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[David-LV]

I have been a Tournament and Horseplayer for over 40 years. I thought I had seen everything until I read this email. I am posting it here because it is extremely important to the future of Handicapping Contests and the Brick & Mortar sites who offer them.

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David-LV



January 5, 2012 – To All Horseplayer's and C.E.O,'s of NTRA Member and Affiliate Tracks

Does the NTRA work on behalf of it's members or compete against them, while charging the Tournament and Tour Players a huge fee in the form of a "hold" to compete in non-member online Contests, and who directly benefits from this "hold"?

Appearances would suggest that the answer is yes, and yes. The greater question should be; What is the impact on racing when this happens and who does it benefit or impact negatively? An equally important question might be; Is this a conflict of interest?

This is a complex issue, so a little background information is necessary.

In mid 2011, as a member the Horseplayer's Advisory Committee to the NTRA, and while in the process of calculating the Entry Fees paid by Contest venues to see if we would reach the $2 Million goal for the NHC Final, I was surprised to find the actual total Contest Fee revenue to be significantly more than would be distributed to the Championship contestants. With no answers forthcoming, this issue became a growing concern and a request for clarification was brought up in Committee discussion and forwarded to the NTRA and was returned with the following response. "The NTRA owns the NHC and they will run it as they see fit". We were also told that it (the "hold") was announced publicly in late 2010 and would not be discussed further. I've saved every NTRA Tour and Tournament email or snail mail from the past 4 years. There is not one mention that the NTRA will "hold", for it's own discretionary use, Tournament/Contest Fees in excess of $3,333.33 (or any other amount) per qualifying spot from Non-member Tournament sites. This lack of transparency for the Players, and it's reflection on my integrity in the horseplayer community, is the main reason for my resignation from the Committee on December 20, 2011.

Since October of 2011 I have posed the following question to approximately 75 Contest and NTRA Tour Player's. Are you aware that not all NHC Contest Fees directly benefit the purse of the NHC Final? Not one person was aware of this and all wanted an explanation and clarity regarding the "hold". Here's the answer.

1. NTRA Member Site's pay approximately $3,333 for each qualifying spot to the Final from entry fees. These fees directly benefit the NHC Final and Purse.

2. Non NTRA Member Site's pay in the range of $6,500-$7,100 for each qualifying spot. Only $3,333 of these amounts directly benefits the NHC Final and Purse.

3. Apparently the NTRA believes that this "hold" of greater than $3,333 per qualifying spot is a way to generate the equivalence of Membership Fees, unfortunately it comes at the direct expense of the Players.

4. The NTRA will take from the Player's Entries Fees, a "hold" of almost $700,000 in 2012 if the projected number of 200+ non-member online contests at NHCQualify.com & HorseTourneys.com is accurate. If you then consider that Twin Spires who offered 40-50 spots in 2010 and are expected to do at least the same in 2012, the “hold” could jump to approximately $866,000.

5. The NTRA Tour prizes are funded from yearly Tour Membership Fees paid by the Player's. Some of the Membership fees cover other NHC costs. Currently, there is no way of knowing if any of these fees are “held” by the NTRA.

On December 23, 2011 I sent a "letter to the Editor" of the Daily Racing Form (a copy is included below). As of January 5, 2012 I have not received the courtesy of a response, nor has it been published. It's reasonable to interpret the reason behind DRF's unwillingness to publish my "letter to the editor" if one considers that Daily Racing Form LLC is listed as an official sponsor of the NTRA Association and is a stated partner with the NTRA on other (UN-named) ventures. It is not a certainty that the DRF does or does not materially benefit from the "hold" taken by the NTRA from non-Member Contests.

The reality of this situation!

The NTRA owns the Tour and NHC Final. It is a "for-profit" business subsidiary of the NTRA. They have the right and responsibility to set and adjust the rules and regulations as they see fit. They also have the legal right to add a surcharge or "hold" at their sole discretion to/from any and all Tour or Tournament Fees. However, it does not serve the greater good of racing when there is no transparency about said fees and a reluctance to make them public knowledge.

The Player's have the right to know what NHC rules, surcharges or "hold's" are currently in existence. Almost all contest sites whether online or Brick & Mortar "hold" up to 25% above the respective contest fees they remit to the NTRA per qualifying spot. The good news for the Player's is that greater than 75% of all Member Contest Fees directly benefit the NHC Final. The bad news for the Player's is that less than 30% of all Non-Member Contest Fees directly benefit the NHC Final. This capital drain and the lack of contest purses will eventually result in the end of NHC Qualifying Contests at Brick & Mortar sites, soon followed by the online contests when the horseplayer's finally see the light.

