Dec 12, 2011

The Fix It Man: New Fans for Racing

If Slots and Racing are Destined for Marriage, At Least Make it a Functional Marriage!

Solution: Convert VLT Revenues into Betting Vouchers

The Problem:

The sport of horse racing is in the middle stages of its slow-motion crash; fading into oblivion from the American consciousness as the gambling public abandons it in favor of alternative entertainment and gambling options.

Despite the fact that racing has a number of key competitive advantages (ex: the advent of satellite telecommunications for broadcasting its product; the fact that it is the only legal form of online gambling in the USA; etc), its share of the overall gambling action continues to decline -- as does it standing in any popularity rankings. Whereas racing was once considered a Top 3 sport, it is now lucky to find itself in the Top 25.

Meanwhile, its legacy business model is failing: the cost of putting on the show has not only risen at a rate above normal inflation in recent years, but it is incredibly expensive to begin with. Whereas a poker operation might need nothing more than stacks of cards, tables and chairs to convene non-stop action, racing requires a massive staging grounds plus a small army of humans to train and maintain each and every equine athlete, which may (or may not) get to the track a couple times a month in an attempt to earn its keep.

There are several unique aspects of this model that need to be recognized: first is that those aforementioned costs are borne not by the "house" (ie., the hosting race tracks) -- in such a way as casinos bear the cost -- but by both those tracks and by a sector called called horse owners. Both have skin in the game, and both are dependent on the flow of wagering dollars as the sole funding means for race purses.

But because of those incredibly high operating expenses, the "takeout" (the piece of each wagered dollar that is retained) is itself incredibly high -- in some cases as high as 35%! Compare this to the typical casino games, where the takeout is in the low single digits. So, not only are horse players (the funding gamblers) dwindling as a % of the total market, but the few who remain are continuously punished for doing so!

The numbers prove it: fewer races are being run; the total purse dollars are declining; as is the money earned by each individual horse in training. That, in return, results in fewer people being employed in this in those once thriving industry, both on the track backsides and in the breeding barns. The vicious cycle ensues.

So, what to do....?

The Current (and Failed) Solution:

Slots +/or Video Lottery Terminals are popularly viewed as the end-all answer to the problem at hand. The thinking is this:

- Stop looking at alternative forms of gambling as the enemy and instead realize that their momentum can not be stopped

- Lobby to have slot machines embedded into race tracks (racinos) as opposed to casinos

- In all cases, dedicate a portion of the slots' revenues back to the racing industry

- This will result in increased race purses, thereby keeping/getting more owners in the game, which will increase the number of runners, field sizes and races. More action will result in more wagering.

The above initiative is at least partially successful in reaching its stated goals: in fact, the average purse-per-race is up, albeit barely -- although that could also be due to consolidation. But it is not fixing the big problem. Further, it is not addressing what SHOULD BE the primary goal -- attracting new action to the game. Heck, it's not even a logical outcome of the chosen plan.

The (Real & Viable) Solution:

1. Stop taking slot revenues for the sole purpose of feeding purses


2. Keep the the slot money in the hands of those doing the gambling and let them wager it on the horses


- Accept the logic, rationale and wisdom of slots/VLT's being used to support the horse racing industry.

- As an option to just moving the pre-ordained share of those slots into the various racing accounts (track, breeding and purse), distribute a BETTING VOUCHER to the individual slot/VLT players.

- Those players are then financially motivated to go "play the ponies" with their credits.

That's right: an increased number of people are now attending the races; handicapping, wagering and watching. Many of them will have never done so prior; many others will have done so only rarely in their lives beforehand. This is called 'new blood'. Some of them will actually find the experience to be a positive one and even (dare say) plunk their own, non-voucher / real money down in the future.

In other words, some might get hooked on the majesty of this great sport.

Objections, Answered:

O: But the machines are not setup to do this.
A: There is adequate software and engineering brainpower out there that can make this work.

O: But not all of the vouchers will be used, thereby costing the racing industry its rightful share of the slots/VLT funding.
A: Again: software accounting can track all of this, and make the necessary adjustments for expired and unused vouchers.

O: The general concept of using a portion of the revenues from slots/VLTs to support the racing industry is an anti-market example of corporate welfare, or at the very least it's an example of a favored industry / picking winners scenario.
A: All public policy and spending favors one industry or another. Even if 100% of the slots revenues were put into a state's General Fund, it is then subject to the the whims, prejudices and influences of its general budget spending. The rationale of this stated mechanism for supporting the racing industry has as its justification the obvious jobs-generating aspect of this major agri-industry.

****** UPDATE ****** UPDATE ******

Nanoburgh appreacites the national play this post/suggestion has received in the past few weeks, especially from the fine racing blog The Paulick Report.



Anonymous said...

As they say on ESPN "Come On Man". Seriously do you play slots? I do and I also play the ponies. Not many cross over and no amount of vouchers is going to make me go over the play the ponies when I am in the mood to play slots. Slots are fast pace, mindless with the potential to hit big every couple of seconds. Typically I play two machines at one time because one does not offer enough excitement. At a $ 5 machine with 3 credits per roll ($ 15) x's 2, I'm rolling out $ 30 every 3 to 4 seconds. Horses can’t compare. I go to the track to have a crappy dinner, drink crappy wine, sit and bull with my table mates and bet the ponies. It is a social thing where slots are not. I talk to no one when I play slots.

Dude - they don’t cross over. Two completely separate games and no amount of number of vouchers are going to make me bet the ponies.

It is throwing good money after bad and these guys didn’t get to where they are by being stupid!

Nanoburgh? said...


No crossover? You started the post by saying you (yourself) play both!

Nonetheless; you're point is well taken: they are two different games with two different mindsets.

But: we're not looking for a unanimous verdict here. Could there not be a potential for SOME new action (i.e., interested fans) here? 2%? 5%? 10%? 20%? All of those figs would have a substantial and positive effect on the game.

Furthermore, I think racing is missing out on the pure 'game of chance crowd' -- those that are prone to playing slots, Quick-Pick Lottery numbers, etc.

As I watch people in a bar mindlessly picking lottery numbers and then watching them either hit/not hit on a TV screen, I ask myself: "why don't they just pick three random numbers in a horse race via a trifecta?"

The reason is that the game is not marketed to them in that manner.

Yes, racing appeals to the deep-analysis handicapper types. But it could (and should) also target the straight "numbers" players.

With 10 different tracks running at the same time on any given afternoon, there is enough action to keep them rolling.


good ideas.

too bad this industry isn't interested in good ideas~!

Anonymous said...


Funny Cide's Missing Nuts said...

Anonymous @ 8:05 is the new and dominant form of gambler: intent on fast action, period. He's not looking to employ a skill to increase his odds. He just wants the constant rush of AM I GONNA WIN?, as often as he can get it.

But if he's handed a $5 voucher, good at the race windows or machines, can't we assume that he is likely to actually use it?

Then, with all of these 8:05's using those race vouchers, can't we assume that some of them will make an additional dollar or two while at it?

If so, the racing industry just won. It earned a dollar or two it did not have beforehand.

Anonymous said...

nah baad