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The Best Interests of the Industry: #FreeDataFriday, Final Volume

by Thoroughbred Idea Foundation

This is the final installment of a year-long series we called #FreeDataFriday. We have greatly appreciated your attention and feedback. To share your thoughts with us, please contact us by clicking here.

In March 2019, the Thoroughbred Idea Foundation published a white paper calling for Equibase to do four things:

Provide free, raw data feeds for registered, non-commercial users.
Provide free, basic past performances on all North American tracks.
Provide responsive channels to regularly address errors and omissions in the data.
Partner with universities to study racing data, developing new and advanced metrics for the betterment of the sport.

There have been few positive developments directly from Equibase on these initiatives.

Fortunately, harping on this topic has yielded far more attentiveness to various outlets when it comes to free data. Some tracks have released free past performances for select races (Volume 35). One reported to us thousands of downloads of free PPs from a single day of racing. It has been, and will continue to be, appreciated.

#FreeDataFriday was about drawing attention to the need of racing to embrace data, an improved approach to information delivery as a path to grow wagering and attention on racing. Regardless of Equibase’s actual behavior, this needs to happen.

We occasionally focused on other sports which are doing this in better ways, some directly connected to wagering, too. This series also highlighted data, some old and some new, designed to focus our followers on the plight of racing’s troubled present, and how hopefully to change it in the future, for the better.

Equibase is an incredibly valuable asset for the racing industry, a legacy to the decision making of its founders, and they have undoubtedly performed a useful service to the sport.

With a firm foundation built three decades ago, we believe now is the time to take a giant leap ahead, to transform, offering the data to a public customer far different than the ones that engaged the sport in 1990. The current and potential racing wagering customer possesses programming and processing power the likes of which could never have been envisioned in those days. Enabling public access to racing’s vast data sets would signal a new era for the sport.

Freely available data will grow handle, increasing racing’s competitiveness for new customers and enhancing the retention of current customers. This is a direct benefit to the tracks, who currently enjoy the spoils of data sales. Growing handle several percentage points replaces the dividends tracks received via the data business, and which some also receive as ADW operators and bet processors. Growing it by several more covers Equibase’s costs.

Equibase could take racing ahead into this new era. We believe this will spark participation and engagement. We want racing to have a seat at the analytics table, joining the many mass-market and even niche sports and games which have and continue to benefit from open and available data. How exciting it would be to unfurl the collective intelligence of tech-savvy bettors, fans, researchers and academics on a sport that desperately needs growth.

Equibase, essentially, holds a monopoly on racing’s data. If you want to register a Thoroughbred for racing or breeding, owners relinquish all of their data rights to The Jockey Club (TJC) and its subsidiaries through its registration process. The terms of use on TJC’s website outline this:

“You agree to grant to TJC a non-exclusive, royalty-free, worldwide, sub licensable, perpetual license, with the right to sub-license, to reproduce, distribute, transmit, create derivative works of, publicly display and publicly perform any materials and other information (including, without limitation, ideas contained therein for new or improved products and services) you submit to the Website or by e-mail to TJC by all means and in any medium now known or hereafter developed. You agree that you shall have no recourse against TJC for any alleged or actual infringement or misappropriation of any proprietary right in your communications to TJC.”

Make no mistake, when Equibase was created, it was viewed as a sustainable source of information collection–by the industry, for the industry, not some evil empire. In 1992, as we cited in Volume 2 of #FreeDataFriday, then vice-chairman of TJC William S. Farish offered a noble take on the need for the industry to maintain racing’s data. There had been a fear that if the data was controlled by a private entity, racing’s records could be lost. Here are some of Farish’s remarks from the 1992 Jockey Club Round Table:

“Before Equibase was formed, Thoroughbred racing stood out alone as just about the only major professional sport which was not responsible for its own records…The Thoroughbred industry has the responsibility and obligation to maintain control of those records, and make sure they are made widely available in whatever way suits the best interests of the industry.”

Responsibility. Obligation. Widely available. Best interests.

The world of racing, betting and information delivery has changed substantially since those remarks, nearly 30 years ago.

Equibase has not evolved to the needs of the modern industry, to present-day horseplayers and horsemen. Serious efforts to reform and modernize are needed to make good on Mr. Farish’s salient recommendation from 1992.

