racetrack closures | Horse Racing Free Tips

T.D. Thornton's report on racetrack closures in California (TDN, 12/6/23) and Dan Ross's piece on Pat Cummings's research into Computer Assisted Wagering in California (TDN 2/13/24) are frightening for all tracks not supported by casinos/slots.

Santa Anita and Del Mar are high-profile tracks in trouble, but they are not alone. The problem? Host tracks are now receiving very little for their racing content.

Remember Napster, when a lot of people were stealing songs and nobody knew what to do about it?

I'm not Steve Jobs, who saved the music industry from Napster, but I'm going to tell you how to save Santa Anita and Del Mar and the rest of our tracks. When you understand how we came to this situation, you will see how easy it is to fix it.

I started working for the Thoroughbred Record in 1972. Then, the revenue from wagers was split 50/50 between the two “partners” in racing: half for the track and half for the racehorse owners' purse account. Each received about 8% of the on-track wager. It was a simple business isolated to the track location.

Off-track wagering across state lines was legalized with the Interstate Horseracing Act (IHA) in 1978. Although Congress has protected dairy farmers since 1946 with a “price floor” on milk, there was no price floor put into the IHA to protect the host tracks. A huge mistake!

After the IHA became law, Tommy Roberts, who pioneered simulcasting, negotiated a deal between Vegas sports books and some thirty tracks. Tommy told me Vegas said they could pay 10% of the wager to the host tracks. But, Vegas' actual offer was 2%. The tracks caved and accepted 2%, which meant the host track and purse account would only get 1% each and the bet takers in Vegas kept up to 15% of the wager. It was a very bad, upside-down deal.

The Vegas deal of 2% became the effective off-track distribution rate for every off-track bet taker, not just receiving tracks. As OTB's expanded off-track wagering locations, they cut into host track attendance, thus high-profit on-track wagering and concessions revenue dropped. Host track admissions and parking revenue vanished. Today off-track is more than 90% of all handle and host tracks and their purse accounts are suffering.

With the 2% rate in place, the major tracks were preyed upon by receiving tracks. NYRA, Keeneland and Hollywood Park all tried to increase the off-track rate for their races, but the hundred smaller tracks colluded to keep the rate as low as possible because they benefitted as bet takers on the major tracks' races. That was not the intent of the IHA.

The godsend of off-track wagering has now turned on racing and is devouring it. In the early days, most off-track bets were being made at receiving tracks and the money stayed in the sport. That ship sailed with computers and mobile phones. Today ADW's and robots are taking the most bets. What they pay the host tracks is so low they have enough margin to give up to 10% to whales. The money is bleeding out of host tracks and purses.

The first step for any business in trouble: Stop the bleeding.

Breeding, raising and racing Thoroughbreds is an agricultural business and sport. Over the years, Congress has responded with every possible advantage.

To stop the bleeding, Congress can establish a “price floor,” a minimum rate that off-track bet takers must pay host tracks. When Congress moved to save dairy farmers, lobbyists for the milk processors preying on them said the free market should set prices. But, the majority in Congress said “Sorry, we like milk and we are going to protect those who produce it.” There are many in Congress who like and care deeply about the Thoroughbred industry too.

Can we fix it? Yes, if Stuart Janney will commit to a “price floor” being put into the IHA, our tracks, purses and thousands of jobs in the industry will be saved. It is that simple.

Stuart Janney, chairman of The Jockey Club, personally committed to reduce the threat cheating has on the integrity of our sport. He worked with bi-partisan help from Andy Barr (R-KY) and Paul Tonko (D-NY) to pass the Horseracing Integrity and Safety Act (HISA). You need someone who has been successful with Congress to get back in harness and repeat the process.

Congress is the fastest way to save California tracks and all other racing states that do not have casino/slots support. As Mr. Janney related in working to pass HISA, you cannot do it state by state, or track by track. It has to be done at the federal level.

Today, the “partnership” between tracks and racehorse owners is far from simple and far from fair. Tracks have created subsidiaries outside the partnership with racehorse owners to take bets on other tracks' races and exploit the high profit margin. As a result, the percentage of off-track wagers going to purses drops every year. Purses fuel foal crops and ours have dropped from 50,000 to 17,000. Nobody wants track closures to return us to the days of Man o' War with a foal crop of 1,680.

