Tweet
Scalping the ponies in Hong Kong
HONG KONG – Dec. 20, 2001 –- As reported by Business Week: “Rarely, though, have I felt so behind the curve on a story than when I researched my most recent article, about the travails of the Hong Kong Jockey Club as it tries to keep Internet gambling services off its turf.
”So I turned to Andrew, a 40-something Westerner who has lived in Hong Kong the past four years.
”…He used to work for a bank, but he has long since given that up to spend his time betting on the ponies -- which is completely legal in Hong Kong -- and working as a bookie -- which is not.
”…The Jockey Club, which operates the only two racetracks in city, has seen its revenues drop dramatically since the Asian financial crisis rocked the local economy in 1997. The take for the racing season that ended last June was $10.5 billion -- compared to $12 billion in 1997.
” And the new season has gotten off to a bad start, with receipts down 5% from last year. The Jockey Club blames the most recent fall on the arrival of Internet gambling sites like Britain's William Hill Organization and Australia's Centre Racing.
”…`The main attraction [of the Internet services] is that they offer fixed odds,’ [Andrew] explains. `I know exactly how much my return will be.’
”Like most racetrack operators worldwide, the Jockey Club adjusts its odds based on demand: As more people believe a horse will win, the odds for that horse fall.
”…For Andrew, that gap creates an arbitrage opportunity. He'll bet one day in advance of the race on a horse that has fixed odds of 5:1 in the expectation that on race day it will fetch 4:1 at the Jockey Club. He'll then offer friends odds of 4.5:1.
”…`I actually make a small profit out of it,’ he says. `I've got a half-point for myself. So, if I bet $10,000 with Centre Racing and my horse wins, I'm going to get $50,000 profit. If I sell that bet at 4.5:1, if the horse wins I will pay out $45,000, and I make $5,000 risk-free.’
”… There are some risks -- going to jail, for one.
”…Before the advent of Internet betting, the risks were much higher. Until recently, Andrew placed his fixed-odds bets with local bookies connected to Hong Kong's feared triads, the local Mafia.
”…In Hong Kong, horse racing is big business. The tiny region is the world's third-largest betting market, behind only Japan and the U.S. Since the city has very little in the way of a professional sports scene, news of horse racing dominates the local newspapers' sports pages during the nine-month season. The Jockey Club, which enjoys a government-mandated monopoly on horserace betting, is the city's biggest taxpayer, accounting for 10% of total revenues.
”…[Andrew’s] revenue for one season of Hong Kong racing is about $4.7 million. Small wonder the city is called `the Olympics of horse racing.’
”…Given the amounts of money at stake, the Jockey Club and the Hong Kong government have their work cut out for them.”
”So I turned to Andrew, a 40-something Westerner who has lived in Hong Kong the past four years.
”…He used to work for a bank, but he has long since given that up to spend his time betting on the ponies -- which is completely legal in Hong Kong -- and working as a bookie -- which is not.
”…The Jockey Club, which operates the only two racetracks in city, has seen its revenues drop dramatically since the Asian financial crisis rocked the local economy in 1997. The take for the racing season that ended last June was $10.5 billion -- compared to $12 billion in 1997.
” And the new season has gotten off to a bad start, with receipts down 5% from last year. The Jockey Club blames the most recent fall on the arrival of Internet gambling sites like Britain's William Hill Organization and Australia's Centre Racing.
”…`The main attraction [of the Internet services] is that they offer fixed odds,’ [Andrew] explains. `I know exactly how much my return will be.’
”Like most racetrack operators worldwide, the Jockey Club adjusts its odds based on demand: As more people believe a horse will win, the odds for that horse fall.
”…For Andrew, that gap creates an arbitrage opportunity. He'll bet one day in advance of the race on a horse that has fixed odds of 5:1 in the expectation that on race day it will fetch 4:1 at the Jockey Club. He'll then offer friends odds of 4.5:1.
”…`I actually make a small profit out of it,’ he says. `I've got a half-point for myself. So, if I bet $10,000 with Centre Racing and my horse wins, I'm going to get $50,000 profit. If I sell that bet at 4.5:1, if the horse wins I will pay out $45,000, and I make $5,000 risk-free.’
”… There are some risks -- going to jail, for one.
”…Before the advent of Internet betting, the risks were much higher. Until recently, Andrew placed his fixed-odds bets with local bookies connected to Hong Kong's feared triads, the local Mafia.
”…In Hong Kong, horse racing is big business. The tiny region is the world's third-largest betting market, behind only Japan and the U.S. Since the city has very little in the way of a professional sports scene, news of horse racing dominates the local newspapers' sports pages during the nine-month season. The Jockey Club, which enjoys a government-mandated monopoly on horserace betting, is the city's biggest taxpayer, accounting for 10% of total revenues.
”…[Andrew’s] revenue for one season of Hong Kong racing is about $4.7 million. Small wonder the city is called `the Olympics of horse racing.’
”…Given the amounts of money at stake, the Jockey Club and the Hong Kong government have their work cut out for them.”
Comment