SADINSKY REPORT GETS A D MINUS

For what is supposed to be a thorough report, IT’S ALL ABOUT LEADERSHIP:
STRATEGIC VISION AND DIRECTION FOR THE ONTARIO HORSE RACING AND BREEDING INDUSTRY, is lacking full understanding of the industry in many parts of the paper, and is not going to help grow the industry in any way whatsoever. In fact, the solutions offered are nothing but a bunch of socialist ideas that will direct the industry back into a monopoly, which favours non profit organizations and kicks entrepreneurship in the teeth.

If many of the key ideas in this report are implemented the industry will be doomed to stagnancy, if not failure.

Most of those who contributed to this report were self serving individuals whose ideas in the past as led to the state of where horse racing growth is today.

And lets not forget about ambiguity and vagueness. The report is full of this.

Now I shall cherry pick the report:

The industry derives its income from three sources: wagering on horse races, the sale of Ontario-bred racehorses and slot revenue.
**********************************
This isn't a biggie, but it is a still an error. Can anyone figure it out? Guessing time is over. There is a fourth way, and it has to do with owners who lose more than they make. And there are owners who do lose money. And they don't get to write off all their losses in one year if they exceed dinosaur day limits allowed by the government.
Owners losing money, are not nearly as major a source of income to the backstretch economy as purses derived from slots and betting, but the omission shows me that the report is incomplete and maybe even rushed.

...HRO’s (the proposed Horse Racing Ontario) new Board to come together and work in the best interests of the industry as a whole is perhaps the single most important element for the future success of the horse racing and breeding industry in Ontario.

*********************************************
How can a board mostly comprised by mostly industry stakeholders work towards the best interests of the industry. Each stakeholder has the interest of the track they work at or the organization they work for first.
Isn't the industry stagnant today because of racing execs decisions in the past and lack of foresight towards the future?

The days of the horse racing monopoly have long gone. The days of failing to respond adequately to or consider the needs of customers are long past and will never return. What was a ‘supply’ based attitude in some sectors of the industry must change to a ‘demand’ based approach in all of its sectors. The horse racing product must become attractive to the betting consumer; otherwise, the industry is unlikely to survive. Customers will vote with their dollars and unless the industry can find ways to attract those dollars to its core racing product, it will be out of business.
**********************************************
I see Andrew Cohen's fingerprints on this paragraph. It is 100% accurate. Unfortunately, there is no solution offered in the report outside inventing innovative betting products (probably directed at WEG's idea of a horse racing lottery bet with a higher than high track takeout).
Marketing horse racing does not work as long as you have astronomical track takeouts associated with it. You need winners, you need BUZZ from those winners.
That is why internet betting on poker and sports games wins out. There are actual winners, and winners bring friends and family to the track as betting on horses become a lifestyle.

That is how it was back in the 60's and 70's, before Beyer figures made it more difficult to win as they became available to everyone, and mooches (those who lose at much higher rates than astute handicappers) were aplenty, playing the only game in town, while donating to the mutuel pools. The mooches money is still being lost, but they lose now to slots and lotteries.

Also, there was only one track you could lose money on a day, and only 9 races on average. Many people didn't leave the track broke, like they do today because there are so many ways to bet during any day of the week, yet the takeouts which should really resemble those found in Vegas table games, resemble takeouts found in lotteries.

Even slots have a relatively low takeout of only around 9-10%, and because of the power of churning, it gives the mooch the illusion they can beat the game. No such illusion exists in horse racing anymore. And for slots, no homework is required. In horse racing, handicappers can spend hours doing research, and what is their reward? Betting into WEG triactor pools with a 28.3% takeout. No chance to win in the long run whatsoever.

As far as marketing goes. The Score's 1-2-3 Racing is as good as any idea Woodbine's marketing team as put together in years, but still on Wednesday nights Woodbine handle usually hovers around only $1.5 million. It doesn't even keep pace with Mountaineer on Monday's and Tuesday's.

What racing execs fail to understand or acknowledge is that John Q. Smith only has so much he is willing to lose gambling a year. He can lose it very quickly at the track or he can lose it slower on lotteries, or even slower on the internet. If track takeouts are reduced, John will lose the exact same amount, he would have anyway, plus some of his internet money as well. If he thinks he has a shot at overall success, he may even allocate more of his entertainment money on horse racing as well, while bring friends to the track or introducing them to internet wagering on horses. Extra lost money by John equals more growth for the horse racing industry.

Until lowering track takeout is addressed, and it is not in this report, marketing money is a total waste, as potential players will go where they get the biggest bang for the buck, and will head in the direction to where there are at least some long term winners.

