Ontario Liberals Spewing Lies and Half Truths

The Ontario Liberals have now gone over the line in trashing Ontario horse racing and the revenue sharing slots deal that racetracks have at this time.

On the weekend they launched a couple of radio ads.
Text of Ontario Liberal Party Radio Ads

Radio Ad One:
“Did you know that Tim Hudak’s PCs started a secret subsidy for a few, very wealthy racetrack owners? And now in these times of restraint, Tim Hudak says these rich payouts should be protected. He’d cancel full day kindergarden, leaving 50,000 four and five year olds stranded. Are we really going to spend more on horse racing than full day kindergarden? The PCs should do what’s right. Tell Tim Hudak his priorities aren’t your priorities.”

Radio Ad Two:

“Did you know that Tim Hudak’s PCs started a secret subsidy for a few, very wealthy racetrack owners? And now in these times of restraint, Tim Hudak says these rich payouts should be protected. But when it comes to our seniors, he voted against new supports to help them stay in their homes longer. Are we really going to protect horse racing over our parents and grandparents? The PCs should do what’s right. Tell Tim Hudak his priorities aren’t your priorities.”

To actually hear the ads, click here and scroll down.

This is repugnant and slimy politics at its worst. Secret subsidy? For a few wealthy racetrack owners? This is just complete crap. I know politics gets dirty, but resorting to blatant lies to make ones case means that the case might just be very flimsy. I believe that this propaganda campaign launched against horse racing in order to break a deal that has benefited everyone except addicted gamblers is way off base. Also, this is not about tax dollars but after tax dollars earned in a business that governments shouldn't even be in, in the first place.

First off, lets address the secret subsidy for a few wealthy track owners claim. Here are the documented words of David Willmot in 2001 which pretty much explains the origins of the slots deal. Also of note, Woodbine Entertainment is a nonprofit organization (they reinvest their profits), and they account for making close to 50% of the revenues from slots in all of Ontario:

"How we got the slots is that the government was looking around for new sources of revenue, possibly through expanded gaming. Fortunately, we convinced them (and they knew, anyway, from their constituents) that slots in bars and restaurants is a terrible social idea. It is just too “in your face” for the average public. They were also looking at the idea of 44 charity casinos around the Province of Ontario, but reaction from people was the same; “We don’t want 44 charity casinos.” The charity casinos were to be mini-casinos since they were talking about 450 slots and 60tables. That would have been a new intrusion of gaming into many neighborhoods and it was very skeptically looked upon. We took that opportunity to work with government, and we said, “If you put the slots at racetracks, and don’t go with the 44 charity casinos, we can provide you with 70-80 percent of the revenue you were projecting from your total expansion, but we can do so in a socially responsible way in a location where there has been regulated gaming for decades.” We were talking, basically, of destination locations. People have to make a conscious decision to travel to the racetrack to gamble.So, this was a politically safe and socially responsible way for government to expand gaming, and, at the same time, because they were focused on creation and preservation of jobs, to help regenerate a very large agribusiness."

It doesn't sound like a subsidy to me, but a business partnership that benefited both the government and the racing industry. One could even argue that racetracks agreed to receiving too small a percentage.

The reason I state that the percentage may be too small is that this same Ontario government that is now calling the slots agreement a subsidy is venturing out to get into online gambling. They, through the OLG, recently closed an RFP (Request for Proposals) in order to choose a PARTNER that has experience in online gambling.

So lets get the crystal ball out. 2 years from now, the government, still looking at a huge deficit, realizes that there was 1.5 billion in revenue earned from their online sites. However, half a billion stayed with the company that set the whole thing up. How, possibly could the government then call that money a subsidy to the other company? They can't. They would be laughed at. But if you buy into the Liberal propaganda right now, isn't that money they pay the internet company (which will mostly be profits for that company), money that could have gone to all day kindergarten or health care?

This is a disgusting campaign by the Ontario Liberals (it should be noted that Federal Liberal Party has all but marginalized themselves out of the political scene in Canada of late).

It is also seemingly unworkable and if pursued it could get uglier and possibly have illegal ramifications.

Though it is hard to speculate on exactly what these snakes have up their sleeves (OK, snakes don't have arms, but you get my drift), however, I don't see how their plan can work other, than stealing a small percentage of what the current arrangement is.

Logistically, they can't demand that slots stay open, if the track owners get a smaller cut or no cut at all, as the government are only renters.

