Archives for August 2017

Every year like clockwork, a few reporters and media commentators write or talk about how horse racing and/or professional boxing are “dying” sports, economically deteriorating remnants of the past.

Yet these two “moribund” activities had quite a day on August 26.  Dying is not a word anyone with a rational regard for facts would use to describe what transpired.

The Floyd Mayweather-Colin McGregor fight, pitting an undefeated world champion boxer against a world champion mixed martial arts champion who had never fought in a professional boxing bout, was a 38-minute monetary blockbuster.

The fight was front-page news, not only in the United States and Ireland (McGregor’s home) but in faraway places like Australia.  I heard people talking about the match-up who surprised me, folks you definitely would not expect to be at all interested.  The first question my wife asked me Sunday morning was “Who won the fight?”

The demand to watch the showdown was so strong that live-streaming Internet sites could not cope and therefore some customers had poor reception or buffering, so much so that refunds are forthcoming and a class action suit is (predictably) already in the works.

According to USA Today, the guarantee to Mayweather was $100 million and to McGregor $30 million “before any of the Pay Per View or Sponsorship money is divided up.”  Turns out that Mayweather’s purse is approximately $300 million and McGregor’s is $100 million.  USA Today said: “That means Mayweather will make more in one night than any NFL, NBA, or MLB player has made in their entire career (excluding sponsorships).  If that’s not crazy enough, that’ll also be close to three times more than Tiger Woods made in on-course earnings during his entire golf career, though, again, that doesn’t include Tiger’s off-course earnings, which put his total earnings over $1 billion.”

These astronomical dollar figures would have been even more impressive had the almost 3 million viewers who watched illegally paid up.  Pirated signals came from people holding smartphones in front of their television screens and sharing pictures on social-media sites like Facebook and YouTube.

Meanwhile, earlier in the day in upstate New York, 47,725 people were elbow-to-elbow at Saratoga Race Course (attendance was limited to 50,000) for Travers Day, and millions more watched on NBC, TVG, at simulcasting facilities, and online.  All-sources betting on the 13-Race Travers Day card was $47.9 million, the second-highest in the history of the Travers and a 5-percent increase over 2016.  (The most ever bet on the Travers card was in 2015, when Triple Crown champion American Pharoah ran second in the feature race.)

The next time a reporter or commentator has a creative block and decides to resort to the all-too-familiar subject of how boxing and/or horse racing are withering away, think about Mark Twain’s retort to the rumors of his demise:  “The reports of my death are greatly exaggerated.” Horse racing and boxing assuredly “ain’t what they used to be,” but their capacity to generate billions of dollars in revenues annually is not what you would expect from anachronisms allegedly one-step away from the grim reaper.

Lately, I have been seeing and hearing more and more about how football’s days are numbered because of head injuries and how baseball’s popularity is diving among younger generations for lack of action, so reporters and analysts now have some more impending death knells to expound upon.

Copyright © 2017 Horse Racing Business

Bill Belichick has coached the NFL’s New England Patriots in six Super Bowls and his teams have won five of them.  Bob Baffert is the great coach’s contemporary in American horse racing.

On August 19, 2017, Mr. Baffert sent out Collected and Arrogate to run one-two in the Pacific Classic and the next Saturday won the Travers at Saratoga with West Coast in a full field that included the winners of all three 2017 Triple Crown races.  Mr. Baffert also won the Travers last year with Arrogate.

In the past several years, Mr. Baffert’s entries have won the sport’s two richest races–the Pegasus World Cup Invitational and the Dubai World Cup—and the American Triple Crown, which had not been accomplished in 37 years, and numerous other stakes like the Haskell.  Were it not for Real Quiet’s loss by a whisker in the 1998 Belmont Stakes, Mr. Baffert would have joined the select company of “Sunny Jim” Fitzsimmons and Ben A. Jones as trainers of two Triple Crown champions.

Remarkably, Mr. Baffert has three horses in his charge—Arrogate, Collected, and West Coast—that could be favored in the 2017 Breeders’ Cup Classic.  It is like having Tom Brady, Eli Manning, and Aaron Rodgers on your team as quarterbacks.

