Friday, November 28, 2014

Good Gambling Play Should Near Always Reflect the Rake of the Game

Yesterday's post about Fantasy gaming sites led to an interesting discussion. These sites keep between 5 and 10% and payout the rest.

During the discussion, some felt that because they are difficult to win at - even though you may get paid near half the time in a 50/50 contest - losing can get old real fast. Others feel the market is so large, and a fair portion of users are used to playing props and sports lottery type games with terrible takeout, that that level can be withstood.

Currently, for example, if you bet $50 in a 50/50 game and land in the top half, you get back $45. One post on twitter noted this:
So, in effect, you would win $47 instead of $45. That's lower takeout. But if this is advertised, people would flock to it. Why would anyone want to enter a 50/50 game when they get back $45, instead of $47, even if it's "only $2"? They would, and they'd be flocking to "lower takeout", the big bad wolf that some think does not matter.

Meanwhile in horse racing, it should be that simple, but it's not. 

You are not betting a 3-1 horse and getting paid $8.00. You are betting a horse "around 3-1, that might go down to 2-1 at the bell, or might even go up". There are different races, you may have different opinions and different tracks, there are exotic bets, and sweeps and everything else. It's muddy. It's not in your face like this.

When we get down to it, however, the rake should matter a lot, and just like FanDuel and others, higher payouts should be used by any good gambler as a part of his or her play.

A serious fantasy player might play 2,000 games at $50 per game in 50/50.

At $45 win, with say a 53% win rate (slightly better than an average player)

Handle: $100,000
Return: $100,700
Profit: $700

At $47 win, with the same hit rate

Handle: $100,000
Return: $102,820
Profit: $2,820

Player B is certainly encouraged to bet more, get better and use the lower juice to his advantage.

In racing, we as players should act exactly the same way. By keeping track of bets we learn what our hit rates are, what our ROI is, and can learn from it.

If you have a hit rate of 27% on 3-1 shots on $4,000 a year bet at a high takeout track:

Handle: $4,000
Return: $4,320
Profit: $320

At a lower takeout track, say that pays $8.60 instead of $8 for a three to one shot:

Handle: $4,000
Return: $4,644
Profit: $644

If you multiply this by thousands of bets, that profit difference, just like at FanDuel, can be huge.

This is why win bonuses work to encourage play. It's an increased payout on that $8 horse, and can turn a $50,000 a year bettor into a $500,000 year one in a a flash.

As for non-bonused players, I often hear, "I know this track and I can beat the 22% rake, rather than at that other track at 12% takeout". I am sorry, but if you are profitable, that's nonsense. If you are good enough to have a hit rate of 27% on 3-1 shots over a long period of time at the Big A, you should be able to translate that to Gulfstream. If you don't and are that variant between tracks, it likely means that hit rate is inflated due to smaller sample size, or it doesn't exist in the first place.

If you are good enough to win at a track with 22% takeouts, and one opens next door with 12% takeouts, run as fast as you can and bet the lower rake track.

Most players aren't good enough to win at 22%+ rake racetracks and push volume - I'm not that's for sure - so in reality almost 100% are losing. I am not comfortable with losing and neither are you. We have to take every edge we can find if we want to make money.

I, for one, take a page from the FanDuel users and flock to those '$47 games, instead of the $45 games'. It might "only be $2" like at a racetrack it's "only 2%", but over time, as things regress to a mean in my hit rate, I end up making more money.

Thursday, November 27, 2014

Newbie Racing Marketing - Why Fantasy Sports Betting Sites Succeed

The Existing Betting Customer Is Racing’s Best Hope

-- When compared to ease-of-use and churn focused fantasy sports startups like Fan Duel and Draft Kings, racing is simply not built for the newbie skill game gambling market -- 

Fantasy sports – drafting, fielding and managing a team made up of players in all major sports  – has been on a tear. Back in 1988, according to the Fantasy Sports Trade Association, approximately 500,000 people were playing games in some form.  In 2003, with the help of the Internet and a growing set of dedicated websites, magazines and software, that number grew to 15.2 million. In 2014, it is estimated that over 40 million people this Sunday will be fielding NFL teams as the NFL Fantasy playoffs approach.  This market will spend upwards of $1.7 billion this year on the craft. 

Happy Thanksgiving. Enjoy your day!