A government cutting back on spending, isn't about to outlay cash to build new casinos on government property. And a government that is receiving over a billion dollars from slots, isn't about to cut off the source of their revenue....anywhere.

So what are their choices? Partner up with large casino companies (who will wind up receiving a lot more than 20% of revenues) and have them finance new casinos? Doesn't sound like a smart move or one that will increase their bottom line one iota.

Buy out at least some of the tracks? These buyouts generally are at high premiums (they have to be, so it doesn't appear that the government took advantage of a situation that they are creating). Payback from such a buyout will take a decade to recoup. It doesn't fix the current deficit problem at all. The last thing the government needs to do is make bad buys as slot revenues are destined to drop from here on in, if internet slots becomes a reality in the near future.

It may come down to track owners telling the government to get off the property, if the new slots deal is too low. And the government needs to watch itself that they don't put a track into a fire sale position, and then buy out the track. That has lawsuits written all over it. And again, the government is not in a position to close down one slots location as there is no guarantee they will make up the lost revenue at another location.

Finally, the Liberals are shooting themselves in the foot through lies and propaganda. In the internet age, the truth generally wins out. If they keep this nonsense up, they will be the next marginalized political party in Canada.

SAVE ONTARIO HORSE RACING PETITION
An online petition was started on Friday, and it has over 5,000 signatures. If you haven't signed it, what is wrong with you?

The Thoroughblog also touches on the scummy tactics used by the Liberal government. Check out the promises McGuinty made to the horse racing community when he was begging for votes.

Tim Hudak (the Conservative Party leader) and the NDP both promised to keep things status quo with respect to the slots agreement. Now that Ontario has a minority government, it will be very telling if either party backs down on their stance.

Why Didn't David Willmot Hear Himself Talk

With handle still plummeting across North America, I though I'd bring out a brilliant speech by none other than David Willmot back in 2001 when he accepted The John W. Galbreath Award for Outstanding Entrepreneurship in the Equine Industry. Racing execs everywhere should take live by the observations he made in the speech. it is a shame that Willmot himself didn't live by those words.

In 2001, Woodbine was doing great. Some history, Willmot took over the reigns at the OJC around 6 years earlier. They were on the brink of bankruptcy, unable to compete with lotteries, the Blue Jays, and Charity Casinos which were popping up all over Toronto, Willmot first sold some of the tracks non-income producing (and/or losing) assets (paintings, Fort Erie, etc.), and also got involved in optimizing the payroll.

But most importantly, he lobbied the government to drop their cut from takeout to next to nothing, while simultaneously bring slots to Woodbine which fueled purses. What he failed to do was cut takeout by the amounts he didn't have to pay to the government anymore. This is one major reason that after 2001, business slowed down.


The other important thing he did was start up phone betting which made it very easy to get into internet betting without any delays when the technology was in place.

Yes, Willmot made it very easy for customers all across Ontario and all of Canada to wager on many horse races a day. The problem of course, was and still is very steep takeout rates which makes winning impossible.

Willmot's failure to compete in the first decade of this new century gave medium and large gamblers no choice but to give Betfair and offshore bookies their action. Woodbine lost close to a generation of new bettors, and Willmot could have saved at least half the loss if he had only acted on what he said when accepting the award.

By not taking his advice, Willmot just allowed Horseplayers to lose faster and faster as more tracks are available from just about everywhere to everyone now. But you won't find any Chris Moneymakers' betting the ponies in Canada, at least into a 21% blended takeout rate. And that is the problem. Winners create new players, and hideous track takeouts only creates losers.

Here is his speech:

Thank you, Bob. I am delighted to be here. My wife, who is from Lexington, was editor of the now-defunct Thoroughbred Record when I met her and brought her to Canada. She found the following words of George Bernard Shaw that were often quoted by John Galbreath. Let me read them to you.

“I want to be used up when I leave this earth. For the harder I work, the more I live. I rejoice at life for its own sake. Life is no brief candle to me; it is a splendid torch, which I have got hold of for the moment. And I want to make it burn as brightly as I can before passing it on to future generations.”

When I read words like that, I am so honored to be associated with an award that is named after John Galbreath. As a younger man in racing, I saw him manage Darby Dan, and I saw him operate the Pittsburgh Pirates. The combination of sportsmanship, business talents, and integrity that Mr. Galbreath possessed was astounding.

