Wal-Mart is bricks and mortar. Amazon is new and fresh. Amazon was first on the block on the net. Wal-Mart was first on the uhhh, block down the street. Bricks and mortar, especially one with past online and offline problems are not supposed to be able to compete with online. But Wal-Mart is doing just that, as witnessed by some webstats from the last shopping month, including Black Friday. From Tomas at Wholinkstome: “For years, Amazon has had practically no competition online, but this year Walmart made significant progress in becoming a possible head-on competitor. Walmart has increased its investments in online advertising and spawned an online marketplace similar to Amazon’s.”
WalMart vs Amazon - Web Stats
How does the old compete with the new? Well, Wal-Mart seems to have succeeded in a number of ways. One, they have a low barrier to entry and are offering their product at a low price. Two, social media prowess, increased online ad spend and community building like the brilliant elevenmoms.com are being done with a grand plan. And three, a complete change in management attitude to online avenues was borne in 2009.
Despite the major problems of the past, the retailing giant is being taken seriously by shoppers, perhaps for the first time.
Flipping the conversation to racing, we see some parallels. Racing is bricks and mortar, and in fact we still see many in the business itself cling to bricks and mortar, this despite the fact that the world has changed and more and more people are looking for easier, less time consuming ways to purchase a product. Racing also has its share of baggage in the customer service area. It is no secret that having a monopoly on gaming has hurt the business in trying to compete, and those customers have left, or are speaking out and not in a nice way. In addition, there are many other games (not necessarily gambling games) being played on the net, which have been for years, like Fantasy Football, who arrived first and have perfected their online marketing.
But unlike Wal-Mart, racing finds itself in an enviable position – one which every business kills for. At this time, online betting like sports wagering, slots, casino’s blackjack and poker are pretty much illegal. The only online legal game is horse racing. The business who once was a monopoly offline, still is a monopoly, but this time online. This is a great starting point for any business.
The problems as I see them, and why I think we have not exploded online wagering as we should are as follows.
1. Price: The web allows for economies of scale, and ease of delivery. This is passed on to consumers and consumers respond. In racing we are charging the exact same online as off. The marginal cost for a $22 bet versus a $20 bet online is zero, but we take 20% or so of that $2 just like the first dollar. Marginal cost pricing for the web needs to be achieved to succeed. Just ask E*Trade.
2. Distribution of Information: In 1990, the Daily Racing Form had to be printed, flown out to whichever track, then unloaded and reloaded. It costs some serious coin to do that, thus the newsstand price. Now the marginal cost of downloading a PDF is pennies. We still charge bricks and mortar prices for PP’s. That is one example, I am sure there are more.
3. Archaic Rules By State or Racing Jurisdiction: Can’t bet online in Arizona? Can’t in Connecticut? What about offering a platform in California with rebates for horse bettors? If you want to see the answer to these and many questions, take a click here. That is the jurisdictional mumbo-jumbo regarding where you live and what you can bet. Pre-1990 issues infect racing like the plague. Could you imagine: If Amazon.com could not sell product in 14 states, could sell stuff in 11 others but only if they have a physical store within 100 miles of said online presence, and would have to sell their millions of products at different prices for each state, would there ever have been an Amazon.com?
It appears racing can be Wal-Mart and can tackle the new kids on the block, but it surely is going to take some work, some new thinking, and some real leadership. It is not going to be easy, but building a billion dollar franchise is not an entitlement and does take some hard work and tough choices. Do we have that will in racing, or are the problems so deep and fundamental that it is pure folly to think we can give this a go?
One Response
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Dean,
The availability of internet wagering is the best thing to happen to horse racing in 30 years. Without it, the sport would be in even more dire straits.
As to why racing hasn’t been able to better leverage LEGAL internet wagering: the 3 causes you identified are definitely factors.
However, a fundamental reason may have more to do with the sport’s overall lack of popularity compared to other major sports.
The key to growing handle isn’t getting horseplayers to migrate from in-person wagering to online wagering, but using legalized internet wagering to attract newcomers to the sport; i.e., those currently betting sports and playing poker online (illegally).
It’s yet another irony of horse racing; Americans are betting untold hundreds of billions of dollars a year on pro and college football, pro and college basketball, and baseball illegally, while racing is getting about $12-14B a year bet legally (combined online & in-person).
The reason seems simple enough, people bet on things they understand – not the best game. Everyone knows how to play basketball and football and you don’t need a racing form to figure out the point spread.
And while takeout rates are a pain in the butt, it’s not stopping people from betting billions on state lotteries which make racing’s bite look like the deal of the century. In the casino, the craps table offers the best odds (and I think the most fun to play), but then why are so many people playing slots and roulette?
Maybe because the lottery, slot machine, and popular sports are so much easier to grasp.
So the industry needs to figure out how to make racing popular again and more accesible for the average person.
I think it’s possible. At least I hope so because I’ve personally spent a lot of time and money trying to crack this nut .
Thanks for another great post. This may be the best blog on horse racing IMHO (including my own!).