For those of you who are not familiar with HANA (Horseplayers Association of North America), they are an independent grassroots organization representing you – the betting customer. The 5MTP team recently chatted with board member, Jerod Dinkin on what HANA’s overall mission is, their views on takeout, breakage, Keeneland, as well as the path forward to revitalizing an industry that is in need of it. The 5MTP team thanks Jerod for taking time out of his busy schedule to interview with us.
5MTP: Why should a horseplayer join HANA? What influence does HANA have on stakeholders in the industry and what are some of HANA’s biggest accomplishments?
JD: HANA is a grassroots organization made up of people like you and me. Our mission is to represent the betting customer. The bettor historically has never had any kind of voice within the system. Pari-mutuel handle funds purses. It funds really the whole system. Without us, the sport doesn’t exist.
HANA does not have a budget. Our budget is entirely made up from ads we sell in the magazine and that money goes to funding the gentleman that puts together the magazine for us. What we wanted to do was come together as horseplayers, instead of just complaining without action. That’s the main reason I got involved and why others should get involved. You can whine and say what you want to say, but if you’re not channeling that in a way that is productive, it’s really only going to hurt the process.
The message for us is that we want to have a voice in the system, to be able to say here’s what we are concerned about. As a player, you don’t have to agree and that’s ok, but we want you to know what the issues are and we will put those issues out there. On the board, we listen to what our members are saying and that is what drives what we push as an agenda. It’s collectively, on a grassroots level, saying what is important to us, therefore we’ll go out into the marketplace and let people know what our concerns are. Now, they are not always going to listen to us, but at least we have a voice where we can say here’s what is important to us.
With HANA, you simply sign up. As a member, you tell us what you are concerned about. If you see something, hear something or experience something you don’t like, let us know and we’ll collectively try to make a difference.
Our biggest success has probably been raising the awareness of takeout. Even 5 years ago, some of the most ardent bettors weren’t necessarily in tune with what the effect of takeout meant to you, as the customer. Additionally, an even bigger issue than takeout is breakage. Breakage is essentially stealing. The pari-mutuel algorithm works where X amount is taken off to pay for all sorts of things, including profits at the track, ADW system, etc. The tote system is rounding down before payout. So, if the tote system says the pari-mutuel payout is $6.48, they are paying you $6.40. Now .08¢ doesn’t seem like a lot, but over time, it’s powerful to explain that that money is simply gone from the system and it’s never going back into your pocket
Between the issues of takeout and breakage, we’ve done a good job with educating our members and the public that this is what is going on. Kentucky Downs has been a big win success for us. They approached us, with the intent to be a track that is player-centric. They have low takeout, big fields and their handle has been explosive. We really want to push that message to other tracks that it’s that simple…we’re looking for low takeout and big fields and we’ll consume your product that is most advantageous to us and everyone.
Another success is that we created an algorithm based on several important factors: takeout, availability of signal, the minimums for the bet, the bets that are offered, signal distribution, pool size of those tracks. It’s just giving people information in one place. Whether you disagree with how we weighted the algorithm, the information is there and available.
5MTP: With the recent news of Keeneland being the latest track to raise their takeout, what are your thoughts on the short term and long term implications of tracks raising their takeouts? Is there an alternative that Keeneland, and any track really, could take in order to accomplish the same thing that an increase in takeout does?
JD: When handle started taking a pretty precipitous fall, the owner and horseman groups thought from an economic perspective that the best way to maximize return was to raise prices and in effect, take a larger piece of a smaller pie. Taking money out of a system is never a good thing. Even if you were getting a slightly higher cut than you were before, it is a myopic type of thing, where whatever short term benefit may result, it will not be good in the long term. Unfortunately, that is the way many things are managed – whether it is a publicly traded company or whether it’s a private company within horse racing.
