New Bloodhorse Article On ADW situation

[Cangamble]

http://news.bloodhorse.com/article/44918.htm
Some offshore rebate companies, including large-volume shops Elite Turf Club and Racing and Gaming Services, also had the Churchill signal.

THG president Bob Reeves acknowledged the horsemen are focused for now on the larger domestic ADWs that deal in high volumes of interstate wagers, and were holding off, at least for now, on other entities, such as offshores.

“Everyone is still trying to figure out how to handle (the offshores),” Reeves said. “Where is the sweet spot? How high can you raise the prices before you damage the handle?”

But David Switzer, executive director of the Kentucky Thoroughbred Association, which ultimately granted approval for the offshores, personally doesn’t believe they should have the signals when others don’t.

“We feel it isn’t fair that our domestic ADWs don’t get the signals, but the offshores do,” said Switzer, whose group, along with the Kentucky Horsemen's Benevolent and Protective Association, granted approval for the current lineup of Churchill Downs signals.
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Switzer doesn't "think" offshores should get the signals, but sends them out anyways??????

[Indulto]

http://news.bloodhorse.com/article/44918.htm
Some offshore rebate companies, including large-volume shops Elite Turf Club and Racing and Gaming Services, also had the Churchill signal.

THG president Bob Reeves acknowledged the horsemen are focused for now on the larger domestic ADWs that deal in high volumes of interstate wagers, and were holding off, at least for now, on other entities, such as offshores.

“Everyone is still trying to figure out how to handle (the offshores),” Reeves said. “Where is the sweet spot? How high can you raise the prices before you damage the handle?”

But David Switzer, executive director of the Kentucky Thoroughbred Association, which ultimately granted approval for the offshores, personally doesn’t believe they should have the signals when others don’t.

“We feel it isn’t fair that our domestic ADWs don’t get the signals, but the offshores do,” said Switzer, whose group, along with the Kentucky Horsemen's Benevolent and Protective Association, granted approval for the current lineup of Churchill Downs signals.
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Switzer doesn't "think" offshores should get the signals, but sends them out anyways??????Sounds as if whales are the only players for whom THG is willing to lower takeout.

From the above article:
ADW Impact on Churchill Downs Unclear
by Ryan Conley
Date Posted: April 29, 2008… Some tracks, including those affiliated with the New York Racing Association, stopped sending signals to offshores. Keeneland, which recently completed its spring meet, also does not send its racing signal to offshores.

Keeneland president Nick Nicholson said such entities that could receive the track’s signal must meet two criteria: Go through the comprehensive due-diligence process administered by the Thoroughbred Racing Protective Bureau, and have a regulatory body that provides oversight.

… “The purpose was to give a clearer understanding of the ownership, the business model, the technology, and regulatory oversight in the location in which they existed,” said Fabian, … “We are not certifying them – perhaps there are those that wish we could – but we are here to report the facts. And then our racetracks can make an independent decision.”

Fabian said seven entities have gone through the TRPB due-diligence process, most recently Premier Turf Club, a domestic cash-rewards ADW operating in North Dakota that was then able to carry the Keeneland spring meet signal. Fabian said Elite Turf Club and RGS have begun the due-diligence process.

… In a lawsuit filed last week by CDI and affiliated entities, documents suggest the Florida HBPA has only withheld approval on eight ADWs: BetAmerica, BetPad, Premier Turf Club, The Racing Channel, TVG, TwinSpires.com, XpressBet, and Youbet.com.

Florida HBPA executive director Kent Stirling told The Blood-Horse early last week that TrackNet Media was offering 5.49% for its ADW signal, which on the surface is 83% higher than the 3% Youbet.com paid last year. But Stirling contends that when a 5.5% sub-licensing fee he said Youbet.com paid to TVG is factored in, the rate Youbet.com paid was actually 8.5% on the Calder signal.

“If they can do it, so can TrackNet,” he said. …http://www.thoroughbredtimes.com/national-news/2008/April/29/Horsemen-dig-in-heels-on-ADW-revenue.aspx (http://www.thoroughbredtimes.com/national-news/2008/April/29/Horsemen-dig-in-heels-on-ADW-revenue.aspx)
Posted: Tuesday, April 29, 2008 6:38 PM
Horsemen dig in heels on ADW revenue
by Frank AngstAs Kentucky horsemen continue to prevent Churchill Downs from importing its signal to most advance-deposit-wagering outlets, the national Thoroughbred Owners and Breeders Association encouraged the hardboots to continue their fight for increased ADW revenues.