The Player's also have the right to participate or NOT participate in any Contests, including those that have an additional or exorbitant surcharge or "hold" that instantly becomes dead money that will never be returned to them. It's strictly an individual choice.

The Player's have other choices. For example, The Horse Players World Series at the Orleans has a Purse in excess of $700,000, returns all entry fees, and in addition they fund the daily prize pool. It's also worthy of note that online Qualifier's for the HPWS have an average hold of less than 20%.

Why should the Player's be concerned?

Apparently this fee or "hold" started a few years ago with the inception of online qualifying contests at NHCQualify.com. As the NTRA continues to have less and less impact on Racing, it will lose more and more members. One option will be to hold an ever increasing number of online non-Member Contests to help fund the NTRA. The next indication of this happening is the projected increase to in excess of 200 online qualifying spots for 2012 between NHCQualify.com and HorseTourneys.com alone. Another option will be to attempt to sell the NHC and Tour business to an outside interest, while it still has value. This idea lacks merit simply because the new owners would then have to recover their purchase costs, and that would naturally be expected to come from the Player's entry fees. Same horse, different owner!

As of December 31, 2006 the NTRA financials showed Total Assets of $32,437,194. As of December 31, 2010 the NTRA financials showed Total Assets of $4,394,254. In four years the NTRA had lost 86.5% of it's value. A further drop to <$3,000,000 Total Assets is expected to be shown in this year's financials. As members leave the NTRA fold the number of online contests will grow and the "hold" will increase. The horseplayer's wagers are the life-blood of the sport. Tournament entry fees come from the Player's wagering bankroll. If the NTRA member contraction continues, the NTRA can be expected to do their best vampire impression and take (hold) just a little more of the life-blood from the Player's, and then a bit more, and on and on until there is nothing left to take.

Why should the NTRA Members and Member Tracks be concerned?

The exorbitant NTRA "Fee to Compete in Non-Member Tournaments" (the total burden of which rests with the Horseplayer's) brings with it the unintended consequence of an exponentially negative impact on the Racing Industry. The most basic reality of Horseracing is the fact that it is funded by wagering, most of which comes from the Horseplayers, some of whom are also Owners. It is an accepted fact that when Win-Place-Show take-out exceed 17%, the handle drops significantly. A reduced takeout results in increased handle. As an example, when NYRA reduced their WPS takeout a number of years ago to the 14-15% range, their handle increased significantly. It is also a fact that on the days following a huge carryover being hit, the daily handle is much lower than on corresponding days. This is known as "the dead money effect".
In 2011, there was a significant drop in the number of entry's and attendance at the Brick & Mortar Contests. The single biggest reason for this was the massive increase in the Non-member online Contests, most of which were scheduled on the same days as Brick & Mortar events. Many of these contests were mid-to-late year additions to the tournament schedule and inserted without regard to the devastating effect if would have on the Brick & Mortar's who had already planned, advertised, and invested time, money, and effort. The late arriving Super Qualifier's can best be described as a disaster. Member tracks affected by this poorly planned scheduling debacle by the NTRA lost money, handle, and unfortunately credibility through no fault of their own.

I'm not sure if the NTRA Member Tracks are aware, and if so, have considered how devastating such a conflict of interest (the hold) is to their growth and existence. The Membership Fees they pay to the NTRA are expected to grow their customer base and profitability. The "hold" will shrink the Players' bankroll by about $700,000 in 2012 to "dead money". Dead money, in this case, is wagering capital permanently removed from play. Most horseplayer's I have interacted with in the past 40 years have had a specified bankroll or a yearly amount of discretionary dollars set aside for wagering. The magic of the bankroll is it's exponential value as it is churned over and over again. Most put the yearly churn rate for a bankroll in the 40 to 50 times range. This means that a $10,000 bankroll can yield $400,000-$500,000 in wagers each year. So what is the effect of $700,000 "dead money" on the NTRA Member Tracks handle. $700,000x40 churn rate=$28,000,000 or $700,000x50 churn rate=$35,000,000. Even a churn rate of 30 would result in $21,000,000 less in wagers.

A few things to ponder:

If the mission of the NTRA Coalition, as stated in April of 2008, is to improve the economics of pari-mutuel wagering for horseplayer's and racetracks, why then is there so little transparency when it comes to extracting huge sums of money from the Players, and in effect penalizing their members at the same time.