Again, this is a myopic view on raising takeout. They may raise revenue in the short term, but time and time again, it’s been shown to not work long term. If you’re going to cultivate a long term strategy, you don’t take money out of the system. Players will bet if you put more money in their pockets. It’s all churn. Players are going to continue to bet, where they have advantageous situations.
Because they are Keeneland, they’ve always been on a pedestal with world class racing – they’re in the heart of breeding country and they have always done things the right way. People love to visit Keeneland and they do a lot of things the right way. I think they honestly thought their elasticity was different than it actually was.
You can’t – in today’s day and age – summarily raise prices. Even if they honestly believed it is the best way for them to maximize profits and to grow, it is the wrong way of looking at it. There is a lot less money in the system. People are literally dying off in this game and they’re not being replaced. And, there’s less dollars to go around. So yes, Keeneland has high class racing and they do a lot of things the right way, but when you nip away at the customer – that’s money the customer has to reproduce into the system – it is not the right solution. Taking money out of the customer’s pockets is not the right solution. You can maximize your revenue by lowering takeout, not raising it.
You’ll always have the casual bettor or fan that comes to the track for the day, buys some food and drinks and they’ll place some bets, maybe spend $20. They will have a good time, whether they win or lose. And, that’s great and, we need more of those people coming to the track, but those people don’t care or understand the implications of raising the takeout. The bigger problem is that you are alienating your best customer – the regular bettor that is continually putting their money into the system. For that customer that is playing your track at 2:00 on a Wednesday afternoon, when the rest of the weekend crowd is going along with their lives, you’re alienating that customer that has sustained you. When you take money out of that customer’s pocket, it’s not getting replaced by the casual weekend bettor. It’s a big problem.
We’ve also heard the argument that Keeneland’s takeout is still lower than a number of other jurisdictions across the country. That is true, however when tracks look at Keeneland and say that Keeneland is the one we look to as the leader in this industry and that’s what Keeneland did and that’s what we’re going to do, that’s almost a bigger issue than the data and numbers itself. It’s that perception that other jurisdictions may model after them. That perception, in addition to the monetary issue, sends the wrong message to the rest of the system.
Instead of raising the takeout, they should have left the takeout the same. They have the field size, they have the quality, they have the geographic location – with new tax laws that went into effect, if they kept the takeout the same, they still would have been hitting it out of the park. Kentucky Downs is up 30%, so it’s there. The new IRS rules are already helping churn. All Keeneland needed to do to raise their revenue was keep their takeout rates the same.
5MTP: Do you feel that the calls to boycott Keeneland were successful? What kind of message do you think the boycott sends and do you feel that the boycott will lead to any change?
JD: We were very deliberate about whether or not to formally boycott playing Keeneland. It’s not something we take it lightly. We decided to proceed after listening to our membership and if they wanted it, then we’ll do it. An overwhelming majority was upset and they wanted their voices to be heard. Our #1 aim is education. We simply want to put the information out there and people can make their own decisions whether or not they will bet. It’s not up to HANA or anyone else to tell someone where they can or cannot play. We put the message out there. We told everyone that the majority of us are not going to play Keeneland and we would like you to join us, and here are the reasons why, but if you choose to play, that’s ok. So far, it appears to have been pretty successful. Obviously long term, it’s too early to tell. But, from a message standpoint, it sends the message that we are not going to take this idly, we’re not going to take it lying down and we’re upset.
5MTP: Some tracks are seemingly more focused on introducing alternative means of revenue (eg slots, charging for admission/parking, etc.), instead of working on a long term solution to increasing handle. What can/should the industry do to focus on increasing the handle?
JD: Alternative means of revenue, things such as the food trucks and the concerts will drive traffic. The lost opportunity that happened during the slot boom is that the money was not used effectively. Obviously you want to augment your purses. You’ve got this huge pool of money and if you lower takeout, you’ll actually make more money. Make the bet more attractive because that is what sustains the game. Have the whole system flourish.
