Going Forward...

[PrairieMeadows]

This Thursday the Prairie Meadows Board of Directors will present thier 5-year plan to the Iowa Racing and Gaming Commission on what racing will look like. It is upon that plan that the Racing Department will have to put flesh and life to bone.

I am looking for direct input from HANA as we build the 2010 season. I want to give you the seat at the table. We all know some the bulk of the sentiment, but as a matter of working out the details of takeout, integrity, access, distribution, quality, field size, etc. the Horseplayers of North America must carefully annunciate their words, in a language that makes sense to the traditional stakeholders of the racing industry.

It is with the aforementioned in mind that I would like to talk about our wagering menu and takeout rates for 2010. Let me tell you what we currently offer, and then why.

WPS@17% (ALL)
EX@20% (ALL)
TRI@23% (>=6)
.10 SPR@20% (>=7)

DBL: 20% (First two, and last two)
P3: 23% (1,3,4,5,7)
.50 P4: 20% (2,6)

1. Our wagering menu is at first bound by what is available from our tote company, Scientific Games. New wagers are costly to develop and program, and for a medium to low handle track, it can be difficult to recoup such costs. If you see a wager at another track, however, it is likely that out tote company has it available.

2. Our wagering menu is bound by the Iowa Racing and Gaming Commission. We cannot offer any type of wager without thier approval. Much of the Administrative rules cover your standard wagers, but deviations from these rules take some lead time, as the changes or additons have to go through the administrative rule-making process.

3. Our wagering menu is bound by volume. While I have read that when it comes to a wagering menu, the more the merrier, In order to prevent a pari-mutuel market failure, we want healthy volume on exotic wagers so as to prevent "waterfall" payouts and offer adequate payouts on exotic wagers. Wagers of similar type tend to canibalize each other, this is why the pick3 is not offered on races where we have a pick 4.

4. Takeout: Takeout is one of the most heated topics, our rates have been the same for some time and were likely set to be competitive in the market. If there is truly to be a takeout revolution, the tracks need revenue, to, at minimum, stay flat. I have read some of the explanations, and simulations of how takeout affects bankroll, but conjecture and supposition is not enough to change the minds of those in charge. Hard facts and research are needed to demonstrate that reducing the price will result in more revenue. Some things to keep in mind:

a. I do not have our exact numbers, but in general tracks sell their export signal for 2.5% to 5%. this means that other tracks are paying this much for it. Thier profit is made in the spread between the total takeout and what they pay for it, so any overall reduction in takeout affects not just the host, but the guest as well.

b. Ellis Park experimented with a low takeout pick 4 a few years ago. As I remember they had mixed results. Some of my research based on using carryovers as a change in price, indicated that in those limited circumstances, the price of our wagers did not show cross-elasticity of demand.

c. Breakage is provided for in the administrative rules of the IRGC, and is used to fund the breeding awards program. Any change to this system would have to recognize that the breeders awards program would need alternative funding to maintain it. Any change to the system requires changing the administrative rules of the IRGC.


Finally:
We are planning on presenting a list of ideas to our Board of Directors, and any idea can be developed, described, and rationales, I will ask to present to the Board. Any idea. I really do want to give you a seat at the table. And as we move forward I hope that you remain involved in our planning process.

Thank you.

[rrbauer]

Originally Posted by PrairieMeadows

c. Breakage is provided for in the administrative rules of the IRGC, and is used to fund the breeding awards program. Any change to this system would have to recognize that the breeders awards program would need alternative funding to maintain it. Any change to the system requires changing the administrative rules of the IRGC.

Well, the breeding awards program is the direct beneficiary of horseplayer robbery because breakage is not necessary except to remove odd cents from payoff calculations. It's a convenient process that enjoys the fruits of the status quo and attempts to reform it encounters resistance such as "change to the system requires changing the administrative rules of the IRGC."

Well, what does it take to change those rules? What leadership can HANA members expect from Prairie Meadows in that regard? Whom should HANA members be contacting in that regard? The irony is that removing breakage except for the calculation issue noted, would increase handle by putting more money in horseplayers' pockets.

I don't speak for HANA but as a horseplayer and a member of HANA and someone that recognizes that racing is secondary to alternative gaming in terms of revenue production at Prairie Meadows can you just do the right thing? Get rid of breakage.

[PrairieMeadows]

rrbauer,

I was not using the facts included as excuses, but rather as an explanation of why and how our race track does not operate by fiat.

