By Patrick Patten, of Handride
The people in charge are right (that is the ethereal “they”): this is not the time for big grandiose ideas. I just think the correct time was 3 years ago and they want to wait another three years,[rimshot].
There was a plan! Right up until someone said ADW. [cue sad horn “waa-waaaaaaaaa”]
Do you know what plan I’m talking about? No, it’s not the TCT that TOBA once floated, as a fix to all of racing ills, nor am I talking about the plethora of other failed big ideas that seem to pop up every other year. [If you think a continued expansion of Win and You’re In is a fix I’ve got a bridge for sale]. I’m talking about a very under the radar idea that us fans are getting a glimpse at now it’s been dead for a few months. In a nutshell; Satish Sanan tried to pull together the disparate parts of the industry and pull them behind a way for all of them to make money. At its simplest it appears to have been an ADW, but in the end it wasn’t anything.
This non-starting hurts my soul; to come that close and be back at square one. I just can’t stand for it. So, here is my idea to get everyone on board right up until the point the group would have to form an ADW. And I have to somewhat agree that the idea of creating an ADW is counterintuitive for a lot of these racetracks. Many of them already have ADW’s, and as a collective forming an ADW seems a bit too bureaucratic and heavy handed.
Very simply: Create an LLC owned by all interested parties, and then go out and buy the exclusive signals from every racetrack in the LLC. The LLC would then sell the signals back out to all racetracks and ADWs. The LLC would become a for-profit clearing house that would make money off the difference in price it bought and sold signals.
I think the easiest way to clarify that is through an example. Let’s say I’m Track X, I sell my signal to a plethora of entities, ADWs, other tracks, and other signal conglomerates, and I negotiate every single one of them. This takes time and effort to say the least, and not only am I negotiating how I sell my signal to everyone else, but how I buy other tracks signals; doubling the work. That right there is inefficiency. Add on to the fact that the structure of our revenue model is hopelessly outdated and you can see that a more efficient approach might kill two birds with one stone.
So, I call up all my track friends and ask them if they want to go into business together. Imagine 20 tracks sign up to sell their exclusive signals to this LLC. There would have to be a structure created to value what a signal is worth: the LLC would pay a slightly higher rate to those tracks that generated higher handle last year, had a high purse to race ratio, averaged a higher number of starters per race, and/or if the track had specific safety measures in place. The LLC would then have to have an outline on how it would sell the signal: is the buyer an ADW, track, partner track, do they televise, how many days of racing do they put on. The amount of carrots and sticks that could be created around the price of a signal is only limited by the time on which the LLC would want to spend on it. Furthermore, all this would all ensure the key aspects of what Mr. Sanan was trying to obtain: transparency, revenue, & cooperation.
As Track X I’m able to sell my signal one time at a specified rate that everyone in the LLC has agreed upon, that I myself had a hand in creating. I can increase the money I receive for my signal by doing very specific things laid out by the LLC that my horsemen know about; my horsemen now have a very transparent way of seeing a big chunk of my revenue. I go to buy signals that I know my patrons will want to wager on and I have an easy way to pick (maybe ala carte, one track at a time, or maybe groups of the smaller tracks are grouped together to help spread their signal), my patrons know what I pay for signal and have a better grasp on where and who is causing takeout. (Speaking of takeout… with the signal all in one place take out could be taken on as a whole rather than 1 or 2 tracks “experimenting.”) I would imagine that ADWs would have to pay a higher rate that might allow tracks to lower theirs. Again it would all be out in the open now in the clearing house. In the end the more money the LLC makes by buying and selling falls back to the tracks as they are all part owners of the LLC.
Now the LLC wants to put on a televised racing show every Saturday, dinner time. We already have the tracks around the table so to speak, and we have revenue to help some tracks make the decision to move races around. As track X, I’m told I can get a percentage more for my signal if I join the scheduling group inside the LLC, meaning that the LLC (that Track X is part owner of) would work with the track to move some racing around. Maybe some of my premiere racing is moved from Sunday to Saturday, or maybe a Gr III is moved a few weeks to better fit in with the overall schedule. No one is going to move the Derby, because the tracks don’t want that. It’d all be about getting the best product on TV, we’re not moving mountains, there’s plenty of good racing every Saturday.
See, I believe the contracts between all these separated tracks, ADWs, and horsemen are a major stumbling block to cooperation. It’s not so much that people don’t get along it’s that there’s always a piece of paper somewhere that won’t let one track do what the track next door does. Many want the government to come in, wipe the slate clean, take over and force rules down upon the industry. But, before that happens, why can’t the industry organize itself, not just for the benefit of a clean house, but for money. Who doesn’t like money? I think we can all agree the revenue structure of this sport is a mess.
Every track raced out to create an ADW because it makes more money than the track itself. Everyone knows that tracks ability to profit is greatly curtailed because of the on-track product they create. (Some of which is poor management and cost control, but some of it must be actual necessary costs). Everyone knows that take-out is too high, and that all stems from these prior problems mentioned. So why not streamline? Wouldn’t a track rather deal with one entity (that it partly owns) and sell its signal at X rate and buy signals at Y rate and be done with it?
The benefits of a race signal clearing house are the same as those outlined by Mr. Sanan, but no ADW is created. So, why not give it a chance?