Horse Racing Has Good Chance...But There Are Catches

The horse racing industry should be pretty healthy 20 years from now -- if it properly embraces technology, expanded wagering opportunities, alternative gaming, and the breeding side of business remains vital, top racetrack officials said March 14.

The officials, who spoke during a panel discussion at the Thoroughbred Racing Associations and Harness Tracks of America joint meeting in Hollywood Beach, Fla., offered their views on what racing may look like in 2023. The reviews were mixed.

"I have a very positive view of the industry," said Jim McAlpine, president of Magna Entertainment. "We have a lot of things that are wrong, but we have the talent to fix them. I think we can handle $50 billion a year by then. It's out there."

McAlpine said the industry must deal with rebating, which he said could be sucking $2 billion from pari-mutuel pools. David Willmot, president of Woodbine Entertainment, said there should be "protocol" for anyone to access pools because rebating could prove "cannibalistic."

Barry Schwartz, chairman of the New York Thoroughbred Racing Association, said he favor rebates in some form. A failed attempt to offer them led NYRA to reduce pari-mutuel takeout because the big players -- $10 million to $15 million a year, he said, can't last long with a 20% tax on bets.

On the subject of gaming, Schwartz said NYRA plans to convert Aqueduct into a major entertainment center complete with an arena for championship fights. He said video lottery terminals at Aqueduct would be integrated with the racing product, something he said is a key to success. Schwartz said the state Lottery Division told him to keep the devices separated from racing, and that he can't do it.

"VLTs will be there to enhance racing and purses," Schwartz said. "It's very important to try to integrate the two of them."

Willmot agreed. He said any racetrack with a separate gaming facility has "given up" on horse racing. "At that time, racing is being used as an excuse for gaming," Willmot said. "I'm disturbed when I hear racetracks say if they had slots, they'd be in a separate building. A number of our old racetrackers are enjoying the track again because there is a buzz."

The officials discussed the all-important legislative role in gaming. In Delaware, for instance, VLTs were sold on the premise they would save the state's teetering horse racing industry. Now, eight years later, gaming is being considered to boost state budgets more than prop up horse racing. And that creates its own challenges.

"In Kentucky during the last legislative session, every casino company in America was working (the legislature), said John Long, president of Churchill Downs Inc. "The message was, 'Don't do it for the racetracks. They don't know how to fix the state's problems.' The days when we thought we could control the agenda are gone. If we can't make the argument in Kentucky, how the hell can we make it stick somewhere else?"

"Racing shouldn't cry poor," said Willmot. "That's a joke. Somebody drives by Keeneland and all those horse farms, and you're going to tell them racing needs help?"

In regard to revenue from gaming, the officials suggested as time goes by, racing may have to settle for a lesser share as states need more money to balance budgets. They expressed surprised at the position of Thoroughbred horsemen in Pennsylvania who aren't satisfied with the 16% share of gross revenue from slots in proposed legislation.

"I think the horsemen in Pennsylvania are nuts for turning down 16%," said Schwartz, who has had to negotiate for a larger share of the VLT pie in New York. "It would make them the richest horsemen in North America."

The Pennsylvania horsemen said they have other concerns with the bill such as the lack of language to protect live racing agreements and a racetrack share that comes in at more than 50%.

McAlpine, who called slots "the newest drug in horse racing," said he often has been accused of talking out of both sides of his mouth on the subject of gaming. He said Magna supports the push in Maryland because of the competition in neighboring states, but in Florida, it's a different story. McAlpine said Florida pari-mutuel racing could do fine without slots if the regulatory climate were friendlier.

Long said many issues are tied to the breeders who produce the horses that fill the races.

"If we don't have vitality in the breeding business, it won't make any difference," Long said. "In Kentucky it is our livelihood, our number one cash crop. The breeding industry will be very interesting to watch in the next 10 to 12 years."