NYCOTB Seeks 'Restructuring' of Industry Economics

A study authorized by New York City Off-Track Betting Corp. recommends action designed to maximize the operation and capitalize on marketing opportunities.

The report, done by The Boston Consulting Group, states NYCOTB, the largest off-track betting corporation in New York, generated about $100 million for the racing industry in 2005 and nearly $2 billion since its inception in 1971. NYCOTB employs about 1,500 people in five New York City boroughs, the report indicates.

The report lists three “critical issues” facing the racing industry in New York: new competition, declining consumer interest, and a financial crisis. NYCOTB, the document said, has been “precluded from reinvesting in its business and has been unable to provide any residual revenue to New York City” because the portion of revenue from pari-mutuel handle it pays to breeders, horsemen, racetracks, and regulators jumped from 4.8% from 1971-84 to 9% from 1996-05.

The report offers four recommendations:

1. Pursue a restructuring of racing industry economics using revenue from video lottery terminals to create financial sustainability and alignment between racing entities by legislatively changing the statutory distribution scheme or integrating operations of tracks and OTB parlors. This would come about by limiting the amount of money OTB corporations must distribute given the “windfall” revenue already accruing at harness tracks; Aqueduct also is approved for gaming.

2. Drive growth through increased customer access via multiple, convenient platforms by deploying new technologies such as the Internet, mobile, and interactive television.
3. Attract new customer segments to NYCOTB from other gaming options with an inviting social betting environment, creating the next generation of consumers for sustainable growth. The report suggests NYCOTB, given its “negative image,” must employ a “brand invigoration program,” incorporate a marketing campaign, and upgrade its facilities.

4. Improve operational efficiency to maximize potential benefit from the current business model, though the impact may not be significant. An upgrade of the phone betting operation, for instance, could improve profitability.

“If nothing is done differently,” the report said, “the outcome will be both predictable and unattractive: lost jobs and lost revenue.  On the other hand, if this report helps produce a reformed distribution scheme that encourages competitive collaboration by and among all racing constituencies, a strong and dynamic future for the racing industry will be in sight.”

The Boston Consulting Group said it conducted a “detailed diagnostic” of NYCOTB operations to find ways to improve the business model.