This forms part of the ICE 365 US sports betting series’ Path to Profitability, a deep dive into marketing, product and new revenue streams across the US. Read the full range of analysis from the iGB team here.
There is also an upcoming webinar on this topic, which takes place on 30 March, at 8AM PST and 11AM EST.
By Cole Rush
It’s March 2021. Just shy of three years since the US Supreme Court demolished the Professional and Amateur Sports Protection Act (PASPA), sports betting has enjoyed a period of rapid growth.
As it stands, that growth has begun to open doors that previously remained tightly locked. Online casino is playing catch-up, as markets that have seen sports betting success are beginning to embrace digital gaming in all its forms.
But one form of gambling significantly predates these online up-and-comers. In fact, it even predates land-based casinos and most state lotteries. Horse race betting – parimutuel wagering – has long been a harbinger of gambling innovation.
Take Illinois, for example. The Land of Lincoln embraced parimutuel wagering on horse races in 1927. Horse race betting enjoyed a legal gambling monopoly until 1974, when the state launched a lottery.
It was not until 16 years later, in 1990, that riverboat casinos joined the scene. Now, Illinois is a bustling gambling market in the Midwest, with legal online sports betting, various casinos, race tracks, and a full-fledged state lottery. Legislators recently introduced an online casino bill, too.
US gambling markets often reflect this timeline, with reasonable differences, of course. Horse race betting has historically celebrated long periods of legality while other forms of gambling lagged behind.
Skip ahead to 2021. Now, numerous gambling formats compete with the equine pastime in plenty of US markets.
In a highly competitive marketplace dominated by fast-growing betting channels, horse racing is staged to carry on its legacy. Parimutuel wagering is no longer a silo. The unique and storied form of gambling slots neatly into the ever-expanding portfolio of gambling options available to US bettors.
A horse racing renaissance?
Gone are the days of horse racing as a separate channel, a niche offering. The rapid migration of gambling options into the online space has opened up new revenue streams and innovation opportunities for companies across the parimutuel spectrum. Technology providers and betting operators on all sides of the horse racing industry are noticing a significant transformation in the space.
Illinois’ own Hawthorne Race Course serves as an excellent example. The track’s assistant general manager John Walsh points out that it is the state’s oldest sporting venue, opened in 1891, with its races simulcast around the world.
“In July of 2020, Hawthorne received preliminary approval to redevelop its facility to include a casino with slots, table games and a sportsbook,” Walsh continues. “The $400m redevelopment is currently underway and an interim sportsbook opened in September through an exclusive partnership with PointsBet.”
Put simply, Hawthorne welcomed shifts in the gambling world. Its partner, PointsBet, is also one of The Prairie State’s five licensed betting operators. And the new casino project takes full advantage of the omnibus gambling Illinois bill signed into law in 2019.
This new era of horse racing isn’t limited to the tracks themselves, however. Newcomers, with horse racing heritage, are moving in.
Among these is PlayUp, an Australian business that offers a host of betting products, including racing.
“Horse racing is part of our DNA and has always been a huge driver for us,” its US chief executive Dr. Laila Mintas says. “It remains one of our key drivers in Australia and we have aggressive growth plans for the segment throughout North America.”
Equally, race betting has been the driver of another Australian business’ growth. BetMakers Technology Group, which is in the process of acquiring Sportech’s global tote business to strengthen its US position, does not see itself as a gaming company, however.
“[BetMakers] is a technology and data company that facilitates commercial opportunities for racing authorities, rights holders, and wagering service providers (bookmakers) while providing an improved racing experience for punters,” its chief operating officer Jake Henson says.
That’s three companies, three strategies, three outlooks. And each perspective includes horse racing as a load-bearing part of the business.
As sports betting and other digital gambling formats proliferate throughout the US, horse race betting operators, technologists, and data providers have to navigate an ever-shifting landscape. As parimutuel wagering is welcomed into the fold, there are a few important factors to consider.
The US has consistently lagged behind its overseas counterparts with regard to gambling. It’s a huge market, and gambling juggernauts are laser-focused on bettor-acquisition and legalization in the States.
