Breaking Story - (Signal Wars) A Knife to the Back for Players Everywhere

[Jeff P]

A must read on the HANA Blog for ADW customers:
http://blog.horseplayersassociation.org/2011/10/knife-in-back-for-players-everywhere.html


-jp

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[JustRalph]

why do I feel I have seen this play out before............... deja vu ?

[cj]

At the end of all this, the result will be the same as everything else related to horse racing. Our product sucks, business is withering away to nothing, so lets raise the price.

The tracks don't seem to realize that people are betting through these so-called micro-ADWs for one reason and one reason only, rebates. Raise the price, lower the rebates, and lose even more customers. That sounds like a great strategy if your goal is bankruptcy.

[Grits]

At the end of all this, the result will be the same as everything else related to horse racing. Our product sucks, business is withering away to nothing, so lets raise the price.

Meantime, between this and other related issues in today's threads . . . don't throw out your golf clubs, keep sharpening the skills in your second game.

[Canarsie]

Didn't these idiots see what happened to Gulfstream's handle compared to Tampa when there was a tracknet dispute going on?

http://www.bloodhorse.com/horse-racing/articles/54830/tracknetcooperative-dispute-taking-a-toll

Sounds like its this company reborn. I'll be writing to my Representatives and Senators expressing that this might affect Monmouth Park and the Meadowlands.

http://www.bizjournals.com/louisville/stories/2010/05/10/daily51.html

This doesn't sound good there has to be even more to this than what's being told as of today.

My gut is telling me that another TVG-HRTV battle is going to start up. How convenient for it to happen as the winter season is fast approaching.

[betovernetcapper]

This is crapnet sh** at its worst. I see this as an anti-trust lawsuit waiting to happen. I hope any attorneys that read the board and want to take this on will contact HANA. I expect Churchill to follow suit. The ultimate goal is to make sure you can only bet races at their ADWs and it probably won't be long until this happens.

[mannyberrios]

This stinks to high heaven! If this crap goes through, we will suffer, as I am a innocent victim !

[OTM Al]

Unpopular position time. I'll start by saying that I think this move is unfortunate, but there is much more blame to go around than just to this Monarch distribution company. The most interesting paragraph to me is this one

"The number of Micro ADWs has significantly increased in recent years; at the same time, the incremental benefit to our racetracks of each additional Micro ADW is subject to diminishing returns. Many of the new Micro ADWs do not bring significant new handle to the Monarch racetracks. Yet each new Micro ADW must be reviewed, approved and then continually monitored by Monarch and its member tracks to ensure regulatory compliance and wagering integrity. The need for monitoring is not just theoretical, as it has recently been discovered that several Micro ADWs were not in compliance with important regulatory requirements."

Sounds to me like they are saying that these micro-ADWs are begining to cost more than they are worth as customers. It also sounds like part of this cost is arising because some of these micro-ADWs are not adhering to the terms of their contracts or the laws in their regulatory environment, thus causing the distributer to have to step up its oversight on the distribution of the product. This makes me question how safe using some of these ADWs really is.

Is this a knife in the back to all players? Hyperbole is always a good propaganda weapon, but the answer here is clearly no. It will possibly inconvenience a few big players and it may put a couple ADWs on shaky ground out of the business, which doesn't necessarily sound like a bad thing. The big question is how much affect will this have on the bottom line of those supplying the product? That I can't answer, nor does the author, though it is clear that very little of what is being wagered is actually going to the tracks producing the product.

By being able to get a package through the distributer, ADWs are getting a lower cost than they would by having to negotiate each contract separately. No way of knowing, but it is possible that that will still be true with the price increase. So removal of this middleman could make the situation even worse for players than it is now.

The real issues this shows up, beyond the regular takeout debate, are those of restrictive regulatory environments and a few unscrupulous ADWs and how to deal with them without imposing larger costs on the structure of the industry.

Ok, feel free to blast away....

[Tom]

BANG! ;)

Why does the racing industry itself get its act together ( :lol: ) and come up with a betting platform that includes ALL tacks and standardizes cuts, post times, inter-track horizontal plays.....you know, manage the product.

Oh, wait, they already gave us colored saddle cloths.


Never mind.

[DeanT]

We've already had a good test case with California for this business model. The quarter of a billion dollar handle loss in 2011 is not from hundreds of thousands of $2 bettors betting nothing (although there are many of those staying away no doubt), it is from the everyday player, squeezed with a signal fee hike, and a distribution quell.

If this same model is initiated to a dozen or so tracks one can expect a multi-billion dollar handle loss over time. On the flip side, four or five internet sites will control wagering, so they will get a larger portion of a shrinking pie, so they'll be happy. I think their business strategy is clear as a bell. The big question is: Will the DOJ allow them to do this.

The model and industry mantra that "we are not getting enough of the pie" is 1970's nonsense.

One, the world has completely changed and resellers of everything from mobile phones to books and DVDs through Amazon et al are what the market is: Lower prices and more distribution of your product for a discerning consumer. Racing is clinging to a model that no longer exists, and likely has not existed for over a decade.

Secondly, the "we are not getting enough of the pie" folks have no leg to stand on when compared to other jurisdictions. If getting more of the pie related to the health of the sport, racing in the US would be a world leader, by a tremendous multiple.

The UK gets 0.99% of wagering into purses.

Australia gets 2% of wagering into purses.

The US gets over 6% of wagering to purses (that is not including the 34% or so of total purse revs they get from slot subsidies).

Upping it to 8 or 9% will not help racing, it will hurt it in the long run, because we will continue to lose customers, and lose eyeballs. When there is no one there to watch racing, we'll have a few rich people racing for ribbons, or a big purses on a big day. It's not a sport if handle is microscopic.

