Conflicting Post Times Reveals Staggering Lost Revenue from Unrealized Betting Handle
The 65th annual Round Table Conference hosted by The Jockey Club in Saratoga Springs, NY revealed a significant problem across all racing: Conflicting Post Times. As a result, the U.S. horse racing industry is losing an estimated $400 million in unrealized annual betting handle.
The staggering figure was released and presented as one of the seven individual presentations on Sunday’s Round Table agenda. Guest speakers covered industry topics on Thoroughbred aftercare, the use of ‘big data’, marketing, international race officiating and the securing of sponsorships. The Jockey Club’s continued support for pending federal legislation that would establish an authority to create and implement a national uniform medication program was also discussed towards the end of the program.
But the topic generating the most buzz was the research outlined by Ben Vonwiller, who leads the management consulting firm McKinsey & Company’s Global Media and Entertainment and Professional Sports practices Mr. Vonwiller pinpointed a staggering lost-revenue figure that has previously only been speculated about when tracks simulcast races that go off right on top of one another.
“We think it’s actually a systemic problem across racing,” Vonwiller said. “This is clearly not an optimal fan experience, and we also believed, as a hypothesis for this work, that this had a direct financial impact on the industry as well.”
Vonwiller explained that his firm’s initial research on the scheduling of sporting events began as consulting work when the National Football League wanted to realign its methodologies to maximize fan focus on the best matchups. Because McKinsey has also spearheaded projects commissioned by the racing industry, Vonwiller saw parallels in those same algorithm-driven techniques that could be of benefit to post time conflicts.
Realizing that simulcast players bet more often when they are able to focus to races that do not overlap, his team used a historical data set of 40,000 races and built a model to predict handle patterns based on things like field size, purses, and the class type of race. The team then compared when the races actually went off against a theoretical “de-duplicating” of the timing to show how much might have been bet if those overlapping races had been better spread out.
Looking at only the top 10% of races based on purse size, Vonwiller said the data revealed 1,500 conflicts that negatively affected handle. Moving around post times by only a few minutes, he added, effectively doubled the share of attention from bettors.
“The payoff is real and significant. Our model predicts a $400 million increase in handle across the industry from better scheduling by de-duplicating races,” Vonwiller said
Vonwiller’s team knew that the model might not be applicable in the real world though, so they talked with various racing officials and industry insiders to see what challenges might prevent optimized post time scheduling from working.
Based on that industry input, Vonwiller conceded that complete de-duplication is impossible. If the industry strictly wanted races to go off only every five minutes with no overlap, he explained, that would require only six tracks running at any given time.
“So an end goal where we have to overlapping races is not possible,” Vonwiller said. But, he added, “an end goal where we have overlapping races that are truly optimized to maximize handle is absolutely possible, we believe.”
Vonwiller estimated that even if only the five largest tracks in the country cooperated by coordinating post times, there would still be a 2-3% growth in annual handle, representing some $200 or $300 million based on the current industry average handle of $10 billion annually. He added that even lower-level tracks that didn’t participate in an optimized scheduling grid would benefit from a trickle-down effect.
“The reason why we think this is worth that investment is that the payoff is real–$400 million, a 4% increase in handle, is a real stiff change that is worth the effort, we believe,” Vonwiller said.
Yet Vonwiller did not speculate or offer any ballpark estimate on the costs involved in implementing such a scheduling system.
Stuart Janney III, the chairman of The Jockey Club, said after Vonwiller’s talk that “This is money that’s available to us if we work together, and we should be ashamed of ourselves if we don’t find a way to take advantage of this.”
More coverage and 8 takeaways from the Round Table Conference.