Well, what does it take to change those rules? In general, a rule change requires a submission to the racing commission for the new rule, a public notice and comment, and then adoption or rejection by the commission.

What leadership can HANA members expect from Prairie Meadows in that regard? First, and foremost, you can expect that we will listen to what the consumer wants. Would you have breakage to the nickel or penny only to have a corresponding increase in takeout? Is breakage more or less important that getting some other changes made? Once we have a comprehensive idea of what the customer wants then we will go forward with a plan of action.

Whom should HANA members be contacting in that regard?
First off HANA, and anyone from this forum is welcome to contact me. PM me for my email and office number. I can give you contact information for almost anyone you need in Iowa racing, or if I don't immediately have it, I can pass your information on to them. Once we have a complete idea of the agenda we will persue, I will let you know who the decision makers are.

[cj]

Originally Posted by PrairieMeadows

Would you have breakage to the nickel or penny only to have a corresponding increase in takeout? Is breakage more or less important that getting some other changes made?

Why are the two related?

We all understand the costs of doing business. But, when purses are being funded by slots, you are not going to get a lot of sympathy. To keep it simple, we don't really care how breeder's programs are funded or why takeout is so high. Do we honestly need more Iowa breds running around? Somehow I doubt it.

When I go to Walmart, I either buy a product or not based upon the price. I don't care what rules are in place at Walmart, and I also don't care how much the worker's health care insurance is, what it costs to pay a cashier, etc.

Horseplayers are finally realizing the prices we pay to gamble, yes GAMBLE, suck. The business needs to find ways to cut costs. This isn't knocking Prairie Meadows any more than most other tracks, but again, when propped up by slots welfare, there isn't going to be a lot of sympathy. It is going to have to be a collective movement by all tracks for it to work.

Despite fierce competition in professional sports, it is the fact the teams are all part of a bigger league that makes it all work. This includes team sports as well as many individual sports. The one sport that is run closest to racing, boxing, is basically dead for many of the same reasons racing is in trouble.

On another note, Ellis' mixed results with the low takeout had more to do with how other tracks handled the bet than it did with the takeout itself. Many wouldn't take it, or in Canada, imposed their own high takeouts, etc.

Finally, I do find it encouraging that PrM seems to want to listen and is inviting HANA to the table. I am just a member and can't speak for the group, but I certainly hope being at the table helps.

[MNslappy]

Originally Posted by cj

Why are the two related?

Yes, why are they?

Originally Posted by cj

I do find it encouraging that PrM seems to want to listen and is inviting HANA to the table.

agree, big props for coming here and soliciting opinions lately PrM guy

[CBedo]

Originally Posted by PrairieMeadows

Any change to this system would have to recognize that the breeders awards program would need alternative funding to maintain it.

I believe this is how breakage and takeout are related, lol. They aren't going cut the breeders awards or pay the difference out of their pocket. Someone has to fund it--unfortunately, that's us!

Thanks to Prairie for actually listening and trying to think about the horse bettor, as well as the horse breeder, in planning Prairie Meadows future.

I would be interested to know how much breakage adds (as a percentage of handle)?

I would also be interested to hear why the Double and Pick 4s are 20% but the Pick 3s are 23% takeout? Same question for why the difference between exactas, trifectas, & supers? Is there a structural reason related to pool sizes or other factors, or is the higher rates on trifectas and pick 3s just "because they can?"

I see that there is no quinella listed. If that is correct, I applaud you.

One thing that wasn't mentioned in your comments that is indirectly related to wagers and wager pools is field size. I saw the article about the shortening of your season (your twitter link), and was wondering what the track's thinking is with regards to targeting field sizes going forward, and what is the right balance for breeders and bettors, and how the racing days changes will affect QH and thoroughbred fields.

Thanks,

Chris

[kenwoodallpromos]

I have a question. I just checked your May 18-June 6 condition book, and you list in every race for 3+up regardless of whether the race is maiden, claiming, allowance, male, female, sprint, or route= 3 year old 117 lbs, older 123 lbs.
My question is, if you want to increase field size why are you penalizing every Thoroughbred 6 lbs who is as little as 1 year older than 3? When you consider on top of that bug weights and non-winner categories there could end up being a 9-16 lbs weight advantage to 3 year olds. How do you keep 4+ups entering to run at your track? What % of "Older" horses win as compared to the expected win %? Do "Olders" keep running at your track, retire, or what? Just guessing that with 3 week meets and at most 2 races at your track for "Olders" it may not be worth bringing some there to race? I suggest trying lowering the weight difference to say 3 bs, and at a certain age like 6 or 7, start lowering the weight lb for each year of age.