This is the worst possible business strategy, and it should not surprise anyone that the folks who have already run racing into the ground are the ones proposing it.

If people want to follow those folks into the sun, go for it. I think we need a new direction. We should throw the bums out and start over again.

All my opinion.

[Pacingguy]

How can you restrict the signal if they are willing to pay the fee? This is restraint of trade.

[Charli125]

Is this a knife in the back to all players? Hyperbole is always a good propaganda weapon, but the answer here is clearly no.
When handle goes down all players are hurt, and this will cause handle to go down. So yes, it is a knife in the back of all players.

Way to call it propaganda though. I wonder who your dog is in this fight.

It will possibly inconvenience a few big players and it may put a couple ADWs on shaky ground out of the business, which doesn't necessarily sound like a bad thing. The big question is how much affect will this have on the bottom line of those supplying the product?
That's just not true Al. It will put all ADW's other than 5-10 out of business. Are you saying that all ADW's other than those accepted few are on shaky ground? If you actually think that then you're unaware of how thoroughly regulated the vast majority of ADW's are. I feel more confident betting through Oregon licensed ADW's than I do betting through most track operated ADW's. The idea that there is some vastly unregulated market where billions of dollars are bet through shady operations is just not accurate when talking about the legally operated US ADW market.

I know you're a smart guy Al, so when I see you write this kind of stuff I can only wonder what your purpose is.

[OTM Al]

When handle goes down all players are hurt, and this will cause handle to go down. So yes, it is a knife in the back of all players.

Way to call it propaganda though. I wonder who your dog is in this fight.


That's just not true Al. It will put all ADW's other than 5-10 out of business. Are you saying that all ADW's other than those accepted few are on shaky ground? If you actually think that then you're unaware of how thoroughly regulated the vast majority of ADW's are. I feel more confident betting through Oregon licensed ADW's than I do betting through most track operated ADW's. The idea that there is some vastly unregulated market where billions of dollars are bet through shady operations is just not accurate when talking about the legally operated US ADW market.

I know you're a smart guy Al, so when I see you write this kind of stuff I can only wonder what your purpose is.

I know you're a smart guy to Charlie, and genuinely concerned, so I answer without any animosity to you here.

My purpose is to look at both sides of an argument rather than blindly sticking to one side or another just because we get a missive from a group that claims to help all players. I look at this case and think about some of these micro ADWs that wouldn't even take my business because I don't bet enough. Why? Because it is too costly for them to bother with me. They wouldn't make enough off of me. That's exactly what I see here. Trying to service and regulate all these little ADWs is becoming too costly for the distributor, so they only want to handle the ones that aren't going to cause problems and are going to bring in enough volume to offset the costs they are incurring. Sounds like a good business decsion to me. I love how one of the posters thought this was a case of restraint of trade. Might as well have said it was against freedom of speech.

Calling it a "knife in the back" is absolutely propaganda: "the organized dissemination of information, allegations, etc, to assist or damage the cause of a government, movement, etc ". Well, it's spread in an organized way to assist a cause, though I'm not totally sure whose, and damage the cause of the provider. It is extreme hyperbole. As is the statement that all but 5-10 ADWs will be put out of business by this. What percentage of tracks does this group represent? 5%? maybe 10%? And ADWs still can independantly negotiate with part of that. My god how did NYCOTB handle over a billion dollars a year with access only to 8-10 tracks a day!!!!!

Where is the acknowledgement that this action was partly brought on by the actions of some of those ADWs? The fact that they didn't follow their contracts? And don't tell me that a few of them aren't shady operations because that wouldn't be true either or that some of them are not operating on a very thin margin.

I'm not going to even talk about how this also can be read as an attempt to preserve those getting the biggest of rebates. I'd like to know how preserving the position of players who have a distict advantage over me as a player for reasons beyond their bankroll size helps me. Especially when so little of the handle they contribute is going to the game itself.

I've said it before and I'll say it again. I am not a fan of ADWs that are not attached to tracks. They give us convenience, yes, but they are also sucking monies away from those putting on the show. High takeout is what allows these entities to exist. They exploit a fine arbitrage opportunity. You get your wish for low takeout across the board, these small operations will no longer be able to exist as the arbitage opportunity will be lost. So HANA's primary agenda itself will put many of these guys completely out of business, not just cause them to potentially lose a couple tracks. Is that a "knife in the back"?

So my purpose is to ask questions like this when I see something that looks funny to me. Stick with trying for lower takeout. That is at least a transparent cause that has the possibity of helping a great majority of players. I just don't buy this one.

[andymays]

From what I can tell Del Mar and Hollywood will still be able take wagers from any ADW. They don't have to follow Monarch.

[cj]

Tracks and horsemen are going to try to get back what they foolishly gave away years ago. There is no way the tracks shouldn't be united and have one ADW with all tracks available keeping a much greater share of the takeout for themselves.

However, if they think they will be able to do that and keep takeout levels where they are without rebates, they are making a big mistake. People will simply stop betting even faster than they are now.

[mannyberrios]

To OTM, I pray that you are wrong about this. When I first read that blog, I was worried. Now after reading your posts, I am shitting bricks

[Jeff P]

Calling it a "knife in the back" is absolutely propaganda:... You're absolutely right. I purposely chose those words to draw attention to this issue.

Where is the acknowledgement that this action was partly brought on by the actions of some of those ADWs?... That's just it. ADWs (retail outlets) that did absolutely nothing to bring this upon themselves were put on notice that they are about to be denied access to product to sell.

If that is allowed to happen, then it absolutely IS a knife in the back for players everywhere.


I've said it before and I'll say it again. I am not a fan of ADWs that are not attached to tracks. They give us convenience, yes, but they are also sucking monies away from those putting on the show.Really? Talk about propaganda... I take it you are privy to the signal and host fees being asked for by the middleman?

