Williams Says Racing Issues 'Complicated'

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Kentucky Senate President David Williams said April 27 issues in the horse racing and pari-mutuel industry are “complicated,” but lawmakers intend to continue working on ways to strengthen the business.

Williams, a Republican, attended the Kentucky Equine International Summit April 26-27 in Lexington. He discussed the industry in an interview with The Blood-Horse after an April 27 panel talked about advance deposit wagering.

Speakers provided background on ADW and its current status but indicated the chief concern—how much revenue is generated to support live racing—won’t be addressed for some time. ADW is yet another issue that has festered in racing for more than a decade.

When asked where the chief responsibility lies in improving the economics of the Kentucky horse industry—with the General Assembly or the industry itself—Williams said: “You could posit that question on any industry in Kentucky. What I heard from the panel is affirmation of a lot of what I believe. It’s hard to get through the filter because there’s so much hostility.”

Panelists touched on the infighting that has plagued racing on the ADW issue and noted the impact of racetracks with slot machines and video lottery terminals. Slots have boosted purses for horsemen but also can “clog” the pari-mutuel system by delaying agreement on a suitable pari-mutuel revenue model.

Such tracks rely much less on pari-mutuel handle to generate purse revenue and aren’t as concerned about what they receive for their product in the simulcast marketplace, Ohio Horsemen’s Benevolent and Protective Association executive director Dave Basler said. But non-slots tracks do care about their percentage from signal export.

“They want their signal out there even if they have to give it away,” Basler said of slots tracks. “It does clog the market (in regard to pricing).”

Williams, who is opposed to expanded gambling in Kentucky, said “concerns about subsidizing racing were validated by the panel.” He said various racetrack gaming states offer more proof.

“In every state we’ve seen problems exacerbated by slots,” Williams said. “And there are some tracks that exist just hoping to get slots. (In Kentucky), Churchill Downs is right in the middle of all that brew.

“The issue is, ‘Should there be more cooperation between the racetracks here?’ The cooperation here now is to get slots. They’re getting away from concentrating on racing itself.”

Williams, who chairs the Council of State Governments, said he hopes to address some racing issues, including the proposed National Racing Compact and perhaps the pari-mutuel model, during the National Conference of State Legislators summit July 25-29 in Louisville, Ky. He said horse racing “cries out” for an interstate compact such as the one proposed by regulators and other groups.

“We want to get the information out there on where problems exist and about the issue of subsidizing racing with gaming,” Williams said. “We’re trying to help the industry, but you have such conflicted interests in the industry. It’s a complicated situation we’re dealing with.”

As for his ongoing battle with the Kentucky racing industry over racetrack gaming, Williams said: “I’ve been demonized by some as someone who doesn’t care (about the industry). We’re here (at the equine summit) to learn about and work on the issues.”

The panel broke no new ground on ADW. Speakers did, however, suggest change in the pricing model will only come if the pari-mutuel industry constricts.

“A national reduction in (pari-mutuel) takeout is another way of attacking the pricing model,” Basler said. “(Other than that), we will get there when there is a consolidation of racing dates that impacts ADW providers.”

Moderator Tom Aronson, who helped launch the TVG account wagering system in the 1990s and formerly worked for Churchill Downs Inc., didn’t offer much hope. He used Pennsylvania tracks as an example: With a takeout rate of up to 30% on some exotic wagers, a wagering outlet that imports those signals can make 25 cents or more per dollar after the 2%-3% host fee is paid.

Wagering outlets, therefore, want patrons to play those races even though players can get a 20% takeout rate on other signals.

“It’s is a vicious circle of the first order,” Aronson said.

Nick Eaves, president and chief operating officer of Woodbine Entertainment Group, indicated racing can’t afford to wait for change.

“It seems to be that the ultimate determinant of a pricing is a customer’s ability to pay,” Eaves said. “Is there something the industry—horsemen and tracks—can do in the meantime. If we wait, I think we’re all finished.”