Business of Horse Racing

[km]

Nevada gambling revenues are officially down about 16% this year, but the reality is much worse. The number of visitors from California is down about 40% and that's the key demographic. I was vacationing in Lake Tahoe and the casinos were "dry" (slow) and there is definitely less activity noticeable in Vegas when we were there in July (although the HTR seminar had a record turnout!). Foreclosures on property in Vegas are massive.

MEC (Magna) was supposed to be de-listed yesterday after failing to hold a $1.00 a share on the NASDAQ the last 6 months. I don't know if that has officially happened. Stronach has reported more bad news and losses lately including the incredible assertion that they want to sell 60% of Santa Anita. Now why would a potential buyer want to be in partnership with Magna? No offers are forthcoming for any of their tracks right now and Pimlico has been vacated until next year.

Horse racing in general did not suffer declines in handle that were indicative of the economy. The 2-3% loss in handle lately has been due to infighting and splintering off-track wagering. If they could get it together and allow all outlets to take all tracks, the handle would rise.

The thoroughbred sport has NO history of downturn during bad economies and tends to thrive during recession. Horse racing expanded and flourished during the great depression of the 1930s and has always seen increased business during inflationary periods and higher unemployment.

Why does that happen?

[Mark]

I spoke to a friend in Reno yesterday, a recently retired poker dealer who echoed your Tahoe observations.

Racing's recession proof history may be just that since the days of cheap fuel and limited gambling venues has passed. On balance, I suspect people bet a higher % of their real income as recession and/or inflation reduce the $$$ total. A struggling time and gloomy prospects probably promotes those inclined to gamble or speculate wisely (HTR devotees) even more so.

[dehere]

Could be wrong Ken, but I suspect that as disposable cash decreases, gambling doesn't decrease, it just happens closer to home. As Vegas gets more and more expensive to get to, eat at, drink at and as table minimums rise, its a whole bunch less expensive to go to Foxwood, the closest river boat, or the neighborhood card game.

[Blueboy]

Poker games tend to stay pretty good in bad times. Not great, but there is still action. I think people feel the need to try and make a score to make ends meet.

As far as horseracing in the 30s vis-a-vis today, there are a lot of differences. Dog racing, which attracts a much younger crowd with it's faster action. The lottery, which attracts your two-dollar lookey-lou betting types, and of course an Indian casino on every street corner. Not to mention the ease of Internet poker and other types of online gambling.

I live near a fairly new racing facility (Emerald Downs-- built 12 years ago) and I've only been there once. I used to got to Longacres all the time. In fact, I loved going to Longacres. This was before the Internet, and simulcasting, and multi-track wagering. You (I) played one track, followed it closely, and everyone (who played the ponies) followed the horses, knew them, and talked about them. It was a lot of fun, and I miss it.

But now I just don't have the interest I once had. And when I ever do get the urge to go I decide against it because I don't want to pay to park, pay to get in, pay for a good seat, pay for this and pay for that. You're stuck a sawbuck or two the minute you walk in the door, so why bother? Plus, I don't follow it that closely, so what are my chances...really?

You can play online, but that's not as easy as it looks either. You have to glue yourself to the computer, follow the odds, have a pretty decent setup, and in general you must really be into the game.

When I want to play poker it's so much easier. Don't have to study, don't have to pay to get in, pay to do this and pay to do that. Just go in, put your name on a list, take a seat and start playing. It's easier and much more profitable--much more consistently profitable. At least for me.

So I pretty much gave up horses for cards about 15 years ago. I'm still interested in horse racing, I still read books about it, read message boards, think about it, study it in my spare time, but because I find it almost impossible to make a living at the game, I don't invest much time in it. I've explored many, many avenues, but I just haven't found a way to confidently do that. In short: it's a lot of work that just isn't paying big enough dividends.

I know a lot of people who used to play the horses regularly who don't even bother these days. I know a guy who has a nice box at Emerald Downs, and he never even goes. His box at Longacres was always filled with a bunch of us guys getting together and having a good time.