I couldn’t be happier to be here today, especially to talk to students in this program. I majored in economics and then law, but my minor was history. All my friends say that I am a frustrated history professor. I love to lecture to students, but I won’t go on too long. When I was in college on a Thursday afternoon, I didn’t want to listen to some guy go on about himself. I wanted to get out. "Where is the nearest pub?"

What I do want to talk briefly to you about are some of my earlier experiences as a breeder and horseman, and how I feel about the business. For me, the epiphany came when I went into track management after almost 30 years on the other side of the sport. It was astounding for me to realize that I knew absolutely nothing about the business of conducting horse racing.

The first race I ever saw was the 1964 Kentucky Derby won by Northern Dancer, a huge Canadian hero. That was the day that I fell in love with the business of horse racing. I love horses. I admire their beauty and courage. But what I have always felt passionately about is the business and the challenge of horse racing. Competition. Can you nick your mares better than other people? Can you raise a better horse? Can you train them better? Can you manage their careers better? And will any of that equate to success at the racetrack?

Kinghaven, the farm that I owned with my father – he died in 1994 – and that I have owned since, has bred over 90 stakes winners, a lot of good horses. During those years I spent on the backstretch, I thought I understood what this business was all about. It was pretty simple. You tried to breed a good horse, you managed it, and then you tried to make sense of your income statement. Of course, everybody that showed up at the racetrack was there to watch your horse run.

In 1984, I was appointed to the board of the Ontario Jockey Club – the youngest member of the board. I am now 51, and it says something about the place, and about horse racing boards, that I was still the youngest member until this past year. But after I went on the Board, I, along with many others in the industry across North America, watched racing go into a serious decline. There were lots of reasons and finger pointing about why horse racing was getting into difficulty.

In 1995, the OJC, which was 120-years-old, operated five tracks. In terms of racing days, it was the largest racing organization in the world before Churchill and Magna became holding companies. The Board asked me that year to go in as the CEO. I had been the “angry young man,” and I think they’d had enough of listening to me complain about how we were messing things up. So they said, “If you are so smart, come in as CEO.”

I had been involved in other businesses: insurance, oil and gas, bottled water, and computer supplies. I had managed to turn some companies around and had done well buying and selling them. A friend of mine, once the head of Hockey Canada, another not-for-profit, where there is a lot of politics and nobody has real ownership, said to me, "David, don’t go in as CEO up there until things get really smelly. Because they are not going to let you do what you think has to be done until things get smelly." By 1995, things were getting pretty smelly at the OJC. In fact, they were so smelly that I began to wonder why I was in that business.

I would look out the window at my farm thinking, “Am I nuts to have money invested in this business? It’s a dying, contracting business, and a dangerous place to have your money invested.”

When I went into the OJC as CEO in 1995, we were about three months from having the Bank of Montreal call our loans. My first meeting with them – I remember well – I was asked to go down and meet with the bank. I thought it was an introduction, just one of those get-to-know-the-new-CEO meetings. When I walked into the room and saw these five faces, I knew this was no introductory meeting. This was a “come-to-Jesus” meeting. I was there to be informed by the bank that if things didn’t change, and quickly, they planned to pull the loans.

The unusual thing about the OJC – we have since changed our name and I will talk about that in a minute – the unusual thing about the Ontario Jockey Club is that it is a dual breed organization. Its harness racing product is on a par with the biggest and best in North America, the Meadowlands. Our Thoroughbred racing is not quite that high, but we would probably have about the fourth best product in North America on Thoroughbreds. Between the two arms of racing, there are about 40,000 jobs in the province of Ontario that rely on the business.

So, I felt a huge pressure to try to make sense of this business that was in difficulty. The first thing that I realized, aside from the lecture from the bank that we had better start proving that we were a business, was that I didn’t really know what business we were in. And it is pretty hard to turn a business around when you don’t know what business you are in.

During the first month that I was CEO, I had a meeting with about eight or ten of our biggest gamblers. During our discussion, I used the word “fan,” and talked about our “fans.” And one of these guys looked at me and said, “Don’t insult me.” I said, “Well, what do you mean?” He said, “I am not a fan of anything that you or your rich friends do around here. And don’t call me a "patron" either, because I’m not a patron. Those are people who give money voluntarily, like for the arts. Philanthropically, I am not a patron. I am a gambler. I am your customer and I want to be treated with the respect that a paying customer deserves.”

