‘It is Incumbent on Our Racetracks to Provide Leadership in the Face of the Current Crisis.’ Letter to the Editor: Gavin Murphy

I wanted to add my voice to the growing chorus, led most recently by Amanda Luby and Lucas Marquardt, bringing attention to the existential crisis we face unless we make immediate and critical reforms to the way horse racing is conducted in this country. In the absence of any national body able or prepared to mandate change, it is incumbent on the racetracks themselves to undertake the requisite reforms. Those reforms need to address the interconnectedness between racetrack surfaces and the equine musculoskeletal system.

Our access to technology and data allows us to understand now more than at any time in our history the causes of catastrophic breakdowns and how to dramatically mitigate them. That is the good news. The bad news (which is incomprehensible to anyone outside our industry) is our continued failure to use that information to inform the way we build and maintain racetracks, and, with the notable exception of Santa Anita, employ available diagnostic tools to monitor in real time the ongoing physical health of our equine athletes.

So far as racetrack surfaces are concerned, there is no disputing the substantial safety advantage synthetic holds over conventional dirt. There is also growing awareness as to why this is, namely the greater loading on a horse's legs when racing on dirt, particularly the ankles and associated structures, which are especially vulnerable to breakdowns. Unless dirt tracks can be built to provide the same level of safety for horses as synthetic tracks, I find myself with those advocating for the wholesale transition from dirt to synthetic. And I do this as someone whose business is built nearly entirely around dirt racing.

I have heard suggestions that dirt tracks can be constructed in a way that makes them considerably safer than they presently are, presumably by reducing limb loading rates to a level comparable to those on synthetic tracks. People making this argument typically point to the surfaces in Dubai and Saudi Arabia as examples of safe dirt surfaces. In the same vein, there are those who advocate for a hybrid surface that combines synthetic components with conventional dirt to improve safety. It is tempting to believe one or both of these arguments (and the Middle Eastern tracks receive positive anecdotal reports) but I am not personally aware of data or scientific learning that supports either.

And this of course begs the question: If we can build better and safer dirt surfaces, either with or without synthetic components, why aren't we? One would hope that each track would have an army of highly credentialled ground engineers (including as part of the track maintenance crew) to design, build and maintain racing surfaces, using cutting edge technology and equipment to make real time adjustments in response to such factors as weather, wind and usage. If this isn't how it works, shouldn't it? And if it does work this way, then we need to concede it's not working well enough and embrace change.

The other related reform that needs to occur is the widescale embrace of diagnostic equipment to identify musculoskeletal responses to racing and training. We know that most catastrophic injuries occur at a site that is already compromised. Fortunately, the last few years have seen the commercial development of equine standing PET and MRI machines, both of which are installed at Santa Anita. Access to these machines allows trainers and veterinarians to identify developing issues and treat them appropriately and have undoubtedly contributed to the decline in fatalities there.  Such equipment should be installed and used routinely at every major racetrack in North America.

We are all aware that our industry has been in decline by nearly every metric for many years, fueled largely by a chronic inability to appeal to a larger audience. We can all debate the structural issues in our industry that have led to this decline but unfortunately, given the persistent and highly public catastrophic breakdowns this year, we are now further away than ever from reaching that audience.  (It is absolutely no defence to this audience to say that overall fatalities are in line with prior years, and nor should it be.) The reality is this; whether or not it should be this way, it is incumbent on our racetracks to provide leadership in the face of the current crisis.

To end on a somewhat hopeful note–we have seen the impact of transformational change in another inherently dangerous sport. The tragic death of Ayrton Senna in Formula 1 was the impetus for an unprecedented investment in safety (involving both racetracks and cars) that has made subsequent fatalities exceptionally rare. Racetracks that failed to make the necessary improvements were removed from the circuit. The return on this investment is clear–Formula 1's mainstream popularity provides a direct counterpart to the sad state of our industry today. Our racetrack executives should be inspired by Formula 1's results to make the same commitment to, and investment in, safety.  Belmont Park's planned renovations would be an ideal place to start, building a significantly safer main track (synthetic if necessary) and acquiring best in class diagnostic equipment for regular use in racehorse care. Failure to do so will only accelerate our decline.

Gavin Murphy

SF Bloodstock LLC

 

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Letter to the Editor: Existential Crisis. No Hyperbole

There have been several stories recently in the TDN about Computer Assisted Wagering (CAW), and many of them have contained accurate and useful information. But what those articles have failed to do is convey what CAW really is and does, why it matters, and most of all, how dire and urgent the situation they have created is. Hence this letter.

1-First, the basics. Betting handle is the lifeblood of our industry. It directly funds purses, creates all the jobs in our business, and indirectly funds the commercial bloodstock industry—no (or less) purse money to run for, and eventually yearlings will have the market value of show horses, and stud fees will follow them down.

