By Dean Towers
I know what you're saying: Oh boy, another column about young people and racing.
'They have short attention spans, so we need to give them action, like slot machines do.'
'They like concerts and bands, and night clubs, so we have to change the on-track experience to meet these needs.'
'Once we get them in the building, they will get the “bug” just like we did when we were their age.'
I promise you won't read anything like the above in the following as a solution. Scouts honor.
“Millennials” is a term we often read or hear, without really knowing what it means. Generally, a millennial is simply someone born between 1980 and 2000. In the U.S. alone, there are 87 million of them, and because they are soon to make up upwards of 1/3rd of all retail spending in the country, they are a big reason every new TV show seems to feature a millennial with amazing skills, working for the FBI, CIA, or something else that is totally unbelievable for almost anyone that age. Appealing to this demographic is big dollars–bigger than ever before.
Like WalMart or any other retailer, casino gambling (and horse racing for that matter) has been trying their best to attack the market. Getting these kids (I call anyone under 35 a kid, forgive me) to gamble is paramount. But, a funny thing has been happening. They aren't gambling like they used to.
Recently, Jeff Hwang, a gambler, president of a gaming company, and a member of this coveted demographic, penned an article for the Motley Fool titled, “The Millennial Problem, Why We Don't Gamble.” In the well-researched essay, Hwang explores the reasons why Las Vegas Strip gambling revenue now only makes up 37% of total strip revenues, despite Vegas doing a lot of the right things. Las Vegas, as many of you well know, has delivered young people into the building–with night clubs, concerts, and all the rest–but these folks are going for night clubs, concerts and all the rest. They are not gambling.
Hwang speaks about the hand-wringing that goes on in casino executive offices, and frankly a lot of it reads like exactly the discussions racing has about the same topic. Everyone seems to be looking for a solution to a problem in the abstract, without looking at the real, fundamental issue. This issue: The declining economics of being a gambler.
In a recently released report, “Slot Market Assessment: Analysis of Industry Data” the eroded value of the gambling dollar for slots was examined. As the following graph shows, industry low holds for slot machines have been creeping upwards.
In addition, new technologies have allowed for quicker slot game play, from around 10 spins a minute to 17 spins a minute. As Hwang notes, “in short, the slot player is losing more money faster than ever before.”
What happens when you feel you are not getting a fair shake, and losing too much money at a game? You play less, of course, and that's exactly what's been happening. Again, from the same report, below is a graph showing the rise in disposable income, versus slot machine handle in the U.S.
That's slots you say. What about table games? Well, those too are having issues. Blackjack, a game long played for a perceived “edge” either through card counting, perfect play, etc, has found itself in troubled waters. In 2013, blackjack revenues in Vegas accounted for only one-quarter of table games revenues, and in the state of Nevada in '13, there were 2,704 blackjack tables, compared to 3,682 in 2000.
Blackjack and other table games have been made harder and harder to beat, throwing salt on the wounds. Continuous shuffling machines combat any card-counting skill, and higher house edge games, like paying 6-5 for blackjack (a takeout rate hike from 3-2) are becoming commonplace. Again, like slot machines, there is less value in table games than ever before.
You might at this point be asking, “what's that have to do with millennials?” That's a fair question. Well, when it comes to gambling, millennials are different than baby boomers and Gen X'ers in one big way: Knowledge.
Hwang: “Millennials who have come of age during and after the poker boom of the 2000s, have the benefit of the Internet and all of the gambling knowledge that wasn't available to previous generations – are more knowledgeable and generally less stupid about gambling than any generation to come before us. Millennials (and the rest of America) are doing what you would expect people to do when they become more knowledgeable about gambling — gamble less in larger amounts for profit, and more in smaller amounts to hang out.”
What we've noticed for some time, however, is that the proclivity for this demographic to gamble is flying high in record numbers. Skill based games – those games where there is a perceived edge – have grown in popularity. “Daily Fantasy Sports” or “DFS” is a term you have likely heard of, and unless you've been living under a rock, have seen commercials for. This type of gambling was virtually non-existent in 2010, but is pegged to grow to over a $31 billion handle business by 2020. Per capita spending on Fantasy sports in 2014 was $465, up from only $95 a year in 2012. In a recent survey, over half of players fall in the 25 to 35 age range, with 60% with an average household income of $75,000 or more. Takeout in “DFS” averages about 8%.
This is has been noticed, and still is, in horse racing. Betfair attracts millennials and has for years with their exchange and fixed-odds platform that appears to them to be beatable. The takeout is low, exchanges with win betting allow for more churn, and young people – craving the ability to keep a bankroll rolling over like in poker and “DFS” – have an outlet. In Australia this is also exemplified with the racetrack handle increases through fixed odds betting – a more modern, lower takeout form of horse racing wagering. In 2014, Tab Corp's fixed odds wagering revenues were up 26.5% to $511 million, with over 60% of this form of betting occurring on horse racing, not sports.
Although you might've been led to believe this narrative, this demographic does not dislike betting on horse racing, just like they don't dislike playing slot machines or anything else. What they dislike is playing a game that, with hard-work and top-shelf skill, they have no shot to beat. Horse racing–a wonderful gambling game with massive, built-in gambling edges if done right–needs to explore these potential benefits, whether it be through fixed odds, exchanges, lower takeout win pools and two-horse exotics, new delivery systems, or richer, malleable data.
In the end, I believe there is one major takeaway from the above, and it's as clear as day: Attracting millennials is not about bands, or action, or time between races. It's not about getting them into a building so they get the horse racing “bug.” It's about betting value, and delivering smart, sophisticated gamblers a modern betting outlet they believe they have a chance to beat.
Dean Towers is a long-time bettor, horse owner and handicapper. He is a marketer by trade and has presented at several gambling conferences across North America. He is a Board Member of the Horseplayers Association of North America.
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