Maryland Track Deal Figures to Have Broad Impact

Magna Entertainment has plans to transform Maryland's premier Thoroughbred racetracks into "destination entertainment centers," and apparently expand off-track wagering in the state. At this time, though, officials are reluctant to discuss details.

Meanwhile, on July 15, the same day Magna announced a partnership with the Maryland Jockey Club, Republican gubernatorial candidate Robert Ehrlich Jr. endorsed a plan to legalize slot machines at racetracks in the state. The Washington Post reported that Ehrlich said gaming at three racetracks could generate up to $400 million a year.

In a deal valued at more than $117 million, Magna would obtain a 51% interest in the MJC, which operates Laurel Park and Pimlico Race Course. MJC president Joe De Francis, and MJC executive vice president Karin De Francis, would retain a 49% interest. The deal could close this fall, subject to regulatory approvals and legislative review.

Jim McAlpine, president and chief executive officer of Magna Entertainment, said the two Maryland tracks are key to the company's to "build the world's leading electronic media wagering and entertainment company." Magna currently owns or operates more than 10 racetracks, include premier facilities in California and Florida, and hopes to close soon on a deal to purchase Lone Star Park, the premier track in Texas.

"Our vision for our premier racetracks is to combine them with destination entertainment centers," McAlpine said during a July 15 press conference at Pimlico. "Basically we should build on the successful experience of places like Vegas, where they took gaming--in our case pari-mutuel wagering--and they combined it with world-class entertainment and shopping experiences for their customers. Frankly, that's what we see for major racetracks across the country in the future."

McAlpine said "telephone account wagering, Internet account wagering, and ultimately interactive television account wagering" figure prominently in Magna's plans. Magna operates the XpressBet account wagering service, and also operates the Racetrack Television Network in partnership with other racing interests.

"Another piece of the puzzle, and its distribution-related, has to do with OTB‚s and off-track-betting," McAlpine said. "Basically we have to take this product--live horse racing--to the customer. And one of the ways we need to do that is take it to their neighborhood sports bar and allow them to participate closer to their home.

"A lot of people are afraid that will detract from the live racing experience, but the truth of the matter is every football fan doesn't go to live football games. They participate by watching their sport at home or in a sports bar, and why can't our sport do the same?"

Maryland racing regulators have long pushed for an expansion of the state's off-track betting network, and have taken the MJC to task for not doing so. Joe De Francis, who will remain in charge of day-to-day operations at Laurel and Pimlico, indicated the MJC could not move racing in the state to another level without the partnership.

"This a priceless opportunity, it really is, and one that the Maryland Jockey Club could not possibly exploit both fully and effectively were it to remain a small and independent company," De Francis said.

In follow-up comments July 16, De Francis said there are no specific plans at this time for new OTB parlors, but "OTB expansion is an important thing for Magna and for me." De Francis said it is "premature to discuss" any plans for major renovations at Laurel and Pimlico, though such projects "are on a short list of priorities."

De Francis also said it is too early to comment on the MJC's deal with the TV Games Network. Racing from Laurel and Pimlico is broadcast on the network, which competes with Magna for customers, particularly in California.

Magna earlier this year made its entry into the Mid-Atlantic region, where racetracks and betting outlets in six states account for almost 25% of annual handle in the United States each year, with the purchase of The Meadows, a harness track near Pittsburgh, Pa. At times, the company has partnered with Greenwood Racing, which owns Philadelphia Park and operates a successful account wagering service in eastern Pennsylvania.

Through its deal with the MJC, Magna apparently would be involved in some way with Virginia racing as well. The MJC, through the Maryland-Virginia Racing Circuit, operates live meets at Colonial Downs. Maryland Thoroughbred racing traditionally shuts down when Colonial Downs is open for live racing.

De Francis said the Magna-MJC deal must be approved by the Virginia Racing Commission given the Maryland-Virginia Racing Circuit operation. He said he expects the Maryland-Virginia relationship to continue in its current form.

De Francis is expected to join the Magna Entertainment board of directors, which could bring about change on the National Thoroughbred Racing Association board of directors. De Francis, a Mid-Atlantic representative, is an independent on the NTRA board, while Magna has its own spot on the NTRA board. McAlpine fills that seat.

NTRA commissioner Tim Smith said that if De Francis joins the Magna board, he would be affiliated with a multi-track concern, and therefore cannot be an independent representative.

"This hasn't come up before, but it probably needs to be reviewed," Smith said. "Obviously, we're in a period of change (with racetrack consolidation). If someone moves from independent status to affiliated status, we need to figure out what to do."

Churchill Downs Inc. and the New York Racing Association also have their own seats on the NTRA board given their holdings.

On the issue of gaming, the new partners said they plan to explore such opportunities in the state, but offered no specifics. Though Republican Ehrlich endorses racetrack slots, Democratic gubernatorial candidate Kathleen Kennedy opposes expanded gambling to raise money for state coffers.

Michael Morrill, Townsend's campaign spokesman, told the Post that Magna has "the resources to make improvements to the tracks without slots. Because slots are not crucial to what they're doing, we can move forward to seek other solutions to preserve racing in Maryland."

Indeed, Magna officials have said alternative gaming is not the key to horse racing's survival and growth. In Florida, where Magna owns Gulfstream Park, the company didn't jump on the slot-machine bandwagon with other pari-mutuel interests when the issue was on the floor in the legislature.

The Post reported Ehrlich's plan involves three racetracks, but Maryland has five. Aside from Laurel and Pimlico, there are the Maryland State Fair at Timonium, and two Standardbred tracks, Ocean Downs and Rosecroft Raceway.

Ocean Downs, located on the Eastern Shore, is owned by William Rickman Jr., who also owns Delaware Park. Racetracks in Delaware have slot machines, and they have been cited as a big reason for a decline in business at Maryland tracks. (Delaware Park is ideally located just off Interstate 95 about an hour from Pimlico, and an hour and a half from Laurel.)