How is the Micro ADW sucking money away from those putting on the show when they are already paying much higher rates than tracks or otbs for the same signal? And on top of that the notices that went out are worded so as to entice a bidding war because recipients of the notices are now being threatened with product to sell being cut off?


So my purpose is to ask questions like this when I see something that looks funny to me. Stick with trying for lower takeout. That is at least a transparent cause that has the possibity of helping a great majority of players. I just don't buy this one.Asking questions is what all of us should be doing.

I see the notices that went out, if left unchallenged, as having the following potentially disastrous outcomes for players:

1. ADWs (retail outlets) that have done nothing wrong being denied access to product to sell if for no other reason than "because the middleman said so."

2. ADWs (retail outlets) that have done nothing wrong being coerced into a bidding war for product to sell as product to sell is made scarce "because the middleman said so."

Under these conditions, the retail price of said product (effective takeout for the Micro ADW customer) WILL be driven up if for no other reason than "because the middleman said so."

Just because a takeout hike is hidden doesn't mean it isn't a takeout hike.

By writing it up the way that I did, and by calling attention to it using words such as "A Knife in the Back" as part of the title - and by including links to the DOJ site in the body of the article itself - it is my sincerest hope that the middleman (and track management telling the middleman what to do) realize the importance of the following:

The financial health of the racing industry (ANY industry really) improves vastly when choices for customers as to retail outlets where they can choose to spend (or choose not to spend) their money is determined not by a middleman - but by a healthy competitive marketplace!

In a healthy competitive marketplace, those retail outlets doing the best job of innovating and satisfying customer needs and wants (whether they put on a show or not) will capture the greatest market share.

Elimination of choices and failure to innovate and satisfy customer needs and wants (through middlemen) has already proven itself a failure. Just look at all sources handle trends since track signal contracts became "packaged."



-jp

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[OTM Al]

That's just it. ADWs (retail outlets) that did absolutely nothing to bring this upon themselves were put on notice that they are about to be denied access to product to sell.

That would be the case of the bad apple spoiling the bunch. My point here was to say that SOME ADWs do have blame in this. Because of their actions an environment was created that caused costs for the distributor to rise. One would think the good ADWs would be the ones getting the contracts but the fact is that the distributor is now incurring costs of checking out and checking on these ADWs to make sure they comply.

Really? Talk about propaganda... I take it you are privy to the signal and host fees being asked for by the middleman?

How is the Micro ADW sucking money away from those putting on the show when they are already paying much higher rates than tracks or otbs for the same signal? And on top of that the notices that went out are worded so as to entice a bidding war because recipients of the notices are now being threatened with product to sell being cut off?.

I didn't specify just the Micro-ADW here. TVG is just as guilty. Tough that they are paying higher rates. A piece is being siphoned away to pay the people running these things and on to of that they have enough coming in to rebate heavily in some cases. This is arbitrage. This is exploitation of market inefficiencies. Further, bidding is one of the most efficient ways to price a product. We always talk about the need for efficiency in the industry, well here's an example of it.


Asking questions is what all of us should be doing.

Glad you agree. I don't intend to stop.

I see the notices that went out, if left unchallenged, as having the following potentially disastrous outcomes for players:

1. ADWs (retail outlets) that have done nothing wrong being denied access to product to sell if for no other reason than "because the middleman said so."

Again, not wholly correct. It is because the presence of other ADWs who did what they felt like rather than abiding by rules and agreements that drove up the costs for the distributor.

2. ADWs (retail outlets) that have done nothing wrong being coerced into a bidding war for product to sell as product to sell is made scarce "because the middleman said so."

They aren't coerced to do anything. They are businesses. If they can still make money they will. If they can't they will cease to exist. What you call a bidding war, I call competition.

Under these conditions, the retail price of said product (effective takeout for the Micro ADW customer) WILL be driven up if for no other reason than "because the middleman said so."

Just because a takeout hike is hidden doesn't mean it isn't a takeout hike.

No, it's a reduction in rebate. Both things have some similarities, but they are not identical in the math were I solving for optimal rates.

By writing it up the way that I did, and by calling attention to it using words such as "A Knife in the Back" as part of the title - and by including links to the DOJ site in the body of the article itself - it is my sincerest hope that the middleman (and track management telling the middleman what to do) realize the importance of the following:

The financial health of the racing industry (ANY industry really) improves vastly when choices for customers as to retail outlets where they can choose to spend (or choose not to spend) their money is determined not by a middleman - but by a healthy competitive marketplace! .

When arbitrage opportunities exist, markets are not efficient. A necessary condition of a competitve market is that it is efficient. Thus the current state is NOT a competitive market.

In a healthy competitive marketplace, those retail outlets doing the best job of innovating and satisfying customer needs and wants (whether they put on a show or not) will capture the greatest market share.

Elimination of choices and failure to innovate and satisfy customer needs and wants (through middlemen) has already proven itself a failure. Just look at all sources handle trends since track signal contracts became "packaged."

Then why were they buying this as a package? Are you saying that packaging is the reason for the decline in handle? can't say as I ever heard that one before. As you said, they could have negotiated separately with many of the tracks. The only possible reason they go for the package deals is because they are cheaper and more efficient to have. Hardly sounds like a failure.

Again, I ask: why make protectionist arguments for operations that are serving, for the most part, the already most advantaged of all players? That are not even available to the average player? What you argue will further damage efficiency in this market, not improve it.

You really want efficient markets, then stay with lowering takout and not issues such as this. Lowering the take will remove these market inefficiencies and will crush many of these micro-ADWs as a result. That's the price, because no change comes for free.