So what is the point of my rambling on? I think that there are a great many people, gamblers, and horse players, who think just the way I do. When deciding how to gamble, we weigh our choices and pick the one that suits our needs--is the easiest to impliment--and has the most profit potential.

I just don't believe that horseracing is attracting many new players, and it certainly isn't attracting it's share of the younger crowd--who you need to cultivate into long term horse players. Most of them are playing poker.

I believe that if we ever do have another depression, horse racing, and a lot of other gambling related business will suffer more than usual--they won't die--there will still be action--but there will be a significant downturn. And of all the gambling related venues horse racing will suffer the most.

The average working dollar is stretched pretty thin these days.

[km]

Thanks for the opinions. We have to remember that we are discussing the American version of the sport only. None of this applies internationally.

In Asia and Australia the sport of horse racing is a frenzy, huge following, they love it, massive betting pools. In Europe the sport is still much more revered than here and the addition of Dubai is a major boost.

So horse racing is only in decline in the USA primarily because of the resistance and stubborness of industry people and politics to let it grow.

We have been adding international customers to HTR in the past couple of years. Overseas users have been getting more exposure to our game and are interested because we have far more available data and more exact timing of races.

Poker vs. Horseracing in SoCal is not even close. We have had Poker in LA (Gardena) long before ESPN picked it up for the craze and 20 million of us are just 4 hours from Las Vegas. Hollywood Park has one of the top poker rooms in the country and attracts a few hundred young players at a time while the Friday night racing gets thousands of them. Gambling options galore have always been easy to access from SoCal but horse racing betting handles here far exceed anything else. DMR is always a romping success as are most of the Cal Fairs and younger crowds prevail. Even Hollywood Park itself has experienced a resurgance since the installation of the synthetic track. Santa Anita is one of the most successful sports operations in the country despite the debacle of Magna and the mess of a surface. It has full community support and is an icon of the area.

The bottom line is that horse racing is a unique skill-based gamble and will continue to attract more and more numbers players worldwide while other forms are gambling eat up the bankroll with virtually no chance of success.

I'm optimistic.

[Blueboy]

Good points. I would like to mention something. Poker has experienced a sort of resurgence, but was always popular and growing. The growth factor was magnified because of television to be sure.

However, poker could be in real trouble down the road. Increased rakes, jackpot drops, and higher table fees make it almost impossible for the small stakes players--the bread and butter of most gambling industries--to win. They are just spinning their wheels--especially in California, where the price to play is exorbitant.

As a player you notice this because the games become tougher...faster. The loose recreational players with disposable income are disposed of much too quickly. Looking around the room you see quite a few good players and not enough bad ones. The games were so good, and now they're not so good--where did all the bad players disappear to?

Higher stakes players at least have a chance to overcome the drop. The drop is so prohibitive in the smaller games that it is virtually impossible. And in my opinion this will eventually catch up to the games, especially since the trend is to raise the drops at every possible opportunity.

Horseracing overseas, especially in places like Hong Kong, are more concentrated with much fewer races. Handles are huge. I believe the same would be true here if the same procedures were applied.

Horseracing can be beat, but the very high rake makes it very difficult--especially for the casual player. In small stakes poker games and horseracing most of the money is taken out of the game in the form of rake and drop.

In a typical $4-8 hold'em game as much as $5 is taken out of every pot. This is not counting jackpot drop and tokes. The dealers are proficient, and upwards of 40 hands per hour is not uncommon. Let's say 35. That's $175+ an hour coming off the table. If everyone buys in for $200, then in 8 hours all of the money has gone down the chute.

Contrast this to the days when we used to pay $1 and then five years later $2 a half hour to play. $135 per hour remains in the game, and after 8 hours $1080 is still on the table for the players to try and win. In those days you could actually beat a $4-8 game for $10 to $25 an hour, depending on the players.

In horse racing a minimum of 15% is taken out of every bet. Exotic bets are much higher. Let's say an average of 20% nationwide. In 2006 the average daily handle at Santa Anita was 2.2 million dollars. $440,000 of that went down the chute. Only the best of the very best can overcome vigorish like that.

