Like other sports, horse racing must gain a critical mass in the millennial generation to perpetuate itself.  Millennials were born between 1981 and 1997, so in 2015 they range in age from 18 to 34.  This generation now comprises the largest share of the American workforce.

The ideal way to develop horse racing fans is for a parent or other family member to cultivate the interest in children, perhaps in the beginning by watching races together on television and later by taking the boy or girl to the racetrack when they are old enough.  However, this leaves out the vast majority of young people whose family members are not fans of horse racing.

Social media is the next best way to foster interest among millennials, and there are many choices such as Twitter and Instagram.  Snapchat may be the superior option.

According to Snapchat, there are almost 100 million daily active Snapchatters and the user base is growing.  Thirty-seven percent of Snapchatters are 18-24 year-olds and 23% are 25-34 year olds.  Sixty percent of the people who use Snapchat create content every day.  More than three-fifths of 13-34 year-old smartphone users in the United States are Snapchatters.

The Los Angeles Times wrote in a September 22, 2015 article:  “If the future of media is distributing content across numerous digital apps, media executives see Snapchat at the forefront, thanks to its engaged audience of young people.  ‘If you throw mobile, video, millennials and explosive growth together, people would be crazy not to focus on it,’ says an executive.

Getting in isn’t easy. The courting period lasts months and usually involves submitting numerous examples of original content to a private content management system.”

Though one would not ordinarily associate a Wall Street bank like Goldman Sachs Group with Snapchat, the firm has recently turned to the company for help in interesting millennials in working at Goldman.  Last week, Goldman Sachs placed recruiting advertisements on Snapchat meant to lure potential hires.

Snapchat is made to order for the social-media efforts of racetracks and other pari-mutuel companies, as well as the Jockey Club, that are intended to promote American horse racing to younger segments of the population.

Copyright © 2015 Horse Racing Business


Whether it is the stock market, horse racing, or Sunday’s NFL match-ups, touts and tips are plentiful.  Buy this sleeper of a stock, bet on a longshot that is sitting on a big race, or take the Bears and the points.  Email has empowered con artists among the analysts/prognosticators to leverage the math in their favor.

The bestselling book How Not to Be Wrong, the Power of Mathematical Thinking (by Jordan Ellenberg) lives up to its billing as “The Freakonomics of math” and in one chapter it addresses the math behind unsolicited mass touting of stocks and horses.

Dr. Ellenberg (Distinguished Professor, University of Wisconsin) explains the pre-Internet parable of the “Baltimore Stockbroker.”  This devious broker mails a paper newsletter to 10,240 recipients predicting that a certain stock will either rise or fall in the following week.  He sends the newsletter for 10 consecutive weeks and is correct in his prediction every week.  On the eleventh week, he asks recipients to invest money with him based on his shrewd prescience in selecting stocks to buy or short.

The odds of the Baltimore stockbroker being correct 10 weeks in a row are 1/1024 or 0.00098 (1/2 x 1/2 x 1/2 x 1/2 x 1/2  x 1/2 x 1/2 x 1/2 x 1/2 x 1/2).  How did he defy such long odds?

On week 1, he sent the newsletter to 10,240 recipients; half were told the stock would rise in the coming week and half were informed the opposite.  In week 2, the newsletter went only to the 5,120 people who got the correct prediction the previous week.  This winnowing process continued until, after the final newsletter, only 10 people were left who had received a correct prediction every time.  Some of them undoubtedly thought the stockbroker was a seer and were likely to rush to “invest.”

Dr. Ellenberg says a stunt from a British reality TV show is the closest real-world example he found of the Baltimore stockbroker parable.  Magician Derren Brown mailed sundry horse-racing selections to thousands of Britions and kept doing so until, ultimately, one person was left that believed Brown had “devised a foolproof prediction system.”  Click here for a link to a website that explains the Brown illusion in detail.

Plenty of experts are adept in picking stocks to buy and sell or horses to bet on or avoid.  None of them are likely to be mass mailing unsolicited free selections week after week and none of them are perfect in identifying winners.

In the era when newsletters went out in stamped envelopes there was a real monetary cost involved.  In the age of email, countless people can be reached at virtually no cost.  This is a modus operandi made to order for touts employing the Baltimore stockbroker scheme to provide tips on stocks or horses, or anything…in order to prey on gullible people.

Copyright © 2015 Horse Racing Business


Nominal takeout rates at various racetracks are public information.  For example, at Santa Anita, the rake on win, place, and show bets is 0.1543 and the percentage takeout on exactas is 0.2268.  Yet a published takeout rate is like the sticker price on a new automobile in that it is usually negotiable.

For example, consider an excerpt from the website of the advance deposit wagering company (ADW) or OTB:

OFF TRACK BETTING is an online horse betting ADW committed to horseplayers.  Every successful horseplayer that we know is playing with a rebate, and you should be too.

A rebate is a cash reward paid on every wager you make, win or lose.  The amount of the reward will vary by track and by bet type.  OTB understands that handle is the one thing that drives this industry, and that handle is generated by its customers, the horseplayers.  By delivering daily rebates, OTB hopes to create an increase in handle leading to more revenue for race tracks, and more money that can be distributed back to horsemen in the form of purses.  In addition, by matching and surpassing current average rebate amounts offered by offshore racebooks, OTB ensures that money will go directly into the U.S. pari-mutuel pools, where it belongs.

Off Track Betting believes that we have established a very generous horse racing betting rebate program.  The more you wager, the more you make.  All horse racing betting cash rebates are placed into your OTB accounts the very next morning. “

Rebates, of course, have the net effect of reducing the cost of playing for people who bet increasingly more money with OTB.  Therefore, if 25% of OTB’s customers account for 75% of its handle and receive rebates accordingly, OTB’s nominal takeout rates are markedly misleading.  While the vast majority of OTB’s customers may be paying the published rates, the bettors whose wagers amount to the lion’s share of the handle certainly are not once rebates are factored in.

Unless one has access to a racetrack’s (or an ADW’s) historical betting data, he or she can only speculate as to what its true or weighted-average takeout rates are on different types of wagers.  Absent the data, the effects of changes in takeout rates on betting revenues, or price elasticity of demand, can’t be estimated with confidence.

When outsiders call for racetracks and ADWs to lower takeout rates, they do so without exact knowledge of what the authentic non-published blended takeout rates actually are.  Maybe it is perfectly rational for racetracks and ADWs to maintain nominal rates for rate-insensitive casual bettors and lower them for rate-sensitive large-scale bettors.  Maybe.

A key question is:  to what extent would total handle expand if nominal takeout rates were significantly decreased, over a protracted period of time, to cultivate additional participation by relatively small-scale bettors?  Perhaps racetracks and ADWs have already done extensive scientific experimentation and know the answer, but I doubt they have.

Copyright © 2015 Horse Racing Business

(Look for a follow-up article soon on a few possible mathematical relationships between takeout rates and betting revenues.)