[DeanT]

They aren't coerced to do anything. They are businesses. If they can still make money they will. If they can't they will cease to exist. What you call a bidding war, I call competition.




The DOJ disallowed this via tracknet already and they are trying to do it again in a different way.

A cartel of tracks forcing out competition, is your definition competition. That's comical.

[classhandicapper]

Tracks and horsemen are going to try to get back what they foolishly gave away years ago. There is no way the tracks shouldn't be united and have one ADW with all tracks available keeping a much greater share of the takeout for themselves.

However, if they think they will be able to do that and keep takeout levels where they are without rebates, they are making a big mistake. People will simply stop betting even faster than they are now.

I know less than nothing about the financial and legal arrangements between tracks, ADWs, middlemen etc..., but this is about the only thing that makes any sense to me.

IMO if the tracks were to consolidate like that they would lower costs and increase their market share and profits enough to lower the take and offer more attractive rebates to their best customers and still make more money than they are now. The next target would be illegal off shore rebate shops. But since the crackdown on poker and other off shores started, I think some of that money is making its way back to legal sources now anyway and I assume that trend is going to continue.

That would be step one.

Step two would be to close a whole bunch of marginal and money losing tracks being supported by casino money. Then the profits for the remainder would go through the roof and even better deals could be offered to players.

[Dave Schwartz]

The DOJ disallowed this via tracknet already and they are trying to do it again in a different way.

Dean,

I have never heard of any Dept of Justice involvement in racing.

Can you point to a link that supports this?


Dave Schwartz

[depalma113]

How can you restrict the signal if they are willing to pay the fee? This is restraint of trade.

Controling content is not restraint of trade. Every major sport controls content and requires bids to show their product.

[OTM Al]

The DOJ disallowed this via tracknet already and they are trying to do it again in a different way.

A cartel of tracks forcing out competition, is your definition competition. That's comical.

From what I understand of what I think you are talking about, this is completely different. Track Net was believed to have been disolved so that CDI could acquire Youbet alongside already controlling another major platform, Twin Spires. Having both a signal distributor and such a large chunk of the ADW market would pique the interest of the anti-trust people because it would involve a further vertical merger and too much control in the ADW market, not just by having the 2 ADWs but having a major distributor content provider for all ADWs. Evidently the distributor business isn't worth as much as the wagering platform business, so they dumped it.

Two cases have nothing in common. As has been pointed out before, bidding out content is common practice in all sports. By forcing a company to provide content to whoever wants it, the DoJ would in effect be saying that any network can show the Superbowl that wants to. Good luck with that.

[OTM Al]

I know less than nothing about the financial and legal arrangements between tracks, ADWs, middlemen etc..., but this is about the only thing that makes any sense to me.

IMO if the tracks were to consolidate like that they would lower costs and increase their market share and profits enough to lower the take and offer more attractive rebates to their best customers and still make more money than they are now. The next target would be illegal off shore rebate shops. But since the crackdown on poker and other off shores started, I think some of that money is making its way back to legal sources now anyway and I assume that trend is going to continue.

That would be step one.

Step two would be to close a whole bunch of marginal and money losing tracks being supported by casino money. Then the profits for the remainder would go through the roof and even better deals could be offered to players.

This is, in some ways, a nice thought. It is also a monopoly situation. The DoJ actually would have a problem with this one.

[Canarsie]

While I disagree with Al this is a very interesting read. It's really appreciated that people contributing to both sides of the fence have taken a bunch of time out of their lives to post their opinions.

Dave some info for you.

http://www.istockanalyst.com/article/viewarticle/articleid/4130627

[DeanT]

Dean,

I have never heard of any Dept of Justice involvement in racing.

Can you point to a link that supports this?


Dave Schwartz

I am sure there are some Dave, if you search the filings of CDI via the Youbet merger (they investigated it to ensure competition was not put in the power of one company to do what they wish). Canarsie's link alludes to that. There are people on Pace, for example, who were extensively interviewed by the DOJ about the Youbet/TS merger.

As Al noted, this is a little different, but to think the DOJ is not looking at things racing does in the competition vein would be a mistake (imo). There is little difference in what an ADW who legally gets a signal at Beulah does who pays 5% to them, as compared to what Twinspires does who might pay 3%, other than give the host track more. If there are only one or two ADWs they can say to a Beulah or River Downs: "screw you, I will pay you 1%" (taking a 2000% margin); and the little tracks have no alternatives and nowhere else to go, so it hurts those tracks and those horsepeople. Competition for horseplayers is good, competing ADWs for racetrack signals is good as well.

If you jumble up the best content in a protective cartel (in an industry who has already said selling signals to licensed resellers is a part of their free business model), it wields huge power and is cloaked in an aura of price-fixing, and that is something that a lot of people care and are concerned about.

[maddog42]

This is crapnet sh** at its worst. I see this as an anti-trust lawsuit waiting to happen. I hope any attorneys that read the board and want to take this on will contact HANA. I expect Churchill to follow suit. The ultimate goal is to make sure you can only bet races at their ADWs and it probably won't be long until this happens.

It does seem like an antitrust violation.

[Jeff P]

Al,

I don't know you and you don't know me. But I'm guessing (based on your position in this thread) that you work (in some capacity) for the industry.

Would that be a correct statement?

Jeff

.

[classhandicapper]

This is, in some ways, a nice thought. It is also a monopoly situation. The DoJ actually would have a problem with this one.

Why? (honest question)

In the days before internet wagering and simulcasting the tracks were more or less regulated monopolies in their own territory. At best they would become regulated monopolies on a national basis. But perhaps not. There could still be other viable ADWs. They would just have a tougher time competing because they'd no longer have the advantage of not having to put on the show.