Since that day, we have never used the terms fan or patron around our company. It is customer. Since that day, everything we have done to turn our business around, and to resurrect horse racing in the province of Ontario, has been customer driven.

One of the difficulties in this industry, and I say this as a horseman myself, is that there has been too much focus on the supply side. This is the side of the business that provides the product, the horses to the tracks, and includes breeders, trainers, and backstretch employees – and I spent years on the backstretch. But there is a demand-side of the business also. The customer, bettor, gambler – who provides the capital; those purses that enable the rest of it to make sense.

Over the years, the thinking in this industry – certainly among management of tracks across North America – has been driven by this supply side. Everything has been, “What can be done for the horsemen. How can we fix up the backstretch? Let’s do whatever the horsemen want. If they want more racing, then we should have more racing, even if that means smaller fields.”

But if you sit down with the gamblers, it is pretty simple what they want. They want field size, they want pool size, and they want low takeout. Frankly, they don’t care if a horse is by Mr. Prospector or Santa Claus. The truth of the matter is, racing is a gambling business 99.8 percent of the time and a sport the other point-two percent. Granted, it’s a sport for a lot of those people who supply the product, but for the industry to work, we have to take care of the customer. I think for decades we have not.

The customer doesn’t want small fields. He doesn’t want “trickle-down economics” like a lot of horsemen do. Horsemen figure, "if we race all year round and have five horse fields, I will pick up enough fourth- and fifth-place finishes that I might make sense of this." Well, racing is still competition. It is not there to guarantee anybody a way of life. You have to be good at what you do, be competitive, in order to provide a product that the customer wants to bet on. And the customer wants things that I just mentioned plus quality racing, but if you don’t give them the fundamentals, five-horse fields of well-bred horses won’t encourage the bettor to bet.

A Philadelphia Park executive said to one of his biggest bettors on Breeders’ Cup Day, “Who are you going to bet on in the Distaff?” He said, “I like so-an-so, and I am watching that race because I’m interested in it.” (I think the race had six or seven horses in it) “But I am betting on the eighth race at Finger Lakes. It has 12 horses in it.”

We have to realize that the customer does not want the same things that horsemen want, and that the customer’s best interests are not served by what horsemen want. But we have to deal with the customer side. Bring the customers back and give them good value for their entertainment and gaming dollar. Only by doing that will we get purses up high enough to make the participants, the supply side of the business, healthy again. It is happening – slowly. Keeneland is dropping its takeout rate. New York is dropping its takeout rate at Saratoga this year. These are terrific signs that a few racing organizations – and I include ours among them; organizations that used to look at things only from the horsemen’s perspective – are beginning to look at them from the point of view of the customer.

So, beginning back in 1995, we adopted a customer-driven philosophy. We lobbied the Provincial government to reduce the pari-mutuel tax, and we were successful after years of trying because we were able to make the argument that the lotteries, the commercial casinos, the charity casinos, the scratch-and-wins, the break-open tickets – all of the things that the Provincial government introduced to compete with horse racing – were being taxed at a lower rate than racing. After years of crying poor, to which the government wasn’t going to respond, we found an Achilles heel, and that was fair taxation. For the first time, when we went to them and said, “We want a reduction because you are unfairly taxing us,” the argument was made, it was accepted, and the tax was lowered. And immediately, some of the tax reduction was passed on to our customers through a lower takeout.

At the same time, we had been lobbying very hard to get the enabling legislation for slot machines at racetracks. It took us three years of negotiating with government on the final deal and the entire industry had to hang together for the Province to agree to a deal that was fair and a true “win-win” scenario for government and the industry. The fact of the matter is that slots are merely a second product line at an existing gaming destination. They don’t create an expansion of gaming locations. This is a politically safe and socially responsible way for government to raise more gaming revenue without introducing more gaming locations in a jurisdiction.

The key is to try and convince government and to be proactive. I think this is one of the challenges that Kentucky has. The key is to convince the State or the Provincial government to put expanded gaming in the racetracks only; don’t put VLTs or slots across the road in bars and restaurants or casinos. That will hurt the horse racing and breeding business. With slots, yes, there is additional capital for purses, which brings back financial health to the business, but you also bring more people back to the track…customers that you can then convert.