But it’s also a new market. Even though horse racing has been around for some time in the US, the country still has plenty to learn from markets that have historically welcomed gambling with more open arms.
Among experts, the prevailing wisdom seems to say that the US market for horse race betting requires careful study paired with select learnings from international geographies.
Henson of BetMakers says: “As a B2B supplier, BetMakers takes its knowledge and learnings of best practice racing and wagering solutions across global jurisdictions.
“BetMakers works with regulators and licensed parties to ensure compliance,” he continues. “Under these conditions, [we explore] opportunities to tailor technology solutions for each region and deliver commercial success for all players while maintaining critical integrity.”
It’s that last point that’s crucial. BetMakers seeks to tailor its products to each region.
Every gambling market is unique, as anyone in the global industry knows. Anyone looking to bring horse racing products to the forefront must strike a balance between what works elsewhere and how each unique US jurisdiction will respond to new channels.
PlayUp CEO Mintas emphasizes the unique nature of the States as well: “We wouldn’t migrate an Australian horse racing product to the US market,” she says.
“There are too many fundamental differences in the way the product is presented to customers. We know we need a product focused on the US style of betting and one that addresses the uniqueness of the market and the bettors. We feel the global horse racing industry is poised for a renaissance that could be driven by the US market.”
The various pieces of the horse racing puzzle come together to tell an interesting story. It’s a narrative of rebirth and of massive change that brings horse racing into the betting scene like never before.
There are, however, other factors at play aside from the heavy influence of experienced international companies. One such factor is a constant conversation topic these days…
The impact of Covid-19
The novel coronavirus (Covid-19) pandemic changed everything. No industry was left untouched by the raging global pandemic.
The gambling industry is no exception. Horse race betting in particular has seen some important shifts that shed light on the possible future of parimutuel wagering. Covid-19 is still shaping the landscape, and horse racing stakeholders are taking notice.
“Covid had (and continues to have) a really nuanced effect on racing,” Walsh explains. “The logistics of our sport enabled us and many other tracks to continue racing throughout the pandemic, albeit with necessary safety protocols.
“Because most other professional sports were shut down for so long, there was a kind of return to racing for a lot of sports bettors. Racing is the original sports betting, after all, and continues to offer much more profitable odds and bigger payouts than other fixed odds sports betting.”
Covid-19 then led to increased betting numbers across digital horse racing channels, which have been available in many states for years, Illinois included.
“Much more of our handle was coming from mobile wagering,” Walsh continues. “Though ADW (advance deposit wagering) has been legal for racing in Illinois for a while, it’s still not as common a way to bet for older handicappers.
“Though newer (and younger) racing fans are very comfortable wagering through an app, they also fall in love with the sport through the experience of being at the track and seeing the horses and jockeys and post parades. So our focus is on developing ways to enhance the mobile experience and excitement of parimutuel wagering through the app as a kind of 2nd screen entertainment.”
According to Mintas, Covid-19 has already summoned a flurry of real, impactful changes. “We have seen a dramatic shift of handle to online. That transfer has been happening gradually for some time, but rapidly accelerated in the last 12 months.”
So early on, during sports shutdowns, Hawthorne saw a bump in in-person race attendance and online handle. PlayUp noted a similar trend. But what happens in the as yet undefined “post-Covid” period? Once the vaccines have reached enough arms and herd immunity kicks in, what’s next for horse racing?
“Spectators are going to return to sporting venues, the growing pent-up demand will hopefully see racetracks the busiest they have been for decades,” Mintas says. “Fixed odds is a product which, if priced correctly, [will] make horse racing a more attractive betting product to the consumer.”
Fixed odds betting is another factor that could transform the parimutuel arena, and it’ll be revisited later in this piece.
Henson notes that Covid-19 could spur rapid globalization for the horse racing industry.
“We are emerging into the new world and witnessing many businesses re-evaluating everything they do – from business models to behaviors,” he says. “With challenges come new opportunities, and I think more broadly we are seeing racing bodies explore new revenue streams from their existing wagering content.
“Our view is that racing needs to unite globally as a betting option of choice for the betting public who have never had so many options. By collectively plugging into a global racing network and exporting their product across the world, racing bodies can monetize existing content to a new global audience of punters. That’s where BetMakers wants to exist – as the technology and rights partner to facilitate this with all the integrity and compliance across licensed jurisdictions.”
