Racing's Funding Model

I have just seen the report back on the Saftote figures for July Day. Although an increase was recorded the % 'improvement' represents a figure equivalent to about 25% of the 'official' inflation rate (which is totally unrepresentative of real day-to-day costs!).

So the biggest day in South African racing simply underlines that turnover in real terms has dropped once again.

Which brings me to one of my favourite topics : South African Racing's funding model; which I contend has been broken for years. Yet operators continue to 'flog the same horse' without actively exploring alternative funding options.

Ignoring for a moment those jurisdictions where a tote driven model does still succeed (often because of a differing legislative environment) my question remains:

Why does our operator not aggressively explore differing funding methods?

For me the obvious model sitting out there for all to see is Association Football.

The abovementioned sport is beloved by billions and consequently is the beneficiary of multi BILLION dollar/pound deals with broadcasters which fundamentally finance the sport. There are a number of lessons for racing :

1.) The sport is simple and can be appreciated and enjoyed by a first timer with minimal instruction.

2.) Fans 'bond' with their heroes and stars are created for fans to follow.

3.) The sport does not rely exclusively on or hanker after physical attendance at matches to flourish. This aspect is more of a bonus than a requirement as the real funding comes from broadcasting.

4.) There is a massive fan industry producing everything from magazines to replica shirts.

Compare this to racing :

1.) Effective participation in the sport requires a long apprenticeship.

2.) There is minimal promotion of the athlete and history gets little or no respect or appreciation.

3.) Although football also has its corruption issues they are, insofar as the fan is concerned, nowhere near as bad as racing's which are PERCEIVED to be almost intrinsic to the sport. (BTW - this issue could have been corrected & eliminated long ago with more effective policing).

4.) Too much mediocre racing is nurtured & presented as being a better product than it really is. (In football terms this would be akin to flighting a television broadcast of a 4th division match in prime time).

5.) Bad racing tends to produce bad results. This in turn sours punters to the game with the accompanying loss in support & revenue. In football an upset result (eg Leicester or Iceland ) is celebrated! In racing skullduggery is often suspected or assumed.

6.) 'Pricing' is far too high. The current tote betting model incorporates a 'rake' which is unpalatably high. To sustain this punitive rake the industry tends to focus on the unsophisticated & ignorant. Additionally it offers a range of 'hard to win' multiple bets to disguise the reality that it is extorting a massive chunk from the gross pools to fund itself. This quickly distances the so called 'professional player' from participation. (Compare bookmaker turnovers with the tote by way of an illustration).

Exacerbating this issue is the mystery surrounding ACTUAL tote takeouts. One is left with the suspicion that they may have increased in recent years. Certainly the much vaunted co-mingling appears to offer few, if any benefits, to the punter. There is no way the big player will accept this state of affairs when formulating a 'play' and may be contributing significantly to the migration to sport.

As a result it appears to me that the target market has fractured into two groups :

a. The group unkindly (and disrespectfully!) referred to as 'mugs' - who place small value exotic bets in large volumes in the forlorn hope that they might land a life changing win.

b. The group usually referred to as 'shrewdies' which gravitates more towards bookmakers (to obtain certainty as to what the outcome might be) and who latterly appear to be migrating out of racing & into sports betting.

Racing's salvation is potentially only an on/off button away from salvation. If the operator were able to convince potential backers of REAL INTEREST in the sport then funding becomes easy without having to continually re-visit a diminishing pool of ageing 'mugs' for a bigger & bigger slice of eroding (or, at least, not growing) pools.

At present it is difficult to envisage a 'soft landing' for this sport.

always interesting topics, thanks Garrick...

Some great points in there Garrick.

For me it has always been about the reward, both entertainment wise and financially that is derived from participation and the balance has got to be right. If gambling was only about winning there would be very few players as winning can desert us all for long periods at times.

It has always been about how much fun I am having whilst burning cash and this isn't equal for all wagers.

Until betting operators with relation to racing realise this very integral part of a players psyche they will never attract new players to the game as racing skills are honed over a protracted period of time for most players. If the fun element and general affordibility (ie value for money) is not present, lack of support follows soon after unless financial gains continue to offset the aforementioned.

A good game will have all the elements including regular rewards and this has to be the basis of any successful wagering product design.

Racing lacks this at the moment as far as new players and those lacking skill is concerned as constant losing will never be much fun for me or the majority that play.

These are simple truths that should be adhered too but sadly are not when it comes to creativity in racing.

Short term gains and squeezing the orange dry seems to be the only law at this time.

Hope the future will see new thinking at some point.