#FREEDATAFRIDAY

To borrow from Bill Gates, if we approached some of racing’s problems similar to the way he addresses myriad issues, perhaps there is some hope we can have a brighter future for our sport. The two questions Gates asks: “Who has dealt with this problem well? And what can we learn from them?”

In some parts of the racing world, significant amounts of data, and past performances, are free, or at least less expensive than they are here. Two of the notable locations–Australia and Hong Kong, jurisdictions where racing, at least as measured through wagering participation, continues to grow.

Data alone is not going to change our future, but it is one element of a needed elixir of renovation for our industry.

We conclude this series with a reprint of the comments of Gary Crispe, the CEO of RacingandSports.com, an Australia-based news and information website which includes a plethora of free data for horse racing around the world, including past performances from many jurisdictions. Crispe offered these remarks when TIF spoke with him while researching our white paper, “Embracing a Future with Free Racing Data.”

“There is an infatuation to pricing racing data, but that sort of model seems to ignore the fundamental business of the sport. Data and its derivatives should be used to drive betting.

“Outside of a few relationships with some big clients, nearly all of the data we supply is free to our site’s visitors. We offer full form guides [past performances] for races in 17 jurisdictions around the world, which includes speed maps [pace projections] and a whole host of value-added services. They come in a variety of formats, some of which can be tailored to the site user’s preferences.”

Why wouldn’t North American racing want that?

Well, “racing” might want it and need it, but Equibase and the tracks have turned data into big business off the investments of owners and horseplayers.

Combining this data access with more efficient pricing within wagering markets is a recipe for significantly increased bettor participation–a new way forward which all of the industry should support.

CLICK HERE to read the TIF Biennial Report.

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Thoroughbred Idea Foundation: Jackpot Wagers Are Bad For Racing

Churchill Downs is the center of racing this weekend as the 2020 Kentucky Derby is finally contested at the famed Louisville track in a year that has been unlike almost any other in modern memory.

Among the special bets available across the two days is the Oaks/Derby Pick Six, which carries a $2 minimum investment, a mandatory payout and a low 15% takeout.

This special bet harkens back to what has seemingly become a bygone era – where pick six bets carried $2 minimums and were absent any jackpot provisions. The twist, of course, is that six graded races across the two days comprise this bet, the Alysheba, La Troienne and Kentucky Oaks on Friday, followed by the Derby City Distaff, Old Forester Turf Classic and Kentucky Derby on Saturday.

Horseplayers have grown both weary of, and disdainful at, the proliferation of jackpot bets – be them pick fives, pick sixes, or other iterations of wagers where a portion of every daily wager is retained for a jackpot paid on the occasion where there is only one individual winning ticket, while another portion is used as a “minor pool” which the multiple ticket winners for the day share.

For customers to really understand the pricing on these bets, it often takes more than just a cursory glance at a number – the takeout – to grasp the impact. Are players betting them? Sure. But, as outlined in our recent report, “Racing Not Only For (the) Elite,” an increasing number of these bets seem to be won by computer-driven high-volume bettors chasing jackpots with massive investments. Last Sunday at Del Mar, a $36,722 investment from a “single” player landed the jackpot of $686,660.

JACKPOT DECEPTION

Jackpot bets are tricky. They deceive.

For now, horse racing wagering in America is presented as almost exclusively a pari-mutuel. The sport earns a guaranteed cut on wagers, and should want as much wagering as possible. In jackpot bets, an amount of every wager is retained and paid to only one customer on the occurrence of that single customer having the only winning ticket in a particular bet.

There may be a belief that jackpot bets drive attention, because horseplayers are always able to shoot for some big carryover or, in the event the bet is not hit for a prolonged period and “forced-out,” wagering on a particular day will be outsized as horseplayers seek to claim the money they know they have a much better chance of winning.

By adding an artificial provision – the single ticket requirement to pay the jackpot – tracks have effectively limited overall wagering churn on other races and greatly increased the takeout on those “lucky” enough to have a winning ticket good enough for only the day's minor pool payout. A segment of informed horseplayers question the long-term, detrimental effects of offering bets where very few customers ever win. Their concerns are well-founded.

A paper from the March 2020 edition of Contemporary Economic Policy offers horse racing some potential lessons as to the long-term impact of actions similar to the proliferation of the jackpot bets in racing. Levi Perez, associate professor of economics in Spain's University of Oviedo and Ph.D candidate Alejandro Diaz are the authors of “Setting The Odds Of Winning The Jackpot: On The Economics of (Re) Designing Lottery Games.”

