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Monday, March 12, 2012

Ontario Racing to Get a Scalping

Almost everyone involved in Ontario racing figured after the government decided to end the Slots at the Racetrack program that it was a starting point in negotiations; some type of haircut was coming but for the most part, the program would survive in some form or another. 

With news today coming from the government, it seems the haircut is not going to be a trim; nor a buzz, but a scalping as the government has decided to end the Slots at the Racetrack program by March 13, 2012.  Unless there is some type of divine intervention, the Ontario racing industry, both thoroughbred and harness, looks like it will be without government funds it has been receiving since 1998.  This leaves the industry a year to figure out what to do to reposition the industry in the doomsday scenario which has now be outlined.

This is not to say all racetrack slot parlors will close. The OLG apparently will be reviewing the locations of the slot parlors and see if there is a better location to place a slot parlor. If the racetrack slot parlor remains, it would appear the racetrack will be paid rent for the locations, but horsemen may still be on the outside looking in unless the horsemen's associations can negotiate a deal with the racetracks. Clearly some racetracks which lose the slot subsidies will be closing or racing much shorter meets to try to present some type of acceptable purse structure, albeit severely slashed. Some of the tracks will close not only because the purse subsidy goes away, but the reality without slots at their track, they still need to pay for the expansions they undertook to house the machines. Expect a wave of bankruptcies to go through the racetracks in the province.

All of a sudden, the Meadowlands is looking pretty golden with upcoming purse cuts at the Pennsylvania tracks and what is occurring in Ontario. I would ask the New Jersey horsemen who are begging for slots to be careful for what you wish for. If there is one lesson to be learned is if the government giveths, the government can and will taketh back.

As for the Ontario provincial government, it is clear they have the legal right to do what they plan to do. I do think it is irresponsible to pull the plug in just one year. My question is how soon will they decide which tracks will still house slot parlors? If they decide in a month as to which parlors will remain or go, it gives the tracks some time to decide if and what they want to do with the empty space they will have once the slots disappear and develop plans for redeveloping the space; to reinvent themselves. However, if this review takes the amount of time governments usually take; it may leave tracks with little time to plan for the future.

I do have sympathy for the Ontario racing community to a point. My question is since 1998 when the slot at tracks program began, what has racing done to reposition itself in the new gaming world? We always hear, in the United States as well how slot revenue has made the industry stronger. Is that really the case? I guess if making the industry stronger is to have horsemen earn bigger salaries, breeders earning bigger breeder awards and higher prices for the yearlings, and owners making more money in purses while interest in racing continues to fall along with handles, then the industry is stronger. I would argue the industry was allowed to thrive artificially; akin to the government having farmers produce more milk so the government can throw out the milk.

For thirteen years Ontario horsemen were given slot subsidies and what did the industry do to reposition itself to retain the existing market, recover some of the customers lost to ADWs, become more attractive to potential new customers? Did the industry cut back on the number of race days to more accurately reflect the demand which exists? Just last year, Standardbred Canada asked standardbred horsemen in Ontario for 5% of their purse account for marketing and the horsemen rebuffed their national organization. Perhaps it took the perfect storm of the 2008 economic collapse to bring us to where we are now, but realistically, everyone had to know sooner or later the music was going to stop yet many people just believed the good times would go on forever just as everyone thought housing prices could only go up. Why worry about repositioning or downsizing the racing product to meet actual market demands?

I apologize if it sounds like I am rubbing salt in the wound, it is far from my intent. The fact is sooner or later the laws of economics will come into play, yet people don't want to listen. The racing bubble was growing and it appears the provincial government in Ontario has just stuck a fork into it.

The worst thing is horsemen in the United States who don't have slots at this time will continue to fight for slots even after seeing what is happening in Ontario and Pennsylvania. Horsemen in New York and other states are going to continue deluding themselves into thinking this party will go on forever until their state government decides to pop the bubble and sadly, they are content with the status quo.

Expect racing to continue fighting in Ontario. However, I hope they spend as much time getting ready to make the tough decisions it seems they will need to make.

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