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Monday, April 23, 2012

The Racino Model is Flawed

Despite what some people will tell you, the commonly used model for racinos is seriously flawed.  Individuals will tell you the racing industry has never been better in that we have all-time high purses which has allowed the breeding industry in racino states to prosper.  I will argue instead of it being the support racing needed while it retooled, it instead was a program which, in effect, delivered crack to an addict.

The biggest problem with racino legislation?  It has rewarded and promoted mediocrity instead of encouraging true growth in the industry for all breeds.  What incentive does racing have to improve the product when tracks and horsemen can continue on their existing path and become handsomely rewarded with all time high purses; purses even higher than they ever were in racing's heyday? 

You are seeing the answer now; very little incentive.  You could argue if there has been any improvement in the industry for the gambler, it has come from ADWs, companies who merely resell the product tracks put out.  It is basically the same product it has always been but the reseller puts so little into the industry, they can afford to offer rebates to their customers, making the cost of wagering a little less.  Otherwise, it is basically your grandfather's horse racing; a little more watered down, but basically the same.

In hindsight, racino legislation should have been written to stabilize the level of the purses being raced for at the time of implementation, perhaps the highest level over the prior five years and tracks should have been reimbursed for the cost of operating slots and for capital improvements in racetrack operations and a minimal profit.  The industry would have been stabilized, but it would be up to the industry to improve the product to increase the profitability of the industry.  In other words, if you want to race for more money,  you need to innovate.  If tracks want to become more profitable, tracks need to improve the gambling experience.

Rewarding an industry for not doing anything is not the way to do things.  This is why every cut in slot revenue hurts the industry.  Horseplayers became an inconvenient reality.  We need the gambler to become a more important piece in the industry's profitability puzzle..

5 comments:

Anonymous said...

Pacingguy:

Have to disagree state creation of racinos is a flawed business model. The lack of incentive to improve track infrastructure, a racing customer's experience and the quality of horses isn't the fault of the states.

I put the blame on the decision makers at the racinos and the horsemen and horsewomen. They shouldn't need legal mandates to pay attention to their businesses. Would WalMart offer car tires no one wanted? Would Baskin-Robbins be around if it sold only vanilla?

A better question about the race part of racinos. Why do people run a business NOT to make a profit? You'd think they're trying to get out of racing. Hmmmm.

Pacingguy said...

Where I say the model is flawed by the states is allowing horsemen and tracks to get a windfall with no effort on their part.

If purse levels were stabilized and the onus of getting bigger purses was dependent on increasing handle, everyone may have had an incentive to do so. Instead, horsemen were handed windfalls with no effort required.

Anonymous said...

Pacingguy:

The horsemen would probably say their effort is getting the horses into the races, but thanks for the response. I understand now.

Anonymous said...

i'm just waiting for a fully dedicated harness racing adw... that could do so much for the sport imo. a site tailored to harness racing, instead of being shuffled through t/ the tbreds.
angers me.

Pacingguy said...

Anon,

Unfortunately, it is unlikely to happen. What is wagered on harness racing is a mere pittance when compared to harness racing. They can't afford to ignore thoroughbred racing. Our best bet would be for an ADW to have a channel for the runners and one for the trotters, but the cost may be prohibitive and would cable companies carry both?