Racing's need for innovation

The horse racing industry is facing serious challenges. According to the MarketWatch 2015 Industry Forecast, the amount wagered on horse racing (handle) in North America has declined 28 percent between 2003 and 2013. In 2013, North American horse racing handle stood at $11.36 billion.

So what's gone wrong?
While interest surrounding horse racing's biggest event -- the Triple Crown -- remains high and even increased with American Pharoah winning the Kentucky Derby, Preakness and Belmont this year, interest the rest of the horse racing industry is in decline.

In 1995 were 7,984 races days according to MarketWatch and an average of 8.17 starters per race. By 2013, those numbers had dropped to 5,556 racing days and an average of 7.85 starters per race.

What has horse racing done to stem the tide?
The two big steps the horse racing industry has taken is supplementing purses with income generated by racinos and permitting online wagers on horse races. By supplementing the purses, tracks have been able to attract better horses to their races -- thus attracting more wagering. Online wagering was originally thought of as a way to attract new bettors to horse racing. But instead, it's primarily shifted the way existing race fans bet.

So can horse racing be fixed?
Yes! The horse racing industry needs to embrace change and innovation in order to attract a new generation of fans. From mobile wagering and marketing to providing race experiences that millennials will enjoy, the horse racing industry is need of fresh blood and fresh ideas. That's where you come in!

If you have an idea, product or business plan that will bring innovation to horse racing, enter the Innovators' Circle at this year's Global Symposium on Racing Gaming.

We're giving entrepreneurs a chance to pitch their ideas or products to innovate racing to a panel of top industry executives. If the judges like your ideas, you'll get a chance to strike a deal with them.

Your pitch will also be by seen dozens of key decision makers in the racing industry. There's never been a better platform to pitch a new business idea to horse racing executives. You'll have access to decision makers and capital, visibility and a platform to make your case. You can even win cash. What more can you ask for?

And if you don't know anything about horse racing, don't worry. We've got you covered with a simple, but in-depth guide to the industry.

New to Racing?  
It is a grand sport steeped in tradition making some of the business operations seem archaic.  But, on the other hand, it is also on the leading edge of technological advances with activities such as legal online wagering.  There’s much potential here for innovation -- all that’s needed are some fresh eyes and new ideas!

Here is a quick overview of how race horses and racing came to America.

A Brief History of Racing (PowerPoint)

The following are resources designed to give you an overview of the industry both from the general industry perspective as well as the gambling point of view.  We’ll start with the “big picture.”  

The Current State of Racing
The National Economic Impact of the US Horse Industry – The American Horse Council
The McKinsey Report 2011, Sustainable Growth in Racing
2015 Industry Trends
Few Positives in 2014 Economic Indicators

Bloodhorse.com: The top news from the worlds of breeding, racing and auctions.
NTRA.com: The horseracing industry's national site includes features, blogs, video and opinions.
HorseRacingNation.com: Racing's largest on-line community, complete with news, videos, profiles and picks.
America's Best Racing:  A one-stop-shop for information about U.S. racing and current events.
Racing Future: Learn the game 

How the Business Works
Each state retains the right to determine if pari-mutuel wagering will be conducted within its borders and, as such, creates its own distinct set of rules for the conduct of racing.  There are a number of organizations, as well as policies, that cross state lines.  They are accepted and followed by many, if not all, of the states.

Model Rules of Racing
NTRA Code of Standards
Uniform Medication rules
California Horse Racing Board videos

If you are interested in how the actual races are presented and officiated, you may be interested in this video highlighting a number of racing participants.

Duties of Racing Officials

Horse Racing as a Wagering Opportunity
Many people think about horse racing first as a gambling opportunity.  With a few exceptions, horse racing is the only sport that may be legally bet on in the United States; this includes wagering via the internet.

The amount of money wagered is called the handle – this is not to be confused with revenue – handle is the total amount of money that changes hands.  Revenue comes from the take-out portion of the handle.   

The most notable historic change in the distribution of racing, and expansion of wagering, was the advent of simulcasting.  This is simultaneous broadcast of a race being contested at one location to another location for the purposes of pari-mutuel wagering.  

