Seeking to make long-stalled legislative gains in the aftermath of the New York City Off-Track Betting Corp.’s shutdown, a number of racing interests are stepping up efforts to create a single, statewide OTB network in New York.
At a December 15 hearing called by the Assembly racing committee, some industry executives said the four-decade-old OTB model in New York should be replaced with a track-owned betting conglomerate as a way to end the internecine warfare for a dwindling betting dollar.
"If we can fix this we can put New York in the forefront of racing," New York Racing Association President Charles Hayward said of a renewed effort to merge OTB operations now scattered across the state.
But Hayward urged state lawmakers not to wait for the industry agreement for a new OTB model. "We aren’t going to get together to solve this problem," Hayward said of the tracks and OTBs that have long butted heads in New York. He called for an "independent" review of the pari-mutuel model in New York that, Hayward believes, will end the longtime, patronage-heavy system that now—with NYCOTB’s shutdown—has five regional OTB corporations operating.
But OTB executives pushed back. "Consolidation is not necessary," said Donald Groth, the president of Catskill OTB. "The OTBs have been turning a profit and sharing revenues with local governments. Those who call for consolidation are really looking to feather their own nests."
In an interview after he testified before the Assembly committee, Groth said local governments—one of the original, intended beneficiaries of the OTB system in New York—would come up short if a track-owned OTB conglomerate was created.
In the week after the closure of NYCOTB, which handled one-fourth of horse racing bets in the state, tracks and their supporters, including horsemen and breeding groups, are trying to use the moment to advance lobbying efforts that have been blocked for years—if not decades—at the Capitol.
"Some of the discussions we’re having today wouldn’t have happened if OTB hadn’t gone down," Hayward said.
"They do have an opportunity," Groth said of the racetracks’ efforts, ''because there’s a public perception that OTB is a failure." But he said the problem is the fiscal revenue-sharing formula, mandated by the state, that put pressure on the NYCOTB to close.
The Assembly hearing was part-lobbying and part comfort-seeking, as racing industry officials in New York try to work their way through the fog that has been created in the aftermath of the NYCOTB shuttering.
As NYCOTB moved December 15 in federal bankruptcy court to have its Chapter 9 case dismissed and on a path to permanently shut down operations, industry executives used the Assembly hearing to do a sizeable amount of venting.
Jeff Cannizzo of the New York Thoroughbred Breeders, said breeding farms in 50 counties are at risk following the NYCOTB shutdown. NYCOTB provided 36% of the revenues of the state’s breeding fund. He predicted fewer New York-breds, resulting in smaller fields at tracks and, as a result, declining handle. At NYRA in 2009, he said New York-breds accounted for 57% of the fields.
"Without providing those horses, this whole game doesn’t exist," he said.
A frustrated Assembly Racing and Wagering Committee Chairman Gary Pretlow, who has refereed years of industry disputes, said the NYCOTB closing should be a time for the competing interests to work on a resolution. "This infighting between this industry really has to stop," he told industry officials.
The racing officials also pushed lawmakers to help resolve a long dispute over video streaming of races over the internet. NYRA and the OTBs, among others, are actively negotiating a deal to permit bettors to watch live streaming – instead of tape delays—on their computers or smart phones. Officials believe it will sharply increase handle and lure some NYCOTB patrons to other OTBs and NYRA instead of out-of-state bookmakers.
Groth, the Catskill OTB chief, said the state attorney general’s office should move now against private, out-of-state ADW shops which he said are "poaching" some $500 million in bets from New York annually.
Joe Faraldo, of the Standardbred Owners Association of New York, who represents Yonkers harness track horsemen, said the state has an opportunity now to create a single OTB. “But not another quasi-government (entity), but privatized and owned by the industry stakeholders." He said New York should model its system on other states, such as Pennsylvania.
"They alone should be in charge of the distribution of the racing product," Faraldo said of New York racetracks.
He said the new OTB entity should be given internet streaming rights and also be required to run a "New York first" program that favors in-state races over out-of-state programs.
"The future of OTB can’t look like the past," he said.
Hayward, the NYRA president, said the industry can no longer support five different OTB centers across the state—with separate costs for administrative positions, tote systems, marketing and account wagering systems. He said a single, statewide racing television channel is needed, and a coordinated marketing effort for the New York product.
"This New York state racing model is fractured," he told lawmakers.
He said a 2006 law intended to permit internet wagering has been twisted to be interpreted that any OTB can block NYRA from streaming live racing on the Web. As a result, he said, the state has only "encouraged" out-of-state wagering. He acknowledged to lawmakers that NYRA has contributed to the “poaching" problem by deals with private ADW shops, but said approval of Internet streaming of racings on web pages by NYRA and the OTBs would drive that money back to New York.
But, consolidation was the buzz word of the hearing. "The obvious thing is to consolidate," said Richard Violette, president of the New York Thoroughbred Horsemen. He said the only pushback comes from the "fiefdoms" created by the OTB system. He said the state can no longer afford so many redundant betting systems across New York.
After the hearing, Hayward expressed optimism that the NYCOTB closing will push changes in the industry, from coordinated betting systems to and end to one of the "most negative marketing messages" for the industry in the form of unsightly betting parlors in New York City.
"I think five years from now we’re going to have a much healthier OTB system," he said.