Monday, July 23, 2018
Which Numbers Don't Lie?

"Without data, you are just another person with an opinion." ~ Andeas Schleicher

rsz_1img_0016With the premier lifestyle racing meets of Saratoga and Del Mar set to open, it's a good time to be thinking about the casual fans of the sport of Thoroughbred horse racing who will be spinning turnstiles on opposite ends of the country. Few would argue that those two venues, in addition to Keeneland, represent the ultimate live racetrack experiences. If you happen to live anywhere near Albany, NY, Lexington, KY, or in San Diego County, and someone asks "What are you doing today?", "going to the track" is a more than acceptable answer. Going to the track is, in fact, the thing to do during these social race meets, and visitors from near and far flock to these "destination" racetracks. In most other places around the country the reply "going to the track" may trigger quizzical, suspicious, or even incredulous looks.

What about the "big picture"? How popular is horse racing? How big is the fan base? We'll spend some time here trying to flesh out these questions.

Earlier this year Alex Waldrop, CEO of the NTRA, penned an article suggesting that the state of the Thoroughbred racing industry in 2011 was rosier than most realized. And he had data to prove his point, which is always a good thing. Alex claimed that around 50 million adults (one in every five) in the U.S. qualified as Thoroughbred racing fans according to research conducted by SocialSphere, Inc. for the NTRA. He went on state that according to 10 years of ESPN Sports polls as many as 83 million adults (one in every three) describe themselves as fans of Thoroughbred racing. These claims raised a few eyebrows at the time, including mine. We'll attempt to put these claims into context.

A book on the library bookshelf recently caught my eye, "Sports and their Fans" by sports economist Kevin Quinn. Surely 50 million Thoroughbred horse racing fans would merit commentary in this examination of the relationship between spectators and sports. In regard to horse racing, if you read this book you will learn from a handful of scattered comments that it exists, it's big business, and people wager on it. You will not, however, learn anything about fans of Thoroughbred racing... their numbers, their characteristics, their relationship to the sport. You will not learn that fans of horse racing exist, let alone that there could be 50 million of them.

According to Nielsen Media estimates, around 15 million people watched the Kentucky Derby this year. Even granting that this viewership estimate is squishy rather than a hard number, 15 million is worlds apart from 50 million.

The sport of Thoroughbred horse racing has fans in the United States. That's a fact. But are there 83 million? 50 million? 15 million? And exactly what do they do to express their fandom? What does racing need them to do?

Elsewhere in Alex's piece he states that "ESPN Sports polls also confirm that roughly 2 to 3 percent of the adult population cite Thoroughbred racing as their favorite sport." This claim is quite difficult to accept, but let's try. In 1974, a year removed from Secretariat's enthralling campaign that dominated the headlines, the Harris Sports Survey asked a national representative sample of sports fans to indicate which sports they follow. Among the many survey findings were these nuggets: One in every five (20%) sports fans claimed to follow horse racing. And 3% chose horse racing as their favorite sport.

Can we really believe that horse racing's "favorite sport" market share is unchanged since Secretariat?

In early 2006 the Pew Research Center conducted a methodologically rigorous survey into behavior and attitudes about sports and gambling as part of their Pew Social Trends series. A randomly-selected national sample of 2,250 adults were surveyed by telephone. One question posed to the respondents was "What is your favorite sport to watch?" 35% volunteered "Football" as their favorite. Additional analysis of my own revealed that a barely perceptible 0.1% volunteered "Horse Racing" as their choice*. Other sources like the Harris Poll typically peg horse racing with 1-2% favoritism among sports fans, down from a peak of 4% in 1985.

Now, it may be that horse racing enjoys support among those who do not consider themselves to be sports fans in the traditional sense. I think this is almost certainly true. Our own survey back in February confirmed this finding, with women dominating this category. Which is why survey results based not on just sports fans but all adults should probably merit more weight.

I also have a hypothesis that online survey questionnaires which present the possible choices for favorite sport to respondents probably produce higher percentages than open-ended questions. Someone may notice "horse racing" as an option and think to themselves "yes, I've watched the Kentucky Derby before, that is my favorite sport." There is an old saying in survey research... "Respondents are like cats, give them a box and they'll go in it." On the other hand, being forced to volunteer a response may be a very different animal. Which method produces an answer closer to the truth I cannot say.

Confusing, isn't it?