If the money isn't there to be returned to the players the game will eventually die--especially when the trend is to escalate, not decrease, the drops even higher.

There are rumors in California of yet another rake increase for poker. It wasn't that long ago when they just had one. In my opinion, because of these trends, poker and horseracing will both take a turn for the worse. I can already see it happening in the poker games.

Not enough money is coming back to the players.

[OPM]

Blueboy, I don't know who you are but you must be a mind reader, let me tell you about my recent experience.

I just got back from a cruise and played a 2/5 game. With 6-7 players I thought it was a really good game, until I found out the rake was 10%(up to $150 pot). After 2 hours, everyone's stacks was halved or they were gone. I went to my room and figured out that if we have seven players and we all buy in for $200, we would be broke in about 5hrs at an average of $50 pot. The dealers were dealing about 35-40 hands/hr.

It then hit me that this is what is happening to horseracing except it is occurring at 2x since the blended take is 20%. The only was to win is to hit a big bet and only play when you have a sig. advantage. I have started to limit my play to fields with > 10 horses because I'm an exotic player and when I have a score I want a score.

However, the big advantage that poker has over horseracing is tournaments where the big pots and a rake of only 6% makes it very beatable.

[MikeDee]

We are on the same page.

I only play dime supers

I only play in fields of 9 or more, VI under 30 and only in races with no FTS. (I can't figure FTS runners)

I only play when I really like a horse with at least 7-1 "probable" odds and l like putting the no 1k and or the probable odds fav in the 2-4 hole along with some hopeless closers at long odds.

my motto "bet a little and try to win a lot"

[DanG]

All good points in this thread;

Call it blind faith or a naïve outlook born out of necessity, but I don’t view racings future bleak at all. Contraction and many versions of rule changes will come down the pike, but federal intervention aside (interfering with the interstate wagering act) our game has strong roots fostered in ownership and the 25 year breeding boom.

I’m very prejudice when it comes to big three potentially “positive expectation” games of racing, poker and some blackjack. I find blackjack like watching paint dry and I frankly don’t have the ‘used car skills necessary to take a mathematical background to the next level.. (No disrespect meant at all btw).

Racings nut of 16-20+ something % is a brutal reality of this business, but I view it the way it was explained to me many years ago. The takeout is non-existent if discipline is applied. Day in / day out there is “at least” 17% of the pool that is utterly clueless. It can be ‘West Point Thoroughbreds” owner’s slamming their horses (and they do!), or a wealthy Ken Ramsey betting $5,000 of his telecommunications holdings, or a weekend when there is actually recreational players inflating prices.

All this is magnified if you have identified what your competition is basing their betting on. With HTR for example there are approaches not practiced by the majority of the pool. Individual skill set aside, this cannot be said about the mathematics of poker which can be taught to an MIT student in three days. True; our game can take a 1/3rd of a lifetime to master, but its complexities are part of the attraction as chess is to checkers.

As Mike Dee pointed out and it reflects Andy Beyer’s famous quote; “Horse racing has one undeniable virtue; one can turn modest capital into a life changing score”

Again; a naïve position, but I look at many pools as a completely level playing field. The work you’re willing to put in / X multiplied by X / the % of uniformed capital has made it so.

Sure…we would all love the rake lowered but some modern conveniences have essentially done that for us. HTR itself has taken the place of multiple information sources / as playing from home has eliminated many expenses as does PTC etc… It’s not all doom & gloom with our sport as long as we have owners willing to finance the show, minimal federal intervention and an attempt to market our game to the mathematically oriented gambler internationally.

PS: This is NOT directed at anyone here; but I would like a buck for every horse player who says he cleans up in poker. I know the ratio is 1,000-1 among players who say their ahead in cards vs horses and it begs the question…just who gets beat in poker anyway? :confused:...not everyone can have pocket aces. ;)

[Blueboy]

PS: This is NOT directed at anyone here; but I would like a buck for every horse player who says he cleans up in poker. I know the ratio is 1,000-1 among players who say their ahead in cards vs horses and it begs the question…just who gets beat in poker anyway? :confused:...not everyone can have pocket aces. ;)

About 95%~ of poker players lose. (This can basically be proven.)