[cj]

Why? (honest question)

In the days before internet wagering and simulcasting the tracks were more or less regulated monopolies in their own territory. At best they would become regulated monopolies on a national basis. But perhaps not. There could still be viable ADWs. They would just have a tougher time competing because they'd no longer have the advantage of not having to put on the show.

I don't think it would be a problem either, other than the problem that the game could never be organized enough to make it work. I'm not sure it would be much different than sports leagues packaging their teams as a league.

[OTM Al]

Al,

I don't know you and you don't know me. But I'm guessing (based on your position in this thread) that you work (in some capacity) for the industry.

Would that be a correct statement?

Jeff

.

No it would not. I work at New York University in the Graduate School. Why does the attitude have to be if someone questions a position that they must be "the enemy"? For the sake of disclosure, I do know and am on very good terms with plenty of people who are "in the industry" as well as plenty of players. Does this change my right to publicly question something that doesn't seem quite right?

I made a point not to go so low as to ask your relationship with micro-ADWs as it wasn't relevant to the point of theory that was being questioned. I remember the Paulick article and the discussion here well, but intentionally did not bring that up. But now since you've let that genie out of the bottle, let's have it out in the open about what you do with respect to these entities. Or let's take personal attacks out of it. Your choice.

[OTM Al]

Why? (honest question)

In the days before internet wagering and simulcasting the tracks were more or less regulated monopolies in their own territory. At best they would become regulated monopolies on a national basis. But perhaps not. There could still be other viable ADWs. They would just have a tougher time competing because they'd no longer have the advantage of not having to put on the show.

What I understand that you describe would drive out all competition. Think of the MLB or the NFL. The MLB has to have an exemption from anti-trust law to do what they do. The NFL teeters on that tightrope regularly and they really are a trust. This is at a national level.

Everybody is a monopoly in their own territory, depending how you define that territory. But you as the customer could always go to another track. With what you describe, the tracks as a single unit would be able to collude to set the prices for the whole industry, so no matter whose territory you are in, you are still facing in effect the same firm.

Yes, of course they could have some sort of government regulation on that status, but honestly, do you really want another level of governmental interference? I sure don't. Tracks having to compete with each other on certain things is not a bad thing really.

[Jeff P]

I asked because the position you appear to be taking is similar to that shared by a lot of people in the industry:

Let's do everything possible to create a monopoly for the tracks.

Since you asked, No. I do not have a financial (ownership) stake in an ADW.

I am a lifelong bettor (for more than 30 years.) I am the author of a handicapping software product called JCapper.

I love this game dearly - and because of that I decided to become a player advocate through HANA.

Other than that, I have no other ties to this game.

My position is the exact opposite of yours.

I recently attended an industry meeting at Hollywood Park. Hollywood's management team presented a series of slides that showed all sources handle numbers for California thoroughbred racing for the years 2001-2010.

The numbers in that presentation were shocking. Total customer spend on the product (not adjusted for inflation) over the 9 year period had shrunk by 50%. (Throw in the YTD numbers from 2011 and the picture gets even worse.)

Keep in mind that I own a racing related business... one that is growing not shrinking.

I remember something I once heard a college professor tell a room full of 19 yr olds in a Strategic Marketing class:

If you study the case histories of successful companies, you will realize they are successful because they do the following three things:

1. They identify their target market.

2. They identify the needs and wants of their target market.

3. They make it their MISSION to satisfy the needs and wants of their target market.

If you study the case histories of any failed company that you can name, you will realize the reason they failed is because they failed to do the above three things somewhere along the way.

With the racing industry showing alarming downward trends everywhere, just maybe it's time to look for cause and effect.

When I look for cause and effect within the context of what I know about running a business... one that is growing not shrinking... it becomes pretty obvious that racing's decision makers are not just failing the course - but failing miserably because they are doing the exact opposite of the things successful companies do that invite success in the first place.


-jp

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[OTM Al]

Sorry. Wasn't going to post this, but you wouldn't take the out I offered you. A reduction of micro-ADWs takes money out of your pocket.

http://www.jcapper.com/Article_Rebates.html

"Full disclosure: If you take me up on my offer, once you are signed up and start earning rebates, I receive compensation in the form of a referral fee."

Good for you. You've exploited an arbitrage opportunity. But don't give me the high moral ground stuff. You have more interest in this than just helping horseplayers. A reduction in micro-ADWs is a reduction in the need for your services.

You state that all ADWs should be able to receive all signals they want. Fine, I have no problem with that in theory. But why aren't you an advocate for all ADWs accepting whatever player that wants to use them? Isn't this a player issue as well?

I enjoy debating points of theory, but I'm done with this one now as I don't care for the direction it's gone in.

[Jeff P]

You're absolutely right Al. I get paid for helping my customers get a price break.

Attack the messenger all you want. But it doesn't change the validity of the message:

Until or unless racing changes the way it operates and starts doing the things successful companies do to invite success in the first place: Expect financial results consistent with those achieved to date by keeping to the status quo (at all costs.)

Using a middleman to threaten ADWs (retail outlets) with denial of product to sell in an effort to further hike up the wholesale cost of a bet is an attack on the customer - one that can only result in further dampening of the overall customer experience.

How can doing that possibly be good for the overall financial well being of the game?


-jp

.

[Cardus]

Sorry. Wasn't going to post this, but you wouldn't take the out I offered you. A reduction of micro-ADWs takes money out of your pocket.

http://www.jcapper.com/Article_Rebates.html

"Full disclosure: If you take me up on my offer, once you are signed up and start earning rebates, I receive compensation in the form of a referral fee."

Good for you. You've exploited an arbitrage opportunity. But don't give me the high moral ground stuff. You have more interest in this than just helping horseplayers. A reduction in micro-ADWs is a reduction in the need for your services.