Simulcast Glossary of Terms
The Jockey Club Fact Book: Handle statistics
Wagering on US Harness Races Down 6.6%

How much money are we talking about when looking at wagering on racing’s biggest days?

2015 Triple Crown
Churchill Downs-Kentucky Derby (first Saturday in May)    $194.3 million
Pimlico-Preakness Stakes: $85.1 million
Belmont Park-Belmont Stakes: $134.8 million

2014 Triple Crown
Churchill Downs-Kentucky Derby (first Saturday in May)    $180.8 million
Pimlico-Preakness Stakes: $83.8 million
Belmont Park-Belmont Stakes: $150.2 million

2015 Breeders’ Cup -- multiple races/distances/age groups
Location varies (two days in late Oct. early Nov.)  $150.5 million

2014 Breeders’ Cup: $127.8 million

Brief History of Wagering on Horse Races
1940’s
- Pari-mutuel wagering replaces bookmakers at race tracks.  Pari-mutuel wagering is when the wagers are placed into a pool; the racetrack takes a cut of the total pool (takeout) for operations expenses, purses, etc. (~15% at the time) and the remainder of the pool is divided equally amongst the bettors who selected the correct horse(s).

1970’s
- Off Track betting (OTB) era begins; you do not have to go to the track to place your wager.
- 1978 - The Interstate Horse Racing Act now regulates racing wagering across state lines.

1980’s
- Intrastate and Interstate wagering begins to grow.
-1983 - Nevada casinos receive video of races
-1984 - First Breeders’ Cup simulcast
- Larger racing states go to year-round racing
- Higher takeout rates start to be seen

1990’s

-Technological advances allow for expansion of full card (all races that day at the track) simulcasting
- Racino era begins (casinos merging with racetracks)

2000’s
- Expansion of account wagering; in 2000 the Interstate Horseracing Act is amended to permit telephone and interactive wagers.
- Expansion of international simulcasting.
- Biggest foreign market wagering on U.S. races is Canada, other markets include: Latin America, South America, Caribbean, Mexico, Europe, Australia, New Zealand, Turkey, South Africa.

Currently
- Horse racing is still the only legalized form of interstate online gambling permitted in the U.S.
- Current industry stats (McKinsey) say account wagering is 20% of industry handle and a growing share of the market; simulcasting (a customer wagering on a race who is not on track) accounts for over 85% of the handle.
- TVG, Xpress Bet and Twin Spires three biggest national account wagering companies.
- Not all states allow account wagering, those that do include: Arizona, Arkansas, California, Colorado, Delaware, Florida, Idaho, Illinois, Iowa, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Montana, New Hampshire, New Jersey, New Mexico, New York, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Dakota, Tennessee, Vermont, Virginia, Washington, West Virginia and Wyoming
-TVG and HRTV are 24/7 horse racing television networks available via DISH, some local cable (usually with upgraded sports package) and DIRECTV.

Common Types of Wagers at the Race Track
Single horse in a single race wager
- Win-horse has to finish first
- Place-horse can finish first or second
- Show-horse can finish first, second or third
(Usually minimum wager is $2; some tracks $1.)

Multiple horses in the same race wagers
- Exacta-picking first two finishers in order
- Quinella-picking first two finishers in either order
- Trifecta-picking first three finishers in order
- Superfecta-picking first four finishers in order
- Pentafecta (Super High Five) picking first five finishers in order
(Minimum wagers can be from $.10 to $2.)

Multi-race wagers
- Daily Double-pick winners of two races in a row
- Pick 3-pick winners of three races in a row
- Pick 4-pick winners of four races in a row
- Pick 5-pick winners of five races in a row
- Pick 6-pick winners of six races in a row
(Minimum wagers can be from $.50 to $2.)

So what about the technology that allows the wagering on horse racing just about anywhere, anytime either in person or online?
The tote system is the actual hardware and software used to calculate the odds given the amount of money wagered; create a mutual ticket that is your “bet” and then cash that ticket to allow you collect your winnings.  It aggregates wagers made at all locations into a common pool.

The “host” is the track presenting the live racing event and the “guests” are all the tracks and companies that are offering wagering on that event.

There are four tote companies in the U.S. - Amtote, LVDC, Sportech and United Tote.  