… “TOBA applauds the leadership of the Kentucky HBPA and recognizes the short-term financial setbacks that horsemen must sustain during this period,” the letter said. “We completely support the goals of the THG to require fair pricing for advance deposit wagering companies as the shift in wagering from on-track and traditional simulcast outlets to ADW companies has led to less money from pari-mutuel sources being contributed to live racing.”

Churchill Downs Inc. President Bob Evans said on Monday he would not agree to the horsemen’s plan because it would make Churchill unprofitable.

The TOBA letter said because track owners like Churchill and Magna Entertainment also own ADW sites, it is important horsemen secure an increased percentage of ADW handle.

“Racetrack companies that own ADW companies are ‘incentivized’ to redirect wagering from on-track to their ADW company by the current pricing model, as they are able to retain more revenue from an account wager and pay less to purse accounts than when the same bet is made at their track,” the letter said.

Ian Meyers of ADW outlet Premier Turf Club noted that some ADW companies and rebate shops currently have access to the Churchill signal. He said those sites include Elite Turf Club, Racing and Gaming Services, and several off-track betting sites that also offer ADW. …Is this the first time the press has mentioned these two CEOs in the same breath?

[Premier Turf Club]

This is a very complicated situation. On the one hand, for years horsemen got less from simulcasting than they probably deserved, but that's where the market was on rates at the time. On the other, I agree 100% with Scott Daruty that the market will not support 1/3 -1/3-1/3. On the third hand (OK,figuratively though I sometimes wish literally) a solution that doesn't include customers is no solution at all.

Joe is speaking with everyone he can find in the industry, and actively tying to broker a solution that works for everyone. No one wants a work stoppage, (which is what this is basically turning into), not us, not Tracknet, not the THG, not Churchill. The timing is awful too. I love the Derby, I look forward to it every year and waited until Derby Day to propose to my wife (in 1989). Hopefully this is something that we can all iron out soon.

[Cangamble]

This is a very complicated situation. On the one hand, for years horsemen got less from simulcasting than they probably deserved, but that's where the market was on rates at the time. On the other, I agree 100% with Scott Daruty that the market will not support 1/3 -1/3-1/3. On the third hand (OK,figuratively though I sometimes wish literally) a solution that doesn't include customers is no solution at all.

Joe is speaking with everyone he can find in the industry, and actively tying to broker a solution that works for everyone. No one wants a work stoppage, (which is what this is basically turning into), not us, not Tracknet, not the THG, not Churchill. The timing is awful too. I love the Derby, I look forward to it every year and waited until Derby Day to propose to my wife (in 1989). Hopefully this is something that we can all iron out soon.
I've always thought that signals were sold really cheap. Can you see the industry getting together and setting signal fees being sold at 7-8% where the track and horsemen split the signal fee (I know the way the horsemen groups are talking right now, they want essentially a 12-13% signal fee...aint gonna happen). Is 7-8% too high? And would this kind of solution hurt the smaller tracks that sell their signals for next to nothing just to get their pools increased?

[Premier Turf Club]

My personal opinion is that their should be a tiered pricing structure based based upon track size. This is what Tracknet does, and that as a model makes sense to me. What the correct levels are, and what the splits are, tough to say. But I don't think 8% on the best signals is unworkable. As long as the model allows ADW's to be fairly compensated for the efforts and risks they take, while still being able to offer significant, volume based rewards.

[NoCal Boy]

You make too much sense Ian.

[NoCal Boy]

Ian...Do you know if TVG is also at the table right now? I believe all the interested parties have to be involved for it to work. It is difficult for THG to demand open access of signals from Tracknet while TVG is not at the table. If TVG steps up and opens up its signals as well (which are not many but are significant in Del Mar and Oak Tree), then a deal is perhaps more reachable than not.

Thoughts?

[northerndancer]

From what I am told TVG is currently not at the table....

Ian your suggetstion of tiered pricing based on track is accurate but I would suggest adding the following in consideration to determining rate for the track signal:

1. Amount of handle wagered per ADW as well as per player;
2. Pricing should be tied to the takeout. The pricing for WPS should be less than exotics;

I will maintain my basic premise that an ADW or any outlet that accepts a wager should retain at a minimum 50% of the takeout with a cap of 10% going to the track/horsemen.

If a Gulfstream Park has a takeout WPS of 15% then the ADW retains 7.5% and the rest goes to the track/horsemen. Then the ADW should take a share of their % and provide a rebate/incentive program back to their customer. If Gulfstreams takeout on Exacta is 20% then the ADW retains 10% of every dollar wagered through them....... for Trifecta market has a takeout of 25% the ADW would retain 15% and the track/horsemen would get 10%.