In the paper, Perez and Diaz contend that customer behavior in light of bigger jackpots, combined with reduced chances of winning a popular Spanish lottery game, changed outcomes for the negative.

“Bigger jackpots no longer translate into higher sales but rather the opposite: it is quite common for the same jackpot size to currently produce lower sales than before [the odds were substantially increased]” in the Spanish lottery game, La Primitiva.

“Players,” they say, “have now become less sensitive” to the jackpots.

This is no surprise to economists.

In racing, the awareness of the customer to their own sensitivity can be masked, as tracks market jackpot bets with one takeout rate, but realistically, charge daily winning customers a different, effective rate. Those who might have picked six winners in a day, but weren't the only ticket, experience a rate that is, in some cases, more than four times higher than the published rate.

WOULD COMMISSIONS APPROVE A BET WITH TAKEOUT AT 62.5%?

Unquestionably, Churchill's Single 6 is the best of the jackpot bets from a pricing standpoint, offering a daily effective takeout of just 23.5%, still significantly lower than even some traditional bets – like a trifecta at Penn National which carries an absurd 31% rake. Below is a sample of several jackpot bets that exist today. It should be clear not all jackpot bets are the same.

If $100,000 is bet into the Single 6 today, and it has a 15% takeout, the net pool is now at $85,000. If there are multiple winning combinations on the six-race sequence, the bet carries a provision that 90% of the net pool goes to any daily winners with all six winning horses and 10% goes each day to the jackpot. That means $76,500 is returned to winners and $8,500 goes to the jackpot.

For this given day, with $76,500 returned from an initial investment of $100,000, the effective takeout is 23.5%.

On the other end of the spectrum, a bet like Assiniboia's Jackpot Pick 5 is just ridiculous.

Picking five winners is, obviously, easier than picking six. That also means that having a single winning ticket for five winners becomes an almost impossible task. In fact, it hasn't happened once in 2020, through 45 days of racing. On two of those days, the jackpot was forced out, releasing the built-up carryover to any customer that picked five winners that night. But for the other 43 days, anyone with all five winners paid an effective takeout of 62.5%. Would a racing commission approve a bet with this high of a daily, effective takeout if they knew this to be the reality?

Promoting such bet-types beyond more traditional plays is pushing customers into bets with incredibly slim chances of winning, and when they do, but others do too, the return is significantly smaller than expected.

But “racing” benefits when customers churn winnings into subsequent bets – jackpot bets reduce overall churn. MANY people winning is good for racing, in the short and the long term. Customers respond on days when they know that a jackpot is being paid out – with days, weeks or even months of money which has been held is finally released. On these occasional days, effective takeout paid by winners is much lower than the published rate.

Here is the takeaway message: jackpot bets are bad for horse racing.

While jackpot bets might sporadically create intense participation from customers on days when the jackpot is “forced-out”, their widespread presence is, on the whole, detrimental to the greater sport.

There are many bettors who know this, and might find it laughable that some still don't.

Granted, not all jackpot bets are the same, but customers should stay attentive to the splits on each bet and the effective takeout (which is not published by the track) and compare it to the actual takeout rate (which is published). Tracks have made generally bad decisions for the greater business in last two decades – the proof is, unarguably, in the numbers.

Overall wagering on racing is not only down, but the composition of that handle is substantially different – play from a small number of heavily-rebated, computer-assisted bettors who can transmit their bets direct to the pools, bypassing traditional ADW setups, is up an estimated 114% in the last 16 years. Meanwhile, play from all other customers – the vast majority of them – is down an estimated 63% adjusted for inflation in the same period.

The two-day, Oaks/Derby Pick 6 with a $2 minimum and 15% takeout is a throwback to well…not all that long ago. It's a decent bet, engaging and “good” for racing. Churchill's own jackpot pick six is one of the “best” of a very troubling lot of jackpot bets, with a daily effective takeout of just 23.5%.

But if faced with an option, as you are on these Oaks/Derby days, it is worth supporting the lower takeout pick six.

For all the discussion around these last few months being a great time for racing to attract new players, we can't think of anything worse than new players being attracted and pushed towards churn-killing jackpot bets.

As racing enjoys a strange edition of one of its premier events, customers who still enjoy having a bet on racing should be provided with greater transparency on the prices they are really paying (takeout) when winning. Racing – including horsemen – cannot afford to continue treating a large segment of customers so poorly.

