startup cost of new ADW

[highnote]

http://news.bloodhorse.com//viewstory.asp?id=45208

Horsemen said the startup costs of a new ADW are too expensive.

Any idea what it costs to start an ADW?

[Premier Turf Club]

http://news.bloodhorse.com//viewstory.asp?id=45208

Horsemen said the startup costs of a new ADW are too expensive.

Any idea what it costs to start an ADW?

I know exactly what it costs. Budget between $5mm and $10mm, maybe slightly less if you are

a) very knowledgeable about technology and
b) very lucky.

Figure on 3-6 months and $25k-$100k to get a license approved plus another $50k-$100k for background checks. Not to mention the 6 months - 24 months it will take to get simulcast contracts.

Then figure on about $100k a month to keep the doors open. And then, you have to attract customers.

If all you want is a couple of tellers answering phones it's probably only 20% of the cost but who these days wants phone only?

If I knew then what I know now I never would have tried it. I know of at least two very well capitalized groups run by experienced people that have thrown in the towel in the last 90 days after spending big $$$ and never getting to the point where they took a wager.

[sandpit]

Great info Ian, but how can Bob Evans say they have spent $100 million or so? Are they spending the other $90 mil on marketing or what (maybe he and his cohorts are getting much better bonuses than we know:D ).

[Premier Turf Club]

Great info Ian, but how can Bob Evans say they have spent $100 million or so? Are they spending the other $90 mil on marketing or what (maybe he and his cohorts are getting much better bonuses than we know:D ).

I don't know what goes into that number. Only CD would know. I think he was referring to the $80mm he spent for BRIS and AmericaTab plus the money they have spent on developing the Twin Spires business.

[Steve 'StatMan']

Hmm. Now they come out and say it is too expensive to THG with their access to large numbers of people with money to own and breed race horses, to open their own ADW. And, as Ian tells us, it costs plenty of money, time an effort to build an ADW. Plus we've learned that CDI spent gobs of money to buy out Brisnet & the AmericaTab companies. But if it is too expensive for the THG alligned horsemen, where do they get off thinking they can reduce the margins for those that did produce or buy ADW's? The ADWs that have had the best success lately of promoting those tracks that give some of those same horsemen an opportunity to race their horses for purses enhanced by bettors across nearly all of the country - or they were until the THG group and their horsement withheld their signal and their chance to do business with most regions in America. The ones that offer many tracks to far regions of the country, so that small or oddly scheduled tracks like Presque Isle, Lone Star, River Downs & Thistledowns are available and hence promoted, rather than missing from the local OTB's simulcast feed for various reasons.

Sure makes their case look even less to me. I understand about the local fans staying home and betting on the net, but for most tracks, more money comes from out of state wagering than in state wagering.

I don't know if they came with 1/3 share before or after looking into the ADW costs. Don't know what is right, but I can't get behind their case, esp. after they shut off the signals and killed their own handle, and have seriously hampered the demand for their product (and thus their track's) if and when the do come back.

I've got other tracks to handicap and bet, and frankly, many other things than betting on horse races that I seriously ought to be doing instead. So keep motivating we, the betting customers to do something else - because we do have options.

P.S. Rumor has it that Calder Race Course is actually running a live racing meet right now. Wouldn't know it from not being able to see or bet it from Arlington Park and the IL OTBs about 1,000 miles away from Calder.

[Burls]

If I knew then what I know now I never would have tried it.If I only had a nickel for every time I said that to myself. :lol: :lol:

[GameTheory]

If I knew then what I know now I never would have tried it.That's true of many things in life, including most things worth doing. And I think many of us would say that about becoming horseplayers in the first place...

[pktruckdriver]

Hey Ian

As a ADW owner, what is your opinion of this current dispute going on??

It seems that from my meager sources, is that the Horsemen are asking for only 7% from the ADW's and the ADW's are giving only 3%, does this sound right?

If this is right, it seems to me that ADW's are extremely , and I do mean extremely greedy, wouldn't you say.

Now I could almost see the horsemen asking for about 1/3 and that to me , the betting public, would not be too outrageous, since we all know that the cost of horse racing is not going down, everything is going up, look around, everything goes up, always does, so for them to ask for thier fair share for purses or what ever they break it down as, which is an issue, you might be able to clear up too, do the Horsemen just get a percentage, and where and how does it get brokedown, who over sees this part of the pie cutting??