The IHA puts people with feet of clay in position to approve multi-million dollar off-track bet taking deals. Dan Ross's piece told of death threats and extreme pressure on these individuals. To reduce the threats and the grip bet-takers have on the integrity of the wager, we need a “price floor” to protect the people giving IHA approval. The price floor will become the non-negotiable base rate for most approvals.

I don't expect tracks with wagering subsidiaries to support a price floor being put into the IHA any more than we expected all trainers and horsemen to support HISA. I don't expect those receiving rebates now to support a price floor anymore than those who got free music with Napster wanted to switch to iTunes. Most times, leaders have to step up and piss off some people to do what is right for the sport.

I believe a price floor on off-track wagers will allow host tracks to refocus on live racing that people want to see and they will be able to sell their product at a good price in the off-track market, something they cannot do today.

There's nothing magic about taking bets. Lotteries pay gas stations a 5% fee for punching in the customers' numbers and taking their wager. A price floor in the IHA is the first step for host tracks to change off-track wagering from a “buyers' market” to a “sellers' market,” where those producing the racing content drive down the costs of bet taking.

Is it more important for us to save Santa Anita, Del Mar and other tracks, or to let the money from their racing content go to Fan Duel and Draft Kings?

What is the fair rate for a price floor?

I believe it is 10%, meaning 5% of the off-track wager goes to the host track and 5% to the racehorse owners' purse account. Blended with on-track handle and imported handle, the host track and purses could exceed 15% of the total wagered on their races.

With a flat rate of 10%, mandated by federal law taking precedence, the states will not be able to pass laws to get a competitive advantage in the off-track market. We've had enough of that. (NJ passed a law prohibiting their receiving tracks from paying more than 3% to a host track.) Each host track would still have the freedom to negotiate a higher rate than the price floor for their racing content.

That's how you stop the bleeding and allow Thoroughbred racing to be turned around.

I doubt most of you give much thought to track business and off-track wagering revenue. But, in the changing world of Thoroughbred racing, that's make or break for our sport. Take the time to learn how who gets what from racing impacts the breeding shed.

And right now, for Santa Anita, Del Mar and the life you love, contact Stuart Janney at The Jockey Club and voice your support for a price floor of 10% to host tracks on all off-track wagers be put into the IHA. Quickly.

The post Letter to the Editor: First, Stop the Bleeding appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

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A panel about racetrack closures in the prime afternoon time slot on the first day of Tuesday's Global Symposium on Racing hosted by the University of Arizona Race Track Industry Program (RTIP) in Tucson had the potential to be a somber and eulogistic affair, but it did yield some interesting back-and-forth when the discussion turned to how the industry might best stem the tide of Thoroughbred venues going dark for good.

The topic “Land For Sale. How Will Race Track Closures Impact the Industry's Long-Term Sustainability?” elicited some of the commonly debated plights facing the industry, such as the decline of the foal crop, the fierce competition for the thinning horse (and horse owner) population, how to shore up field sizes, and the emergence of so-called “super” trainers and multiple-owner partnerships.

The panelists largely agreed those practices are consolidating the remaining equine assets into the hands of too few entities, but each speaker had a slightly different take on how to best deal with those woes.

Bill Nader, the president and chief executive officer of the Thoroughbred Owners of California (TOC), didn't shy from rhetorically asking what he termed as “the hard question” about racing in the state that he represents. California is facing outsized upheaval because of the planned 2024 closure of Golden Gate Fields, right on the heels of a 10-year span that also saw top in-state tracks Hollywood Park and Bay Meadows slide off the Thoroughbred grid.

“What's the best path forward, and can California support two circuits?” Nader postulated before following up with the TOC's perspective.

“We know we have the [Northern] fairs, that's a given,” Nader said. “And we have Southern California. But can we support two circuits, knowing what we know?” in terms of the above-referenced downward trends.