When you move to a track such as Canterbury Park type the ADW should be albe to retain 65% of the takeout. In the WPS pools wth a 17% takeout the ADW would retain 11% and the track/horsemen would get 6%. For all other markets the takeout is 23% and the ADW would retain 15% and the track and horsemen would receive 8%.

I have had industry people from the track side suggest they would not want to tier pricing based on the pool. When asked why that is they state because we would like to discourage WPS wagering and instead move that handle into the exotics. This knocked me to the floor........ I stammered a bit and replied you are not serious......

[DJofSD]

I have had industry people from the track side suggest they would not want to tier pricing based on the pool. When asked why that is they state because we would like to discourage WPS wagering and instead move that handle into the exotics. This knocked me to the floor........ I stammered a bit and replied you are not serious......

This is an important revelation.

As far as I'm concerned, this proves there is not a single party involved in this fiasco that can be trusted. And that since the ADW clients, i.e the people making the wagers, are not directly represented in any aspect of this negotiation, guess who's going to get bent over -- again.

[john del riccio]

I love the Derby, I look forward to it every year and waited until Derby Day to propose to my wife (in 1989). Hopefully this is something that we can all iron out soon.

Ian,

Thats pretty cool, this way...you can never forget your anniversery also,
very schrewd manuever !

John

[chickenhead]

as an outside observer without much insight into the costs associated, it does not seem logical to me that ADW would require a greater percentage of the take than the tracks or horsemen to be viable.

How can running an ADW be the most expensive part of the equation? What am I missing?

[Indulto]

as an outside observer without much insight into the costs associated, it does not seem logical to me that ADW would require a greater percentage of the take than the tracks or horsemen to be viable.

How can running an ADW be the most expensive part of the equation? What am I missing?TV broadcasting costs?

[BillW]

as an outside observer without much insight into the costs associated, it does not seem logical to me that ADW would require a greater percentage of the take than the tracks or horsemen to be viable.

How can running an ADW be the most expensive part of the equation? What am I missing?

I can see it. The tracks are motivated to compete for customers by getting the "ADW's share" for bets accepted on site. To do this they would have to compete as all other businesses to offer an attractive product to induce their customers to show up live. In addition I believe that the gov't take is paid by the entity receiving the wager (i.e. the ADW pays the gov't take on all wagers they accept, the track only pays on bets accepted locally, not those coming in via ADW. Ian, is my understanding correct???)

[chickenhead]

who pays the gov't take was going to be my next question. The split should be net of that, to be rational.

Also whatever they call them, where some of the money goes to the track nearest the bettor, that appears to be another impediment to an efficient setup. That seems like a welfare check that we shouldn't be paying.

But it seems if you netted out the gov't take, and removed those other fees, a 1/3 split seems fairly rational.

[BillW]

who pays the gov't take was going to be my next question. The split should be net of that, to be rational.

Also whatever they call them, where some of the money goes to the track nearest the bettor, that appears to be another impediment to an efficient setup. That seems like a welfare check that we shouldn't be paying.

But it seems if you netted out the gov't take, and removed those other fees, a 1/3 split seems fairly rational.

Should the track get 1/3 whether or not they accept the bet? i.e. get 2/3 on any bet they accept locally?

[chickenhead]

Should the track get 1/3 whether or not they accept the bet? i.e. get 2/3 on any bet they accept locally?

It seems like there is a significant fixed and recurring cost associated with all that goes along with providing for on track patrons. So it makes some sense to me that whoever accepts the bet gets the "ADW" fee, tracks included. Otherwise there is no incentive to actually build the grandstands, have the tellers, clean up after everyone, etc.

[BillW]

It seems like there is a significant fixed and recurring cost associated with all that goes along with providing for on track patrons. So it makes some sense to me that whoever accepts the bet gets the "ADW" fee, tracks included. Otherwise there is no incentive to actually build the grandstands, have the tellers, clean up after everyone, etc.

I'd probably want to tweak the ratio a bit (of the track share) due to admission/parking/seating/restaurant revenue and $3 cokes. But in general I agree, tracks should get ADW cut for wagers they accept locally.

[Kelso]

How can running an ADW be the most expensive part of the equation? What am I missing?The cost of running an ADW or OTB is not really for anyone to consider other than those institutions, themselves. (Just as the tracks' cost structures are none of the horsemen's or ADWs business.)