In 1998, the total pari-mutuel wager in Ontario was just over $1B. Wagering grew to a high of just over $1.2B in 2001, declining to just over $1.1B in 2006.....However, between 1997 and 2006, total Ontario wagering on Ontario product decreased by $176M or about 26%.
****************************************
These are shameful and embarrassing numbers. Foreseeable cannibalization by slots is hardly an excuse. Horse racing, in 1998, required one to go to a teletheatre or track to make a bet. Now, you can bet on the internet or phone from anywhere at anytime, on a variety of tracks from New York to Hong Kong.
Meanwhile, internet gambling is growing exponentially, so the dollars have always been out there (again, being allocated to where the player gets the best long term odds for his money), and despite the fact that you can watch horse racing live on TV 24/7 in Ontario homes, horse racing growth is non existent.

WWe have been told that what increases wagering is: i) wagering pool size, ii) a competitive race, and iii) field size.
********************************************
This is not an answer to get more Ontarians to bet money at Ontario tracks. It might attract a little more betting from non Ontarians, but they make chump change on simulcast wagering from a foreign source in comparison to what they make off Ontario bettors.
Big fields can kill bankrolls, and that coupled with insanely high takeouts just turn players off more in the long run.
The Woodbine Polytrack which has made handicapping a bigger nightmare than ever before, creates competitive racing that is too unpredictable. Again, this turns off many players.
As long as pool size is at least $20-25,000 most gambler will be attracted enough that pool size doesn't matter.
And you could run 12 14 horse fields a day at Flamboro Downs, or any harness track in Ontario for that matter, and you still won't attract any new business.
Competitive pricing is all that really matters.


The membership on the Board of HRO should be comprised of the following: one senior official from WEG; one senior official from a not-for-profit racetrack other than WEG; one senior official from a for-profit racetrack; the presidents of each of the following organizations – the Ontario Quarter Horse Association, the Canadian Thoroughbred Horse Society, the Standardbred Breeders of Ontario Association, the Ontario Harness Horse Association and the Horsemen’s Benevolent and Protective Association; and three independent members appointed by the government of Ontario. The three government appointees should be appointed for three-year terms with the option for renewal for one further three-year term.
*******************************************
Of course and as usual, absolutely no representation from the people who are most responsible for the games existence and future: THE PLAYERS.
Just a bunch of self serving execs whose past ideas and treatment of the players, has resulted in an industry that appears to be in the terminal ward of a hospital.
Oh, and three government appointees? Yeah, they usually really understand the game...sarcasm off.
Basically the deck is rigged. Since majority wins, whatever WEG wants, WEG will get.
And this gives WEG what they want...less power for the ORC.

Each racetrack knows best what is required to draw in customers and encourage them to wager on live product.
I didn't realize that Sadinsky is a stand-up comedian.

We recommend that:
i)
Whenever the New Program comes into effect, all of the funds payable to the industry from slot machines at the racetracks are pooled.
ii)
The total amount payable into the Slot Funding Pool in each of the three years following the commencement of the New Program shall be 20% of the slot revenue generated at all of the racetracks. The amount payable should be reviewed after three years.
iii)
Out of the pooled fund, money will be paid to HRO to fund its costs of operation, the cost of branding and generic marketing of Ontario horse racing, the investment in research that will enhance and protect the racehorse, and, the investment in the development of innovative technology and new betting products.
iv)
Out of the pooled fund, payments equal to 25% of the slot revenues generated at each racetrack will then be paid to both the racetrack and to its respective horsepeople for purses.
v)
The balance of the pooled funds (the “New Program Funds”) will then be paid to HRO and distributed in accordance with the programs and initiatives established under the New Program.

********************************************
This penalizes companies that are not non-profit. It really takes the incentive of owning an Ontario race track away to a large degree. In other words, it creates less buyers of race tracks. It takes enough wind out of the entrepreneurs sail to move out of Ontario. And it plays right in the hands of monopolists.
To the race track owner, taking a cut, where much of the old money will go towards bureaucratic mumbo jumbo, it almost makes it worthless to have slots considering the cannibalization that comes with that product.

HRO operations 1.7%
Research .85%
Innovation and betting products .85%
Branding and marketing 2.1%
Restricted Races 12.5%
Breeder, Owners Awards 12%
Purse pooling 12%
Payments to racetracks (pooling) 10%
**************************************
This represents where 10% of the slot revenues is going to go under Sadinsky's plan.
The track owner will now get 70% of what they used to get from slots (not taking in the ambiguity of how the pooling would work).
Horsemen would get a 23% increase in what is available too them minus approximately 2.6% of total betting revenues if all proposals are used. Again, this isn't taking into account how much exactly the purse pooling will translate for the individual track.
Note: If the 2.6% resulted in a takeout reduction, the tracks would make up at least that in churn, and maybe attract new betting as well. So depending on the split on betting at the specific track, the result might be just a 1-1.3% decrease of revenues from betting for the horsemen, while the track would see an increase of 1-1.3% increase in revenues from betting (assuming a 50-50 split).