I am not a horsemen yet, but I honestly can't see 7% as asking too much, if it is, please explain to me why it is, now 33% I may be able to see as asking too much, but then again, do they have a business if the horsemen, don't race their horses, no of course not, but ....... that's where it get's sticky, right?


Hopefully Ian you might be able to give us an ADW's persective on this issue, if not, then other's here might fill me in, because I do care what goes on here in this industry, a shouldn't I??

Patrick

[startngate]

Great info Ian, but how can Bob Evans say they have spent $100 million or so? Are they spending the other $90 mil on marketing or what (maybe he and his cohorts are getting much better bonuses than we know:D ). Well, they did spend around $87 million on AmericaTab and BRIS. I'm sure that's part of it.

[DeanT]

Well, they did spend around $87 million on AmericaTab and BRIS. I'm sure that's part of it.

I'm not a big Evans fan, but in this fight he has a point with that capital outlay. They spent market value on a business that is priced at future cash flows. That made the price what it was. Then, what a year later, the group says they want more of the cash flow, which in effect probably cuts the value of his business in half.

If the horseman started this before they bought Bris, they would have a bit more of a leg to stand on, imo.

[Javagold]

bob 'sausage man' evans changed the rules when they bought ATAB and started TSpires ADW, as they LIE and say they want open access for all ADW, yet they have done everything in their power to make open access for all IMPOSSIBLE....they dont want competition and they want a cut as a track owner AND a ADW middle man......thus the horsemen have a leg to stand on !!

[Steve 'StatMan']

I can see the argument for some of the money formerly bet on-track but now bet locally but now through an ADW. But the out of state betting situation hasn't changed, and was never going to be bet at the live meet. Worst case, keep the signal flowing out of state, but no, they shut out everyone, in the Florida/Calder case, including most out of state tracks for simulcasting.

[happy1]

Here it is in its simplest form

*The wagering pie is getting smaller every year.

*For some reason the horsemen want a bigger piece of this shrinking pie

OR

* ADW creates a new business efficiency for those that have invested in its time and money

* The horsemen who did not participate in the creation of the new business process want a cut because “we are who we are so, just give us some”

Either way the net-net if the horsemen get more will be, more people entering more horses in to more races so, we can have 100,000 crappy 6 horse races in North America.



BTW Bob Reeves appears to have a personal vendetta over this. There many links to different comments over the years too many to list here.

http://www.hbpa.org/newsdisplay.asp?section=3&key1=2924 (http://www.hbpa.org/newsdisplay.asp?section=3&key1=2924)

Remember there is no more money in the system now, then there was before in fact the opposite is true, it is just moving around to different places. In this chaos people tend to grab whatever they can get.

Looks like its going to be, horsemen make the squeeze, the tracks pass it on and the bettor takes the hit.

[cj]

Here it is in its simplest form

*The wagering pie is getting smaller every year.

...

I didn't realize handle was shrinking. Are you sure about this one?

[Premier Turf Club]

I didn't realize handle was shrinking. Are you sure about this one?

CJ,

It was pretty flat before this year but there is no question it will be down in 2008. The biggest of the players are moving their handles out of the pari-mutuel pools into the exchanges so that alone will result in a decrease. Combine that with the signal wars, horsemen's actions, and player disgust and this is only going to go one way.

[DeanT]

I didn't realize handle was shrinking. Are you sure about this one?
Absolutely.

In 2003 it was about the same. Last year it was down $400M.

Remember, as well, in real dollars it is down precipitously. Id say around 20% since the 1990's at a 2% or so inflation rate.

[DeanT]

PS: The classic article from Nick Kling addressed the handle declines. What a great article.

http://www.troyrecord.com/WebApp/appmanager/JRC/BigDaily?_nfpb=true&_pageLabel=pg_article&r21.pgpath=%2FTRD%2FSports%2FHorse+Racing&r21.content=%2FTRD%2FSports%2FHorse+Racing%2FTopSt oryList_Story_1440676

One of my favorite lines. The guy always makes me laugh.

