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Thursday, February 23, 2012

Time for Horse Racing to 'Confront Reality'

Says Hugh Mitchell, the CEO of the Western Fair District in an interview with published in the Guelph Mercury.  Mitchell goes on to say  “We can’t continue to tread down the same road we’ve been treading and accept status quo as a business plan going forward, because it’s not going to work.”

I believe we have found the Jeff Gural of Canada here and as in the United States, it may be the operator of a small track which may make a big difference in Canadian racing, not only in Ontario, but throughout the entire country. 

One thing which will likely not endear him to the horsemen is that he found the rally yesterday in Ottawa to be 'counterproductive'.  Based on his other comments in the interview, it would appear he feels it re-enforces the belief with the Provincial Government that all the horsemen want to do is to keep the status quo; a failed business plan with the feeling that racing is entitled to the support the OLG's lottery machines have been providing.  That is a losing strategy.

So what does Mitchell think racing needs to do?  Racing needs to work together to develop business plans which are customer focused, not horsemen focused.  For far too long horsemen have been content to race with declining handle and fewer people in the grandstand (and on the computers) because quite frankly, the slot machines have either provided a nice supplement to the purse account in the case of WEG, and is providing most of the purse account at the smaller tracks.  In the United States, in those states with racinos, subsidies provides almost the entire purse account.  Unfortunately, those days are coming to an end.

We have said it before but it bears repeating, what is a customer-focused plan?

Destination Racing.  There needs to be more than attending the races to watch the horses go around the track to attract customers and that doesn't mean only slot machines.  It means restaurants run by private restauranteers at the racetrack, nightclubs for the younger generation for after racing fun.  A place where gamblers can bring their children and have them entertained while the adults play the horses. 

Realistic Expectations.  The year-round drone of racing in certain areas wears the customer base down (and out).  Let's face it, most horseplayers lose in the long run.  Not only does the gambler get sucked dry by the takeout; you leave them no time to recharge their bank accounts and wallets.  The demand for the product is not there so why are twenty-one harness tracks running on the same day in the summer?  Shorter coordinated race meets are the way to go to avoid dilution of the wagering pools and more importantly improve customer retention.  If you race a shorter meet your long term customers who are getting beat for whatever reason are more likely to look at the next race meet with anticipation while those tracks who operate long meets are more likely to find customers dropping out for good after they have been sucked dry.

Realizing Customer Expectations.  Customers want a faster paced experience.  While you may not be able to meet the speed of video games, there is no reason why you should expect a customer to wait twenty minutes between races, to stare out at your track.  Partner with another track to run alternating races so every ten minutes a race goes off or better yet, have an inner track and a mixed meet with a different breed, alternating races.   Use smart phone technology to allow people to wager from their phones if they want to instead of dealing with a teller or self wagering machine.  Your potential customers don't want to see horses 'beat' (their perception) so get rid of those whips.  They want to see the horses treated humanely so they don't want to see freezebrands on those horses either so start microchipping them instead.  Develop formal adoption programs for those horses who can have a meaningful secondary career and keep horses out of the slaughter pipeline.  In the name of humane treatment of horses, perhaps we need to go back to building stamina in horses instead of speed to reduce career ending injuries and extend their racing careers.  Customers don't want monotony so adopt the European style of racing with varying distances and include monte racing.  Perhaps some of the older gamblers may be lost but not making changes will mean you have no chance to replace existing customers.

Rethink the Gambling Model.  The parimutuel model in North America is broken.  No, you may not be able to go down to single digit takeout rates, but the days of 35% and 25% takeouts need to end.  There should not be any takeout rates higher than 15% (ideally 10% ) and that includes win, place, and show wagering.  Pool integrity is a must.  Exchange wagering, which most of California racing recently rejected needs to be implemented  to get the video generation and day trading crowds attracted to racing; they will still need the parimutuel pools for other wagers.  Tracks need to recoup some of the business lost to outside ADWs and develop a non-profit ADW to compete against the existing ADWs.  Rebates should be phased out if possible; if you lower the takeout rates enough you shouldn't need rebates.  I think rebates are in impediment to developing new fans.  Most people start at the tracks as little fishes when compared to the whales.  How many little fishes are you going to get hooked on racing if they hear that they are paying 10% to play while others are paying only 5%?   Gambling is a retail business and while volume purchasing power is great on the wholesale side of business, it is poison in the retail business.  How would you feel if you bought something for $10 and the person next to you bough the same thing for only $5?

Integrity is #1.  How long do you think a casino would remain open if word came out they knowingly had a rigged roulette wheel?  Not very long.  Again, this is a retail business and there is no reason to expect customers to stick around if they find the racing game 'rigged'.  Every scandal sucks a little more of racing's lifeblood out.  Rules need to be strict and violations need to be costly.

Some of this is radical, and you are probably arguing why would a racino track even consider such changes when they race only because they have no choice?  Perhaps if you build a business plan that makes sense and may make horse racing a profit center instead of a cost center, management may be willing to listen.  Casino operators like making profits, anyway they can.

Like it or not, subsidies are going to go away.  As Hugh Mitchell stated, it is time to confront reality.  Maybe if racing can show that it is taking the steps to be run like a real business with the gambler being the customer, it can be weaned from subsidies in a controlled manner instead of having them yanked from suddnely from under them. 


JLB said...

I refer you to a very thoughtful article on the USTA website written by "Outside the Box" contributor Bob Carson. Bob is a long-time fan and horse owner who suggests that the regulations be amended so that a 10% take-out is available at the track only. In this way, casual and serious bettors alike would be drawn to the track. Grandstands would appear less cavernous and the track would retain more of each dollar bet.

Pacingguy said...

JLB, there has been some experimenting with a different takeout rate or bonus on some wagers made on track vs. off-track in the past, but the question needs to be asked would the increase on track be enough to offset the pushback by ADW gamblers?

That said, if you don't try, you don't know.

ITP said...

Hugh Mitchell "confront reality"?

That is hilarious coming from his mouth.

Maybe he should confront that WPS 21.4%, Tri's 28.3%, others 26.3% takeout rates at the track he runs is CRIMINAL!

How could someone who lets that happen and destroys the customer be allowed to speak?