Wednesday, November 26, 2014

Breeders Crown Wrap Up

The Breeders’ Crown is never uninteresting. This year was no exception.

We had driver choices, where the top driver in North America booked off a horse who just might be Horse of the Year. We had a fellow (you’d know him, he has a moustache and has won a lot of races) who has not gotten as many stakes drives as we usually see him get, taking a few of the younger boys to school and winning two Crowns. We had a form reversal, where the most hyped trotting colt of 2014, looked more like his old self than he had looked the past few months. Meanwhile, his nemesis was the one who came up flat. We had a Euro win the Crown Open Trot, and his name was not the usual Euro trotter we think of, but Commander Crowe. He was 11 years old.

We saw a horse named after a character in an AMC show who was supposedly not very good; so not good he might’ve been entered in Harrisburg. He won his Crown at even money. We saw a scratch of a Jug Champ early in the day and in the same race, the fastest horse we’ve seen at three in some time, be a scratch at post time.

Like I said, it’s never uninteresting. Unlike past Crowns where things seemed to be settled immediately after the big night, I really don’t know how much was.

Who is the Three Year Old Trotter of the year? Do we make it Father Patrick for winning the Crown, or does Nuncio’s performance since Hambletonian Day trump that. I really don’t know. All I do know is that EL Titan was probably the best trotter tonight – he was hung in no horse land with a brutal trip and put a scare into the winner, with a cheap middle half – and Nuncio has been the best trotter for awhile. Before him, well, let’s not forget about Trixton. It’s a shame we never saw each of them at their very best, by the way. I love all three.

JK She’salady slammed the door, if we can call slamming a door that was already pretty much shut, slamming, for her division. Is she Horse of the Year? I really don’t know. We’ve always wondered what her bottom was and it was kind of her mystique, but you found out tonight. Tetrick went to the well pretty hard. The bottom was 50 and change. We don’t give this award to two year old fillies unless they do something crazy good and generational do we?

As for the two year old pacing colts, we saw an excellent race, but it didn’t really settle much did it? Artspeak wasn’t there, and the “new” divisional leader (In the Arsenal) lost after getting a pretty nice trip after the three wide flashing of the swords that occurred near the half.

The Three Year Old Colt pacing trophy is as muddled as it ever was. Mcwicked won, almost not holding off a 40-1 shot. JK Endofanera looked a little lost out there tonight and Always B Miki joined the Jug Champ on the bench (since then, out with a surgery for a P1).

How about what I think is the most talented trotter to set foot on North American soil since possibly Varenne, Sebastian K? Well, he wasn’t there because he is prepping for the TVG, so we hear. If he wins that race lights out, is he not the Horse of the Year?

The Breeders’ Crown Saturday was entertaining, not even remotely dull, and once again reminded us all why we love this event; especially when it’s at the Meadowlands. But did it all come down to the Breeders’ Crown? I don’t think so; not this year. We have a little ways to go to compile our final tallies.


 -Darin Zocalli was happy with the handle: “The two night format was a proven success producing a combined handle of over $7 Million. Both Pick 4 pools on Saturday were over $100,000. We couldn't be happier with how these races were received by the betting public.” He noted via email. I agree. That’s a pretty good number and the races on Saturday were compelling. In addition, the undercard was quite good, spawning some decent pools, along with a fairly well bet Pick 5. It’s important for this event to be bet, because it’s how the sport is showcased, and how well it is bet is the way we keep score.

 -I postulated last week that I would like to see the Trot Crown races raced in the morning, to export the signal overseas. One of the reasons for that was because of the chalk we see in the Trot races; overseas won’t care as much as North America does when it comes to these payouts. We saw a little of that again on Friday. The first three races were 5-2, 2-5 and 1-9 and they were the trots. Filling up a pick 4 with those prices is generally not what the sport wants to promote. As well, the Open Trot was carded on Saturday very late – like 4 in the morning in Sweden late. That’s something to think about, should this ever be exported in earnest.

 -I believe that the industry has to get together and set a plan in motion to get Breeders’ Crown handle up to $6 million for the assorted races. Getting people together, on the same page, rowing the boat to a destination, is important for any business.

 -I was sorry to see Gallie bythebeach scratched Friday. She was scratched for last year’s Crown final, too. She’s a really nice filly. I feel for the owners of Limelight Beach and Always B Miki as well. How disappointing for them. As a horse owner I know how hard everyone works to get a horse to the races, and to have them not make it on such a big night is downright sad.