Another good sensible pragmatic assessment by Garrick.
One point I would like to add ,is that there is a very popular opinion in the industry that the tote should be the only game in town,and all will be well!
There is a consistent cry that punters owe it to racing,to only utilise the tote,and supported by the argument that racing thrives where there are no bookmakers.
I doubt that removing the benefit of fixed odds betting,once punters are used to it,would actually fix the problem.I suspect fixed odds punters would merely switch to other sports!
If the good of racing is the real motive behind the complaints ,then the focus of trying to shame punters into using the tote's poor value, needs to change, and rather work towards forcing fixed odds operators to provide the same benefits to the industry as the tote does!
The problem with the operators is, that their argument against bookmakers is perfectly valid ,but they have just been pathetically inept at levelling the playing field!
An increase in the take-out of bookmakers,should theoretically allow a reduced take-out for tote bets.
Another thing that never fails to astound though ,is that racing operators have not been able to convince govt that sports betting ,(which has no direct operating expenses) should be tax free ,but race betting,that funds the activity,should be taxable.
If sports bets(particularly soccer) were taxed at,say 3% ,racing tax could be reduced to the same ,and govt would show an overall increase!

some good replies too...

6.) 'Pricing' is far too high. The current tote betting model incorporates a 'rake' which is unpalatably high. To sustain this punitive rake the industry tends to focus on the unsophisticated & ignorant. Additionally it offers a range of 'hard to win' multiple bets to disguise the reality that it is extorting a massive chunk from the gross pools to fund itself. This quickly distances the so called 'professional player' from participation. (Compare bookmaker turnovers with the tote by way of an illustration).

Exacerbating this issue is the mystery surrounding ACTUAL tote takeouts. One is left with the suspicion that they may have increased in recent years. Certainly the much vaunted co-mingling appears to offer few, if any benefits, to the punter. There is no way the big player will accept this state of affairs when formulating a 'play' and may be contributing significantly to the migration to sport.

Before anything else,this needs to be sorted out asap.

Why is this not a prerequisite in terms of gambling board legislation?

I have contacted the gambling board trying to find out,without any luck.I know you have tried too Garrick.How is this possible?

Why would anybody with half a brain cell want to have a tote win bet?

Ken race 2 today is a perfect example.

Bookmaker sp 7/2.3rd favourite.

Win 6 = R 2.60
Place 6 = R 1.10
Place 1 = R 3.30
Swinger 1/6 = R 2.70
Swinger 3/6 = R 2.60
Swinger 1/3 = R 4.30
Exacta 6/1 = R 15.10
Trifecta 6/1/3 = R 85.20
Quartet 6/1/3/5 = R 325.90
Double 1/6 = R 107.30
Favourite: 6
Scratchings: None

1.) Effective participation in the sport requires a long apprenticeship.

Let's consider one step back. Awareness of the sport. A survey was done about 3 years ago (privately funded) and the outcome was rather shocking. Never mind people having a perception about horse racing, close to 100% of respondents were completely unaware that SAF had horse racing. Respondents were valid, active economy contributors from varying market segments/demographics, not people from outlying villages or dorpies, mind you.

Coca Cola - why do they still advertise, year in and year out? Because they know the upcoming generation needs to experience their product. If you neglect one generation, you break the link or chain. During the late 80's and into the 90's and 00's, there was neglect in this regard in racing. This is one of (by far not the only) reasons racing is suffering today.

Now add Garrick's point 1 to the mix = the learning curve of racing. This is a tremendous barrier to entry and hampers the conversion rate more than just a little. In fact, without meaning to be arrogant, racing has converteds (punters) active for a decade or more who still don't understand racing as much as they should be (No fault of their own). The problems are complex...and matrixilated.

Don wrote: 1.) Effective participation in the sport requires a long apprenticeship.

Let's consider one step back. Awareness of the sport. A survey was done about 3 years ago (privately funded) and the outcome was rather shocking. Never mind people having a perception about horse racing, close to 100% of respondents were completely unaware that SAF had horse racing. Respondents were valid, active economy contributors from varying market segments/demographics, not people from outlying villages or dorpies, mind you.

Coca Cola - why do they still advertise, year in and year out? Because they know the upcoming generation needs to experience their product. If you neglect one generation, you break the link or chain. During the late 80's and into the 90's and 00's, there was neglect in this regard in racing. This is one of (by far not the only) reasons racing is suffering today.

Now add Garrick's point 1 to the mix = the learning curve of racing. This is a tremendous barrier to entry and hampers the conversion rate more than just a little. In fact, without meaning to be arrogant, racing has converteds (punters) active for a decade or more who still don't understand racing as much as they should be (No fault of their own). The problems are complex...and matrixilated.

Nothing captures the imagination like puzzles ......crosswords,Rubik Cube ,Sudoku etc etc.
Racing should be marketed as such ,the difference being ,if you get the puzzle out ,you win cash!!!!!!!!The theory fails however when the clues of the of the puzzle have no right answer,due to a complete failure to regulate them.The concept would never catch on without at least a perceived regulation of consistency and running on merit (ie,the answers)
I'm not suggesting that form could ,or even should, work out all the time,but it should have at least a theoretically predictable premise...so some sort of balance would be good!

Horse racing is resistant to marketing.

To test for yourself you can ask people around you, or ask people in racing how they became involved. I have done this, it would be interesting to hear others.

One of my most interesting answers was an owner/punter who emigrated to SA. He said he grew up with horse racing permanently on radio/tv at home and hated it. The switch game when he started racing with mates here and got introduced to trainers etc at the races.

But punting and owning are different markets entirely, different goals and aspirations.