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Friday, July 27, 2012

Aligning Interests

One of the biggest problems horse racing, be it thoroughbred or standardbred, has when competing against casino games is an issue the horse racing industry doesn’t want to talk about; the interests of a horse’s connections at times are in conflict to the horseplayer.  At a casino, it is simple.  If you win, the casino loses and vice versa although the way the games are  designed ensures in the long run the casino will win.  The following from a piece Bob Marks wrote in the 1990's which appeared in a harness racing publication (the exact publication is not known) no longer published.  Reading Bob's complete column is what inspired me to write this blog entry.

It is imperative to earn purse monies.  Unfortunately, this may not coincide with the WINNING of any one particular race.  Prudence dictates that the flesh and blood standardbred commodity be nursed through his season so as to maintain the capacity to earn.  If this means never overtaxing the animal in one hell for leather attempt to WIN any single race, so be it.  Elementary business procedure makes it expedient to be assured of part of a purse rather than gambler for all or nothing if that means overusing the horse.  Unfortunately, horses must be used hard in order to win, resulting in listless non-competitive animals for several starts thereafter.
In addition, many horses race “hurt”.  Degrees of soundness may determine degrees of usage on any particular night.  Many are competitive at certain levels but non-competitive at higher levels.  Economically, these horses are better off remaining at levels where at least they have the capacity to earn....  However, when winning means class elevation resulting in stable overload within that class, it’s obvious that these individuals are better off staying levels affording maximum race frequency.  There are a number of other related situations that we all know which come under the heading of the realities of racing.  Unfortunately, from a bettor’s point of view, these realities are not in HIS [/HER] best interest.

Some of the factors above can be accounted for by a sophisticated gambler, one that has been around the game long enough.  Obviously a horse can't race all out week in week out, this is where you get the bounce or the horse who decides to catch a trip hoping to win the race without doing all the work and this is fine, provided the end result is attempting to win the race.  But we can't forget the bottom line is the gambler making a wager on today’s race is trying to collect today, not next week or the week after.  The connections of a horse are understandably trying to maximize the earning possibility of a horse over the long turn; how to make the most money during the season.  It is this divergence of interest which threatens the sport. 
Can you imagine how many regular gamblers wouldn't give racing a chance if they realized the interests of an owner competed against theirs?  For the gambling part of the sport to survive, the interests of the gambler and horse’s connections must be aligned as much as possible.  The question is how does one do it?  One thing which can be done is change the way purses are paid out.  The horse should earn only if the public earns.  This means you don’t earn any purse money if your horse is not involved in the mutuel payouts.

Here is an example of how purse distributions could be paid (the exact percentages may change):

Race Programmed As
Win Only
Exacta Wagering
Trifecta Wagering
Superfecta Wagering
High Five Wagering
1st Place
100%
65%
60%
55%
55%
2nd Place
0%
35%
35%
20%
20%
3rd Place
0%
15%
15%
12%
4th Place
0%
0%
10%
8%
5th Place
0%
0%
0%
5%

All starters that finish the race (and those involved in an accident of don’t finish due to broken equipment) earn 2% of the purse in addition to any purse money earned.

Using the chart above, if a race is carded as having a having Win wagering only, the horse who wins the race earns purse money only.  If a race offers only an Exacta, but no Show wagering, only the top two finishers earn purse money.  In these cases, it is the way the race is drawn and state law; the number of purse winners doesn’t get reduced due to scratches or if the track decides not to offer a certain type of wager because of fear of a minus pool.    The other examples show what happens if Trifecta, Superfecta, or High Five Wagering is offered; in those cases purse money is earned through the final position of the exotic wager.  By having this type of purse distribution, saving a horse for another race isn’t going to earn you any purse money this week so there is more incentive for a horse to race competitively instead of racing easy hoping to pick up minor spoils.

Owners of horses will complain this would make it harder to break even with a horse.  In my proposal, this is addressed by all horses in a race, provided the horse finishes (unless involved in an accident or broken equipment), earning a 2% starting fee.  This 2% is earned by all horses in a race including those who earn purse money.  The 2% starting fee would not be included in the horse's earnings and not be held against them in any conditioned racing.  The 2% fee would only go to the owner(s) with trainers and drivers not earning anything from it, so the owner is helped in paying their bills but by horsemen not earning anything from the 2%, they will have more incentive to race competitively.  By having a starting fee which is a percentage of the purse instead of a flat fee, horses will have added incentive to race in the highest possible class as the starting fee will be higher than a horse racing in a lower class.  The starting fee does come out of the purse account so it is conceivable that purses for races would decrease but hopefully the more competitive racing will draw additional wagering action to offset the drain on the purse account.

What about the issue of horses not being able to compete in higher classes; is there something which can be done about it?  While I am a fan of classified racing, I realize the majority of the industry is against it, so there is no sense rehashing the issue, but there may be away a racing secretary can address the situation where horsemen feel they can't win in a higher class; that is by writing the conditions correctly.  For example, assuming you have enough horses entering a race, the race secretary can seed the entries based on purses competed for.  As an example, let's say you have a bunch of horses which enter a Non-winners of $10,000 last 5 starts condition.  The race secretary can divide the field by appending the condition to separate horses that are dropping down versus the horses who may have earned their way into the class.  An example could be appending the conditions after the fact so you have in effect a field of Non-winners of $10,000 last 5 starts that did not start in a race for a purse of $10,000 or more in the last five starts  and a field of Non-winners of $10,000 last 5 starts which started for a purse of $10,000 or more in the last five starts.  The same purses can be offered for both races and in past performance lines, you can have nw10000l5cd-1 and nw10000l5cd-2.