[kenwoodallpromos]

The scale of weights or weight for age have not changed in 100 years. Races written to be run under "scale of weights" or "weight for age" are supposed to use the weights listed below.
Years
of Jan Mar Nov
Distance Age Feb Apr May Jun Jul Aug Sep Oct Dec

Half mile 2 ... ... ... ... ... 105 108 111 114
3 117 119 121 123 125 126 127 128 129
4 130 130 130 130 130 130 130 130 130
5 & up 130 130 130 130 130 130 130 130 130

Six 2 ... ... ... ... ... 102 105 108 111
furlongs 3 114 117 119 121 123 125 126 127 128
4 129 130 130 130 130 130 130 130 130
5 & up 130 130 130 130 130 130 130 130 130

One mile 2 ... ... ... ... ... ... 96 99 102
3 107 111 113 115 117 119 121 122 123
4 127 128 127 126 126 126 126 126 126
5 & up 128 128 127 126 126 126 126 126 126

One and a 2 ... ... ... ... ... ... ... ... ...
quarter 3 101 107 111 113 116 118 120 121 122
mile 4 125 127 127 126 126 126 126 126 126
5 & up 127 127 127 126 126 126 126 126 126

One and 2 ... ... ... ... ... ... ... ... ...
a half 3 98 104 108 111 114 117 119 121 122
miles 4 124 126 126 126 126 126 126 126 126
5 & up 126 126 126 126 126 126
_____________________
Obviously the weights in race conditions have been scaled back, appearantly due to faster maturing horses nowadays, and probably steroids.

[kenwoodallpromos]

Here is a study showing generally that 3 yr olds at least hold their own vs. older, and with fillies do even better than expected: "http://www.homebased2.com/km/pdf/HTRMonthlyReport-MAY2001.pdf".
Do you really think 3 year olds need as much extra help to win (6 lbs including in sprints) as a beginning bug (7lbs)?
Since you are currently running a meet, why not survey the trainers for their opinion on whether more "olders" would run at PM if the 6 lb advantage for 3 yr olds were reduced?

[chickenhead]

I think it is great you are soliciting HANA and others opinions, and I hope the HANA board and track mgmt can get together for some fruitful meetings about these things.

My own personal response to the general takeout/breakage question in general

Would you have breakage to the nickel or penny only to have a corresponding increase in takeout?

This is not meant to be snarky, but what makes mgmt think that increasing the takeout would increase revenues? Do they believe they have infinite pricing power? What is their evidence for that belief?

Mgmt obviously has an understanding of the economics of their outlets, when it come to lowering takeout. Lower takeout too low (cut into their revenue), and they won't carry your signal. The same is true of bettors. We are logical people, just like the wagering outlets. If we get a better deal somewhere else, we will play somewhere else. Either at some other track, some other type of gambling, or in the stock market.

It is not the responsibility of the customers to behave it a way that solves a business problem for management.

If tracks did have pricing power, racing would be in great shape, subsidies would not be required, and every year would be a banner year for tracks and horsemen. And the answer would always be simple, just raise takeout to make as much money as you want.

We know that is not true. There is an optimum level that will bring you the most revenue. If you set your rates to be competitive with a horse racing industry that sets its rates grossly too high, chances are yours are too high as well.

People increasingly are not willing to pay 20+% for the product. That is not going to abate, I'd expect it to get worse. That to me is the reality, the only variable is if and when racing is going to adjust, or is even able to.

For the structural hurdles PrM or any other track faces to lower takeout, so far as working with its partners -- I know that is real, or begins to be real at some takeout rate. So what works?

Let's assume a number that for US racing would be an extreme example, lets assume the mgmt of PrM decided that the optimal price point, the price at which your signal should generate the most overall revenue for you was 16% across the board.

What would happen? Would any of them drop you, or require you to drop your fees? At what takeout rate does that realistically begin to come into play? Is it more an issue with ADWs, or other tracks and OTBs?

[DanG]

Originally Posted by PrairieMeadows

I have read some of the explanations, and simulations of how takeout affects bankroll, but conjecture and supposition is not enough to change the minds of those in charge. Hard facts and research are needed to demonstrate that reducing the price will result in more revenue.

