Economics: Racetracks Drop Keeneland Signal

Unable to strike a deal on a simulcasting fee, the racetracks that fall under the Mid-Atlantic Cooperative will not offer the Keeneland signal at their facilities effective Friday, opening day of the Lexington track's fall meet.

The fee became an issue with the Mid-Atlantic tracks when Keeneland lowered its pari-mutuel takeout to 16% across the board, the lowest combined percentage in the country. Though even receiving sites recognize lower takeout as a way to generate interest and wagering dollars, it can negatively impact their bottom line, they said.

Martin Lieberman, executive director of the cooperative, said a reduced takeout, when not coupled with a cut in the simulcasting fee charged by the sending track, puts all the risk on the receiving sites. Meanwhile, he said, the "overwhelming activity" takes place at simulcasting facilities.

The six-state Mid-Atlantic region, which includes Thoroughbred and Standardbred tracks, accounts for about 23% of total annual handle in the United States.

"We support reduced takeout and any other initiatives that bring people to the racetrack," Lieberman said. "But simulcasting facilities bear the brunt of takeout experiments. The producer has no risk, while the end-user experiences all the risk."

Racetrack officials in the Mid-Atlantic region wouldn't comment, and referred all questions to Lieberman.

Keeneland president Nick Nicholson said the track offered to work with the cooperative, and suggested the Mid-Atlantic tracks at least try a three-day experiment. Lieberman acknowledged the tracks want the signal, but also would like "consideration for softening the risk."

Due to confidentiality agreements, officials wouldn't discuss specific fees charged for signals. The Keeneland fee, though, is lower than those charged by the major tracks in California and New York.

When the New York Racing Association lowered its takeout effective with this year's Saratoga meet, the Mid-Atlantic tracks continued to take the NYRA signal, though Lieberman said the cooperative voiced concerns and continues to have dialogue with NYRA officials.

Nicholson said Keeneland's shorter meet offers an ideal opportunity to experiment. He also said the track must show it's being proactive in the racing community, both in the state and nationally.

"How can we as an industry go to any state capital and ask for consideration when we can't demonstrate we're doing everything we can to help ourselves?" Nicholson said.

Horsemen's groups have viewed racetrack cooperatives with some skepticism because of anti-trust considerations. But Alan Foreman, chief executive officer of the Thoroughbred Horsemen's Association, which has several Mid-Atlantic affiliates, said horsemen "may not have a quarrel with the cooperative" on this particular issue because they understand the economics of the situation.

"Cooperatives buy and sell signals, and in most cases, they act in our best interests," Foreman said.

Dick Watson, president of the Charles Town Horsemen's Benevolent and Protective Association, said he understands the economics as well, but believes the industry is missing the boat. Last year, he said he encouraged Penn National Gaming, parent company of Charles Town Races, to lower takeout in an attempt to generate interest in the West Virginia track's signal.

It went nowhere, he said.

"Does the gambler want the highest takeout, or the lowest takeout?" Watson said. "If they don't want to take the Keeneland signal, I can't make them, but this reflects an attitude I think is in the medieval times. I expect to see (track officials) coming in with maces, crossbows, and wearing armor."

Though track officials said the issues are unrelated, Keeneland doesn't take many of the Mid-Atlantic tracks' signals. It did take Monmouth Park all summer, and Delaware Park on selected days, but in September it dropped the Pimlico Race Course signal. It takes partial cards from Meadowlands only three nights a week, though that will end Thursday night.