Critics say that Bill Belichick would not have been so productive without a Tom Brady playing quarterback or that Bob Baffert is riding high only because of horses like American Pharoah and Arrogate.  Indeed, talented athletes give a coach or trainer the ingredients needed to be successful, but they must be developed into winners.

Horse racing has several outstanding up-and-coming trainers and a handful of very accomplished veteran trainers.  However, if I could choose an individual to train a potentially “big-money” horse to run on a dirt surface, the white-haired fellow from California approaching the twilight of his career would be the choice.  He has a rare talent to get a horse ready to win the crème de la crème of races.  He can beat you on his racetracks in California or ship in to beat you on your racetrack in Dubai, Florida, Kentucky, or New York.

Copyright © 2017 Horse Racing Business

The annual Jockey Club Roundtable was recently held in Saratoga Springs, NY.  Presentations covered a potpourri of topics relevant to horse racing, but one stood out in terms of its value.  In fact, of all of the recommendations that I’ve seen at The Jockey Club Roundtable, past and present, the one by Ben Vonwiller of McKinsey & Company has the most potential to provide an immediate catalyst to boost stagnant betting handle.  (You can watch and read Mr. Vonwiller’s entire presentation on The Jockey Club website.)

Basically, the hypothesis McKinsey researchers tested was “if you maximize the share of attention bettors can focus on any one race, they will bet more often.”  This seems logical enough in that if several high-profile races have almost identical post times, bettors won’t wager as much as if the races do not have overlapping post times.

In order to test the hypothesis and to put some mathematical precision to the notion that non-overlapping post times have a salutary effect on handle, McKinsey developed a multiple regression model (using 40,000 races in 2015) with seven (independent) variables that were able to explain 73% (coefficient of determination or R2) of the variance in the dependent variable betting handle.  This is an excellent outcome from a statistical perspective.

Six of the independent or predictor variables (or variants thereof) have been used by previous researchers, so the McKinsey research offered nothing new in this regard:

• Field size
• Purse size
• Track
• Race type
• Grade I at track that day
• Exotic wagers

What makes the McKinsey research distinctive is the seventh independent variable, “Concurrent purse,” which is a very creative proxy for the share of attention that bettors can give to a race.  This concept is operationally defined as “The share of the total aggregate purse represented by each race in any given time period.”

Mr. Vonwiller explained: “We took a race, we took the sum of that race’s purse and then all of the purses that were represented by races that had off times [post times] within five minutes of that race.  So that is the total available aggregate purse.  Then we asked how much or what share of that aggregate purse did our race represent.  If it had 100% share of concurrent purse, it meant it was the ony race running in that time slot.  If there were two races with the same purse size, you’d have a 50% share of concurrent purse for that race.”

He summed up the projected increase from better scheduling of races between and among racetracks: “Our model predicts a $400 million increase in handle across the industry from better scheduling by de-duplicating races.”  This assumes industry-wide cooperation.  However, if only the top-five racetracks (based on handle) cooperated, the predicted increase would still be $150 million.

The McKinsey report was careful to identify and discuss five objections that racetracks might raise about coordinated race scheduling, which you can read in Mr. Vonwiller’s presentation.

I have some technical statistical questions about the independent variables in the McKinsey model that I would want to know the answers to before buying into the $400 million and $150 million projections, but these are too esoteric to delve into here.

It may be that the response by handle from better scheduling among racetracks would turn out to be curvilinear rather than linear, with handle increasing at a declining rate of change, which would reduce the magnitude of the increases in handle predicted by the model.  Yet, it is a good bet that handle will meaningfully go up with more skillful race scheduling.  And it is not a zero-sum outcome in which some racetracks win at the expense of others.  Every track should accrue additional handle from optimizing bettors’ “share of attention” on showcase-type races.

In my view, The Jockey Club and Mckinsey & Company have offered manifestly actionable empirically-based race-scheduling tactics that racetracks have a compelling incentive to implement sooner rather than later.

Copyright © 2017 Horse Racing Business