The chief executive of the organization which oversees all Thoroughbred racing and its records is telling us that in an era when technology allows us to watch a schoolboy in Tibet dance on You Tube, when you can buy a stock on the Asian market while sitting in Troy, and when you can Google a person's name and get their 50-year-old high school graduation picture, that the "experts" who govern racing can't conjure up the facts needed to manage the sport?

And we wonder why racing is a mess?

The Jockey Club should hire the guys who invented Google, or the kid who started Facebook, and put them in charge. Then Marzelli and every¬one else in a position of authority should resign.

Regrettably, racing probably can't afford people that talented, and even if it could, current leadership would find a way to foul it up. Despite Marzelli's reluctance to identify why wagering handle declined, there are clear reasons.

[cj]

CJ,

It was pretty flat before this year but there is no question it will be down in 2008. The biggest of the players are moving their handles out of the pari-mutuel pools into the exchanges so that alone will result in a decrease. Combine that with the signal wars, horsemen's actions, and player disgust and this is only going to go one way.


That is what I was getting at, it has been pretty stable UNTIL this jacked up year. It is down only because the industry is sabotaging itself, not because there aren't people that want to bet the sport. Of course, that is probably changing now.

[highnote]

Flat handle is not necessarily a problem. The key for any business is to distribute it's product more efficiently. The internet makes that possible for racetracks.

As distribution costs decrease, margins should increase or at least remain stable.

I assume this is what Tracknet is trying to do -- own the pipeline. By owning the pipeline, there should be better margins for them -- some of which can go to the horsemen and also to the bettors in the form of rebates or lower takeouts.

[Javagold]

CJ,

It was pretty flat before this year but there is no question it will be down in 2008. The biggest of the players are moving their handles out of the pari-mutuel pools into the exchanges so that alone will result in a decrease. Combine that with the signal wars, horsemen's actions, and player disgust and this is only going to go one way.


dont forget an awful economy and polytracks and handicappers have just about thrown in the towel, perhaps for good.....i know most handicappers complain ABOUT everything, but this time it just feels different AND IN A BAD WAY !!!

[Kelso]

bob 'sausage man' evans changed the rules when they bought ATAB and started TSpires ADW, as they LIE and say they want open access for all ADW, yet they have done everything in their power to make open access for all IMPOSSIBLE....they dont want competition and they want a cut as a track owner AND a ADW middle man......thus the horsemen have a leg to stand on !!True enough on all counts ... and all of absolutely no relevence to horsemen. How tracks make money is none of the horsemen's damned business!!

The horsemen's business is finding the best purses and track circumstances for and in which to compete ... and receiving the purses they win. The tracks own the races and the signals. Only the tracks are entitled to whatever revenues those assets can generate. The horsemen own only the horses. They have four legs per horse on which to "stand" ... nothing more.

The morons leading the effort to extort the income produced by someone else's property, and the greedy bastards who support them, have managed to cast Evans in a sympathetic light. Way ta go, fellas. :rolleyes:

[Kelso]

horsemen make the squeeze, the tracks pass it on and the bettor takes the hit. If the tracks are dumb enough to cave into the horsemen's greedy demands, they won't have as many bettors to whom to pass it on ... nor as many ADWs sending them all that found money.

All bettors, even whales, have a takeout price-point beyond which they will not bet at a given track. They'll simply place their bets at more player-friendly tracks. ADWs are run (generally) by people who actually understand investment, marketing and competition. They'll won't buy overpriced signals.

[trigger]

http://news.bloodhorse.com//viewstory.asp?id=45208

Horsemen said the startup costs of a new ADW are too expensive.

Any idea what it costs to start an ADW?


Well, it looks like somebody came up with the necessary cash:
"Gordon Tallman, ORC’s supervisor of account wagering hubs, said he expects another AmWest Entertainment to join the Oregon ADW hub ranks in the coming weeks, but doesn’t have an anticipated launch date for Racing 2 Day."
http://news.bloodhorse.com/article/45196.htm

[happy1]

i was thinking about the numbers today.. do anyone think varying the take-out would be an option? something like, drop 3 points off all pools but then add back on up to 5 points when the numbers of runners are increased. start at like 6 runners drop 3 points. each added horse raises the take-out back up one point up to 5 max. (not these exact numbers but this idea.)


i am still pondering the ramifications. but i figure maybe there is someway to include all three parties (players, tracks, horsemen) into the mix to incentivise all parties for the best race conditions...

any thoughts/angles on this?? what are the pitfalls?