All Site Holder Agreements that are due to expire prior to December 2011 be extended on their existing terms until December 31, 2011. As of January 1, 2012, the New Program would take effect subject to the Five Agreements that will continue to remain in place until they reach their respective termination dates
************************************************
Since the tracks affected are not non profit organizations, how about taking an additional 10% out of the slot revenues from the OLG? Why should new owners who had deals in place get screwed?
Why not increase the take that horsepeople and tracks get from slot revenues? Why is that a non starter?

...a decision will have to be made with respect to the approximately 2.6% levy on wagering that is currently taken from horsepeoples’ purses and directed to HIP - this is a decision that HRO will be required to make. These funds were generated as a result of the reduction of the tax on pari-mutuel wagering. HRO will be required to determine whether, under the new funding structure of the HIP Program, these funds should be directed to non-HIP purses, to a reduction in take-out or for some other industry purpose.
********************************
How about a directive to reduce takeouts by the 2.6%, instead of more ambiguity? I know that once the HRO deals with it, a takeout reduction is the last thing they will do.
I don't think the horsemen will like funding the HIP program with slot revenues, so I don't know how this will fly. Even if they are getting an increase of 23% on slot revenues.

Wagering on races involving Ontario-bred horses will be stimulated by a program that provides incentives for writing restricted races for Ontario-breds.

**********************************************
If this means Ontario bred claiming races, I'm all for it. I've always said that in order to prop up the prices of Ontario breds, the lowest priced horses need to increase in value first. And the only way to make them worth more money is to give out good coin for low level Ontario breds.

This could be accomplished by providing purses for such races (excluding HIP) directly out of the New Program Funds. To compensate the racetracks that write such races (Ontario bred races), the entire take-out on the wagering on these races would be kept by the racetrack up to the amount of the purse. Take-out above this amount would be divided between the racetrack and its horsemen in accordance with their contract for purse distribution.
*********************************************
This is complicated but I still like the innovation involved. Why not just mandate that 25-35% of races carded in a week must be Ontario bred races and 30-50% of total purses must go towards Ontario bred races?

It may be wise to grant bonuses only up to the time that a horse is claimed.
*******************************************
This has already been implemented and it is a disaster. It puts less value on Ontario breds as potential owners don't feel like getting ripped off of future earnings of the horse. It may lead to private sales, which sort of defeats the purpose of the rule in the first place.

...the operations of the two commercial casinos in Niagara Falls could play a role in assisting Fort Erie. If gaming in these two areas of the province was considered as a whole rather than facility by facility, a great deal could be accomplished by enhancing individual operations and making adjustments that could support the objective of sustaining jobs, particularly in the agricultural sector, rather than simply maximizing provincial revenue.
*************************************************
In order for Niagara Falls and Fort Erie to be considered a whole, the owners of all three facilities need to be the same.
It doesn't benefit Niagara Falls in the least to promote Fort Erie and visa versa.

Windsor Raceway, Fort Erie Racetrack, Hiawatha Horse Park, Rideau Carleton Raceway and Woodbine Racetrack all request that card table games should be introduced at their respective slot facilities with a share of the revenue going to the industry.
*********************************************
Again, more ambiguity as to what share should go to the industry. If the share isn't high enough for the track, card tables will cannibalize horse race betting even more at Fort Erie, for example.
And the cost of card tables makes them by themselves very unprofitable. But it could attract more people to the tracks.

OOPs. I forgot to mention that even though the report discusses integrity and drugs, there is not enough being done right now about it. Some of the monies collected should go to more extensive testing. I guess the horsemen on the panel forgot about that one.

ONE MORE RECOMMENDATION

I think there should be a potential penalty placed on non profit organizations, where the CEO and two top racing execs risk being fired if they can't increase betting, by Ontario gamblers, of a minimum of 3% per year, 6% over two years.

This could lead to a few WEG execs to sell hot dogs on the corner of Bay and Richmond. A more appropriate line of work for many of them.

The term non profit organization is so misleading. I'm not sure where I read it but I thought I saw Willmot makes over half a million a year. He probably has a bonus clause that gives him another quarter of a million if betting on Woodbines product doesn't drop by more than 25% in a calendar year.