog is don’t get too hung up on the action of the whales because mostly they are betting against each other. Derek also suggests that the rebates are irrelevant and that is where I want to zero in.

In 1968, Richard Carter using the pseudonym Tom Ainslie, published the seminal work, Ainslie’s Complete Guide to Thoroughbred Racing. On page 38 he talks about The Magic Number. Basically Ainslie suggests that no one should lose more than the track take on the win pool. So if the take is 17%, at worst, even if you are betting randomly, you should lose no more than 17% of your bankroll in the long run. He goes on to say that if you only bet favorites, you can reduce that loss to around 8%. Now imagine you are a whale getting a 10% rebate. Betting only favorites to win, you do two things. First, you skew the pool by making the favorite all but unbettable. Second, you still make a 2% profit. Think about it. You are an 8% loser making money, and the more you bet the more you make. If you are any type of handicapper, or if you are using a sophisticated betting program, you might erase half of that 8%, making you a 6% winner. Our same $250,000 a week whale would net a cool three-quarters of a million dollars.

Back when Ainslie wrote his book, favorites were winning at about a 32% rate and one of the first four choices won around 78% of the time. Today, the dilution of the racing product has resulted in smaller fields and a higher percentage of favorites winning. The modern percentage is close to 35%, and at the smaller tracks it seems like there are an increasing number of days when favorites win all the races.

Rebate whales affect the pools and sooner or later they are going to make your return on investment lower than it would be otherwise.

That is bad enough, but they negatively impact the industry as a whole. Ten years ago the New York Times published a short piece on how rebate whales affect the industry. They documented that since the advent of the rebate shops, purse money was declining even though handle is increasing. Is there another viable explanation? It doesn’t seem likely. So what do the tracks do? They think about raising the take, and guess who suffers the most? That’s right, the millions of patrons who aren’t whales. According to the NTRA, money is leaking out of the system and it isn’t going back to live racing. Instead, low overhead operations pay for the signal, make their profit on the volume of bets, and cater to the big money whales.

What’s the answer? I’m going to ask you to tell me your thoughts. Tell me what you think about whales, rebates, and how tracks are dealing with them.