Nader continued: “One avenue would be to look at something new [as a flagship track] in the north. [Plus] there is no alternative [revenue stream from gaming to fund purses], which makes it really hard, because we're doing it the old-fashioned way, pari-mutuel wagering only, sort of one arm tied behind your back…

“If there's something in the north that we think is viable and can really form a good business case, that would be option one. If not, then we have to redirect to suitable opportunities in the south, and make use of our assets at our racetracks at not only Del Mar and Santa Anita, but also Los Alamitos.

“If the foal crop can rebound, and we can get some positive momentum, maybe we can stay a little bit close to even” in terms of nationwide track closures, Nader said.

“It's really important that California stay strong, that we keep supporting [it],” Nader said. “Our owners are big players at the Keeneland sale and many of the major yearling sales. [So] in terms of understanding the worth and the value of what everybody brings, less racing may not be the worst thing if we can improve the product and make it better for the people who bet on the races, because that triggers the handle, and that drives the engine.”

Nader explained that for Californians, it can be difficult to see other iconic, nationally important tracks, like Belmont Park and Keeneland, planning substantial long-term facility upgrades while grand places like Santa Anita and Del Mar are more focused on the year-to-year survival of their underlying state circuit.

“That's great that they're leveraging that [financial] advantage to make their venues better, no problem with that,” Nader said. “But I want everybody to be reminded how important California is. California doesn't have those [secondary revenue] advantages…. In terms of expectation management, we're okay, but we still want to escalate to the next level…. I think for the rest of the country, everybody should recognize [how] important California is to the rest of the country: Racing, breeding, history, tradition.”

Smaller tracks weren't left out of the discussion. Phil Ziegler, the president of Emerald Downs in Washington, made the observation that all too often the big-name track closures get the headlines, while it is often the disappearance of the smaller venues, like county fair race meets, that quietly erode the sport from the bottom up.

Chris McErlean, the vice president of racing for Penn Entertainment, Inc., whose Thoroughbred track holdings include Penn National in Pennsylvania, spoke candidly about how well-intended racing executives in Penn's home region of the mid-Atlantic unintentionally contribute to the very problems they're trying to fix.

This includes, McErlean said, giving big-outfit trainers “unlimited” stall allotments or writing so many conditions that races either become hard to fill or go with too few entries to be appealing to bettors.

“We do that out of convenience, [and] that's kind of self-perpetuating. That's kind of what works, but it's probably not the right thing to do,” McErlean said.

McErlean talked about how difficult it can be for a racing executive to deny alleged “super” trainers stall space and dominance across race conditions knowing that if they clamp down, that trainer will just move on to the next track down the road that will be more accommodating.

“I think we've hurt ourselves that way, and it just becomes more difficult to bring that genie back into the bottle once you let it go,” McErlean said.

“I've been involved in the mid-Atlantic for maybe 25, 30 years,” McErlean continued. “Tracks always work together very well there. But every year the discussion is, 'Let's coordinate race dates' or 'We need to coordinate race dates, it makes sense.' And it never happens. So, yeah, we're our own worst enemies.

“But at the end of the day, we run our individual businesses. We're not a league,” McErlean said. “We compete against each other [and] it's difficult to do those changes [because] we can step out and make the right choices, and then everybody else keeps doing what they're doing, and then we end up being the net loser. People want to cooperate. It's just very difficult to be able to actually pull the trigger…. In theory it sounds good. In practice, it's just much more difficult to execute.”

Craig Fravel, the executive vice chairman of 1/ST Racing and Gaming, whose portfolio of tracks includes Santa Anita, Gulfstream Park, and the to-be-closed Golden Gate, underscored a focus-on-owners mantra.

“We do have to make sure that owners are sustained in a more profound manner, that they're engaged, and that they have, you know, a fighting chance to make some money,” Fravel said. “It's a game of hope. We don't want to fool them into thinking that this is a [can't-miss] investment in Microsoft in 1978. But we do want to give them hope, and we want to make sure they're well-treated…

“If we're going to try to change things, we're going to have to try things,” Fravel said. “We're going to have to do things that are new and different and sometimes make us uncomfortable.”

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