It can therefore be said that Covid-19 has sparked a new way of thinking about horse race betting. The industry is looking inward for existing products and services that will easily transfer to a more digital-savvy audience. At the same time, horse racing companies are looking outward to the changes that can bring parimutuel to the next level.
But of course, Covid-19 is just one piece of the puzzle, and a hopefully temporary one at that. The growth of one major space has brought welcome disruption to virtually every other gambling format.
Fixed-odds betting: The next frontier?
If the US is the room, sports betting is the elephant everyone wants to address. And if you skip much of the story so far (PASPA, ongoing state legislation, M&A), you arrive at 2021, where US bettors have an unprecedented knowledge of sports betting.
“Point spread,” “moneyline,” and “totals” now mean something even to the casual sports fan. The past three years have seen a remarkable increase in layperson sports betting knowledge.
Naturally, that’ll have a huge impact on horse racing.
Horse race bettors–especially casual fans–now have an entirely new vocabulary they can leverage to bet on races. Historically (and even nowadays) horse racing has been dominated by the parimutuel structure. Odds and payouts change based on the wagers that come in from around the world. This presents both a challenge and an opportunity for race tracks and horse racing tech providers.
Dr. Laila Mintas says: “Fixed odds will certainly help the cross-sell of racing to sports betting players; it’s not a good experience for someone used to fixed odds to back a horse at 5/1 and get paid 5/2 through the pari-mutuel system.”
“The opportunity for fixed odds betting,” she continues, “is in taking the sportsbook player who has a $50 football parlay on a weekend and giving them the opportunity to place $20 win bets in a format and presentation style which looks like their existing online sportsbook […] this is about bringing betting players to view racing as another sport they can place bets on.”
And this sentiment seems to be the secret sauce for the racing industry: give existing sports bettors an easy, understandable way to bet on races that looks and feels like the sports betting they already do on a regular basis.
Walsh says fixed odds betting offers certainty to fans who want to make a bet and get the odds they see rather than parimutuel, which is based on global wagers.
“I see lots of big race future pools coming into being with fixed odds,” he adds.
Fixed odds offer an opportunity, but one that does not necessarily cannibalize parimutuel stakes, Walsh continues.
. “[Fixed odds betting] will be another source of revenue, augmenting parimutuel betting but not replacing [it],” continues John Walsh.
There’s also a completely new generation of bettors to consider. Millennials now have access to online sports betting and horse racing in dozens of US markets, and when Gen Z reaches the legal gambling age on a wide scale, there could be a new, addressable audience on the scene.
Henson thinks this, if properly leveraged, can be a winning bet.
“As we have seen with younger, digital-savvy Australian punters – they like the certainty of ‘getting set’ at a fixed price and having no surprise changes in fluctuations,” he says. “While we think fixed odds can grow the overall wagering pie for horse racing in the US, we have recently shown our commitment to the tote as a betting option with the acquisition of Sportech’s racing and digital assets.
“We believe the tote and fixed odds should be complementary options for different audience segments.”
At this point, fixed-odds betting isn’t just a pipe dream, with a bill working its way through the New Jersey legislature. There may even be movement before that passes, with the state Racing Commission approving a pilot program for fixed-odds race betting, limited to bets on out-of-state Grade I races, approved in November 2020.
BetMakers, because of its partnership with Monmouth Park and Dennis Drazin, is supporting the bill’s passage. While the Garden State has been particularly progressive when it comes to gaming expansion, Henson believes it’s a harbinger of what’s to come.
“We have been in discussions with other states, and there is no doubt that there is much wider interest than just in New Jersey,” he says. “We believe that as the awareness grows of what fixed pdds can achieve as a complementary option to the tote for a whole new audience of the betting public – one that is accustomed to fixed odds sports betting – then we will see traction.
“The commercial returns to industry participants will tell the story.”
At any rate, it appears fixed odds wagering is simply a matter of “when,” rather than “if.”
And paired with the already strong parimutuel offerings at race courses across the nation, this particular betting channel seems well-positioned for continued success.