Now, a lot of gaming consultants, and you have one on the faculty of this university, will say that racing is cannibalized by slot machines and that you cannot cross a slot player over to racing. But we believe that we are proving every day that that is not true. When we brought slot machines into Woodbine and Mohawk, our two tracks, we physically integrated the machines in such a way that no one coming to the slots could not be exposed to horse racing, as opposed to going in and out for the slots and not knowing they were at the races.

We built or modified our plants in such a way that slot players, whenever they go for a walk, find themselves on an attractive racing floor. We spent millions improving our racing floors so that when slot customers went up the escalator, they didn’t walk out onto what we used to call “1956 industrial Woodbine” – gray steel pillars, gray walls, stereotypical racetrack, cigar-smoking guy standing in front of the TV saying things you don’t want to listen to and throwing paper on the floor. We completely renovated and rebuilt our tracks so that they were modern, clean, safe – we beefed up security, and barred about 50 of the worst actors. Incidentally, since we’ve done this, female attendance is up about 40 percent and families are coming back.

We want customers to have a very entertaining experience in attractive surroundings, and to feel they are getting really good value for their dollar.

At one of those early customer meetings, that gambler I told you about, said, “For years, what you guys have done for those of us who want to bet on the horses, is drag us in, turn us upside down, shake the money out of our pockets, and then kick us back out. And you think the only reason we are here is to watch you, your friends, and your brown furry animals enjoy your elitist activity.”

Those are pretty harsh words, but he was right. That is how customers at racetracks have been treated. They’ve been dismissed by management as people who will be there no matter how they’re treated. Well, we spent $120 million on our tracks, which was funded by turning our business around, by bringing people back to the tracks, by restoring the confidence of our bankers, by the general turnaround in the industry, and by the prospect of slots. We created facilities that a lapsed customer would come back to and feel comfortable and that a new user would come to and say, “This is not what I expected from a racetrack. This is very nice.”

At the same time, we realized that we had to distribute our product off-track. Our TV department now has over 100 people in it, which makes it as large as a station in a large city. We have gone out on three platforms. We have gone out with what I term hard-core, medium, and soft-core distribution of our racing product in Canada. The hard core is The Racing Network Canada (TRNC). The TRN in the U.S. went broke competing with TVG for several reasons, including a high cost of distribution. TRN Canada, which is owned 100 percent by our company, has been very successful. In just three years, our telephone account betting has grown from zero to $60 million, and it is because we are putting our product into the home. If you have TRN Canada, you basically get barraged with racing and betting information.

Our soft-core product is SportsNet, where we have a lot of racing on basic cable. It is more the TVG style; that is, explaining to people how to bet, although they don’t use horseracing jargon. They wouldn’t talk about a horse running for a “tag.” If you had never watched a horse race, what does it mean? A dry cleaning tag? What’s a tag? So that product is much more geared toward exposing racing and converting new people to racing.

In the middle is full-card simulcasting. We have 426 live race programs a year, so we have a lot of product we send out to various simulcasting networks across North America.

You folks are obviously in this program because you are interested in the business side of the equine industry. For those interested in racing, the opportunities for skilled management are endless. As the industry starts to turn around, the opportunity for exciting and challenging employment is growing dramatically.

In our company, the Food and Beverage Department has 450 employees and does $30 million a year in business. Our Television Department has over 100 employees. There are more than 400 employees in the Mutuels Department. It goes on and on. We have 26 teletheaters, which is another department. So, there are a number of different areas that you could look upon as a potential career opportunity, and those are in addition to the racing departments. Presumably, you like the equine industry, and may like being involved with horses. But the business of racing needs capable, bright, young people who have had formal business education.

For years, racing used to rely on people coming up through the backstretch for the management side. But we are desperate for bright, young people who can come in and look at the horseracing industry as a business. Who can understand demand side and supply side and what has to be done in the way of marketing. You have to understand your product before you can sell it, and you had better understand whom your customer is before you can sell that product to them.

We have an incredible opportunity in horse racing today. We have the bubble of the baby boomers for the next 20 years. Racing probably has the best demographic of almost any business in North America in the sense that it is basically 45-year-old-and-up people who have disposable income and discretionary time for racing. I’ve heard people say we need to get more young families out to the races. But I know that when I was younger, going to the races didn’t make an awful lot of sense. Our two kids did not want to go and we were too busy.

