Racing Industry Told to Innovate or Suffer

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A Dec. 7 panel discussion on new frontiers in wagering turned into an indictment of the North American racing industry over its failure to innovate and change parochial revenue models that hinder the growth of pari-mutuel wagering.

“It’s always amazing the lack of outside investment that comes into horse racing,” said Ben Pinnick, chief executive of i-neda, a gaming consultancy based in Great Britain. “It’s a very insular business here. We need to create an environment of healthy competition.”

Pinnick and others made their comments during the University of Arizona Symposium on Racing & Gaming in Tucson.

Two PowerPoint slides offered by Pinnick were striking. One, called the “right view,” showed past-performance information made available to bettors for free. The second, called the “wrong view,” showed a past-performance PDF with a $3.95 price tag next to it.

“This is not a sustainable model,” Pinnick said. “It’s the road to ruin. Players do not want to pay over and over again to get data. You have to rationalize the relationship between data and how it’s distributed. We have to resolve this issue.”

Pinnick said that in North America, the last real change in the pari-mutuel market came 10 years ago with the launch of advance deposit wagering. He said the downward trend will continue unless there are new product offerings.

TVG Betfair CEO Stephen Burn outlined his company’s plans to launch exchange wagering on a limited basis in California, perhaps in May 2012. Burn said a sticking point has been the revenue model.

In Great Britain the commission on exchange wagers is 5%, but in California—and other North American markets should it be approved by regulators—it’s likely to be about 10%. In a submission to the California Horse Racing Board, however, TVG Betfair states the optimum number may be 6%-8%.

“For it to work (in the United States) it needs a degree of trust,” Burn said. “We need the racing industry to work with us on a pricing model. There has to be an optimal pricing point. We’re completely prepared to take a long-term view.”

In pushing the TVG Betfair product, Burn said the U.S. is poised to relax online gambling restrictions, and horse racing, the only legal form of online betting in the country, needs to be out in front.

“Racing has to be careful it doesn’t get left behind,” Burn said. “It’s too small an industry for us to be beating the crap out of each other and filing litigation. The future of the industry should be about collaboration.”

Burn also contended monthly reports showing continued declines in pari-mutuel handle but increases in purses are “disastrous.” He said there is too much reliance on revenue from gaming machines and not enough innovation to grow pari-mutuel offerings.

Paul Cross, international wagering manager of Tabcorp in Australia, discussed fixed-odds wagering and how it is used to complement pari-mutuel wagering. Both options are displayed at betting shops and on websites to give customers a choice.

“It’s a good guide as to what the market really sees,” Cross said. “They can work quite well together. It’s a change in culture with taking risks. It’s kind of a ballsy move. We’ve dealt with a number of operators who are very cautious about fixed-odds wagering.”

Cross said overall handle has grown, with the biggest growth in fixed-odds betting on racing and other sporting events.