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Thoroughbred Idea Foundation Special Report: ‘Racing Not Only For (The) Elite’

In lieu of its traditional #FreeDataFriday series this week, the Thoroughbred Idea Foundation released a special report: “Racing Not Only For (the) Elite.” This report is the culmination of months of research, conversations across informed pockets of the industry and extreme frustration, and the executive summary is printed below:

Do stakeholders in American Thoroughbred racing really understand the state of the business as it relates to wagering? Do the horsepeople's representative groups, HBPAs and THAs, groups that have a hand in approving contracts to permit wagers on their races, understand it? Do the boards of major industry organizations? Does Kentucky, whose economy is so intricately tied to the proliferation of Thoroughbred racing?

If so, there is no conceivable way that our sport would find itself in the position it does.

Industry organizations boards and the directors of representative groups of horsepeople surely have the desire to act in the best, long-term interests of the sport and their membership. But have they been given, or do they understand, the full picture as it relates to racing's most natural source of sustainable income – wagering?

All signs point to no.

We believe the HPBAs and THAs should be asking some of the following questions: Where is your handle originating? What are the “effective” takeout rates for horseplayers from different handle sources? What is being done to attract and retain recreational and middle-market horseplayers? Are some wagering groups given preferred information or access which advantages their rate of winning over others bettors?

This TIF Special Report outlines a problem which has grown increasingly noticeable. Unfortunately, it is a problem that was detailed in a report commissioned by the NTRA's Wagering Systems Task Force, published in 2004. The report is a blueprint on how to avoid the exact situation racing is in today, though which few seem to recognize.

In brief, deals enabled by tracks and distributors of their signals with high-volume betting shops (HVBS) such as Curacao-based Elite Turf Club, have promulgated a great disparity between racing's largest bettors and the rest of the sport's bettors. This has a crushing financial effect on recreational horseplayers, racing wagering's largest customer base, while stunting growth of the sport's middle and upper-market players who are left to compete on a distinctly unlevel playing field.

In raw figures, wagering on American racing is down roughly 27 percent in the last 17 years, but over the last decade, the figures seem relatively flat. Judging the performance and state of wagering based on these numbers alone reveals almost nothing.

Play from HVBS customers, a group whose overall numbers reach into the dozens, has grown from roughly four percent of handle in 2002 and more than seven percent in 2003 to maybe 30 to 35 percent of overall play in 2019. The estimate of 30 to 35 percent is based on a combination of private expert assessments and a review of behavior in wagering pools. Some think this estimate is slightly high, but believe it is rapidly reaching that point. The exact figures are known by tracks and those who enable HVBS play, but major industry organizations, which include representative groups like HBPAs and THAs, do not seem to know.

Many in racing think of the bettors they see AT the track, or their experiences with betting via a retail advanced deposit wagering outlet (ADW) like TVG, TwinSpires, Xpressbet, or the rapidly growing NYRA Bets. The only trait these entities share with players from HVBS is that they are betting on the same races. Everything else is different.

HVBS players operate what are, essentially, the equivalent of profit maximization machines.

These are not individuals who bet big to impress anyone. They bet big because their own systems, developed and honed over years – the math – tells them to do it. Those bets, and the rebates they receive, will maximize profits. They are the most efficient operators in a sport that is notoriously replete with inefficient market behavior.

They don't lose, and if you try to reduce their rebates, they will turn to another source for betting.

HVBS play makes them the least profitable participants, as it relates to their contributions to purses, across racing wagering. As HVBS play grows, profits shrink, the net amount returned to racing declines.

Racing's most loyal, passionate customers, its recreational ones, contribute the most to the sport as a percentage of their overall play. Of prime concern is the portion of non-HVBS play which is decreasing. Since the publishing of the Wagering Systems Task Force Report in 2004, we estimate non-HVBS wagering in America has reduced 63 percent.

Now, take note of this element of the WSTF Report, again – with figures from 2004.

“There has emerged…a major gap within the retail distribution of Thoroughbred racing in the portion of handle going to purses and other track expenses associated with putting on live racing. On average, purses ($1 billion) are 6.7% of aggregate U.S. handle ($15 billion). Under the current pricing structure, however, a rapidly growing distribution channel, [that which we recognize in this report as commissions from high-volume betting shops], contribute materially less than this amount – from 3-5% of their handle – to tracks for purses and other track expenses associated with putting on live racing.