We have a great demographic. If we can build on that demographic, give them what they want, give them security, give them good transportation, give them good food, give them good surroundings and give them good racing product that is based upon all the fundamentals of what a good gambling product is, we can succeed. If we are ever going to expand horse racing, if it is going to regenerate itself, then we do have to bring new people into the business.

A few years ago, Andy Beyer referred to racing as “a gambling game.” I believe it is more often that than a sport. It is a sport on Kentucky Derby day, and on Breeders’ Cup day, or on Queen’s Plate day at our track, but it is not a sport most of the time. Most of the time it is gambling. A $20,000 claimer on a Thursday afternoon is not a sport. Jerry Bailey may be brilliant when he wins the Breeders’ Cup on a horse, but he is a bum when he gets beaten on a 4-to-5 shot in a $20,000 claimer on Thursday. At that moment, he is not a sports hero. He is simply a means to a gambler winning his bet, and if Jerry blows it, that gambler is very upset.

So, we have this hybrid between sport and business. Over the years, by convincing ourselves that it was purely a sport, we let the business slide. We lost track of those people who come to the tracks, why they come, what they want by way of product, value, and entertainment for their dollar. I believe we are starting to bring them back and I think we have to just not be naïve about what brings them back.

We have two teen-age sons, 14 and 16. If I am watching TRN Canada at home and they walk into the room, they will ask, “Do you like anything?” If I say, “No, I’m just watching,” they are gone out the door. But if I say, “Yeah, I like the five horse in this race,” they’ll ask, “Can I have a piece of your bet?” They will sit and watch with me because they have $2 or $5 riding on the race. Even though our foaling barn is 50 yards from our house, our sons have not taken much interest in “the horse” or “the sport,” but they like to gamble. We can talk about juvenile gambling, but forget that. They are going to be on their own soon and I want them as customers.

So the fact is, we have got to attract the next generation of fans by making it a fully and excitingly interactive in-home product. I don’t think with conventional marketing that you can get many people who have never been to a racetrack to go.

We have to get people out to the tracks for reasons that are necessarily associated with racing. They have to come out because the food is good, and the ambiance is good. They feel the entertainment experience as well as the racing experience. We will soon have fully interactive in-home wagering where the picture comes up – you put up your account – you build your bet – you place it – it is automatically credited or debited. When that kind of legal in-home wagering becomes common, I believe that young people of today, who are computer literate, who love that interactivity, will start betting on racing just because it is a gambling game.

Ultimately, they may become interested in the horse and the sport and will one day ask, “Why don’t we actually go to the track and see what this is like live?” I believe that is the way to bring new fans to the racetrack. But when they get there, they had better be able to find a combined entertainment-sport-and-gaming product that will satisfy them. At the very least, the track can’t be so empty that they walk in and say to themselves, “What’s wrong with me that I am here?”

People are coming back to tracks today and it’s a challenge. It is going to be a long row to hoe, but I think racing is over its worst days and has its brightest days ahead.

When I started as the CEO of the OJC, we had negative cash flow of $10 million. Today, we have positive $40 million in cash flow. In terms of perception, our name sort of fit our management. We were the Ontario Jockey Club, a bunch of elitist, self-perpetuating, self-appointed guys, running their horses, and hoping the public came and bet enough money that they could make sense of their “elitist activity,” as that gambler told me. We have now changed our name to the Woodbine Entertainment Group. We are not-for-profit, but we don’t think of ourselves as not-for-profit. We are a business with over 3,000 employees that does $1.3 billion a year.

Today, just the change of name evokes for customers and potential customers the fact that we are an entertainment experience and not an outdated club. Our vice-president of human resources was meeting with the Deputy Minister of Labor, and when she put her business card in front of him, he said, “How many jockeys are in your club?” So we changed the name to change the image of racing.

Thank you very much for having me today.

A couple of final things. Willmot did drop takeout on doubles and exactors around 2000 by a point. The thing is that the government gave the track around a 6% cut. The good majority of it was split between the track and the horsemen and not the bettors, though some more was given to larger bettors through a very minor rebate program through their betting account system.