So, go ahead, pick your number. As many as 3% or as few as 0.1% of total adults may consider Thoroughbred racing to be their favorite sport. If you're a "3 percenter" you would not flinch at the challenge of standing outside your local DMV office asking exiting adults for their favorite sport until you find someone who prefers horse racing. However, should you accept this challenge, my advice is to bring a tent and an adequate food supply.

In my mind the stark difference between a claimed fan base of 50-80 million and a Kentucky Derby viewership number under 20 million has been tough to reconcile. How do 30-60 million "fans" not watch the Kentucky Derby? The basis for the viewership numbers, the Nielsen ratings, is well understood but not without controversy. The methodological basis for the fan base numbers is not public knowledge however. I cannot comment on the methodological aspects of the survey research -- the research design, the sampling, the question wording. All of which, if flawed in some way, can undermine any research effort.

Searching for guidance, I posed this question to Dr. Richard Luker, founder of the ESPN Sports Poll and early pioneer of sports fan research. In 1994 Dr. Luker developed and tested 35 different kinds of fan measures to find the the single measure that was most predictive of broad fan behaviors (attending, watching, reading, knowledge, favorites, sponsor awareness, and purchase). The measure he landed on was "current interest", a closed-ended (response alternatives are pre-determined) item. And the sampling approach used by the ESPN Sports Poll is rigorously scientific. In short, the ESPN Sports Poll is as close to authoritative sports fan research as you will find.

Dr. Luker was ready to help me understand how Thoroughbred racing might have 3-4 times as many fans as the number of Kentucky Derby viewers. "The primary driver in all this is not appeal, attention, or interest. It's priorities." He went on to provide an example from the NFL... "72% of Americans are NFL fans and 66% of all Americans watch a part or all of an NFL game sometime over the course of the year. And yet, less than half watch all or part of the Super Bowl -- no doubt, the biggest American sporting event there is."

And his convincing closing argument: "Life happens. Births, deaths, foreclosures, weddings, injuries, moves, job changes. All these things take priority over an avid interest in a sport or event."

Dr. Luker makes a compelling point. Life does happen.

And I should know having watched Monarchos storm home in the 2001 Kentucky Derby from a hospital room while cradling my one-day-old son. How many other racing fans snuck away from a wedding reception to watch the race in the bar that day? To my knowledge the Nielsen TV ratings system fires blanks in terms of measuring out-of-home viewership situations like these. Maybe that numbers gap between Kentucky Derby viewership and fan base is closer than we think?

Back to the ESPN Sports Poll's "current interest" measurement. The response "a little bit interested" appears to be an option for respondents. I can recall watching curling for the first time during the Winter Olympics many years ago and thinking how interesting it was. If I was asked in a survey how interested I am in curling, I'm certain I would recall having watched the sport long ago and liking it. I would choose "a little bit interested". But to say I am an unengaged fan of curling would be a gross overstatement. Obviously, including these fan types in a sport's avid fan base is incorrect, and the inclusion into the fan base at all is perhaps dubious. More information is needed and I have to assume that the ESPN Sports Poll manages this scenario in some manner. If not, their clients must assuredly have drilled into the data to learn more about these "a little bit interested" fans.

At the very least, let's agree that Thoroughbred racing has tens of millions of fans. To put it better, let's agree that tens of millions of people in the United States share an affinity, in varying degrees, to the sport of Thoroughbred racing. In the end we may as well debate the number of angels on the head of a pin, because whether there are 15 million fans or 83 million fans -- they're not coming out to the racetrack and they're not betting.

You can easily imagine a graph showing pari-mutuel handle and the estimates of the fan base size over time. Just for kicks let's go ahead and do it. We'll take U.S. pari-mutuel data from the Jockey Club web site and add Alex Waldrop's 50.6 million fans, a "number that has been consistent over the course of the last 10 years of NTRA polling..."
What's going on here? There's a few possibilities. The survey-based estimates of fan base size may be way off the mark for a multitude of different reasons. Or, those estimates may be generally accurate but interested fans have soured on the racing product from a wagering perspective, perhaps due to deteriorating racetrack facilities, excessive takeout rates, declining field size, or illegal drugs. Maybe many fans and horseplayers are betting less than they used to, or not at all. And maybe a significant chunk of handle has slowly but surely moved outside of the pari-mutuel system. If Thoroughbred racing's leadership knows what is going on here and has a strategy to address the situation, they're not telling.