-Entertainment value of Saturday versus Friday? It was off the charts. The fractions were big, the racing was tough; a middle half of 53 in the Open pace, and a huge battle in the Open mares, for example. That was electric.

 This was originally posted at Harness Racing Update.

Friday, November 21, 2014

Breeders Crown Friday Longs and Fades

Tonight is the first night of the dual evening Breeders' Crown. I'll be playing live on the twitter so if you want some picks that will probably scope sick afterwards you can follow me there. As for the Crown races themselves tonight, here are a few thoughts.

Race 7 - Aged Mare Trot

Last year's Horse of the Year Bee a Magician has been a shadow of herself this year, despite being in contention, or favorite almost all year. She reminds me a lot of four year old Rachel Alexandra; she's raced okay, but she is not herself. She was particularly flat last week and adds lasix. I suspect you might get odds if you like her, but she's been a fade for me all season and I can't change now.

I am not overly thrilled with anyone here, because they all look a little flat. Classic Martine is an obvious use and if somehow Charmed Life can race like she did a month ago, I think she airs, because at her best, she is probably the best horse in this division. I will have a look at her in the post parade. If her head is straight and focused, not on one line, that will be my cue to bet.

Race 8 - Two Year Old Filly Trot

For those of you who like handicapping, you hate Mission Brief. For those of you who like math, you might as well use it to handicap her. She has broke 3 of her last 7 races and when she breaks it's over. The other four were cakewalk wins. I don't think there's ever been a horse like this in harness racing history. If she's 2-5 she is mathematically a poor bet. End of story. She did drift out last week and should find it a bit tougher this time. 2,3 and 9 are uses for me in the sweep.

Race 9 - Three Year Old Filly Trot

Shake it Cerry stands out and should win this race at a short price, keying a low paying pick 4, if so. I have been very impressed of late, however, with 30-1 Morning line filly Riveting Rosie. I will use her in the two and three slots underneath, and in the pick 4.

Race 10 - Three Year Old Filly Pace

This is probably the most interesting race to bet of the evening. The star of the division is 6-5 chalk Colors a Virgin, but I will be looking elsewhere this evening, because I feel she will be too short a price and I expect some fireworks here off the gate.  I won't be betting the farm, but I will be looking at post ten starter Precocious Beauty, and last week's winner Gallie By the Beach.

We'll be back tomorrow with a look at the Saturday card.

In the meantime, for more Breeders' Crown thoughts there is a 10 page pullout in this month's Horseplayer Monthly magazine, for free, here. (includes a free pp link)

Good luck and Happy Friday!

Thursday, November 20, 2014

Margins & Profit: The Difference to Betting Growth Depends on Where You Take the Money

I've been doing some reading based on NBA head Adam Silver's recent comments about betting, and his partnership with Fantasy sports stalwart Fan Duel. It's of interest for a number of reasons; primarily because from a revenue perspective it provides league's with a number of options.

By partnering with a fantasy site, part of the 800,000 or so users can be promoted to watch games. Since many NBA, or NHL games do not even get 800,000 viewers for one telecast, the potential is obvious. However, what is interesting is the revenue end. Fantasy sports revenue has been estimated at several billion dollars, and they are using teams and players to generate that money. There's some potential meat on the bone for the league's themselves.

Coincidentally, yesterday we saw another CHRB meeting, where we witnessed what we usually end up witnessing at them. A fight over who is betting what, where. According to a few items I read on the twitter, the board was asking ADW's to somehow have location based IP blocking, so when customers are at the track they would not be allowed to bet with the ADW. Of course, the track and purses in California gets about 20% of the action in revenue, for a guy betting on Xpressbet at the track they get about 10%.

Although those two examples highlight the same thing - going after at least a portion of revenue that a league or track think they rightfully "own", there could not be more stark differences.

In the NBA's case (and other sports' leagues as legal gambling or fantasy move along) they would ask for a slice of this revenue (call it monetizing) in a number of ways:

1) A share of gross profits. This is a form of licensing fee.

2) Because states would be taxing legal sports betting or fantasy, the leagues would get their share, or kickback, from stadium deals, rent, and tax breaks.

3) Advertising partnerships, like Silver is doing with Fan Duel - Fan Duel has a lot of eyeballs, and eyeballs are worth money.

