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Thursday, July 30, 2009

Duh! - A New Study on New Jersey Racing and VLTs

Harness Edge reported that Rutgers University's Institute of Public Policy released their 2009 Economic Impact Study yesterday regarding what can best be done to support horse racing in the state of New Jersey. No surprise, the study calls for a casino racetrack partnership to allow both industries to survive in an increasingly competitive market. Note the study said BOTH industries (for a summary of the report, click here; for those who want to read the entire report, you may click here).

I have not finished reading the entire report but there were a few things that came to my attention at first glance. First of all, it calls for the racetracks to build all the permissible OTB locations permitted in the 2001 legislation. Only 3 of the authorized 15 have been built (one more is in the planning stage). Even more interesting, is the following tidbit:

It is estimated that the combined impacts of existing and scheduled future machines in Pennsylvania and the New York City metropolitan area racetracks will reduce Atlantic City gross gaming revenue by as much as 12.3 percent. It was also projected that installation of video lottery terminals at three New Jersey racetracks would reduce Atlantic City gross gaming revenue by 1.8 percent.

Note, if slot machines were installed not just at the Meadowlands, but at Freehold and Monmouth Park, not only would racing benefit, but Atlantic City would suffer a 10.5% smaller loss of revenue. That's right, Atlantic City would benefit by having slots in New Jersey racetracks. Well being, slots are not going to disappear from Pennyslvania, New York or Delaware, it seems to be an obvious choice.

It will be interesting to see if anyone on the Governor's blue ribbon committee on the future of racing will be reading this report and finally come to their senses to work out a mutually beneficial agreement.

The report also discusses what racing should do once it gets its new revenue source. Here is one interesting paragraph from this section:

Irrespective of the source of much needed revenue to ensure the future of racing in the Garden State, the racing industry needs to invest a portion of those dollars in things besides purses to ensure continued viability. These include: marketing of live racing and creation of a racing brand, creating innovative wagers, reductions in costs of regulating racing and the role of the New Jersey Racing Commission, investment in capital improvements, maintaining the integrity of racing, including research to benefit the equine athlete.

Note it says reducing the cost of regulating racing, nothing about reducing the cost of wagering (i.e. takeout). Obviously there was no conversations with serious horse players. Did anyone ask people why they are betting less on horses or are they making assumptions?

Another serious flaw in the study is:

The industry needs to define itself: Is it sports? Is it gaming? Is it entertainment? The racing industry also needs to recognize that it is two-sided: side one, the horsemen and women who produce the product and side two, the racetracks which put on the show.
Racing must define what its common purpose is and answer the question of who is in charge if it is to be successful in branding and marketing the betting product.

They still don't get it. People need to realize that the racing industry is three-sided: side one, the horsemen and women who produce the product; side two, the racetracks that put on the show; side three, the customers that wager on the sport for if there were no customers wagering, there would be no industry. Unless you get the customers to buy in to the solution, nothing is going to get produce more wagering on racing. Some of the VLT revenue needs to be used to reduce the takeout rates. Racing for the fans is discretionary spending, if you don't give them a better value for their wagering dollar, they will spend it elsewhere.

If racing and academics don't talk to the people wagering on horse racing, all the studies in the world are not going to solve the long term problems of racing. Racing for higher purses may be a fix for the short term but if you don't increase wagering, the fix will only be a band aid.

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