You state that all ADWs should be able to receive all signals they want. Fine, I have no problem with that in theory. But why aren't you an advocate for all ADWs accepting whatever player that wants to use them? Isn't this a player issue as well?

I enjoy debating points of theory, but I'm done with this one now as I don't care for the direction it's gone in.

Sharp post.

[mannyberrios]

I have to admit, I liked it myself!

[Ian Meyers]

Sorry. Wasn't going to post this, but you wouldn't take the out I offered you. A reduction of micro-ADWs takes money out of your pocket.

http://www.jcapper.com/Article_Rebates.html

You state that all ADWs should be able to receive all signals they want. Fine, I have no problem with that in theory. But why aren't you an advocate for all ADWs accepting whatever player that wants to use them? Isn't this a player issue as well?

For the most part, all ADWs will accept any player that wants to sign-up. The exceptions are due to state law that restricts a player's ability to do so, see California, New Jersey, Illinois, Oregon, Virginia, etc. You can't blame an ADW for that.

I know for a fact that Jeff has worked hard to try and change some of those state laws.

[andymays]

For the most part, all ADWs will accept any player that wants to sign-up. The exceptions are due to state law that restricts a player's ability to do so, see California, New Jersey, Illinois, Oregon, Virginia, etc. You can't blame an ADW for that.

I know for a fact that Jeff has worked hard to try and change some of those state laws.

I'm in California. What is the text of the law out here?

[Ian Meyers]

I'm in California. What is the text of the law out here?


ADW operators must be licensed and bonded by the state of California. My understanding is the license and bond are very expensive. Coupled with the retention cap that makes it impossible for California licensed ADWs to pay rebates to California players, most ADWs choose not to get licensed in your state. Most would accept California players if they could.

The little-known retention cap is something else that Jeff and HANA have worked very hard to remedy, without success so far.

[FenceBored]

I'm in California. What is the text of the law out here?

You don't want to know. Really, you don't want to know. You really don't want to know.

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=bpc&group=19001-20000&file=19590-19604

Ctrl-F Advance

Take this section on non-CA ADWs having to have agreements with CA parimutuel clerks:
B) The board shall not approve an application for an original or renewal license as an ADW provider unless the entity, if requested in writing by a bona fide labor organization no later than 90 days prior to licensing, has entered into a contractual agreement with that labor organization that provides all of the following:
(i) The labor organization has historically represented employees who accept or process any form of wagering at the nearest horse racing meeting located in California.
(ii) The agreement establishes the method by which the ADW provider will agree to recognize and bargain in good faith with a labor organization which has demonstrated majority status by submitting authorization cards signed by those employees who accept or process any form of wagering for which a California ADW license is required.
(iii) The agreement requires the ADW provider to maintain its neutrality concerning the choice of those employees who accept or process any form of wagering for which a California ADW license is required whether or not to authorize the labor organization to represent them with regard to wages, hours, and other terms and conditions of employment.
(iv) The agreement applies to those classifications of employees who accept or process wagers for which a California ADW license is required whether the facility is located within or outside of California.
(C) (i) The agreement required by subparagraph (B) shall not be conditioned by either party upon the other party agreeing to matters outside the requirements of subparagraph (B).
(ii) The requirement in subparagraph (B) shall not apply to an ADW provider which has entered into a collective bargaining agreement with a bona fide labor organization that is the exclusive bargaining representative of employees who accept or process parimutuel wagers on races for which an ADW license is required whether the facility is located within or outside of California.
Please!

[Robert Goren]

Quote:
If you study the case histories of successful companies, you will realize they are successful because they do the following three things:

1. They identify their target market.

2. They identify the needs and wants of their target market.

3. They make it their MISSION to satisfy the needs and wants of their target market.

If you study the case histories of any failed company that you can name, you will realize the reason they failed is because they failed to do the above three things somewhere along the way.


Race tracks have identified their target market and it is the horsemen. They have identified their needs and wants. They have made it their mission to satisfy them. Everything racetracks have done in the last few decades has been designed to help the the horsemen. If any of that spills over to helping the bettor, it was an unintended consequence.

[ByeByeBuck]

My main b**ch is that I am unable to see or hear the live Aqueduct, Belmont and Saratoga races. Don't these idiots in charge of all this realize that horseplayers want to enjoy seeing the race, at least hearing the damn call? If I was in charge of this, I would want the audio and video signal readily available anywhere and everywhere I could get it. I don't give a s**t what they say the stupid reasons are - in the overall scheme of things, it's bad business, simple as that - a blind man could see it.

[classhandicapper]

Everybody is a monopoly in their own territory, depending how you define that territory. But you as the customer could always go to another track. With what you describe, the tracks as a single unit would be able to collude to set the prices for the whole industry, so no matter whose territory you are in, you are still facing in effect the same firm.


This is all pipe dream.....

There could still be independent ADWs.

The difference would be that the tracks themselves would be more efficient and charge no more than the cost of putting on the show to those other ADWs. That way the tracks and independent ADWs would be on the same competitive playing field. Right now, it appears to me that the tracks are at a disadvantage which IMO is a preposterous state of affairs.

In what other business does the customer put his supplier out of business?

The real question would be calculating that "cost" to create that level playing field and enforcing it. As much as I hate government intrusion into practically anything, we already have state governments meddling all over the place anyway. So perhaps the tracks could get together, present the model, and get multiple state approvals.

The other alternative is to just allow the tracks to become a "so called" monopoly and bury all the competitive ADWs (something I am not opposed to).