Unfortunately, having the slot-infused pot of cash and keeping the takeout the same would be have been fine, but instead, they raised the takeout. You have this huge pool of money at your disposal, purses could have gone up, handle would have gone through the roof, but instead, they put it in their pockets.
They had this opportunity to use that money and have the whole system flourish, but now that ship has sailed and the game has to stand on its own. It cannot rely on government or slot subsidies. The business needs to be able to find a way to thrive on its own, without alternative sources of that kind of revenue.
So, in the short term, the food trucks, concerts, the wiener dog races will get a huge crowd but the majority don’t bet. It isn’t sustainable. The focus has to be away from those things.
Parx is a prime example. Their purses, subsidized by slots, are generous, but the takeout is high. At 30% rake for tris and supers, at some point, you’re going to be broke. It’s a huge lost opportunity. Kentucky Downs’ purses are funded by instant racing, which is effectively a slot. But, they use it in the right way. They have huge purses, they set the pricing of the bets at the right level and people absolutely love that track. Why other tracks don’t see that and follow Kentucky Downs’ model is really perplexing.
Horse racing has two competitive advantages – it’s a gambling sport and it’s the athlete. When you go to the track and you see how fast these horses are and how majestic they are, it’s a great thing. It’s something that needs to be promoted. Horse racing has allowed those two competitive advantages to fall by the wayside.
5MTP: Some ADWs are “better” than others; some only cover certain tracks, not all wagering options are available across the multiple platforms. What should be done to provide better products for customers?
JD: Customers want to consume. I want to be able to open up whatever ADW I have and be able to play whatever track I want to play. I don’t want to have three ADWs to have access to the track I play. I don’t care what the reason is why I can’ have access to those tracks. I just want to consume the product, I’m the customer. Give me the product.
Let’s say I open an ADW — maybe I get three quarters of the tracks, maybe half of the tracks or maybe for this particular month, I don’t have access to a particular track because of a dispute. This experience is not something that will: a) cultivate customers or b) keep customers coming back.
We are in an era where we can literally order anything off the internet from anywhere in the world, yet the system can’t figure out how to offer to the customer what they want on an easy to consume basis.
Players don’t realize that the government has decided to tax some signal feeds within some states. So for example, if you’re a resident of New York and you bet on a race outside of New York, they will throw on a nice 5% tax on that bet. If you are a big revenue player, that will cut into your rebate. Even if you’re not a big bettor, it still impacts you. Now, that’s not horse racing’s fault or the ADW’s fault, it is the government trying to get as much as they can.
If we’re talking about cultivating new fans, let’s use the example of the Kentucky Derby. A good portion of people going may not know anything about horse racing, but they have a great time and love it. Once they get home and decide they want to learn more about it, there is such a laundry list of things and hoops to jump through. That person may live in a state where ADW wagering is illegal. There are states where you are limited. There are states, such as New Jersey, where only certain ADWs have rights. It makes consuming the product very difficult. Imagine being someone new to horse racing trying to learn. You almost need a betting concierge, someone who knows the ins and outs, to walk you through it. That is unacceptable. That is not the way to grow a sport. Eventually, like most things, they will probably be forced to address it when it breaks completely, before things will change. There is too much infighting. Every state has its own laws, so that’s not in their control. But, what is in their control is how they treat customer, access to customers, price of product and a few other things that they can easily control that they aren’t currently doing.
5MTP: What can the industry do to attract more bettors?
JD: The number one thing that can be done, as far as education is concerned, is to make past performances widely available. Yes, there is a cost to creating them and putting the data out there. Yes, you need to make money off data, however, if you look at every other sport, nobody is charging you to find out what Aaron Judge’s stats are. It needs to be more widely disseminated. Even if having past performances can be somewhat intimidating, at least it is something where people can have access to the data cheaply.