“All other distribution channels contribute materially more than this amount when one combines revenues going to host tracks, to guest tracks and/or to in-state hosts – at least 8%, and more typically 10-13%. So the gap is at least 3% but more typically 6%. There are two principal effects of interest. First, the distinct gap in overall support of live racing is a key component – and probably the key component – of rebates made available by the advantaged entities to high volume bettors. Second, the growing (and resulting) shift in handle toward these entities necessarily reduces track revenues and purses relative to aggregate handle.”

It was not addressed in 2004, and the gap has widened ever since. Action is needed.

This WSTF Report made three key recommendations to the greater industry. First, increase handle – that has NOT happened. Second, tracks should vertically integrate, that is, become online betting providers, control the tote companies, manage the levers in the greater value chain of the sport. This HAS happened.

The third recommendation, which has not been implemented, was presented as follows:

“Establish the most attractive blend of economic incentives to participation for both informed bettors and recreational players…Economic theory suggests that the higher effective takeout rates on all other bettors would decrease their participation in Thoroughbred racing, all else equal.

“The imbalance, we believe, is rooted in current [2004] technology that makes handicapping information and pool data available on demand and the process of placing bets almost instantaneous, but which cannot then redistribute updated pari-mutuel pool information on a real-time basis. Longer term, the solution lies in improving technology for all bettors.”

This report is meant to leave industry stakeholders, and particularly the boards of major industry organizations which includes representative groups of horsepeople, with a single call to action. Recognize that the situation, as outlined, is problematic, get answers to the key questions we suggest, discuss this more than it has ever been discussed before, and then move on to finding a way to operate successfully and sustainably, in the future.

CLICK HERE to download the entire TIF Special Report as a PDF

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‘An Affront To The Integrity Of Racing’: Gulfstream Held Racing Without Several Vital Camera Angles

“Will this action foster increased participation and confidence from horseplayers and horse owners?”

This should be the question considered by all decision-makers in horse racing.

Strong storms cascaded through the area around Gulfstream Park on Saturday morning. Besides races on grass being shifted to the dirt and that course being downgraded to sloppy, there was another significant change on the day.

The storm knocked-out several camera positions, including head-on views and a remote camera positioned to capture starts deep in the one-mile backstretch chute.

As a result, neither the stewards nor the betting public have any record of the start and first furlong from four races at one mile on the dirt track (click each race link to view the video as it appeared on Saturday Race 1, Race 2, Race 5, Race 10).

The Thoroughbred Idea Foundation (TIF) contacted the Gulfstream Park stewards on Sunday morning regarding this matter. They confirmed that while there was an individual observing the start of the four, one-mile races, the stewards had no video to review in the event of any incident near or soon after the start and do not believe any video was otherwise recorded for their review or public dissemination after the fact.

More than $3.5 million was handled in intra and inter-race bets involving these four races.

“If the basic measures to ensure the integrity of the race are not available to the public or the stewards, the race should not be run. The races should have been cancelled,” said Patrick Cummings, TIF's Executive Director. “Simply put, the public has not gotten a fair run for their money.”

“While a cancellation would be an unfortunate outcome for the dedicated horsepeople who had their horses ready to go on Saturday, we believe it is in the best interests of all racing stakeholders to ensure that the proper integrity infrastructure is in place for all wagering on a horse race.”

The TIF has advocated for an increase in stewards' reporting on matters related to each race, meeting the standard that has been embraced by nearly all foreign jurisdictions.

“This occurrence is akin to an assault on the wagering public perpetrated by an operator of a regulated wagering event. The actual impact, however, is completely unknown, because there is no record of what occurred. Our industry has to be better than this.”

Cummings filed a complaint after Saturday's second race with the Division of Pari-Mutuel Wagering of Florida's Department of Business and Professional Regulation.

“How long would a casino be allowed to get away with just telling customers the results of a dealer's cards in blackjack as opposed to showing them? Basically, that is what happened here.

“Customers of future races will also be impacted, though to what degree is impossible to determine given the actions of the day, as horses from the four, one-mile races on Saturday go forward.”

Chart comments for the four races lacked any remarks regarding the start or opening furlong, in contrast to other races on the card where those could be observed.

No times are available for the one-mile races, either, and hand-timing cannot be conducted due to the lack of video.

Would the actions of Gulfstream Park on Saturday, July 18, 2020 have fostered increased participation and confidence from horseplayers and horse owners?

No.

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