The tracks would set the prices to actual customers (horse players) with the track "take" by competing for the gambling dollar. In other words, instead of saying track "A" is competing vs. track "B" (which was never really the case decades ago anyway) or that the tracks are competing with other ADWs where they seem to be losing because of an idiotic relationship, we are saying the tracks are competing against lotteries, sports betting, poker, slots and casinos etc.. That is a big part of the reality of the situation now anyway.

Unless they lower the take, they'll continue to lose ground to other more attractive forms of gambling like they are now. The difference would be as the dominant force in racing, they actually could do it and still generate more profits than they are now. Then everyone will be happy....except the ADWs because they would be less efficient and deserve to fail. ;)

[Canarsie]

For the most part, all ADWs will accept any player that wants to sign-up. The exceptions are due to state law that restricts a player's ability to do so, see California, New Jersey, Illinois, Oregon, Virginia, etc. You can't blame an ADW for that.

I know for a fact that Jeff has worked hard to try and change some of those state laws.

Do you have any idea that my being a resident of NJ will afford me the opportunity to make my own choice of a ADW?

Is there even the slimmest of chances that another ADW could run the NJ operation so I could at least get free programs if I wager at that track.

Thanks.

[andymays]

ADW operators must be licensed and bonded by the state of California. My understanding is the license and bond are very expensive. Coupled with the retention cap that makes it impossible for California licensed ADWs to pay rebates to California players, most ADWs choose not to get licensed in your state. Most would accept California players if they could.

The little-known retention cap is something else that Jeff and HANA have worked very hard to remedy, without success so far.

Yes, I've been involved in the retention cap B.S. It's sponsored by the T.O.C.

The TOC and CHRB are a disaster for California Racing.

Must watch video: Larry King Interviews Keith, Jack, and Lou. - YouTube

http://www.youtube.com/watch?v=ZENLBAEWRLU

By the way, thanks FenceBoard

[OTM Al]

For the most part, all ADWs will accept any player that wants to sign-up. The exceptions are due to state law that restricts a player's ability to do so, see California, New Jersey, Illinois, Oregon, Virginia, etc. You can't blame an ADW for that.

I know for a fact that Jeff has worked hard to try and change some of those state laws.

That is informative Ian, and as someone that is directly involved in an operation like what is being discussed, I'd like to hear what you think about this. I know most ADWs would take me, but I was referring more to the ones that cater exclusively to the large volume player.

Now, I freely admit I could be confused about the existance of such entities, but it's something I took from a conversation I listened to this summer when I learned about how agents work with rebate shops. I don't think a lot of people know that such a thing even exists, so it would also be informative if you or someone else could describe this process.

I don't doubt that Jeff has worked hard on this issue and has helped people. I also don't have a problem that he works as an agent for rebate shops. Like I said, good for him finding an opportunity. But the way this issue was presented did bother me. First, the refusal to admit that some "rogue" ADWs had caused cost increases on distributors and the focus on how this was going to affect all those innocent ones that did no wrong. Well to be extreme, I didn't blow up the World Trade Center, but that act has imposed costs on people from all walks of life that did no wrong. The argument that these signals should just be sent to whoever wants them at a price the purchaser deems fair is ridiculous and ignores market forces.

Second, the refusal to admit a conflict in interest. Making this an issue that all players need to fight for without the full disclosure that the author has a vested interest, beyond being a good guy, in as many miro-ADWs existing as possible is a move just like the crap our politicians in NY pull regularly when they refuse to disclose what businesses they have relationships with.

Third, I never wanted to make this discussion personal, but instead of answers, the subject was changed to get me to admit that I was part of the "enemy", track management. I'm not even going to go into how couterproductive such an attitude is, and I well know why some feel frustrated, but this was a deflection to try to say clearly I was the bad guy because I wasn't going to blindly go along and I dared ask hard questions.

Something I truly believe in is that we should be far more suspicious of those claiming that they want to do good things for us than those who want to do bad. We know where the latter group stands, but it's too easy to get sucked in by the former and suddenly find yourself in a place you never expected. Was it the "Godfather" with that keep enemies close, but friends closer line? Same sort of idea anyway.

If those then who claim they want to do good for us instead refuse to answer our questions, turn the topic so that it isn't about them, but about us, and hide things, one has to wonder why those people are claiming they want to do good for us.

[Ian Meyers]

That is informative Ian, and as someone that is directly involved in an operation like what is being discussed, I'd like to hear what you think about this. I know most ADWs would take me, but I was referring more to the ones that cater exclusively to the large volume player.

Now, I freely admit I could be confused about the existance of such entities, but it's something I took from a conversation I listened to this summer when I learned about how agents work with rebate shops. I don't think a lot of people know that such a thing even exists, so it would also be informative if you or someone else could describe this process.

I don't doubt that Jeff has worked hard on this issue and has helped people. I also don't have a problem that he works as an agent for rebate shops. Like I said, good for him finding an opportunity. But the way this issue was presented did bother me. First, the refusal to admit that some "rogue" ADWs had caused cost increases on distributors and the focus on how this was going to affect all those innocent ones that did no wrong. Well to be extreme, I didn't blow up the World Trade Center, but that act has imposed costs on people from all walks of life that did no wrong. The argument that these signals should just be sent to whoever wants them at a price the purchaser deems fair is ridiculous and ignores market forces.

Second, the refusal to admit a conflict in interest. Making this an issue that all players need to fight for without the full disclosure that the author has a vested interest, beyond being a good guy, in as many miro-ADWs existing as possible is a move just like the crap our politicians in NY pull regularly when they refuse to disclose what businesses they have relationships with.

Third, I never wanted to make this discussion personal, but instead of answers, the subject was changed to get me to admit that I was part of the "enemy", track management. I'm not even going to go into how couterproductive such an attitude is, and I well know why some feel frustrated, but this was a deflection to try to say clearly I was the bad guy because I wasn't going to blindly go along and I dared ask hard questions.