Why can’t tracks partner with the data providers and to find some system of providing past performances to customers? So, when the person comes to the track and wants to learn how to bet, they can learn how to bet, without having a huge barrier. What is intimidating to newcomers is why people – once they have overcome that learning curve – love it so much. It’s a puzzle that you are trying to solve. The more betting options that are available to you, the better you can try to solve that puzzle, so you can maximize your returns. How do we attract more bettors? Free past performances and there’s also a need for fan education. If you don’t know an exacta from a pick four, it can be very intimidating. Canterbury Park, as an example, does a great job of educating fans. A lot tracks have made a concerted effort to educate fans. Start newcomers with something as simple as Win, Place, Show betting. Start to learn to handicap and keep it simple and build from there.
One other anecdotal thing that might be helpful to horse racing is to take a cue from dog racing. Dog racing is very easy when it comes to how they group together the class. If you are an “A” dog and you don’t hit the board in three races in a row, you go down to “B”. If you win a race as a “B” dog, you go to “A”. Horse racing could keep their conditions the way they are, but than have a macro level condition based on “A”, “B”, “C”, “D”, etc. so people can understand class a little easier. If you look at the conditions of some of these races, it’s very confusing. Imagine trying to explain “Non-winners of two other than state-bred optional claiming race” to someone that doesn’t understand horse racing. If there was a simplified system, say…this is a Stakes race and it is an “A”; non-winners of one allowance is a “B”; an open claiming race is a “C”; an condition claiming race is a “D”, a maiden race, etc. Create a system that makes it easier to learn. That would help newcomers start to get into handicapping and understand the differences in class.
5MTP: What are the biggest challenges you feel are facing the industry? And, what is the path forward?
JD: We’ve covered a lot of the challenges in the previous questions, but to add on to those, some of the other challenges are the drug problem or the perception of such; the last minute odds changes, poor timing of the races; inconsistencies with steward decisions, among others.
The path forward, from HANA’s perspective is simple. We can turn the industry around or at the very least get it going in the right direction literally by fixing one thing and that is breakage. You have a negative pool – a horse like Songbird in a five horse field, goes off at 1/9 and the actual payout based on the algorithm would be less than your betting. You’re actually losing money, so you end up with a big negative pool. If you eliminate breakage, you’re putting money back in the player’s pocket. It’s cleaning up a complete wrong. Even if they did nothing with takeout, by eliminating breakage, you’ve improved the money in the system. That is a simple thing that can be done tomorrow at the flip of a switch that would radically improve the industry.
The player-centric view of the path forward is to give us advantageous bets. We’re bettors. Give us something good to bet on and we’ll be there in droves. The problem is there are less and less to incentive to bet.
5MTP: Do you only play NHC contests or are there others that you participate in? Do you have a strategy that you follow? Do you prefer live bankrolls or Pick & Pray?
JD: I used to be more active with NHC, but it hasn’t been as advantageous as it used to be. The takeout is absurd, so I have avoided NHC in recent years. I enjoyed it when I played and it was a good time. I like Derby Wars and the Horse Player World Series. It’s not for everyone, as the format is playing fictitious win, place bets over a three day period and some people prefer live money. I don’t mind the fictitious bets.
Strategy is entirely based on what the format is. You can’t go in with a one-size-fits-all strategy or you will be beaten before you even get there.
Personally, I’m 50-50 on live bankroll or Pick & Pray. Others have stronger thoughts on that. Certainly the professional horseplayer are going to do the live bankroll almost 100% of the time, as that’s what they do every day.
For me, if it is a good set of races, the purse money and the structure is appropriate, I’ll do whatever makes sense from that perspective. Also, camaraderie is a big thing. If my friends are playing, I’d be more apt to participate.
5MTP: In closing, are there any final thoughts that you would like to share with our readers?
JD: One misconception of HANA is that we are telling you what to do — to bet this track, to not bet this track. Some may believe that there are people or organizations that we are affiliated with, but we’re not. We are 100% independent. At HANA, we’re simply putting out information and our rationale for representing what our players want. We represent you – the betting public.