My guess is that 99% of horseplayers lose.

[OPM]

Hey Dan:
HOpe you had as great of a vacation as my family.
You bring up an interesting point that I have never found an answer to (either intuitively or otherwise). Is a high takeout bad for you as an individual horseplayer in an individual race or just bad for the overall game. After all, if you are playing an exacta and the payoffs are $150( this is calculated after the takeout), does the takeout really affect you?
I really think it affects you if you play this game for a living. If you bet $1 million/yr and get a rebate of 10% in ex, then you are up $100,000 at the end of the year. That is money that would go down the tubes otherwise. HOwever, if you were discipline enough to only bet when you have an advantage(and to realize that you have an advantage) then it may or may not matter.
This is maddening but all the studies(and Fraser can comment on this) says that lower takeout will improve the longterm viability of this game.

REgarding poker: I think Beyer's quote is more apropos to this game than horseracing these days with the 75 or so multimillion dollar tournaments each year. 3 days can get you a lifetime score!!!

[Blueboy]

Is a high takeout bad for you as an individual horseplayer in an individual race or just bad for the overall game.

It's the same. Both are equally bad.

After all, if you are playing an exacta and the payoffs are $150 (this is calculated after the takeout), does the takeout really affect you?

What should the payout have been? With a 20% take it should have been close to $180. Multiply that $30 times the number of exactas you play in a given year, and that becomes real money you would like to have in your pocket.

I really think it affects you if you play this game for a living. If you bet $1 million/yr and get a rebate of 10% in ex, then you are up $100,000 at the end of the year.

Only if you are a winning player. And you're not really up anything you've just lost less in the form of takeout.

Regarding poker: I think Beyer's quote is more apropos to this game than horseracing these days with the 75 or so multimillion dollar tournaments each year. 3 days can get you a lifetime score!!!

True, but there is an opportunity cost. These tournaments cost upwards of $10,000 apiece to enter. How many times can you afford to lose 10K and still be intact financially?

Many of the so-called "poker pros" you see winning some of these events aren't doing so well these days. Variance has a way of catching up with you.

[km]

I think Blueboy got my point very well above.

Poker eats up a lot more time and expense than meets the eye. Don't be fooled by 'young guns' on t.v., almost all of them are impulsive and broke. Top poker stars have their expenses paid by sponsors, they have nothing to lose. Only a handful can survive the daily grind and costs involved. A regular tourney player can eat up $100k a year in expenses and entry fees.

Takeout is not an element that matters to me. If it was i would be at the crap table (<-1%) or Baccarat (-1%) or still playing blackjack (+1%) and counting cards with my toes.

Horse racing can beat for the same reason as poker: you capitalize on other people's mistakes. Beating the horses based on takeout notion is absurd - it's a ripoff takeout - no one denies that. Yet unlike any other gambling venture, the variation in the error by the other bettors is the highest of any game. Technically that's known as an "inefficient market". Horse racing has the most inefficient market of any gamble, so despite the takeout, it can be exploited.

No one reading this, no matter how sharp your level of knowledge about poker, could sit down with the top 10 poker players in the world and have any prayer of beating them all. No chance, no hope, nada.

But that situation is not impossible with horse racing. An average HTR user could sit down with the top 10 finishers at the last NHC and have a decent chance to beat them because the game has much higher volatility of outcome.

[Mark]

Interesting note on Bloomberg this morning:

" William Hill Plc and Ladbrokes Plc fell as analysts at JPMorgan recommended selling shares of the U.K. gaming companies on concern the economic slowdown will cut earnings."

I'd be willing to take the other side but not with sterling/dollars clouding the bet.

[Blueboy]

No one reading this, no matter how sharp your level of knowledge about poker, could sit down with the top 10 poker players in the world and have any prayer of beating them all. No chance, no hope, nada.