This is such a positive step that a track is open to having player representatives join their meetings.

What troubles me is the above quotes concerning takeout. (This is not your exclusive belief btw; it seems to be an industry standard.)

If in 2009 “hard facts and research” are still needed to establish the relationship between omnibus taxation, long term churn and attracting serious players who are price point sensitive we are all in trouble.

If the incredibly limited examples of takeout reduction show little gain for the racetracks, why not take this to its ultimate conclusion and raise the rake to 80%? If we honestly belief there is no cause and affect; lets get serious and skim the pot into oblivion.

Takeout reduction is what can distinguish PRM from the simulcasting marketplace. The “before and after” payoff examples should be calculated and posted on PA, your web site and be key in your basic advertising budget. Expanded wagering options are terrific, but in all honestly you won’t create much buzz among players because an extra exotic is offered.

As far as I can tell; you have a pretty loyal on track following in Iowa. Let’s say HTR Donnie is putting 100k into your tri pools each meet. At your rate of taxation he is writing you a check of $23,000 regardless of his personal outcome in the wagers. Next meet; you meet Donnie at the door and explain; Donnie, we have lowered our tax by 5% so you will only have to pay $18,000 this year for the privilege of risking your hard earned cash.

What will Donnie do with this extra 5k per meet for the next 20 years? Right…it is part of his gambling allotment and it will simultaneously wind up churned many times over back into your pools (where you will rake it again for 18%) and it will drastically improve Donnie’s chances of sustaining his level of play. (Sorry Donnie; your so synonymous with PRM I couldn’t resist)

There is no infinite amount of betting dollars to be had. Even Vegas customers who are additive to the medal vacuum cleaners often shop price. Our industry is losing the casual players for a variety of reasons. This can leave shark vs. shark and when sharks find better feeding (I.e. off shore, rebate, straight up reduction etc) they find it and eat.

[PrairieMeadows]

First: Thank you everyone, this is exactly the type of discourse and information needed to effect change.

Second: In regards to the relationship between breakage and take. I am trying to gauge the relative importance of issues. Pushing all changes at once may not be as effective as a concentrated spearhead of a handful of issues. I want to maximize the efficacy of our efforts. Though, in the practicality of dealing with all stakeholders involved CBedo's insightful response may have something to do with it.

Third: Quinellas are part of the wagering menu. With the availablity of the $1 Box the wager seems redundant. I think the feeling is that they provide a relatively easy entrance point to exotic betting for the new comer. I take it then you would like to see them eliminated? Care to develop that further?

Fourth: Regarding the Ellis Park experiment. Thank you. This is very valuable infomation as Chickenhead alludes to in his post as well. Too low of a takeout and we risk particular outlets dropping us, though that concern could be outweighed by consumer demand for the product.

Fifth: Regarding targeting field size going forward. Part of the changes in our season is in itself designed to increase our ability to recruit trainers, and increase field size. I believe that we have 1250 stalls available. Some stalls need to remain open at all times for ship-ins, ponies, and potential quarantine, but we are still not at capacity.

Our goal is to solidfy our racing circuit. In the past with the end of the Thoroughbred-only meet, we had to make room for the incoming quarter horses of the mixed meet by asking some trainers to leave, or cut back. The problem is that when our Thoroughbred-only meet ended around the 7/4 each year, there was few options as to where they could go. They were left with the prospect of trying to ship to another track in the twilight of thier meet, go the Ellis, or layup somewhere.

The aforementioned situation decreased the success of our recruiting efforts. By extending our meet to the end of July or Beginning of August we hope to give trainers the opportunity to move from our meet to Remington Park. Remington Park opens in mid-August, and thier stable area opens three to four weeks prior to thier opening.

Right now the strongest flow of horses in regards to Prairie Meadows goes something like OP>PRM>RP. The second strongest circuit is HAW>PRM>HAW. In regards to Quarterhorse field size, the hope is that with a Quarterhorse-only meet, we will be able to recruit more trainers and better showcase that breed. It will be the first time we have a Quarterhorse-only meet we will have to see how that plays out.

Sixth: In regards to the weighting of races. I suspect that our weighting system is a product of convention and I will discuss that changes that kenwoodallpromotions made with Dan Doocy, our Racing Secretary, and Derron Heldt, our Director of Racing. I will conduct my own research both on historical past performances, and as was suggested polling. Would it be possible for you to send me the research they have at HTR?