[rrbauer]

Here's the quote from the Kling article (attributed to Marzelli) that just blows my mind because it shows how ignorant and clueless the people are who run the industry:
"He went on to add, "Our tote systems are such that we don’t have good control of knowing where...revenues are coming from. And if you don’t have good control, it makes it difficult to analyze the business."

What is he talking about? How many reports for how many time periods are available to any of us for our accounts from any of the ADW providers? When somenone hits a big P6, how does the host track know that one winner came from this place on a $256 ticket; and, that another came from that place on a $64 ticket? The information is all there and available for reporting. It's more like dumbo's like Marzelli wouldn't know what to do with the information, so they pretend it isn't available. The article is a few months old, but the beat goes on!

[Premier Turf Club]

Here's the quote from the Kling article (attributed to Marzelli) that just blows my mind because it shows how ignorant and clueless the people are who run the industry:
"He went on to add, "Our tote systems are such that we don’t have good control of knowing where...revenues are coming from. And if you don’t have good control, it makes it difficult to analyze the business."

What is he talking about? How many reports for how many time periods are available to any of us for our accounts from any of the ADW providers? When somenone hits a big P6, how does the host track know that one winner came from this place on a $256 ticket; and, that another came from that place on a $64 ticket? The information is all there and available for reporting. It's more like dumbo's like Marzelli wouldn't know what to do with the information, so they pretend it isn't available. The article is a few months old, but the beat goes on!

We have a record of every wager ever placed with us. I have to believe many other ADWs have the same records. I say many, because believe it or not I know some that still have to request that information from the tote is asked.

[BillW]

i was thinking about the numbers today.. do anyone think varying the take-out would be an option? something like, drop 3 points off all pools but then add back on up to 5 points when the numbers of runners are increased. start at like 6 runners drop 3 points. each added horse raises the take-out back up one point up to 5 max. (not these exact numbers but this idea.)


i am still pondering the ramifications. but i figure maybe there is someway to include all three parties (players, tracks, horsemen) into the mix to incentivise all parties for the best race conditions...

any thoughts/angles on this?? what are the pitfalls?

Possibly have the unintended consequence of racing secys pressuring horsemen into running horses that are not fit to run.

[Kelso]

i am still pondering the ramifications. but i figure maybe there is someway to include all three parties (players, tracks, horsemen) into the mix to incentivise all parties for the best race conditions...

any thoughts/angles on this?? what are the pitfalls?An appealing thought, but cannot happen unless the players form a solid organization of our own. Until then, the tracks will continue picking us off like grapes ... getting some of us to bet here or under one set of circumstances, while getting others to bet there or under some other circumstances.

Players need a collective determination to get things done OUR way ... to develop and follow some shrewd leadership.

We truly hold all the aces. The money over which greedy bastard horsemen and moronic managers are fighting comes almost exclusively from US. We just have to be told how to play those aces ... and that is our heaviest handicap. Players don't accept being told how to play anything.

Gotta wonder if we're just as stupid as the idiots running the industry.

[Indulto]

An appealing thought, but cannot happen unless the players form a solid organization of our own. Until then, the tracks will continue picking us off like grapes ... getting some of us to bet here or under one set of circumstances, while getting others to bet there or under some other circumstances.

Players need a collective determination to get things done OUR way ... to develop and follow some shrewd leadership.

We truly hold all the aces. The money over which greedy bastard horsemen and moronic managers are fighting comes almost exclusively from US. We just have to be told how to play those aces ... and that is our heaviest handicap. Players don't accept being told how to play anything.

Gotta wonder if we're just as stupid as the idiots running the industry.:ThmbUp:
IMO no one faction holds all the aces. We all have to work in our own self-interest to balance things properly and the only players at the table are the rebated whales who give no indication they would support lower takeout for all.

The whales obviously have power of some sort or they wouldn't keep getting the signals at Elite and RGS.