But that situation is not impossible with horse racing. An average HTR user could sit down with the top 10 finishers at the last NHC and have a decent chance to beat them because the game has much higher volatility of outcome.

Actually, what you say is not entirely correct for the very same reasons you site for horseracing.

Very inexperienced, and lesser poker players win major poker tournaments all the time. Some examples would be Jerry Yang, Chris Moneymaker, Robert Varkoni, David Williams, and many others. However, they wouldn't stand a chance, as you say, surviving in the day to day grind of high stakes poker. (Although there are some exceptions.)

Ken, let me ask you something. Above, you use a big horseracing tournament as your barometer. Horseracing tournies, like poker tournies, have a built in fixed loss--namely whatever you buy-in for. In a horse-racing tournament you can afford to splash around on big longshots, because that's what you must do in order to win, and all you really lose is your initial buy-in. But can (do) you play that way in your day-to-day handicapping? That is, always splashing around looking for big longshots? Are the two apples and oranges or apples and apples. Do you play tournaments the same way you play on a daily basis?

You certainly don't play the same way in a poker tournament as you would in a cash game.

You hear so much about successful tournament horse players, but are they that successful in their day to day play? Can the two be equated?

Just as tournament poker and ring-game poker are miles apart, I can't help but think that the same is true for horseracing.

[DanG]

Good points Gupta [OPM];

The discipline / work ethic / information base overcomes a large portion of the rake along with the type of player you are. The more complicated the wager, the more inherently inefficient the pool. We must capitalize on human nature in this game and that hasn’t changed in thousands of years. Even when our competition has a very good read on the race, so many bet the race recklessly.

The Ernie Daulman’s / Wall Mart type gamblers of the world are FAR more impacted by the takeout then a player like either of us imo. There are huge swings in advantage with complex wagers just as “many” major wins pools have minor inefficiencies.

Regardless of who is writing the article; no one has accurate numbers on who is profiting from this game. The best player in our group (who recently retired) was as anonymous as a human could get. He is not in the statistics of ‘winners and he’s not alone in the shadows for a variety of reasons.

Getting back to the rake Gupta; there is little debate that lowering the takeout keeps more players in long term and the churn helps all involved. As you said however and Ken touched upon…Every gamble we make has (sometimes) huge variance in advantage, so to use +-20% as a constant in our business is fortunately not correct. :)

[km]

Blueboy, your citing guys who won in a 5000+ player single elimination lottery known as the WSOP Main Event, my example was if the average guy sat down with the 10 best poker players at once in a money game or tourney - he would have no hope. But any regular HTR horseplayer could sit down with the 10 best NHC finishers and have a near equal shot no matter what the format.

As for your question about horse tourney vs. money. Most seem to excel in one or the other. In both cases they are doing the same thing though, stepping up and swinging for a grand slam home run. We have HTR users that have won millions in pick6s and other wagers and groups of subscribers have won millions in tournaments over the years. We just don't hear about the guys with the wagers because they keep it quiet :cool:

[attytess]

First, let me say I really enjoy this thread and all of the comments. That said, I really think we're comparing apples to oranges to the "nth" degree. Poker is merely a game of percentages and position--and like horse handicapping-- you can make all the right moves and still fail. In poker, you usually know rather quickly what went wrong when you fail, whereas it usually takes some research to determine the horse handicapping flaw. Any disciplined poker player can and do play with the "best" poker players. Ken, regarding any regular HTR horseplayer taking on the top 10 NHC finalists, I agree that any HTR player would have a good chance to win. I would suspect that 4 or 5 of the top ten finalists are already using HTR, but I am convinced after sitting amongst HTR players at the Gold Coast Tourney that 1)no two HTR players use the same route at arriving at their horse selections, and 2) all HTR players are the opposite of "regular"---which suits me fine.:)

[km]

We'll give atty' the last word since he makes a good case and close the thread.

If you are the best at what you do and prepare better than anyone else, you can't help but make money at whatever the game.