Archives for July 2009

CAN SLOTS PLAYERS BE ATTRACTED TO PARI-MUTUEL WAGERING?

Horse-racing tracks with alternative gaming, so-called racinos, have generally been successful in revitalizing the racing product by subsidizing race purses with earnings from gaming.   Yet racinos have not achieved what racing interests had hoped would occur:   the large-scale crossover of gaming players to betting on horse racing.  The question remains whether, given enough time and exposure to horse racing, gaming customers will increasingly be attracted to pari-mutuel wagering.   As far as slot-machine players are concerned, the most likely answer is no, not in significant numbers, without significant repackaging of the pari-mutuel product.

The learning theory explaining why customers become loyal to slots is very different from the learning theory accounting for why horse-racing players prefer pari-mutuel wagering.   It comes down to a marked contrast in consumer behavior.

The late B. F. Skinner, the famous Harvard psychology professor, is most associated with operant conditioning, which is also referred to as instrumental conditioning.   In operant conditioning, behavior is rewarded or punished and the learner thereby eventually associates the behavior with a consequence.   Positive reinforcers follow and reward a particular behavior and increase the likelihood that a behavior will be repeated, whereas negative reinforcers or punishment are intended to deter a behavioral response.

There are two kinds of positive reinforcement: continuous and partial.   In the former, the behavior is reinforced every time it occurs and in the latter the behavior is only sometimes rewarded.   Further, of the four types of partial reinforcement, gaming and lotteries are based on one type–a variable-ratio schedule of reward.   In a variable-ratio schedule, the slots player, for instance, is rewarded with a win only after an unknown and unpredictable number of tries.   This has the effect of fostering additional responses because the slots customer is conditioned to know that his or her next play may be a winning one.

Contained on a video tutorial about operant conditioning (click here to view it), B. F. Skinner states that “people gamble because of the schedule of the reinforcement that follows.”   This is why, of course, that it is difficult to extinguish the compulsion of addicted gamblers.

While wagering on horse racing also has elements of operant conditioning, an alternative explanation of learning–cognitive theory– is more applicable.   Compared to the rote stimulus-response-reinforcement pattern of slot-machine play, productively handicapping horse races is a far more complicated task.   It requires intellectual skills such as assessing past performances and determining their relevance to an upcoming race, making accurate probability estimates, and managing money.

A handicapper tries to decipher what a horse’s past performances bodes for its next race rather than betting strictly on the basis of some predetermined rule of thumb, such as using the first three digits of one’s home telephone number to select the Trifecta in all races on tonight’s card at Charles Town.  The numbers player is, of course, much closer to a slots player than he or she is to a handicapper.

Cognitive theories reject the notion that all human behavior can be attributed to people responding to stimuli in a certain way, based merely on past positive or negative reinforcement.   In the cognitive view, humans are information processors who learn by thinking, remembering, and applying their mental capabilities to solve problems.   The adept horse-racing handicapper processes and organizes esoteric information that may vary widely from race-to-race and track-to-track, depending on, for instance, whether the surface is dirt, turf, or artificial and whether the distance is a mile around one turn or two.

The operant conditioning of slot-machine behavior and the cognitive learning of horse-racing handicapping are so dramatically different that to expect a lot of crossover between the two forms of gambling is unrealistic.   Card games requiring skill like poker and blackjack may provide for better crossover prospects for handicapping.

However, that does not mean enticing slot players to pari-mutuel wagering is a lost cause, provided the pari-mutuel product can be adapted and presented in a format that is based on the theory of operant-conditioning.  Notably, Instant Racing, or recycled horse races presented on slot machines, capitalize on operant-conditioning.   The website of Arkansas’ Oaklawn Park Racing & Gaming  says:   “Alongside the latest electronic games of skill in the Instant Racing and Gaming room, you’ll find these popular pari-mutuel machines that combine all of the fun and flash of video gaming with the wagering excitement of racing.”

Instant Racing is consistent with the stimulus-response-reinforcement consumer behavior of slots players instead of the thinking–or “figuring it out”–behavior of horse-racing handicappers.   While the Instant Racing machines are today’s best model of a slots/pari-mutuel interface, creativity by racetracks, perhaps in collaboration with their customers and slots vendors, might yield new and profitable approaches to packaging horse racing in a way that would appeal to slots players.   Moreover, consumer-products companies often retain firms (click here for an example) that specialize in new-product ideas and development, so that is another promising option for racetracks to pursue.