Common Terms Used by the Four Tote Companies
ITSP (Inter Tote System Protocol) - the language that tote company machines use to speak to each other.
Version - Type of ITSP being used (5.18 or 6.0), needs to be compatible with host-higher versions also allow for end of day transfer of TRA files and greater entry into international pools.
Host - Tote system handling wagering on a live racing event.  It controls the link and the messaging, transmission should occur every 15 seconds.
Remote/Guest - Tote system wagering into host.
Hub - Central tote location that handles wagering for many locations.
Pool - Report sent by host to remote which defines all pools offered in each race of the card as well as number of runners in each race.
Link - When host tote and remote tote are transmitting data back and forth.  If link fails, the host will send messages to attempt to reestablish link. If it cannot, host will either go official with whatever money was received or “clear and close” i.e. remove all the money that the remote wagered into the pool.
Stop Betting - Host will send electronic notification to remotes when race has started, it will then send message for final cycle information.
Progressive Scan - Used in multi leg pools like the Pick 4, 5 and 6; it will scan pool totals as well as winning and losing dollars in each leg of wager.
Net Pool Pricing - Allows host to link to remote when take-outs between two locations are different.
Interface Fee - Fee charged by host tote-company for wagers processed from a different tote company.
Entries and Fields - Groups of horses linked as one wagering interest due to common ownership or if system cannot handle the large number of betting interests (for example in KY derby future wager #24 is “all other three year olds”.) Tote system sees entry or field as one betting interest as long as there is a live runner.
TRA Settlement File - Generated after racing has concluded by tote, it splits all hubs into their individual locations for auditing and settlement purposes.

Race track video and video streaming in the U.S. is provided by Roberts Communications Network.
All domestic North American racetracks currently use the RCN Ku Dish network for domestic satellite transmission. This change which occurred in 2011 and allows small sites (bar/OTBs) to use smaller dishes than the conventional C-band dishes.

Pros:  One system allows for one stop shopping for decoders and equipment.

Cons:  Smaller dishes more susceptible to adverse weather-specifically rain fade than larger dishes.  The RCN Ku satellite footprint is limited to North America. RCN has a different system-LAST (Latin America Simulcast Transmission) system that goes to Caribbean and South American locations.

Video Streaming Definitions
Encryption - Manipulation of the audio-visual signal transmitted by the host track to ensure that it is unusable to anyone except an authorized guest site which can unscramble the signal using a decoder.
Encoder - Computer in host television truck which encrypts (scrambles) the simulcast signal.
Uplink - Small satellite truck which sends the signal from the television truck to the satellite; satellite time is pre-ordered-specific space on a satellite and is called a transponder.  The video is compressed so it uses less space on the satellite which saves money.  The major problem with a HD signal is it takes a lot of transponder space making it very expensive.
MPLS - A dedicated data line to RCN which serves as primary transfer of signal backed up by satellite redundancy.
Downlink - RCN Ku dish that receives the signals and disseminates them to the decoders.
Decoder – The equipment that authorized guests use to unencrypt the signal. Each RCN decoder has two channels, so the guest can bring in two tracks at once per decoder.  You can also piggyback-take two tracks that start at different times on one decoder channel. This saves money and space in the TV truck.
Modulators – The equipment hooked up to decoders that send tracks from the TV truck or dock to RF system channels in the building.
Router – This allows for signals to be sent to several different channels at once. It creates flexibility as you can switch tracks to different channels during the day.

Wagering-based Information Resources

TimeformUS.com: Picking winners is fast and easy with TimeformUS past performances!

Drf.com: America's Turf Authority delivers the news, stories and handicapping information from the world of horseracing.

Equibase.com: The keeper of statistics/data in thoroughbred racing.

Trackmaster.com: The keeper of data from the world of Standardbred racing.

Americanturf.com: The site supports the monthly magazine with information, opinions and selections for thoroughbreds.

Hello Race Fans!: A handy resource for people (including beginners!) who want to handicap and wager on thoroughbred racing.

Glossary of terms

Horse racing is popular around the Globe.  The following are links to racing rules, regulations and customs in other parts of the world.
Hong Kong

Australia

Canada

British Racing