Something I truly believe in is that we should be far more suspicious of those claiming that they want to do good things for us than those who want to do bad. We know where the latter group stands, but it's too easy to get sucked in by the former and suddenly find yourself in a place you never expected. Was it the "Godfather" with that keep enemies close, but friends closer line? Same sort of idea anyway.

If those then who claim they want to do good for us instead refuse to answer our questions, turn the topic so that it isn't about them, but about us, and hide things, one has to wonder why those people are claiming they want to do good for us.


I'll preface this by saying in the interest of full disclosure Jeff is a close personal friend of mine. That doesn't mean I wouldn't call him on it if he had a conflict of interest. He doesn't, his heart and his actions are in the right place. He is 100% pro-horseplayer.

As far as agents and ADWs, many ADWs use agents (e.g. independent sales agents) to help recruit and manage players. There isn't anything wrong with that, it's really no different in concept from an insurance agent getting a commission to place you with an insurance company. Most agents work of a commission of less than 1% though there are some agents gouge players taking as much as 3 or 4 points on their handle. This happened much more in the past than now as margins are just way too thin and players are better educated about what rates they can get based upon their volume. It's not just micro ADWs; Twinspires and Expressbet both pay agents. I'd bet TVG does as well but I don't know that for sure so I won't say it. You can argue that agents are simply another layer of expense, but good agents help their players get the best rates, free pp's, video and other concierge services including restaurant reservations, tickets to sporting events, etc. again depending upon how much you bet. It's really no different than host/hostesses that work for a Vegas casino. You might even say that ADW agents are even more removed from the player's economics. Since what you win in Vegas a casino loses, hosts want big players but big players that lose. Bring in a bunch of gamblers that win and you'll find your services are no longer required. Since ADWs are pari-mutuel, agents really do want to help you win.

As far as not being able to play at some ADWs because you don't meet volume minimums, that does exist but there are fewer of those than people think. Most of those that impose minimums do so because the larger tracks makes them; e.g. we'll give you our signal at x% but only if you restrict wagering to guys betting $1mm, $10mm (some even $50mm) a year. Under the old Tracknet system if an ADW had the wholesale (e.g. high volume) ADW agreement you couldn't take any player betting less than $1mmm annually, or at the least had to restrict their wagering on Tracknet tracks.

As far as 'micro-ADWs' go in general, conceptually you get very little innovation / competitive pricing in industries that can be described as monopolistic. Why invest in making your products and services better or pricing them 'more fairly' when there's no place else for customers to go? Remember, I ran the first ADW that developed conditional wagering, file upload and odds dutching. We had to because we were the little guy and needed to compete based upon superior technology since we couldn't do it on name recognition, marketing budget, etc. Others, Twinspires, Youbet, Xpressbet copied what we did a year later. Might they have introduced it if we didn't do it first? Maybe, maybe not.

I hope some of this helped. :)

[OTM Al]

Good stuff Ian. Makes the picture much clearer to analyze. So the other side of the equation we would need to find out is what type of auction this distributor would be running. Depending on that type of auction, we could determine if they truly were attempting to behave monopolistically or in a way that would mimic a competitive market (or somewhere in between)

I'll keep this simple. Auction A would be one in which each bidder selected as a winner would have to pay the full price of their bid. This in essence is, if you remember your basic economics with supply and demand curves, would be extracting the full amount of the area under the demand curve as profit. This is actually even more profit than a fixed monopoly price level would extract. The setting of the number of firms would also be involved in maximizing these profits. The Auction B could essentially mimic a competitive market in that the price paid by all winning bidders would be the same and it would be that of the lowest winning bidder. Thus the consumers retain much of that area under the demand curve with only the lowest winning bidder essentially not making profit on the deal.

I don't know which of these forms is planned, The fact that they are trying to set a limit might mean A, but the fact that they might adjust that could also mean B. They also could be setting the number based on what they know about their own cost structure which could go either way as well. But without knowing these things, to make a blanket statement that this action is bad is completely wrong. And if the marginal cost the firm is incurring by taking on and having to monitor each additional ADW is big enough the firm starts losing money by taking more business. As I said, the fact that ADWs want to use this service instead of negotiating separately where possible clear means there is value to the ADW of doing this. So putting the firm out of business by forcing a price structure on it could well do even more damage than the auction systems described above.

What this all means when put together is that this is a very complex issue and without the facts about what is going on, blanket accusations get us nowhere.

[Dave Schwartz]

Al,

Respectfully, I must say that you might as well assume option A.

Historically, everything done in racing is for the extreme benefit of the people in control at the direct expense of the people with the least control. After the manure ball gets done rolling downhill, it always lands directly upon the betting public.

This will be no exception.

Bear in mind, the closer we get to a "free market" the more it benefits the bettors. This is clearly a step away from free market.


Regards,
Dave Schwartz

[OTM Al]

Al,

Respectfully, I must say that you might as well assume option A.

Historically, everything done in racing is for the extreme benefit of the people in control at the direct expense of the people with the least control. After the manure ball gets done rolling downhill, it always lands directly upon the betting public.

This will be no exception.

Bear in mind, the closer we get to a "free market" the more it benefits the bettors. This is clearly a step away from free market.


Regards,
Dave Schwartz

Could be Dave. Racing has no exclusivity in such behavior though. The purpose of any business is to maximize profit. That is what it is. I just don't care to make such assumptions until the facts come in. Clearly the ADWs that broke their contracts which contributed to this situation were doing exactly that as well. (well expected profits anyway...). Just because one piece is changing the way they do things doesn't automatically mean bad, and sometimes things like this have unforseen consequences that take the situation in the opposite direction simple instinct would tell us. Blanket statements made without full information are not helpful.