2–The parimutuel pools are a market; horseplayers compete against each other, not the house. CAW is not just someone using a computer to handicap. Yes, there is a handicapping element, and if someone creates a good handicapping model, good for them. But the important part is this—CAW “players” are being given a massive advantage over regular horseplayers. They get electronic access and a last split-second look at the pools, which gives their computers the ability to assess the situation in a microsecond, and automatically make hundreds of targeted and incremental bets, totaling tens of thousands of dollars per “player,” right at the bell. No human can do that, or compete with it.

3–Because CAW is responsible for so much handle, and because many of the CAW “players” have banded together to negotiate, they receive gigantic rebates. So in effect, they are playing into a much lower takeout than the general public, and that, combined with the advantage they have been given, enables them to basically vacuum the pools. And since it's a market, if they're siphoning off money, someone else is losing it. More on that in a moment.

4–In our industry, we publish handle figures, not profit and loss. But remember: CAW “players” get gigantic rebates. That means the industry gets to keep much less of every dollar they bet—roughly speaking, it takes $3 of CAW handle to equal $1 bet in the backyard at Saratoga. So if overall handle stays the same, but CAW handle is replacing non-CAW handle, for purses, and for everyone else in the industry, it's like handle going down. And CAW is now responsible for about one-third of national handle.

5–The overall retail blended takeout on racing is normally about 20%. But with the CAW “players” making money as a group, it means the horseplayers who make up the other two-thirds of the pools are in effect paying the entire takeout. So for them, the takeout is up to roughly an onerous 30%. Now, horseplayers are not like the people who buy expensive yearlings. They generally work for a living, and as a group have a finite amount they can lose over the course of a year, or lifetime. So as the takeout has gone dramatically up, one of three things has to happen:

A) Horseplayers bet the same amount, and tap out faster. That reduces churn on handle, and handle overall goes down.

B) Horseplayers reduce what they bet as they lose more, to make their money last longer. Handle goes down.

C) Horseplayers stop betting or switch to legal sports betting, which has a takeout of between 5-10% (and no learning curve, since most of us grew up with these games, and there are no odds changes after you bet). Handle goes WAY down.

In other words, CAW isn't just disguising the drop in non-CAW handle, it is CAUSING it.

I know many serious, lifelong horseplayers who now only play on big days, or who have quit the game entirely.

6–So here it is; figures courtesy of Pat Cummings:

As CAW handle has gone from about eight percent of the pools to about a third over the last 20 years, non-CAW handle has nosedived. To give you an idea of how short a time period we're talking about, Smarty Jones won the Derby in 2004.

ADJUSTED FOR INFLATION, ORDINARY (NON-CAW) HANDLE IS ABOUT ONE-THIRD OF WHAT IT WAS JUST 20 YEARS AGO.

Do I have your attention now?

Almost all of that drop came before the advent of legal sports betting. And remember, the non-CAW handle is the oxygen-rich blood that nourishes everything. CAW is not just taking money out of the pockets of ordinary horseplayers; it's killing horsemen and the industry as a whole.

This is an existential crisis, without exaggeration. Since only handle figures are published, the picture has been obscured to the public, but we are not talking about a long horizon–I think major cracks will start becoming visible within the next year or so, because the downward spiral is accelerating rapidly now that there's sports betting. And as ordinary handle goes down, CAW will as well–the robots adjust their bet size to the size of the pools, so that they aren't killing their own prices. These guys aren't in our game for fun, like horseplayers are, they're here to suck money out of the pools. And when they no longer can, they will leave.

7-So, what can be done? Finally, some good news: because the industry makes so little from a dollar of CAW, eliminating a portion of their handle will not have anywhere near the same effect as eliminating the same amount of ordinary handle.

The first thing that has to happen is that the unfair advantage has to be taken away from the CAW players. Their special access to the pools has to be shut off with three minutes to post, like NYRA did with their win pool. But it can't be just cosmetic. It has to happen in all pools.

The second thing is to reduce their rebates. If you make twice as much from each dollar bet, even if CAW handle is cut in half, it's a wash. And if those two actions erode their edge to the point where they bet much less, good; that's the idea. We need to knock that third of the pools figure down by quite a bit, to salvage what's left of the non-CAW handle, and hopefully create more.

I'm using “salvage” advisedly, because we are hemorrhaging customers, and once they are gone, it is hard to get them back. Since I wrote the first draft of this letter one of those cracks has appeared. Golden Gate is closing, in an attempt to triage California racing. We need to stop the bleeding. And we need to do it right now.

Jerry Brown is the president of Thoro-Graph, Inc. 

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