Unless the owners and gamblers interests are tied at the waist, racing is looking to push gamblers towards alternative gaming where the interests of all parties are clear.  Bad enough you have to beat the higher takeout but must there be times where the gambler's belief that interests aligned are at times violated?

Another issue where interests of horsemen and gamblers are not aligned is innocent but still damaging to the game.  It is the size of fields.  Back when I started in this game, the USTA rules allowed for fields of 12 horses on the half mile oval, 14 on the 5/8ths, and 16 horses on the mile track.  One of the neatest races I ever saw was the time 16 green two year old trotters took to the track at the Meadowlands the last week of June for the Harriman Cup which was raced back then at the East Rutherford oval.   While proponents of the rule change which reduced the number of trailers on each track as a safety precaution, the race described above was contested without a problem. 

I understand horsemen's desire not to have trailers,  a horse going off stride in front of you can interfere with your horse's chance to be competitive; if you pay a nomination fee, you should expect to have your nose on the gate; the modern style of racing makes it that much harder for a second tier horse to win a race at the standard mile.  However, horseplayers in general like more wagering interests, not less so racing should attempt to accommodate their customers, at least in overnight events because the gambler is the lifeblood of racing, either via handle or in the case racinos, the gauge which will be used to determine whether or not slot subsidies shall continue.

There are some carrots which could be used to make a second tier more acceptable.  Horses that draw the second tier and race could have their preference date remain the same as if they never entered the race, ensuring they go to the head of the line for the following week's event; a stipend could be paid to those horses who draw the second tier; a guarantee for an inside post the following start could be offered.  For those events which require payment of a starting fee, a 50% reduction of the starting fee could be offered for those horses who draw the second tier.  Don't want to have a second tier, tracks could be reconfigured to widen the track's outside through the first turn to allow additional horses to line up on the gate.

Horsemen need to remember the gambler is the customer and you need to serve the customers' needs or you will find yourself in a new business.  This particular issue can be easily solved provided the stakeholders are reasonable and understand the big picture.

4 comments:

Mike said...

Pacingguy,

I commend you for trying to come up with new ways and ideas to alleviate this conflict of interest. The bettor should feel secure gambling on races. In turn, horsemen have an obligation to be competitive whenever they enter their horses in a pari-mutuel event.

How many times has the bettor lost money when wagering on horses just out for a joyride? How would 2% of the purse help in this situation? There is still an incentive to protect the horse by just finishing the race without attempting to compete. Look at all the money is wagered on that particular horse in the mutual pools that basically is dead money before the race has even started.

I like your idea with the chart in that when tris and supers are offered purses are only earned according to their placing in a particular race. I just don't believe giving 2% to finishers out of the tri or super helps this problem because it seems like wasted money for finishers that didn't have a chance to start with.

On the flip side, how about horsemen putting up a 2% entry fee to race. If they finish in the top five, they will be reimbursed the entry fee. If they can't finish within the top five in a horse race, well then they don't deserve anything. Or maybe the placing should be top four in a superfecta race as you have proposed.

Here's an example:

$50,000 Open (Meadowlands)

Entry $1,000 with 10 Starters for a total of $10,000 extra purse. After the reimbursement for the top five finishers, $5,000 is left over. Listed purse is still split in traditional manner. $1,000 goes to winning driver, $2,000 each for the trainer and owner. There should be incentives for those who are competitive in a race and no incentives for those who aren't.

Pacingguy said...

Charging a starting fee is what is called a stakes race. Oveernights don't cost anything to enter.

The idea of a 2% starting fee is to counter the charges that you can't cut the number of placings to pay out because they need to cover expenses which paying 4th or 5th does. In addition, by paying 2% of the purse instead of a flat fee, it encourages them to race competitively in higher classes because otherwise, they will end up in a lower class that pays a smaller starting fee.

Finally, if a horse is not deemed to be competitive by the racing secretary (for whatever reason), they can make the horse qualify again before acccepting entries on the horse, meaning no 2% the following week.

Truth is there is no perfect system. The best we can do is go with something to minimize the incentive not to be competitive.

Anonymous said...

Horses that finish worse than fifth deserve no piece of the pie. A 2% payout for being not good enough is pointless and is contradictory to the point you are trying to make with your entry. If you want horsemen's interests aligned with the bettors, you don't award anything to finishers who cant finish better than fifth. So with your system, the horsemen that aren't in it to win it, lag behind and finish last and collect 2% percent of the purse? That would give the horsemen more of reason to enter in a race not inclined to win rather than giving the horse a week off.

Pacingguy said...

Anon, I don't think it does. First of all, 2% is a pittance; it won't cover all the expense. Secondly, the trainer and driver would get none of it; so it would not encourage them to just go around the track; they would have to get into a position that pays regular purse money to earn.

If anyone is just going around the track just for the 2%, the horse can end up on the stewards list forcing them to waste a week and qualify.