In a nifty book from 2006 called "The Elusive Fan" by Irving Rein, Philip Kotler, and Ben Shields, the authors present the concept of a fan involvement ladder within sports fandom, "designed to illustrate the degrees of fan intensity and help sports decision makers determine how to increase fan involvement." From the bottom up, the seven rungs of their fan involvement ladder are:

Indifferent Fans

The Indifferent Fans at the lowest rung are, well, simply indifferent to sports, not hostile.

The Eyeballs, the largest, most profitable and most studied group, watch sports in their living room. They fuel revenue from television. The challenge to all sports is to get those Eyeballs to come out to the game and part with their money.

Wallets are those sports fans who are "motivated to seek out the live sports venue". These prized fans want to experience a sport and will travel and spend money to do so.

The Collectors spend money, sometimes lots of it, on sports merchandise and memorabilia.

Attachers want to interact with the teams and stars of their sports. The explosion of social media has enabled Attachers to "attach" like never before.

Insiders can be found in the "upper echelon of fan commitment". They invest in seats, teams and are rewarded with special perks and relationships with executives and athletes that are out-of-reach to those on lower rungs. The other category of Insider pursues a professional career that provides special access to a sport - journalists, agents, trainers, etc.

At the top rung of the ladder are the Ensnared. The Ensnared are in it for life. They have "centered their identity" on a sport, team or player they follow. But some take it too far and become obsessed, destructive, or just a little creepy.

rsz_img_0103This typology of fan involvement is a compelling one that seems to suit most sports. But it doesn't work so well for Thoroughbred racing, so let's try to adapt it.

We need to add a rung at the very bottom -- those hostile to Thoroughbred racing. These are primarily the folks who believe Thoroughbreds are routinely mistreated and abused as a result of racing. Even though they are anti-racing, in a very real sense they are involved with the sport. They will not climb the ladder of involvement any further but need to be mentioned since other sports do not have to contend with this. For lack of a better label, we'll call them "Hostiles".

Indifferent fans are the next rung and we can keep them. They don't follow sports, including horse racing. Enough said.

I'll propose that we need two categories of Eyeballs. Those Triple Crown viewers that tune in every year seem to believe that Thoroughbred racing's "season" starts with the Kentucky Derby and ends five weeks later with the Belmont Stakes. They are a different breed than those who would tune in to watch the Bluegrass Stakes, the Travers Stakes, or even the Breeders' Cup for that matter. It will be interesting to see how NBC fares in holding on to some of these viewers when their "Summer in Saratoga" series debuts. NBC's (and NYRA's) challenge is to convert Triple Crowners into Eyeballs.

Wallets we can keep but we'll alter the definition. Chances are decent that if you are reading this you are a Wallet. Who are horse racing's Wallets? The fan who travels for the racetrack experience at Saratoga, Del Mar, Keeneland, or any number of other racing venues is a Wallet. But the horseplayer who plays from home with an ADW account is also a Wallet. As is the OTB player. Seeking out the live sports venue may be a litmus test for Wallets in most sports but not Thoroughbred racing. To become a Wallet for horse racing, one opens their wallet and bets -- on-track, at the OTB, over the phone, or online.

Collectors are a big deal for the major sports leagues, not so much for racing. Derek Jeter drilled his 3,000th hit into the stands at Yankee Stadium and triggered a financial windfall in merchandise sales. You could have scribbled his name onto a crumpled foil hot dog wrapper and a wild-eyed Yankee fan might have offered you $10 for it. That's not the way horse racing rolls. Looking back I think I've bought four items of racing merchandise over a 20 year period. A t-shirt at Del Mar and three caps: one each at Keeneland, Santa Anita, and Saratoga. And the Saratoga cap came from one of those cozy shops on Broadway. On average that's about $3 per year spent on merchandise. I feel confident that my spending pattern on merchandise is the rule rather than the exception. No revenue stream here, folks. Move along.

Attachers. Sure, racing has Attachers. The explosion of social media has enabled Attachers to connect and interact with jockeys, trainers, owners, organizations, handicappers, and many others. The NTRA Facebook page is closing in on 10,000 "likes". No question that Attaching means climbing the next rung to deeper involvement.

In Thoroughbred racing, it's actually fairly easy to become an Insider compared with other sports. Thoroughbred owners are Insiders. Go in with your pals and buy that bottom claimer. Congratulations, you are an Insider. Try becoming a Boston Red Sox Insider. Hope you have money to burn. The other category of Insider is well-populated in racing. Journalists, trainers, agents, track announcers, media types -- all kinds of positions exist if you hear the calling and have the goods.

