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Sunday, February 21, 2016

Hitching Your Cart to the Wrong Horse

Horsemen are screaming foul in Florida with the likelihood decoupling (pardon me, partial decoupling) will be taking place, essentially wiping out the standardbred, quarter horse, and jai-lai industries as well as reducing racing opportunities for thoroughbred racing.  After all, with all the money the casino industry is making, why can't they afford to supplement purses, especially since their gaming licenses were issued on the promise of maintaining racing?

Make no mistake, the gaming industry got their slot machines on the promise of maintaining racing and you can make an argument they made their bed and they should sleep in it; don't want racing, give up your slot license.  The proposed legislation being considered along with the Indian Gaming Compact is also biased against racing in that two years of no racing at a track like Pompano kills the standardbred license in Florida and doesn't give someone else willing to try the option of bringing harness racing back.  Clearly the goal is to reduce competition for gambling dollars.  Make no mistake, the pari-mutuel industry is getting the short end of the stick.

But what if racing hitched its cart to the wrong horse, a horse which acts like racing; being comfortable with the way things are until the wheels show signs of falling of the cart?  While the focus of the racing world is the fact there will be decoupling, truth is there is more to the story.  For example, taxes on slot machines will drop from 35% to 25%.  Knowing the government doesn't like giving money away, one must wonder what gives especially as it allows the industry to shed racing.

Truth is, while profitable, the casino industry had gotten too complacent, thinking slot machines would be enough to keep the money flowing.  Turns out, the casino industry suffers from the same demographic problems horse racing has, an aging audience.  Millennials are not finding slot machines or casino games attractive as they have other entertainment options available and we know how they love their digital devices.  The fact they have a lower rake is why the casinos are able to maintain profitability, for now.  For an industry which is highly leveraged, one can imagine why the casino industry is looking to divorce itself from racing as it seeks to cut costs to maintain their profit margins. While many of these gaming companies may have in good conscious promised to support racing, it may be a case of not being able to afford it any longer.

There are other parallels as well between racing and casino gaming.  Too many racetracks?  Well, there are too many casinos, not only in individual states (the Florida proposed legislation allows for more casinos), but across state lines.  Whereas the racing industry could if desired coordinate racing dates, you are not going to have casino seasons so the same pie is being cut into more pieces as more casinos are for all practical purposes going head to head against each other.  Hence, casino resorts are going to suffer stagnation and while they are for the most part good for now, the time will come when they will be forced by the market to right-size or as in Atlantic City's case, forced to close.  So while there is hope for the Meadowlands to get a casino, what is going to happen when a new mega casino opens up in Manhattan (the same question can be asked of Yonkers for that matter)?  Any renaissance of racing at the Meadowlands may be short-lived.    

Unlike the racing industry, the casino industry knows it needs to innovate if there is any hope in regaining millennials and younger gamblers but it needs legislators to make laws flexible so they can get new games and products out to the market as quickly as it can, something up to now in most jurisdictions has not been possible.

No doubt racing will do its best to keep the slot money coming in.  However, the question to be asked is it going to solely hitch its cart to the same horse until the cart breaks or is it also going to seek flexibility from legislators to innovate and get new ways to present racing to its potential market as quickly as possible (think V75 and new wagering propositions)?  Racing needs to do something because sooner or later, the market always fixes itself.

Let's head to Woodstock!   Not that Woodstock but Woodstock, VA as it appears harness racing's new home in Virginia will be at the Shenandoah County Fairgrounds for the next five years.  If all goes to plan, there will be eight days of pari-mutuel wagering this year (up from four days last year) with hopes to expand racing days over the next few years.

1 comment:

Marv said...

As I've long said, unless racing can stand on its own as a going concern, we have no future. The Meadowlands is certainly proving that you can make a go of it without slots. Large competitive fields are the key to future success.

As for Virginia racing, I don't see how they can be viable in the long run without year-round simulcast monies building the purse account for the live racing. I do wish them luck. It's tough to rebuild from what was once there at Colonial Downs (I owned a part of a horse that raced in the Breeder's Crown there).