Q&A: Bringing fixed-odds racing to New Jersey

In an announcement that was buried among the usual US betting noise released each week, Australian supplier BetMakers revealed it was partnering with New Jersey’s Monmouth Park racetrack to provide fixed-odds bets on horseracing in the state, and eventually the rest of the legal betting landscape in the US.

BetMakers CEO Todd Buckingham discusses the process of bringing the vertical to the US and how horseracing’s juicy margins might appeal to operators in states with higher betting tax rates.

Drawing on his experiences Down Under, Buckingham also highlights the crossover between the nascent US market and Australia’s long-established equivalent.

EGR North America (EGR NA): How long have you been working on the deal with Monmouth Park to provide fixed-odds betting to US operators?

Todd Buckingham (TB): We’ve been working on it for a few years. It’s been something that we’ve had in mind, and then once the sports-betting bill was passed, a whole bunch of things fell into place.

We were fortunate enough to get through that in Australia 10 years ago where we had a monopoly with Tabcorp and it was a 100% pari-mutuel market. We had some on-course bookmakers but there was none of that online.

It all sort of evolved in the past 10 years, and we’ve been fortunate to see how that has impacted across the board, from the racetracks, through to the horsemen, bookmakers, operators and incumbent totes as well.

We’ve used the model that’s worked here in Australia, but now we’ve got the benefit of hindsight, so you can see where things should have been different.

And that’s the model that we’ve gone on to teach in the US market, in New Jersey in particular. New Jersey’s a great scenario for us in that it’s quite a closed unit because every state’s operating independently.

It’s not like you have to go and conquer the whole US market. We’re just trying to get a model right for New Jersey, which will then lead the way into having fixed-odds horseracing rolled out into all the other states.

You need to consider all stakeholders as opposed to just one bookmaker trying to do fixed-odds betting. In Australia, we help out racing bodies. We’re sort of an independent body that sits in between, facilitating how it works for both sides.

And we’ve taken that model into the New Jersey market and been the piece that’s in the middle, negotiating with Dennis [Drazin, chairman and CEO of Darby Development] and Monmouth Park and also negotiating with the operators on the other side to try and find a happy medium.

If it was up to Monmouth to decide, then they would make more favourable decisions to suit them, and if it was up to the other bookmakers, they’d do the same thing.

The past 12 months have been a negotiation stage. Stage one is getting Monmouth and the horsemen fit so that if this model works, they’re going to get looked after. And then stage two is bringing external content into New Jersey from other racetracks around the US and from international courses as well.

It’s then about [ensuring] the operators are happy to have a model that you have packaged and a solution that would work for them as well. There is still a little bit of work to do, but we’re on the right path.

EGR NA: How will BetMakers provide pricing and liaise with the operators on providing the fixed-odds betting product?

TB: From a bookmaker’s perspective, you need a hand with all of your information to be able to formulate odds. So, we get that information off of Monmouth. With pari-mutuel it doesn’t matter what price it is because all the money just goes into a pool and there’s no risk.

So for us, we take the information from Monmouth and create a fundamental price. Then the bookmaker can go and sell bets on that, and we’ve facilitated that some of that is paid back to Dennis and Monmouth.

We sit in the middle and provide a normalized solution. The data that comes from Dennis or from any track is going to come in the same format and structure. If you’re William Hill or Fan- Duel or whoever else, you’ll get a single solution – as everybody’s data and prices are all packaged up in a single solution.

EGR NA: Why has it taken this long to have fixed-odds betting on horseracing widely available in New Jersey?

TB: There’s no fixed-odds betting in the US because the model is lower margin for bookmakers as racing bodies need to take a small percentage of the bets as well. There needs to be a model where we ensure that the pari-mutuel betting market doesn’t suffer because of fixed odds being introduced.

We don’t have a cannibalization of fixed odds. We want fixed odds to actually increase on top of the pari-mutuel market. What we’re doing is that when the operators offer fixed odds anywhere, whether it’s fixed on betting on Monmouth racing in New Jersey or whether they’re offering Monmouth races in Australia or the UK, they also offer Dennis’ tote alongside it as well.

While we’re taking fixed-odds bets, they’ll also be putting money back into the pools to ensure that the pools are increasing.