The top of the ladder: the Ensnared. You know if you are in this category or not. If you are, you're a lifer. Racing though has little to fear from the "creepy" dimension of the Ensnared. Zenyatta fans were never going to turn over cars and set them ablaze after last year's Classic. Thoroughbred racing fans don't riot. If Belmont Park wasn't trashed after Birdstone nipped Smarty Jones... well, you get the idea. Similarly I don't think Calvin Borel or Mike Battaglia have anything to fear from obsessed stalkers. Racing fans are really pretty laid back. The sport's athletes and celebrities move freely among the fans and I doubt that will ever change.

If you spend any time at all at the racetrack you will eventually rub elbows with recognizable faces. I mean that quite literally, having stood next to Dave "and down the stretch they come" Johnson in the men's room at Turfway Park some years back. "Hey Dave". "Hey". No, we didn't race, but if we had you know Dave would have nailed the call. I chatted briefly with Steven Crist at the iconic PJ's on a sultry Sunday night last summer at Saratoga. See someone you recognize at the track, or in a social setting outside the track? Go ahead and strike up a conversation. It's even money that they will be approachable. It's just one of many things that makes this sport special.

As an aside, I'll also let you in on a secret. Racetrackers tend to break the ice with "Who do you like"? The thing is, neither person really cares about the other person's opinion. "Who do you like?" is basically a coded message for "I love this sport and I'm thrilled to be here today, wouldn't want to be anywhere else." It's true.

But I digress. We were building a ladder of involvement for Thoroughbred racing. This is our ladder from the top to the bottom.

Triple Crowners
Indifferent Fans

A rough stab at fan involvement with Thoroughbred racing to be sure. Note that it is a ladder of involvement, not customer value. A Triple Crowner who travels to the Kentucky Derby every year and hits the windows hard, but does nothing else all year, has a bigger impact than the Attacher who makes an occasional $2 bet. The objective though is to push that Triple Crowner up the ladder and deepen their involvement with the sport.

Bear in mind that anyone can jump onto the ladder at any rung and move up and down. What's your story? I was a Wallet, betting casually but often, long before I became an Eyeball. This forward and backward movement on the ladder is what really sets Thoroughbred racing fandom apart from other sports.

The obviously critical climb here is from Triple Crowner/Eyeball to Wallet. And maybe, to a lesser extent, Attacher to Wallet.

But here is a potential obstacle that rarely gets mentioned in discussions of growing the game. It has been shown that nearly one in three adults in the U.S. are morally opposed to gambling of any kind: see Pew Research Center and Gallup. That's a significant chunk of potential Wallets that are simply "off the table". And it begs an important question: How many of those 50 million Americans with an affinity towards Thoroughbred racing are morally opposed to gambling? I don't know the answer but it's likely a significant number. Even Thoroughbred owner/enthusiast Pat Robertson was chased from the game by his evangelical constituents. Compare this situation to a country like Japan where the act of gambling is devoid of any moral component. In Japan, the Thoroughbred racing industry is healthy despite widespread gambling competition.

How many others of that 50 million have visited a racetrack, perhaps long ago, and decided it wasn't for them? Can it ever be?

Maybe the assumption that new customers, new Wallets, will come from those with a tepid interest in the sport is flawed. We've wondered in this space in the past if NFL fans might represent a target market for Thoroughbred racing. Others have suggested that sports fantasy players may be predisposed to enjoy handicapping. And sophisticated marketing based on psychographic profiling is becoming more of a reality. Fishing in a different spot than usual can be a good idea.

 To be clear, I'm glad that Alex Waldrop shared his opinions backed with research data. Anyone can see that he is in a tough spot and has a daunting challenge on his plate every morning. But measuring broad "fan interest" and "favorite sport", while hardly a vanity metric, only goes so far without a strategic framework. The monthly report of Thoroughbred Racing Economic Indicators from Equibase does not include current estimates of the size of the fan base or the percentage of those whose favorite sport is horse racing. It does, however, include hard data on wagering, purses, and race days.

What we would much rather hear I think is something like: "Our research shows that 50 million Americans have some interest in Thoroughbred horse racing, but less than 5 million of them drive the sport on a day-to-day basis. Our long-term strategic plan hinges on moving those remaining 45 million unengaged fans onto the ladder of involvement."

Whether such a strategy is the best strategy or not is an open question in need of data-driven answers.

* The Pew Research Center bears no responsibility for the analyses or interpretations of the data presented here.