If you are creative, conceive of a modus operandi besides Instant Racing to present pari-mutuel wagering in a format that will appeal to slots players, patent your invention, and maybe sell it to a slots or pari-mutuel equipment manufacturer for sale to racetracks.

The June 27, 2009 edition of Horse Racing Business had a related article titled:  “Alternative Gaming at Racetracks:  Gold or Fool’s Gold?”   It is available in the June archives.

Copyright © 2009 Horse Racing Business

INDEPENDENCE DAY: RACING IN EARLY AMERICA

The sport of horse racing was deeply ingrained in American culture long before the American Revolution.   The first race course was established in 1665 on Long Island in Hempstead Plains and was called Newmarket after the original site in England.

Immigrants from Great Britain brought their appreciation for horse racing with them to America.   Colonial aristocrats and Founding Fathers George Washington, Thomas Jefferson, James Madison, and James Monroe were fans of racing, as was John Marshall, who served longer as Chief Justice on the Supreme Court than any person.   George Washington was an expert horseman himself and one of his leisure activities was fox hunting.  He attended races in Annapolis, Maryland, and kept a written record of his gambling wins and losses.

Daniel Boone, who served under Lt. Colonel Washington in the French and Indian War and later became famous as a daring explorer, introduced a bill in Kentucky’s first legislative assembly to “improve the breed of horses.”  

Patrick Henry, as governor of Virginia after the American Revolution, made a land grant to a man named Keen (eventually changed to Keene).   The property passed down through several generations of the Keene  family and part of it became the setting for Keeneland racetrack in Lexington, Kentucky.

Many, perhaps most, of the jockeys in colonial America in the South were slaves, who were referred to only by a first name.   Racing was the one aspect of life where slave jockeys competed on even terms with whites.   After the Civil War, African-American jockeys were some of the top riders, men such as Isaac Murphy, Willie Simms, and Jimmy Winkfield, all of whom are inductees in the National Museum of Racing and Hall of Fame.

In the first decade of the 19th century, future president Andrew Jackson was a prominent breeder in Tennessee, which at the time was a leading horse-racing state.   The Belle Meade Plantation in Nashville was once a premier Thoroughbred breeding farm where Jackson boarded some of his stock.  Its present-day motto is “history, horses, hospitality.”

In 1806, Jackson’s Truxton was to engage in a match race with Captain Joe Ervin’s formidable stallion Plowboy, but Ervin forfeited due to Plowboy coming up lame.   Ervin was a Jackson political rival and there was bad blood between the two men.   Circumstances surrounding the race and a slur by Charles Dickinson, Ervin’s son-in-law, against Jackson’s wife Rachel led to a pistol duel.   Jackson was wounded but then killed Dickinson, who was purportedly the best pistol shot in Tennessee.

Another political enemy of Jackson, Henry Clay, was a Thoroughbred owner and breeder and a prolific bettor on horse racing (click here to read in detail about Clay’s involvement in breeding and racing).    Clay, the Speaker of the U. S. House of Representatives, detested Jackson and ganged up against him to elect John Quincy Adams president in 1824 rather than Jackson.   It became known as “the corrupt bargain” because Adams appointed Clay as his Secretary of State as a quid pro quo.   Jackson referred to Clay as “the Judas of the West.”

In the late 18th century and early 19th century, four important breeding stallions were imported from Great Britain to the United States: Diomed, Medley, Messenger, and Shark.   Diomed won the first Epsom Derby in 1780.   The stallion was a disappointment as a sire in England and also had declining fertility.   He was purchased and imported by two Virginians when he was 21-years-old, even though James Weatherby, the publisher of Britain’s initial General Stud Book in 1791, warned them that Diomed was not a good sire.   After arriving in Virginia, Diomed’s fertility inexplicably improved and he sired exceptional racehorses, including Sir Archy, who was the best racehorse of his day and an exceptional sire.

Although the American Stud Book was not printed until 1868, breeders in colonial days began to keep their own records.   Jockey clubs were organized to set rules and regulations.   The Philadelphia Jockey Club, for instance, was founded in 1766.

In 1823, America’s first blockbuster spectator sports event was held on the Union Course in New York.   Sixty-thousand people showed up for a match race between the North’s American Eclipse, by a son of Diomed, and the South’s Sir Henry, in an equine precursor of the bloody Civil War 38 years later that ripped the country apart.   Senator Andrew Jackson attended the race, as did former vice president Aaron Burr (himself a notorious pistol dueler), and most of the members of Congress, which adjourned so that senators and representatives could travel to the race.  American Eclipse won in three heats.   Some Southerners reportedly bet and lost their plantations and, as a result, a few became so distraught that they committed suicide at the race course.

