Archives for August 2011

MORE ON RACETRACK PARI-MUTUEL WAGERING

One of the principal findings of the McKinsey & Company study presented last Sunday at the Jockey Club Roundtable is that handicapping and betting on horse racing can be intimidating to people who are not familiar with the processes. The McKinsey consultants showed a video clip of a man in his early-to-mid 20s trying to figure out how to place a bet on an ADW site (you can see it at the Jockey Club presentation that is available at their website). It took him about 45 minutes and he was still flummoxed. This is why the Jockey Club is funding a free-to-play practice site.

I have observed countless people who frequently buy lottery tickets and have rarely or never been to a racetrack. They might buy a pari-mutuel ticket on horse racing  if it did not entail them going to a racetrack or opening an ADW account and if the potential payout was large enough. Never mind that their chances of winning were exceedingly slim. The slots areas of racinos would be naturals for selling big-payoff pari-mutuel tickets based mostly on chance rather than handicapping skill.

I have never suggested or recommended that racetracks change the present wagering format for experienced bettors. What I did suggest is that wagering options should be expanded to make them attractive to people who can’t or don’t want to handicap for various reasons. Any consumer product company is always looking to expand its product line to attract new segments of customers. Racing must not exclude the millions of people who will not wager on the sport if they have to handicap and cope with confusing betting requirements. What is routine to seasoned racehorse bettors is complex to the neophyte.

Copyright © 2011 Horse Racing Business

WHY PARI-MUTUEL BETTING IS TOO COMPLICATED

Racino earnings from slot machines have helped to support pari-mutuel purses in North America during a time when wagering on horse racing has been in decline. However, there has not been the hoped-for migration of slots clientele to pari-mutuels. This is unsurprising because slots are simple to understand, easy to play, and provide immediate feedback, whereas effective handicapping of horse races requires in-depth thinking about esoteric information and a significant commitment of time.

The intellectual challenge of deciphering past performances and evaluating odds and probabilities is incompatible with the skill sets and/or proclivities of a significant slice of the American population. Consider some of the abundant evidence.

The Organization for Economic Cooperation and Development periodically administers competency tests to students across the world. In the latest study of 470,000 15-year-old students in 34 countries, the United States ranked 25th in math and 14th in reading.

The Newsweek issue of April 4, 2011, carried an article titled “How Ignorant Are You?” that reported the results of a scientific poll the magazine commissioned to ascertain how well Americans would perform on the official U. S. Citizenship test. This test asks 10 questions randomly selected from an inventory of 100 standard questions and is comprised of five categories covering American government and history. A score of 60% is passing. In February, Newsweek had a pollster administer the U. S. Citizenship quiz to a representative sample of 1,000 adult Americans.

Overall, 62 percent of the respondents passed and 38 percent failed. Outcomes from many of the questions posed were dismal. For example, only 65% of the test takers knew what transpired at the Constitutional Convention, 40% were unable to identify who the U. S. fought in World War II, and 80% did not know who the American president was at the time. Sixty-three percent could not correctly stipulate how many judges are on the Supreme Court and 81% could not articulate a single constitutional power of the federal government. Twenty-seven percent did not know that the president is in charge of the executive branch of government, 29% could not name Vice President Joseph Biden, and 59% could not designate Speaker of the House John Boehner. Worse yet, 33% did not know when the Declaration of Independence was adopted and 67% missed the question “What is the economic system in the United States?”

The repercussions of having so many uninformed citizens—combined with inadequate competencies in reading and math–for the future competitiveness of the United States are beyond the scope of this analysis, but the implications for the future of pari-mutuel wagering are not. While there will always be a relatively small segment of Americans who have the time, inclination, and aptitude to handicap, the vast majority will not. Reversing or moderating the downward trend in pari-mutuel wagering necessitates relentless experimentation with products that are as effortless to grasp and play as lotteries and slots and have the promise of big payoffs.

Copyright © 2011 Horse Racing Business

Originally published in the Blood-Horse. Used with permission.

THE JOCKEY CLUB ROUND TABLE CONFERENCE

Saratoga Springs, NY – The Jockey Club Round Table Conference that was held yesterday covered a number of important subjects. The one of most interest here was the McKinsey & Company report on how to reverse the longtime downtrend in horse racing, and in particular in pari-mutuel handle. The McKinsey & Company consultants were quite candid in characterizing racing’s current metrics and trends as awful.

A detailed consideration of each of the strategies recommended by McKinsey & Company is beyond the scope of this narrative. However, my overall impression of the report and the promised Jockey Club follow-through is highly favorable. In fact, this report and the Jockey Club’s commitment to implement its recommendations are the best reasons for optimism that I have seen in the sport and industry of horse racing.

From my background of having conducted and written many similar reports and having read countless others, I would rate the McKinsey & Company report as being strategically sound and eminently doable. Commendably, the consultants conducted in-depth research among bettors ranging from neophytes to whales. While many of the report’s recommendations are not new, for the first time many of the suggested initiatives will have the considerable force of Jockey Club funding behind them.

McKinsey & Company drew on its in-house bench strength in statistical and quantitative analysis to derive data-driven recommendations. Indeed, this was a report long on numbers and refreshingly short on armchair theorizing about what to do about racing’s ills. For example, McKinsey & Company was able to calculate that the practice of multiple racetracks’ scheduling of graded stakes at approximately the same day and hour and minute causes a certain suppression in handle as compared to what handle would be if the stakes were spaced out more. Similarly, the consultants found that rebates to large gamblers are superior to a general cut in takeout because not all bettor types have the same price elasticity of demand.

Any successful plan has to incorporate strategy and tactics and supply the resources to achieve them. McKinsey & Company provided the brain-power and creativity regarding the strategy and tactics and the Jockey Club is stepping up to fund efforts like getting racing a better footing in social media.

How many of the McKinsey & Company strategies will prove to be successful, only time will tell. The consultants correctly called for innovation and the strategies boldly fall in that domain. With innovation, there will always be a certain number of winners and losers.

Another topic at the Conference was the Equine Injury Database. Using data from thousands of races, the researchers are statistically beginning to identify the elements that increase the probability of a racehorse suffering a catastrophic injury. This ongoing study has much promise for reducing the incidence of breakdowns.

It is heartening to see some of horse racing’s pressing issues being put to rigorous analysis.

Copyright © 2011 Horse Racing Business

Click here to access the slide show and video replay of the Jockey Club Round Table Conference