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Sunday, April 4, 2010

The Problems Facing Racing

In the first column regarding the Zielinski report, we discussed how racing continues to offer the same product it has for the last sixty years and how each stakeholder in the industry looks out for their own interests instead of the common good. This article will discuss some items the Zielinski report has identified as issues facing harness racing in 2010.

Harness racing continues to market the sport from the perspective of what the industry desires, not what the consumer wants. As a result, the same product offered sixty years ago continues to be offered. With other types of legalized gambling available, consumers have a choice. It is no longer what the customer can do for racing, but what racing can do for the customer. The sooner we learn this, the better off we are.

The product has not been updated to meet the demands of the current customer base. Look at the movie industry. The product has been continuously updated to meet the needs of their customers; from silent movies, movies with sound, color movies, and now 3-D movies, the product has continuously been updated to remain relevant. How popular would movies be if they continued to be in black and white? Well, harness racing, for all purposes is still in black and white. If other gaming opportunities are ‘in color’, is there any wonder people no longer consider racing an attractive option? All businesses must adapt their product to meet the consumers’ demands otherwise, the product becomes obsolete.

There is an oversaturation of racing which has developed as a result of the expansion of gaming and the Internet. The local market is now national. A track in California is competing against tracks in Illinois, Ohio, Kentucky and New York. With product demand decreasing, having so many tracks racing at the same time dilutes the mutual pools to the point where wagering is not feasible for the heavy gamblers who prefer standardbred racing. The amount of racing must be decreased in order for the individual wagering pools to remain a viable option for gamblers.

Racing relies on government support in the form of subsidies to support the industry. Unfortunately, the severe economic downturn makes racing’s economic benefits less tenable. After all, does supporting the racing industry outweigh the needs of educating the state’s children? When you have casinos willing to pay higher tax rates (in effect that is what Harrah’s offer in Iowa is) in an effort to discontinue making payments to support an unpopular sport, it makes racing’s situation even more precarious. Whipping can also be used as a weapon. Anti-greyhound groups have been writing Iowa legislators asking them to accept Harrah’s offer because of the treatment of greyhounds. Don’t think similar groups won’t be willing to use whipping against harness racing.

It is inevitable that VLT revenue will be reduced or eliminated yet racing is planning its future on such subsidies. Racing states without VLTs spend all their efforts on gaining VLTs instead of improving the sport and horsemen with racino revenue assume the spigot will never turn off. Also, the genie called Internet wagering has gotten out of the bottle. More and more gamblers, especially the heavy gamblers will continue to flock towards the Internet and away from traditional wagering sources. Racing needs to deal with this growing trend. Perhaps fixed odds and wagering exchanges need to be considered.

Racetracks don’t like to segment their market. There are different people with different needs so racing must adapt to appeal to potential customers. You don’t see casinos offer one type of slot machine; there are different types of machines being used to attract different types of gamblers. Racing must offer a product varied enough to appeal to the various group of consumers who are willing to partake in racing. This could be pari-mutuel, fixed odds, and/or exchange wagering; lottery type jackpot wagers; different ways of putting races together; different distances; etc. One size does not fit all.

Racetracks think they know what the core bettor wants, but in reality they don’t know. The report indicates what the profile of a core bettor is yet after interviewing a few ‘core’ bettors, it turns out their needs are not known. Some of the comments were: they know people who stopped playing the trotters because the payoffs are too low and/or the takeout it too high; they don’t bet or bet more on races because the horses are better (they look for the best deal); late odd changes discourage their playing; they hate claiming races (surprised me); whipping does not indicate a horse or driver are giving their best efforts, it can even turn newcomers off (this will surprise a lot of people).

While the report recognizes whipping is a controversial issue, the report concludes it is inevitable that whipping will be banned. Whipping is something that newcomers to the sport will not accept and eventually the media, animal rights groups, and/or casinos will focus on it as an argument to get subsidies reduced or eliminated. Society does not accept animal cruelty and racing needs to accept the fact society considers whipping as being cruel. Yes, there is a chance some core gamblers may not like the elimination of whipping but if there is to be a future in horse racing, the industry must position the product for the market it hopes to attract; not a continually shrinking portion of its market.

The report laments the lack of a long term strategy. The various stakeholders (breeders, track operators, and horsemen) are more focused on short term gains considering the uncertain future of the sport. However, if there is to be a future, these interests must work together on a long term plan even if it means sacrificing some immediate profits.

A gloomy picture has been painted but all is not lost. If the industry commits itself to uniting and revamping its product (let’s call it harness racing 2.0), the chance of survival will be much greater. Racetracks in states without racinos will be able to remain relevant and turn a profit. Racinos seek to get rid of their racing side of the business not because it hates racing, it hates spending money on a product that consistently loses money. If the industry can get its act together, gaming executives and accountants will be happy to invest and maintain a profitable racing enterprise at their properties.

The next article discussing the report will discuss the recommendations made in the study.

Racing Briefs:

Cangamble on his blog discusses the Beaulah Park Fortune 6 and how the wager can attract the lottery crowd.  Being the chances for a V75 type bet are remote at the present time, perhaps this wager may help racetracks stimulate handle. 

With the threatened deadline of an April 11 closure of NYCOTB, I can't help but wonder if harness racing is about to get shafted once again in New York State.  There is a proposal to transfer NYCOTB's profitable account wagering accounts to an agency which will then in return allow NYRA to manage the accounts.  Some of these accounts belong to harness horseplayers and if the accounts are managed by NYRA, how much access to standardbred races will these customers receive?  Harness interests must take steps to ensure if this proposal goes through, these customers have access to harness signals. 

1 comment:

Pocket Up said...

If you care about harness racing you should read what Pacingguy has to say. It's tough to argue with any of his points although the truth does hurt.

Harness racing's issues are known by all, in black and white, so why is it so difficult for the sport to change?