Let's face it. Most non-professional players don't care enough to get involved and the horsemen collectively have turned from natural allies to opponents.

The only hope left seems to be the establishment of a commissiner's office that has a real understanding of how to grow handle along with the power to implement what it takes to do it.

[Kelso]

the horsemen collectively have turned from natural allies to opponents. Don't see that at all ... or ever. The horsemen have always wanted money from the players that we want to keep in our pockets. (Whether on-track or off, it all and always comes down to takeout. Less takeout, more left in the pocket.)

[happy1]

An appealing thought, but cannot happen unless the players form a solid organization of our own. Until then, the tracks will continue picking us off like grapes ... getting some of us to bet here or under one set of circumstances, while getting others to bet there or under some other circumstances.

Players need a collective determination to get things done OUR way ... to develop and follow some shrewd leadership.

We truly hold all the aces. The money over which greedy bastard horsemen and moronic managers are fighting comes almost exclusively from US. We just have to be told how to play those aces ... and that is our heaviest handicap. Players don't accept being told how to play anything.

Gotta wonder if we're just as stupid as the idiots running the industry.

i agree, someone could work out a formula that would create the incentives for all parties but, tracks and horsemen would most likely never agree to start such a program. We would be in the dilemma of who would go first.

[osophy_junkie]

It was pretty flat before this year but there is no question it will be down in 2008. The biggest of the players are moving their handles out of the pari-mutuel pools into the exchanges so that alone will result in a decrease. Combine that with the signal wars, horsemen's actions, and player disgust and this is only going to go one way.

Do you know why they are moving?

And would them moving have the effect of making the pari-mutuel pools less efficient, thus offering better returns for the knowledgeable better?

- Ed

[sjk]

Do you know why they are moving?

And would them moving have the effect of making the pari-mutuel pools less efficient, thus offering better returns for the knowledgeable better?

- Ed

This gets at an excellent point.

Guys that can only handicap well enough to lose 5% without rebates (which is not especially stellar handicapping in my book) are able under the current regime to bet large amounts making the pools more efficient and getting bailed out by their rebates.

This makes the game much more tedious for the better handicapper since the more efficient pools make him wait longer for good overlays to arise.

It makes the game totally hopeless for the casual player who is effectively fighting a 30% takeout.

[Premier Turf Club]

Do you know why they are moving?

And would them moving have the effect of making the pari-mutuel pools less efficient, thus offering better returns for the knowledgeable better?

- Ed

They are moving because they get better execution through the exchanges. The takes there equate to just a couple of %, about half of what they pay through the pools. They are also pretty concerned about getting ultimately getting stiffed by racetracks whereas there is no credit risk associated with Betfair.

You could make the case that these events would make the pools less efficient, though for the most part I haven't seen that.

[DeanT]

Guys that can only handicap well enough to lose 5% without rebates (which is not especially stellar handicapping in my book)

0.95 ROI is not stellar handicapping? I disagree. That is an amazing handicapper. In fact you would probably be able to make $250k a year as a professional player in Hong Kong with that ROI, you would be able to make $500k or more a year at Betfair. You'd probably be wise to sign up for PTC, too, as I am pretty sure you could quit your day job.

Mike Maloney in a recent interview said there are only a handful of people in the entire US making money like he does as a pro player. With a 0.95 roi and a bit of work to relieve price pressure, you'd be one of the handful.

[Premier Turf Club]

0.95 ROI is not stellar handicapping? I disagree. That is an amazing handicapper. In fact you would probably be able to make $250k a year as a professional player in Hong Kong with that ROI, you would be able to make $500k or more a year at Betfair. You'd probably be wise to sign up for PTC, too, as I am pretty sure you could quit your day job.

Mike Maloney in a recent interview said there are only a handful of people in the entire US making money like he does as a pro player. With a 0.95 roi and a bit of work to relieve price pressure, you'd be one of the handful.

The pros are between 0.93-0.97 ROI (pre-rebate) on average. Some years they might be at or above 1.00 but it's pretty rare. I understand Peter Wagner hit 1.03 on $150mm wagered about 10 years ago and we have two players above 1.04 on more than $2mm in handle. That's just flat out astonishing.