Seventh: Regarding setting the takeout. Again, you have provided me with the arguments and information that will be necessary for change. Please keep it coming. Chickenhead you elucidate the crux of the issue. I am trying to discover what the number is. Arguing that takeout 16% seems more conducive to getting all the stakeholders behind a change than does arguing that takeout should be 5%. More candidly, I would like to know, that with todays current market what is the most bettors fairly expect to pay?

We need to conduct research of our own, in regards to lowering takeout to the issues Chickenhead pointed out: "What would happen? Would any of them drop you, or require you to drop your fees? At what takeout rate does that realistically begin to come into play? Is it more an issue with ADWs, or other tracks and OTBs"

Just as an idea, on an earlier post, I tossed out the idea of a variable rate of takeout based on field size. I do not know if it is possible with the tote system and account issues involved, but does this appeal to anyone?

Eighth: Wrap-up. Thank you. Thank you a lot. The information and arguments that you make great strides towards our journey to improve our product. I want to reiterate that in my quest for devining the relative importances of issues, I will ask questions and pose scenarios. These are not meant to say that a situation is either-or, or that one results from another, I am just trying to sharpen the focus, or develop a thought further so that when the time comes we can maximize all of our efforts.

[rrbauer]

Originally Posted by PrairieMeadows

Third: Quinellas are part of the wagering menu. With the availablity of the $1 Box the wager seems redundant. I think the feeling is that they provide a relatively easy entrance point to exotic betting for the new comer. I take it then you would like to see them eliminated? Care to develop that further?

Quinellas are most popular at two venues: Dog racing and Quarterhorse racing. If your geography has you drawing customers that have been or are involved with either of those, then they will be a popular bet for your menu and offering that wager is a no-brainer.

Originally Posted by PrairieMeadows

Just as an idea, on an earlier post, I tossed out the idea of a variable rate of takeout based on field size. I do not know if it is possible with the tote system and account issues involved, but does this appeal to anyone?

A better idea IMO is that any race with less than x starters goes as a non-betting race. If the racing secretary is having that much trouble filling fields or if taking races off the turf is reducing fields to 3- and 4-starters then the concept of substitute races needs to be utilized; or, the association needs to cut some days; or, cut some races; or, both.

[DeanT]

That is some really good stuff Patrick. Kudos.

I have to go through everything again, but I think the single biggest thing for Iowa racing is to change the mindset of slots being used for paying for everything, to slots being used to grow racing in Iowa on the demand side of the equation. I see you eliminated harness racing. It makes me wonder if your harness folks would have said 'yes' to using slots money to grow demand, rather than having no money at all for purses now.

For a look at how slots could/should be used in a better way for demand, you can try this at the HANA blog. http://blog.horseplayersassociation....cing-czar.html

If PM was the first to rejig their budget based on slots revenue with a proactive demand based formula you would be the first in North America to do so. If measured metrics (i.e attendance and handles), over time, increase, you would have proven to the world that slots can be used in a fresh way to grow the sport. To me, venues like yours using slots in a better way can do more for racing than many other things. It will not happen overnight, and the strategy must be long-term, but I think it could work for the better.

When slots were introduced, there was no five year business plan written. The stakeholders simply fought over slices, and then assumed (wrongly) that if people bought a few more state breds, and feed men made more money the sport would grow (a microcosm of this business and another beacon that tracks have no idea who, or what their customers do). A five year business plan, written smartly and implemented will have to be done in slots jurisdictions. Making PRM the first to do this would be a step we have not seen in racing, which is long overdue.

[rrbauer]

Originally Posted by DeanT

When slots were introduced, there was no five year business plan written. The stakeholders simply fought over slices, and then assumed (wrongly) that if people bought a few more state breds, and feed men made more money the sport would grow (a microcosm of this business and another beacon that tracks have no idea who, or what their customers do). A five year business plan, written smartly and implemented will have to be done in slots jurisdictions. Making PRM the first to do this would be a step we have not seen in racing, which is long overdue.

Five-year plans make business sense. But, when you have politician's operating on two- and four-year plans because that's how frequently they have to work on being re-elected; and state governments working on one-year plans because that's the revenue/expense budget cycle, then if the pols or the state budget are part of retaining your purse subsidies, your five-year business plan may be moot.