But there is still and always the "found money" character of ADW/OTB cooperation.

The smaller tracks are willing to give up a larger share of the take in exchange for the obvious financial reward of a huge percentage increase in overall handle. The potential is always there for a slick track manager to parley steadily increasing pool-sizes into steadily increasing purses and steadily increasing attention from players which will start the cycle again.

A free market says the world won't stop if, over time and thanks to an enormous infusion of ADW/OTB handle, an Ellis or a Tampa can't overtake the Belmonts and Churchill's of the industry as first-tier tracks. (Not saying it's likely ... just that it's a ready possibility.)

ADWs and OTBs provide significant infusions of NEW cash to tracks of all sizes and reputations ... cash that tracks would otherwise have no way of ever attracting. Smart track managers recognize that 5% of a big pile of money is worth a lot more than 20% (blended) of nothing.

(And I think you're spot on, Poultry Pate, with likening that nearest-track fee to a welfare check. Who says the bettor next door would ever bet at his local track, anyway? It might be owned by Stronach! :D )

[chickenhead]

The cost of running an ADW or OTB is not really for anyone to consider other than those institutions, themselves. (Just as the tracks' cost structures are none of the horsemen's or ADWs business.)

I don't think I really agree with that. If a business partner says they can't get by with X amount of dollars, and you value them as a partner and care whether they stay a partner, or in business, "Why not?" is a perfectly reasonable question. Everyone always knows, within a pretty small degree, everyone else's margins, and what sort of leverage they might have to move them.



ADWs and OTBs provide significant infusions of NEW cash to tracks of all sizes and reputations ... cash that tracks would otherwise have no way of ever attracting. Smart track managers recognize that 5% of a big pile of money is worth a lot more than 20% (blended) of nothing.

I'm not arguing against independant ADWs here, but they really exist only because the tracks are so disorganized to begin with. An ADW is basically an E-commerce site with the tracks acting as the backend. Pretty much every business in existence manages to run their own E-commerce site that they've overlaid successfully over their former bricks and mortar selves. They didn't outsource the job and a fat slice of the margin to someone else.

The idea that it is found money, or that the tracks couldn't bring in that money themselves....says more about the crazy splintered nature than about any necessary reality, it seems to me.

[DJofSD]

An ADW is basically an E-commerce site with the tracks acting as the backend. Pretty much every business in existence manages to run their own E-commerce site that they've overlaid successfully over their former bricks and mortar selves.

Oh, you mean like, mmmm, Amazon?

[chickenhead]

Oh, you mean like, mmmm, Amazon?

Sure, they somehow manage to run both a website and a warehouse.

Racing is more akin to having many many websites, each having to try and sign up with each distinct Amazon warehouse in each state, which each has it's own little rules about which websites they'll allow, how much they charge, yadda yadda yadda.

And then everyone wonders why it costs so much to run, and everyone loses money.

Would this be better for us, the bettors? Depends on who is in charge. Put together a National Track Owned Wagering site, and put someone like Ian in charge, it would be the best thing that ever happened to the sport. Without question.

[Kelso]

I don't think I really agree with that. If a business partner says they can't get by with X amount of dollars, and you value them as a partner and care whether they stay a partner, or in business, "Why not?" is a perfectly reasonable question. Everyone always knows, within a pretty small degree, everyone else's margins, and what sort of leverage they might have to move them.Well, nice it theory perhaps. But so was "to each according to his needs" at one time. That didn't prove very workable, either.

Players-ADWs-Tracks-Horsemen all working for themselves at arm's length ... with the free market as sole arbitor ... is the way to go. No need (other than competitive intel) for anybody to know or care about the others' needs.


I'm not arguing against independant ADWs here, but they really exist only because the tracks are so disorganized to begin with. An ADW is basically an E-commerce site with the tracks acting as the backend. Pretty much every business in existence manages to run their own E-commerce site that they've overlaid successfully over their former bricks and mortar selves. They didn't outsource the job and a fat slice of the margin to someone else.

The idea that it is found money, or that the tracks couldn't bring in that money themselves....says more about the crazy splintered nature than about any necessary reality, it seems to me.I surely agree with you here, CH. It is, after all, horse racing industry people who have been demonstrating their ineptitude every since racing lost its near-monopoly gambling status.

Outsourcing, however, isn't necessarily a bad idea. I think leasing PTC's facilities as the operating end of track-owned ADWs would make sense for every track in the country. Ian could even educate them about rebates as a marketing tool!