Horses have had a long and vital role in the United States in war and peace.   The Narragansett pacer that Paul Revere rode in 1775 to warn the Massachusetts citizenry of British troops on the march became a legend in his time.  The first Triple Crown winner, Sir Barton in 1919, stood at stud for awhile at an Army cavalry remount station.   Even today, U. S. Special Forces are using horse soldiers to combat the Taliban in Afghanistan.

Horse racing in North America began in pre-revolutionary colonial days and has survived into the 21st century.   Before the days of baseball, football, and basketball, horse racing was the sport of its day, attracting, as it does now, all classes of people.

Copyright © 2009 Horse Racing Business

Happy 4th of July to American readers!   We owe our freedom to the men who had the courage to risk their lives by boldly affirming over their signatures…

 IN CONGRESS, JULY 4, 1776

The unanimous Declaration of the thirteen United States of America:

When in the Course of human events it becomes necessary for one people to dissolve the political bands which have connected them with another and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness…

“WHY NOT GIVE SLOTS TO EVERY FAILING BUSINESS?”

The following excerpt is from an online column, titled “Governor Rode a Dead Horse” and published on June 26, 2009, by Jim Waters of the Bluegrass Institute in Frankfort, Kentucky.   Mr. Waters is the Institute’s Director of Policy and Communications.   [click here to read the column in its entirety]

“Businessman Ron Geary [owner of Ellis Park racetrack in Henderson, Kentucky] who’s already reduced the number of racing days during this year’s live meet by more than half, says Ellis Park will close after Labor Day.   Yet Geary knew when he bought the track that it was already losing money.

Geary wanted a bailout from Frankfort during the recent special session, claiming he didn’t grasp how competitive the industry was when [he] took over Ellis Park.  

But should we usher in what Rev. Bob Russell, former pastor of Louisville’s Southeast Christian Church – one of the nation’s largest congregations – called ‘the crack cocaine of gambling’ just because Geary is afraid his risk might not pay off?   Why not give slots to every failing business?”

Here is a four-point answer to Mr. Water’s rhetorical strawman, “Why not give slots to every failing business?”

Point 1:   In the first place, Mr. Water’s question is flawed because it is crafted around a false premise.   No one is proposing to “give slots” to anyone.   Should slots be legalized in Kentucky, the licensees would be required to pay millions of dollars in upfront fees, plus the Commonwealth of Kentucky would extract ongoing operating royalties that would be considered confiscatory in any other type of business.   These fees and royalties would, in turn, be put to use in educational and social services for the Kentucky citizenry, including the treatment of compulsive gamblers.

Point 2:   Companies organize around product lines.   For example, Procter & Gamble’s product lines are separated into personal and beauty, pet nutrition and care, health and wellness, and so forth.   A company’s product lines are put together with consistency and marketing logic.   For the same reason that Procter & Gamble would not mix and match its various product lines, the addition of video lottery terminals, or slots, only makes business sense for certain types of enterprises.   While slots are a natural product-line extension for racetracks, which already offer gambling, they are manifestly not a fit for the vast majority of other businesses.

Point 3:   Mr. Geary’s Ellis Park is failing largely because of government fiat.   The word fiat means a “decree,” or “an authoritative or arbitrary order.”   For instance, the U. S. dollar has value, not because it is backed by gold, but rather, because the U. S. government declares it has value.   Ellis Park is precluded from expanding its natural product line by a Kentucky government fiat that proclaims slots to be illegal within the Commonwealth’s boundaries.   Change the “arbitrary” decree and Ellis Park has the chance to become profitable and save the jobs of numerous working people.

Point 4:   Confining slots to racetracks (as opposed to giving them to every failing business) is a reasonable and livable compromise between libertarians on the one side of the expanded gambling issue and advocates of government restrictions on unfettered personal behavior on the other side.

Opponents of slots at racetracks typically rely on often-effective emotional arguments (e.g., slots are “the crack cocaine of gambling”) and ad hominem assertions (e.g., “expanded gambling will attract mobsters”).   Thus don’t look for facts and logic to persuade them, even the undeniable fact that prohibition has a history of failure in the United States.   If people want to engage in an activity, they usually find a means to do so.  It is just a short drive from Kentucky across the Ohio River to play the slots in Indiana.

Copyright © 2009 Horse Racing Business