Ray Paulick<br>Editor-in-Chief

Ray Paulick

Return for Deposit

The numbers from the recently completed Del Mar summer meeting reflected a minor downturn in business from the Southern California seaside track's record season in 2005.

That wasn't unexpected, given the uncomfortably hot weather at the beginning of the meeting and the negative publicity in the San Diego media resulting from a series of catastrophic horse injuries.

There was one surprise -- no, let's call it a shock -- among the statistics from this year's meet: average daily handle from advance deposit wagering (known as account wagering in other states) declined 7% from 2005, from $1,261,534 to $1,171,761.

Advance deposit wagering, in its fifth year in California, was viewed by many in the industry as a potential growth generator for a stagnant sport. With races from Southern California meets at Hollywood Park, Del Mar, Fairplex Park, and the Oak Tree Racing Association broadcast on TVG and Fox Sports West, and Santa Anita Park's races shown on HRTV, there has been more distribution of Thoroughbred racing into California homes than ever before.

Increased distribution along with the convenience of telephone or Internet betting resulted in double-digit increases of advance deposit wagering handle in 2003-2005. Del Mar reported a 24% increase one year ago, which makes this year's 7% drop all the more puzzling -- and alarming.

Before the Del Mar meet opened, the Thoroughbred Owners of California undertook a study of wagering trends in the state and the impact advance deposit wagering has had on the business. The study, which compared figures from 2001 (the most recent year without advance deposit wagering) to 2005, showed that:

  • Overall handle grew 3.5% over four years, a decline of 7.3% when adjusted for inflation;

  • On-track handle declined 12.2%;

  • Off-track or satellite wagering declined 12.8%;

  • Overall purse revenue declined 1.3%, a decline of 11.6% when adjusted for inflation.

The TOC study has prompted the organization to "reconsider the economic model and processes" of advance deposit wagering. TVG, Magna Entertainment's Expressbet, and Youbet are the only licensed operators in the state, and they are entitled to compensation as high as 6.5% of handle. Some think that's excessive.

California isn't the only state looking at its account wagering models and contracts. The Illinois Thoroughbred Horsemen's Association exercised its rights under the Interstate Horseracing Act and cut off the Arlington Park signal to TVG earlier this month, a move that was followed by the termination of an exclusive contract between Hawthorne and TVG.

Earlier this year, Churchill Downs Inc. officials said they will reexamine the account wagering business model to ensure horse owners and tracks obtain a "fair share" of revenue. The exclusive contract between Churchill Downs racetrack and TVG expires in March 2007.

The fundamental question some people are beginning to ask is whether or not the industry was better off before account wagering began, suggesting that instead of a growth platform, it has served merely as a means to shift money from traditional betting outlets (OTBs or the track) to the Internet or telephone.

That is a head-in-the-sand approach. Racing must continue to embrace account wagering, but it must learn to work together as an industry and urge consolidation in a fragmented market. It also must seek ways to fight the rebate operations and illegal offshore bookmakers that are siphoning revenue away from tracks and horsemen. Finally, industry leaders and racetrack operators must remember that promotion and marketing of the live racing product should, in the end, contribute to wagering growth on-track and online.