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Sunday, July 25, 2010

Gaining Control Back of the Product; Dennis Robinson Speaks

So what does horse racing need to do to survive and prosper in the long run? There are a slew of things which need to be done which have been talked about in this blog and other sources for years, but there is one step racing needs to take or it may all be for naught.

Racing needs to take back control of its signal. While the vast majority of the wagering is being done off-track, so little of it is coming back to the sport; typically horsemen and racetracks earn half as much on a dollar wagered through an ADW or simulcast site than it makes on the elusive on-track wager. An ADW which doesn’t own a racetrack can live with a low commission rate as their costs are much lower, but most of the producers of the product, track operators and horsemen, can’t survive for any length of time on such margins. Hence, ADWs can offer bigger and more frequent rebates than a racetrack is able to.

Racetracks of all breeds need to get together and form their own ADW to compete against the existing ADWs and run it for the benefit of the racing industry. Depending on a metric to be determined, racetrack would need to contribute funds for the start up of the company. Rather than the current split of the commission, this racetrack sponsored-ADW would only retain a percentage to cover the operating expenses of the ADW with the balance of the commission being distributed to the track and horsemen producing the product.

Of course, such an ADW would have to take steps to avoid violating anti-competition laws. Current ADWs will still need to be given the option of carrying a racetrack’s signal, but when contracts are up for renewal, the terms can be renegotiated. Since more of the commission would be going to the producers of the product, they will be able to compete with the existing ADWs and offer rebates they currently are unable to offer. If a gambler stays with their current ADW, the tracks will be no worse than they are now, but every gambler who decides to switch over to the industry-owned ADW, will result in greater income for the tracks and horsemen.

Fearful of the ADWs retaliating against the tracks if this was done? Remember, the existing ADWs have to worry about anti-trust violations as well.  You might not be able to get rid of the existing ADWs, but there is no reason why the tracks can’t compete against them.

Runners returning to Hazel Park?  According to an article in the Detroit News, management at Hazel Park is considering adding a thoroughbred meet to Hazel Park for the first time since 1984.  This would not displace the standardbreds, but may be an attempt to maximize the number of racing days at the plant.  While thoroughbred purists don't care for bull ring racing, the thoroughbred horsemen know their situation at Pinnacle Race Course is tenuous at best so racing on the bull ring is better than no racing at all.  Michigan harness interests need to be somewhat concerned that one day they may be on the outside looking in.

Dennis Robinson, the CEO of the NJSEA was interviewed regarding Governor Christie's plans for the Meadowlands.  It is business as usual at the Meadowlands for the balance of 2010. 

There were some rumors going around that Freehold Raceway was going to close in February, 2011.  Freehold management has gone on record as saying Freehold will race in 2011.  During this period of uncertainty, there will be plenty of rumors flying.  My guess is there will be racing at both the Meadowlands and Freehold next year; how much racing remains to be seen. 

Sand Pail won the Maple Leaf Trot last night at Mohawk in an impressive display.  What happened to the American dynamic duo of Enough Talk and Lucky Jim?  Enough Talk jumped off the moment they came down the stretch while Lucky Jim's mystique may have worn off with his fourth place finish.  Actually, the horse that impressed me was the Eurpoean invader Reven Damour who was placed second.  Slave Dreamer, who finished second was disqualified for a lap on break would likely have finished third anyway if he stayed flat as it looked to me like he gained ground on the break.  Considering this was Reven's second start in North America, it was an excellent attempt.  Hopefully we will see Reven Damour at the Meadowlands on Hambletonian Day.


Cangamble said...

The biggest problem with the industry owned ADW idea is the fact that tracks don't readily give out rebates (if they did they would be into takeout reductions instead). Rebate players will start leaving or betting a lot less if rebates are cut any further. Take the rebate player out of today's pools and handle will dry up significantly.
Until track takeout is cut significantly across the board at the majority of venues, there is nothing to save the industry.
Also, horsemen get a very large chunk of change collectively from alternative gaming. In fact, North American horsemen have the highest purse to handle ratio in the world.

I don't know if you've been noticing, but a trend is occurring right now. Tracks that have higher distribution fees (what they charge ADWs) are reporting terrible numbers (ie Hollywood and Lone Star) while those who give out their signal at reasonable rates are showing an increase in handle (ie Colonial and Indiana).

Check this out regarding the ratio that goes towards purses world wide.

Pacingguy said...

Thanks to anti-trust laws in the United States, tracks would have to offer independent ADWs the signal at a reasonable price compared to what they in effect offer their 'own' ADW. Even though the tracks would own their own non-profit ADW, they would need to treat it in effect, as if it was an independt company; with basically the same rates. Also, they can't offer predatory pricing; a price which another ADW could not make money on.

The advantage of a jointly owned ADW is they could pay back their earnings to the tracks that own them; this is the way the tracks would get more money for themselves and purses.

Since the tracks could not cut out the ADWs, they would need to compete to get gamblers to use their ADW. Why should someone leave ABC ADW for a track's ADW? Better service or pricing. Hence, I think rebates would continue.

Yes some tracks have slots which add to the purses, but some tracks don't. They could benefit. Also, those that do may not have later.

You are right, higher distribution fees hurt tracks. However, the ADW need signals to operate. By having a competing ADW, they will be willing to accept a little less profit; it is basic economics.

In the long run, this will be better for the gambler.

That being said, nothing I am proposing should be considered a substitute to lowering takeouts, cutting race dates, etc.