Archives for November 2015

By its own admission, World Wrestling Entertainment Inc. or WWE matches are not “sport” in that they are choreographed and the outcomes are predetermined.  Nonetheless, WWE’s WrestleMania was included in Forbes magazine’s (November 23, 2015) ranking of the 40 most valuable sports brands in the world, broken down into four categories of 10 each:  business, event, athlete, and team.  The number one ranking in each category was held by Nike (business), Super Bowl (event), Tiger Woods (athlete), and New York Yankees (team).

Forbes explained the methodology it used in the rankings:  “The Forbes Fab 40 measures the value of the top brands in sports.  Our brand values do not tell you what the top teams, athletes, businesses and events in sports are worth.  Rather, the Fab 40 quantifies how much the name of each–all by itself–contributes to the value.”

Sports events brands were ranked on the criterion of revenue-per-event-day.  The top ten events were:

Rank                                            Brand Value ($mil)
1    Super Bowl                                     580
2   Olympic Summer Games               348
3   Olympic Winter Games                  285
4   FIFA World Cup                               229
5   WrestleMania                                  170
6   NCAA Men’s Final Four                   150
7   Daytona 500                                    136
8   UEFA Champions League               127
9   College Football Playoff                 106
10  World Series                                   101

Source:  Forbes November 23, 2015, p. 28.

WrestleMania’s brand was not only the fifth most valuable in the global event category, but it came out ahead of, for example, the World Series, the NBA finals, the NHL finals, Formula One and NASCAR auto racing extravaganzas, and the Kentucky Derby and Breeders’ Cup.

This result lucidly illustrates how shrewd marketing can create brand equity, even in a faux sport like professional wrestling that has prospered despite ridicule and recurring scandals.

Unlike the WWE, North American horse racing has long suffered from a lack of a coherent marketing strategy, aided and abetted by parochial interests in the sport/business.  As a result, commendable and well-funded efforts by the Jockey Club to craft and implement a grand strategy have been undermined, for instance, by intractable pricing on the part of racetracks and resistance to uniform drug policy and testing by numerous owners and trainers.

Copyright 2015 Horse Racing Business

Most people are to some degree affected by weather conditions.  Winter in, say, New York, Minneapolis, or Chicago can literally have a depressing effect on individuals, whereas springtime brings with it brighter outlooks owing to the promise of longer days, gradually warming temperatures, and sunshine.   Behavioral finance researchers are interested in how various weather conditions impinge on investor decisions.

Researchers at Stanford Business School recently published a scholarly paper that reported on their investigation of the work-related behavior of 5,456 brokerage-firm stock analysts, during 1997-2004, under differing weather scenarios.   In all, there were 636,000 observations.  The Stanford researchers knew where the analysts were located so they were able to determine the weather for each of the observations.

According to the Wall Street Journal (November 9, 2015), weather had a pronounced effect on the analysts’ actions.  For example, analysts experiencing bad weather were lackadaisical compare to analysts having good weather.  The former were “9% to 18% less likely to issue an annual earnings forecast; a recommendation to buy, hold, or sell; or a target-price recommendation.”

The findings are consistent with “research on weather and moods, which has found that dreary days cause mild depression, and can reduce cognitive capacity, increase apathy, and slow activity.”

How stock investors, rather than stock analysts, tend to act under different weather conditions has not been demonstrated empirically, as constructing a study to find out is difficult at best.  The main obstacle is ascertaining with sufficient precision where the investors are located.

Turning to horse-race bettors, an interesting hypothesis to test would be that warm weather fosters more bettors and also increases per-capita handle.  This thesis would be hard to test because racetracks offer vastly more graded stakes in months with favorable weather and graded stakes attract bettors.  Moreover, several of the best racetracks hold meets entirely or mostly in the summer.

However, intuitively, it seems that a prototypical average bettor, particularly in a snowbird state, would not be as keen on playing the January card at Aqueduct, or Hawthorne, or Laurel, as he or she would be to play Saratoga in August or Keeneland in April or October.

While drawing hard and fast conclusions about the effects of weather on horse-race bettors in general is not possible, one finding from behavioral finance is a certainty:  people investing in anything—stocks, bonds, alternatives, etc.–or wagering on horses should avoid the activity when his or her prevailing mood is unusually downbeat. ..and weather is one of the exogenous causes of moods.

Buoyant moods, of course, can also be hazardous to financial decision making.  For instance, radiant sunshine and warm environs by the calming sea at Del Mar in August can create a false sense of being able to do no wrong.

Copyright © 2015 Horse Racing Business

Forbes publisher Rich Karlgaard recently (November 2, 2015) had an article in the magazine titled “Pro Sports’ Achilles’ Heel” in which he identified and discussed matters that threaten the future of the four major North American professional leagues.   Mr. Karlgaard is correct when he says:  “Great sports franchises and coaches can teach us a lot—as can the worst ones.”

In his view, the NFL “is rife with life-shortening injuries and performance-enhancing drugs,” and has a number of well-known meddling and incompetent owners.   The NBA , with a season beginning in October and ending in June, “has too many games–82 in a regular season, which means more than 100 for those teams making the finals.”

America’s supposed pastime, Major League Baseball,  “offers scant appeal to Millennials” with long and drawn-out games and flagging participation by African-Americans.  Finally, in the NHL “you can often injure the other team’s star player with little consequence.”

This article provoked thoughts about horse racing in North America.  First, the sport/business has a lot of work to do in regards to how it is perceived by the public.  Uniform medication rules and testing need to be instituted across the various jurisdictions in order to improve the integrity of the product.   Second, aftercare for retired racehorses is a humane issue that requires ongoing attention.  Third, larger field sizes are desirable in driving up pari-mutuel handle.

But racing’s Achilles’ Heel is an uncompetitive wagering product owing to takeout percentages that repel many bettors.  This deterrent has not been addressed by racetrack owners and managers who are evidently unwilling to at least attempt to test the effects of significantly lower takeout on betting revenue.

Whether the professional sport leagues can maintain their respective current level of popularity for the next half century or more is a great unknown.   How, for example, does one make football or hockey safer?

As for American horse racing, an absolute certainty is that the future is decidedly bearish unless the industry dramatically improves its image, promptly enhances the integrity of the betting product, and offers bettors a far better deal on pricing.

Copyright © 2015 Horse Racing Business