In 2009, the NTRA Safety and Integrity Alliance instituted a Code. A worthy endeavor indeed. "The Code focuses on six areas: equine injury reporting and prevention; drug testing and medication; safety protocols; research; equine retraining and retirement; and wagering integrity". You will notice that wagering integrity (the Horseplayer) is the also-ran of this group. Some might wonder why integrity does not include informing the Horseplayer's that they are now a funding mechanism for the NTRA to the tune of an estimated $700,000 in 2012 and who knows how much in the near future. Transparency and Integrity go hand-in-hand in the real world. The NTRA Members and affiliates each know exactly how much they are contributing to the NTRA and how it is spent. Isn't it time that the Horseplayer's whose wagering dollars actually fund the sport, are as well informed.

What do you think the daily handle would be at your favorite track if the ("hold") take-out was 70% on every bet you made?

One final thought. It would be great if the main internet contest sites (HorseplayersQaulify.com - NHCQualify.com – HorseTourneys.com – TwinSpires.com) could get together to create the next great national contest experience where everyone is satisfied with up to a 20% business fee ("hold"), full transparency of costs and benefits, where all the contests have a purse, and the Championship Final represents all Entry Fees.

Sincerely,
Edward J. De'Ath

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Letter to the Editor: DRF -- December 23, 2011

Is the NTRA National Handicapping Championship becoming a Lottery or Casino?

Most, if not all, Tour Members will be surprised to hear that not all NHC Contest Fees directly benefit the purse of the NHC Final.

NTRA Member Site's pay approximately $3,333 for each qualifying spot to the Final. Non-NTRA Member Site's pay in the range of $6,500-$7,100 for each qualifying spot.

Apparently, ALL Entry fees in excess of the approximately $3,333 per qualifying spot are held by the NTRA as a business fee. It has been explained that the NTRA owns the rights to the NHC. As an example, NHCQualify.com and HorseTourneys.com, who are Non NTRA Members, are expected to propose a 2012 schedule that offers over 200 qualifying spots. Assuming 200 spots, a simple calculation of a minimum $3,000 "hold" per spot will net the NTRA a cool $600,000 in 2012. To be fair, HoreseplayersQualify.com, NHCQualify.com and HorseTourneys.com offer complete transparency that indicates their "hold" of up to 20%, which is the accepted norm. There are other non-member sites but none as large. The average betting "hold" in racing is about 20% so this is not an issue.

The questions I would ask all Tournament Players is; Are you aware of this "hold" and are you willing to pay this price to compete, and what exactly are they doing for the players to earn such a substantial fee? Personally, I was very disappointed and discouraged to recently find that we are being charged this 50% fee and it is not common knowledge amongst the Players. Of the 40+ players I have spoken to in the past 2 months, NOT ONE was aware of this "hold". We end up competing for a benefit of ONLY 30% of these Contests. The final insult is that those who are skilled enough to win the year-end big prizes then get the opportunity to share an additional 28%+ with the IRS. Lotteries also "hold" 50% and then you get to pay tax on your winnings.

The approximate $700,000 NTRA "hold" effectively becomes Dead Money. The Dead Money Effect is when a significant amount of betting capital is removed from play, never to return. Online (Non NTRA Member) Site's offer NO PURSE money. Purse money is churn money. Churn money keeps us and our bankroll's solvent and allows us to continue to play, whether in contests or our daily wagers, to the direct benefit of racing. The unintended consequence's of this "hold" is that it has had a huge negative impact on the Contests, and handle at the Brick & Mortar Tracks and Contest Sites. It will not be surprising to see a significant number of defections from the Brick & Mortar Contest scene.

My greatest fear is that in the near future the NTRA will continue to lose Industry support (Members) and the burden of their existence will rest with the Fees they levy on the Contest Players.

I have a one suggestion.....Periodically, DRF publishes the "hold" for all bets at all North American Tracks. As a founding supporter of the National Handicapping Championship and it’s players, how about publishing the Contest "holds" relative to these events. Maybe it's time for Noel Michaels to update his Handicapping Contest Handbook again.

It's ALL about transparency or lack of it in this instance. The issue IS NOT whether the NTRA can legally "hold" 50% of (Non-NTRA Member) Contest Entry Fees. The issue IS that ALL Contestants who purchase an Entry should be made aware of the "hold" so they can make a choice to play (pay) or not, based on all the facts. No more, no less!

With great respect for all Handicappers and Tourney Players,
Edward J. De'Ath