By T. D. Thornton
The United States racing industry could recoup an estimated $400 million in unrealized annual betting handle if the sport invested in advanced data analytics to minimize the ongoing, daily problem of conflicting post times.
That stunning statistic anchored the most informative of seven individual presentations on the agenda at Sunday’s 65th annual Round Table Conference hosted by The Jockey Club in Saratoga Springs, New York.
The 2 1/2 -hour symposium featured guest speakers whose talks touched on Thoroughbred aftercare, the securing of corporate sponsorships, the use of “big data,” and international race officiating. The back end of the program was devoted to the reinforcement of The Jockey Club’s support for pending federal legislation that would establish an authority to create and implement a national uniform medication program.
The overall tone was positive and–as is often the case at these sorts of industry forums–leaned heavier toward platitudes than to practical plans of action to advance the many worthy ideas that were discussed in principle.
But the arresting post-time conflict research outlined by Ben Vonwiller, who leads the management consulting firm McKinsey & Company’s Global Media and Entertainment and Professional Sports practices, stood out because his talk pinpointed a staggering lost-revenue figure that has previously only been speculated about when tracks simulcast races that go off right on top of one another.
“We think it’s actually a systemic problem across racing,” Vonwiller said. “This is clearly not an optimal fan experience, and we also believed, as a hypothesis for this work, that this had a direct financial impact on the industry as well.”
Vonwiller explained that his firm’s initial research on the scheduling of sporting events began as consulting work when the National Football League wanted to realign its methodologies to maximize fan focus on the best matchups. Because McKinsey has also spearheaded projects commissioned by the racing industry, Vonwiller saw parallels in those same algorithm-driven techniques that could be of benefit to post time conflicts.
Working off the premise that simulcast players bet more often when they are able to focus to races that do not overlap, his team used a historical data set of 40,000 races and built a model to predict handle patterns based on things like field size, purses, and the class type of race. The team then compared when the races actually went off against a theoretical “de-duplicating” of the timing to show how much might have been bet if those overlapping races had been better spread out.
Looking at only the top 10% of races based on purse size, Vonwiller said the data revealed 1,500 conflicts that negatively affected handle. Moving around post times by only a few minutes, he added, effectively doubled the share of attention from bettors.
“The payoff is real and significant. Our model predicts a $400 million increase in handle across the industry from better scheduling by de-duplicating races,” Vonwiller said.
Vonwiller’s team knew that the model might not be applicable in the real world though, so they talked with various racing officials and industry insiders to see what challenges might prevent optimized post time scheduling from working.
Based on that industry input, Vonwiller conceded that complete de-duplication is impossible. If the industry strictly wanted races to go off only every five minutes with no overlap, he explained, that would require only six tracks running at any given time.
“So an end goal where we have to overlapping races is not possible,” Vonwiller said. But, he added, “an end goal where we have overlapping races that are truly optimized to maximize handle is absolutely possible, we believe.”
Vonwiller estimated that even if only the five largest tracks in the country cooperated by coordinating post times, there would still be a 2-3% growth in annual handle, representing some $200 or $300 million based on the current industry average handle of $10 billion annually. He added that even lower-level tracks that didn’t participate in an optimized scheduling grid would benefit from a trickle-down effect.
“The reason why we think this is worth that investment is that the payoff is real–$400 million, a 4% increase in handle, is a real stiff change that is worth the effort, we believe,” Vonwiller said.
Yet Vonwiller did not speculate or offer any ballpark estimate on the costs involved in implementing such a scheduling system.
Stuart Janney III, the chairman of The Jockey Club, said after Vonwiller’s talk that “This is money that’s available to us if we work together, and we should be ashamed of ourselves if we don’t find a way to take advantage of this.”
The theme of unrealized gains continued in a presentation about corporate sponsorships by Rachel Jacobson, the former senior vice president of global partnerships for the National Basketball Association.
“The good news is the dollars are growing year over year, which presents significant opportunities to get a larger piece of the spending if you prioritize having a sales team out cultivating relationships and staying top-of-mind when dollars become available from companies to invest in sports and entertainment,” Jacobson said. “But it has to be a priority, and you have to spend time and resources in this area, with partnerships taking months and even years to come to fruition.”
Jacobson pointed out several specific areas where corporate sponsorships might dovetail well with racing, including:
- Apparel: Companies like Nike, Under Armour, and Adidas are all aligned with pro sports. They produce high-tech clothing and know how to market to customers. The racing industry, Jacobson said, could still preserve the tradition of individual ownership silks while partnering with some entity that would see value in being the “official” sponsor that outfits all jockeys.
- Spirits: Alcoholic beverage firms are always looking to pair their products with celebratory moments, and racing provides such opportunities every time a horse wins a major race.
- Technology: So many new firms, Jacobson said, are looking to trumpet their latest-and-greatest devices. By outfitting horses and jockeys with cutting-edge, wearable sensors, racing would get reams of new statistics to drive betting while perhaps providing a some sort of “virtual reality” experiences that could hook new fans. The tech firms, in turn, get welcome exposure for their products.
In a discussion on horse welfare, Stacie Clark, the operations consultant for the Thoroughbred Aftercare Alliance (TAA), introduced a new way for horseplayers to donate money to the TAA.
This new initiative, created in partnership with the Stronach Group and its wagering subsidiary, AmTote International, provides a self-service wagering terminal interface that prompts bettors cashing winning tickets to donate a portion of their payouts to TAA. If a customer chooses to donate, they get both the traditional credit voucher and a separate donation receipt that can be used at tax time as proof that the money went to a charitable cause.
“This new terminal offers a convenient, non-intrusive, streamlined, charitable giving experience,” Clark said. She did not offer any details about where or when the terminals would be in use.
Shawn Smeallie, the executive director of the Coalition for Horse Racing Integrity, updated the Round Table audience on the current status of H.R. 2651, the Horseracing Integrity Act of 2017.
Smeallie said that “we expect next month to have over 100 co-sponsors,” and added that the House Energy and Commerce Committee chairman has indicated he would like to advance the bill out of committee during the upcoming Congressional session.
A Senate version of bill, Smeallie said, is also expected to be introduced soon. “This will happen once we have secured a Republican co-sponsor, which should happen in the next month,” he added.
“So why does this bill, which has a strong, but not unanimous, industry support have such a promising chance to move in Congress? Why should Congress care?” Smeallie asked rhetorically. “The bill will move, because in the end, it does right by the horse. Opponents take false comfort that the bill has yet to become law. But I have learned over my 30 years experience in Washington if you pursue the right policy in the right way, you will eventually prevail.”
Barbara Banke, the owner of the breeding and racing outfit Stonestreet Farm, who is also the proprietor of the Jackson Family Wine company, spoke in favor of H.R. 2651. She likened the prospect of federal involvement in racing to similar oversight that her firm deals with in the wine industry.
“The federal regulatory framework afforded by this bill will lead to greater public trust similar to the wine business, which has a uniformity of standards and practices with some federal oversight,” Banke said. “Many of the aspects in wine that affect consumer trust, like labeling and appellation standards, are federally regulated, and in the wine business we’ve learned to thrive in that environment.”