D7P5HG Oceanport, NJ, USA, 11 May, 2013. Opening Day of racing at Monmouth Park Racetrack in Oceanport, New Jersey, and area of the Jersey Shore which was hit hard by Superstorm Sandy last October. Patrick Morisson/Alamy Live News

EGR NA: Why is fixed-odds racing an appealing addition for betting operators in the US when it is not as engrained into the culture as in the UK or Australia?

TB: While fixed-odds betting margins are probably around 12% gross gaming revenues (GGR), pari-mutuel is about 18% to 20%. But, still, there is a 10% to 12% margin on horseracing, which is still a whole lot better than 3% to 5% on sports betting.

The view is that horseracing is going to be a significant part of a sportsbook. If you look at the online market now in New Jersey, that’s circa $5bn in turnover. We think fixed-odds horseracing can be 20% of that market.

And so even just on the current numbers, if they can get to 20% then it’s a billion dollars in turnover, which is about three-times bigger than the current New Jersey pari-mutuel betting market.

EGR NA: What has been the response from operators?

TB: They like it. The initial stage was just to get Dennis and the horsemen signed up and happy with the deal. In the next month, you’ll see operators coming on board. I’ll be surprised if all operators don’t get on board, it’ll just be a matter of when they can fit it into their development lifecycle.

EGR NA: Do you think it would be as attractive to operators in other states? Pennsylvania comes to mind with high taxes, or the states that require in-person registration or only allow retail betting?

TB: It is more important in those states. You need to have high-margin products. As far as betting around the world, with no other high-margin product like horseracing, and the fact that you’ve got, generally, 10 horses in a race, you’ll end up with significantly more profit than traditional sports betting.

Also, there are so many races – their target is to deliver 100,000 races a year with our solution, so that’s around 2,000 betting opportunities every week, including international events.

If you compare that to the NFL, there are 200 games a season. Obviously, there’s not going to be as much turnover on each race as there is on an NFL game, but given the fact that it’s such a high volume of races and significant margin, it’s going to play a substantial part for every sportsbook in the US.

EGR NA: What is the racing culture in the US like?

TB: Racing is a 24/7 operation. These operators from Australia and the UK realized that racing is an important component of every sportsbook. It’s a matter of getting the model right so that the horsemen and racetracks are rewarded in the US.

We need to look after them first, and we need to make sure that the pools are still increasing and are a part of the offering that the operators will be a part of. Because the margins are so high, it’ll be 40% of their GGR and any single sport that provides 40% of GGR is going to be an important piece of the puzzle.

EGR NA: How did you find the regulatory process in New Jersey?

TB: We’re still working with the DGE and the New Jersey Racing Commission. Dennis has done a lot of work with us there and [lobbyist] Bill Pascrell. It’s an educational process for us to learn about a new market and who we need to talk to.

And it’s an educational process for the horsemen on how this works in other jurisdictions, how it’s worked in Australia and using that model as well as being able to explain that. So, I suppose from a regulatory point of view it’s just maintaining that constant contact and feeding as much information to the relevant people as you can.

EGR NA: Are operators happy to adopt uniform pricing across the board?

TB: You don’t have to have uniform pricing; everyone can do their own pricing, but you just put your own slant on it. Some operators will want to have more risk on certain races, so they’ll offer better pricing. In most cases we give them a general price of what it should be, and then they’ll say I don’t like this runner, so I’m going to take a bit more of a risk on that runner.

Or you know, we lost this race so we’re going to take a bit more risk on the next race.

EGR NA: And what are your expectations for further expansion across the US?

TB: In 2020, we just want to get New Jersey right, and I think the rest will take care of itself. We’ve had lots of enquiries from other operators and racetracks in other jurisdictions already, but I think it’s important that we don’t try to spread the butter too thin and instead just concentrate on getting it right in one location.

That then becomes the model that you can use and roll out and other people will be able to understand it a lot better from that. Maybe if we have the result we think we’re going to have in New Jersey, and we can double the turnover on horseracing, plus provide a whole bunch of extra revenue for Monmouth Park and generate more excitement around horseracing, then I think it’s got to be a model that will be relevant pretty quickly across the other states.