More on ADW's and the IHA

On the heels of the recently wrapped up Symposium on Racing and Gaming at U.A. comes an article on the Bloodhorse site : IHA Blamed for Flawed Revenue Model. This is an issue I have been directly and indirectly barking about for a long time and most recently in my first entry for this month. In my opinion it is the single most important issue for the health of horseracing in the U.S. That is of course now that a relatively industry wide drug policy seems to be emerging. And I would argue it has always been even more important. Without funds to maintain the show the lights would go out, regardless of the integrity of the business.

Fred Pope said it perfectly, “The IHA resulted in an upside-down business model that’s killing Thoroughbred racing. The bet-takers are ‘gaming’ the IHA to the point where there is no incentive for the host track to put on the show. The potential closing of Hollywood Park (in California) is the new reality. Correct the IHA, and American racing will be the strongest program in the world.”

Perhaps at the time of the legislation it made sense, but as with almost all laws and regulations they don't evolve or change with time to meet the evolving landscape of the area it was meant to regulate. And in racing the changes have been fast and furious since 1978. The entire ADW sector has evolved since then and in a way that benefits the bet-taker over the producers of the show. It is likely that any change in the law(s) will eventually create yet another niche for yet another industry that will again present a threat, but that is no reason not to do something now. We can't see into the future but we can enact regulations that have the best interest of the industry at heart. Perhaps a law that guarantees that at least 50% of the takeout -that Pope argues for- stays in the game. I would argue for higher, along the lines of 65%. Most certainly the ADW's will argue that they cannot run their businesses on 30 -35% of the take. I say fine, let them close shop. Someone will come along and find a way to take our money and make a nice profit off of the billions of dollars that the 30-35% represents. And it might be noted that the ADW's have expected the horsemen and tracks to conduct their end of the industry business on that same 30-35% percentage of the takeout.

Please excuse me for stating the obvious, but the takeout was established and (presumably)calculated to ensure the health of the industry; not for the health of several industries. And considering the lions share has been siphoned out of the sport in the current model it is a no brainier that something has got to be done. While the figures Pope cites "In racing, those that put on the show get 3%, and bet-takers get 15%, he said," are not exact for every jurisdiction they are (or have been) generally accurate throughout the industry. This follows the mistaken model NYRA made with the NY OTB's in the 1970's. So perhaps it should not have been an unforeseen inevitability, even in 1978. But farsightedness is not an attribute of greed or government; they are much more about "what can you do for me now."

As stated by Pope in the above quote "...there is no incentive for the host track to put on the show." That is of course unless you are an ADW that owns a track e.g., Twinspires and Expressbet. Then you are able to keep even more of the takeout. I don't know of any other business where you can control (through track ownership and purse distribution) , distribute (through sale of signal) and sell (take wagers) a product when it is the only product of it's kind. I'm sure Ma Bell would have loved to continue under those same business circumstances. Well I supose there is one other business, cable T.V. And I'm not sure how that is continuing (follow the money) since the 70% saturation rate is a long ways back in the rear view mirror! It's time to start following the money. Where's it going? Who's ending up with it? Really, who's getting it? - and I don't care to see the creative accounting behind it all. Wall Street has shown us what creative accounting can do. I want my money to go back into the sport. I want my money to help maintain and improve the sport. I am not suggesting that ADW's do not have a raison d'etre or that they do not provide an important service to the industry. But they are NOT the industry. It is a case of the remora having outgrown the shark and now the provider has become the feed. They (ADW's) deserve to exist and profit but not at the expense of the sport and not on my dime. I don't like government involvement any more than anyone else but when it is seen as preferable to the model, the model is obviously a broken one. And at this point I think it is preferable. Legislation is needed to set realistic intra-state and inter-state minimum rates for the industry to ensure that the sport can sustain and improve itself into the future. Let the market dictate how secondary and tertiary providers can best service the fan on the remaining share. I'm sure then the sport and all its' fans will benefit. If you are truly a fan of racing and not just of wagering you should not only care about how high the rate of takeout is but where that money it is going. If you care try to place your money where the largest share will go back into the game. For most that don't live near a track it is a Sisyphean task that further illustrates the problem.