When a racetrack or horsemen group wants money or the ubiquitous "fair share", it's done quite differently.

1) They ask to stifle competition, so they get more. This is the CHRB example above. They're asking players to pay 5% more to bet at the track; if for example, the ADW player is getting 5 points back.

2) They ask for an increase in margins. This is a boost in takeout, not an increase of a share of end profit. California did this in 2010, Churchill this year, and hundreds of tracks and commissions have, since the original takeout rate (again, margin) was increased from 5% in 1907 to about 21.5% today.

In case I, the sports leagues would get paid their fair share, as they see it, and as the reseller sees it. It's not based on anything but a profit motive. i.e. when the sports' league takes a share of net profit, they are a partner in Fan Duel growing their net profit numbers, and their revenue numbers. As Fan Duel goes, as the popularity grows, so do revenues.

Fan Duel's average margin (takeout) is about 8%, which is where they need to be to maximize their growth and profit. The NBA would not ask for 4% of margin, because that margin increase would be met with i) decreased top line revenue ii) fewer eyeballs and iii) less long term profit for both the NBA and Fan Duel. This is not hocus pocus, it's just business. Wal-Mart would love 5% margins I am sure, but it would put them out of business, so they can't. Just like any other business, it's in the NBA's best interest not to touch margins, because increasing margins does not mean more money.

Not only that, the state itself won't want that to happen. You don't see the state of Nevada taxing 4 cents of a $1 token on a slot machine, or asking Steve Wynn to add zeros to a roulette wheel. They'd make less tax money. They leave that to the resellers and tax as revenue and profit grow. 

Contrary, in horse racing, this is all that's touched: Margins.

As margins are fought for, at Churchill or with the CHRB, or otherwise, top line revenue falls, racing gets less popular, and in the end, it's detrimental, and everyone makes fewer dollars.

Horse racing was not built to grow, because revenue has never been taken off at the gross profit level, but at the margin level. It's been a fight for a slice, where when the slices get bigger, the pie gets smaller. It's fundamental, entrenched, and racing simply knows no other way.

Wednesday, November 19, 2014

No Easy Answer to Breeders' Crown Conundrum, Notes

Crown elimination winners Voelez Hanover and Traceur Hanover are set to go this weekend, despite their trainer getting popped with a positive this week. Trainer Corey Johnson, according to harnesslink, had a blood gas positive (he also had one in May of 2013), and all of his horses have been scratched in Canada, and he is under a full suspension.

This is clearly not ideal for the Crown, and rings similar to the Doug O'Neill situation in the Cup, but I doubt there is too much that can, or should, be done. I suspect that it being a full suspension, the NJ commission could honor that, or Jeff Gural or the Crown could, and ask that the horses be entered with another trainer (I believe his father is under a two year probation as well, so someone outside the stable), but time is clearly of the essence, and I don't know how fair that is either way.

Racing is never boring.

As for the Crown, Friday and Saturday night are the races, and there should be some better than average races to watch. Most of the stars are there, and despite the end of the year when some of these horses are a little chewed, many are not. JK She'salady, Always B Miki, the aged pacers, and Commander Crowe trying to win the Crown for Europe all provide good storylines. Harness Racing Update will have several big issues this weekend, highlighting the Crown.

The Crown will also be featured in Horseplayer Monthly with a special section, coming out tomorrow. Also looked at will be the DQ situation at Santa Anita from the BC Classic.

I saw on twitter today purses will be rising at Hawthorne because betting is up. That's doing things the old fashioned way.

November will be a down month for horse racing, but by how much? That's the question. There are some tracks  - Aqueduct, Churchill - doing poorly.

Thanks to Joe F for the link, the city of Halifax has a special bond with the people of Boston, and they've sent the usual November tree. When the massive explosion happened during WWI, killing 1,600 from the city, the city of Boston came to their Canadian friends aid and people in this part of the World never forgot. It's a big reason why there are so many Bruins and Patriots fans out this way as well. Generational.

Analytics on NFL telecasts do not happen. This was looked at today on MMQB. Long held narratives continue, while they simply should not. You get a real sense of this with in running betting. When a coach makes a mathematically poor, but politically right decision, the odds on the team will drop. Meanwhile on TV, the commentator says, it was the right call.

Courtesy Emma Vare EL Titan readies for his Crown try in the three year old trot, in the snowstorm that hit the northeast yesterday. Have a great day everyone.