I'm hopeful, new Woodbine Chief Nick Eaves will actually follow through on Willmot's superb ideas and observations (the one's I highlighted as his crystal ball was way off when speaking of the future). There are indications that he is as Woodbine handle bucked the trend last year (allowing the big rebate shops to take the signal, getting TVG to feature them, and also being placed in the Eastern edition of the DRF is why). Domestically they still sucked DB's (the first initial is Donkey), as they are priced too high as a competitive form of gambling, though they look like they are starting to get it (the change of direction on their Racing Show on The Score) as they realize that nothing has changed since 2001, 1981, or 1931: Horse racing is fueled by the bettor. The bettor is the customer, not the fan, not the horseman.

Handle Up: Why Woodbine Bucked The Trend

Woodbine execs probably know better, that their recent announcement about the handle increase for 2009 for thoroughbred racing, isn't as good as it seems, or maybe they don't.

"All-sources handled totaled $361,435,208, compared to the $337,660,570 from the 167 dates in 2008. The daily average handle this year was $2,164,282.....Most of the $23.7 million increase came from U.S. sources. TVG, the national racing channel, offered Woodbine racing for the first time beginning on June 19."

Now let me give you the rest of the story.

Handle at thoroughbred tracks in North America in 2009 will show a drop of around 10% when final numbers come out in early January, so Woodbine's increase of 7% was against the trend.

Bad economic times is most likely to blame for the drop, however, even during the economic upswing prior to the bursting of the bubble, horse racing was barely holding steady from year to year when it comes to total handle.

So why did Woodbine do so seemingly well? There are a few reasons, and all of them helped.

1. Being featured on TVG definitely increased Woodbine's exposure. Horseplayers tend to bet races that are shown on TV. When a track gets featured, players become more familiar with the horses, jockeys, and trainers.

2. Probably the biggest plus for Woodbine was that they were not involved in signal blackouts, and other games that were being played out in 2009 by racetracks and horsemen groups. Woodbine's signal was available at every major ADW in the USA without disruption. When a player can't bet on a certain track, they will gravitate to another track. Tracks like Woodbine and Delaware were major benefactors in 2009.

3. Woodbine's seeded Pick 6 experiment caused handle to increase during its short run, and may have helped Woodbine's long term exposure in the USA. Woodbine lost money on the deal, and even with the increased handle and exposure, their bottom line has suffered.

4. Field size of 9.1 horses per race (up a little from 2008) is attractive to almost every bettor on the planet. It leads to bigger payoffs. And if a bettor hits something really big, he or she might actually overcome Woodbine's monstrous takeouts (their Win Place Show and Exactor takeouts are reasonable in today's market, but that isn't what I'm talking about here).

5. Mine That Bird put Woodbine on the map in a few more households in the USA in 2009.

6. $2 million races might help with exposure a little bit. But horseplayers collectively are more into bigger fields and reasonable payouts in the long run. When you do the math on days that have the big races, sure handle is up considerably, but the reality is the track loses a lot of money on those days if one looks at their cut of takeout versus what they give out in purses.

7. CHANTAL SUTHERLAND! The series Jockeys put her on the map. Male bettors (and maybe a few female bettors too) are all aware of her stunning good looks now. The fact she was the second leading rider at Woodbine this year, and brought home some nice prices, especially earlier in the year, definitely got more Americans playing Woodbine. I get lots of hits daily because certain individuals search "Chantal Sutherland nude."

8. Woodbine dropped their takeout on triactors from a whopping 28.3% to a whopping 27%. Now this probably didn't get US players to play more, however, the limited details announced regarding Woodbine's handle seem to indicate that domestic handle was close to even versus 2008, and dropping the takeout definitely helped. The increased payouts Canadians received when cashing triactors were most likely churned back on Woodbine races. Not so much in the USA, where players were more likely to churn the monies back into a race at another venue. As an aside, is it coincidence that tracks that increased their takeout in the past 18 months or so like Calder, Aqueduct, Belmont, Pimlico, and Laurel have seen high teen decreases in handle in 2009, almost double the trend?

9. Another thing that prevented domestic (on track and HPI account wagering) numbers from following the downward trend in North America was the fact that Woodbine were reportedly more aggressive in giving more of their biggest bettors large "secret" rebates in order to keep them from betting offshore or with a US ADW (most don't take Canadians, but some do) and even perhaps Betfair. This definitely increase churn on their own product domestically, maybe even by enough to make up the difference of losing 10% versus staying even in domestic handle. I know that when I receive a rebate in the neighbourhood of 7%, my handle increases three or four fold. But keeping big customers doesn't increase real growth. What Woodbine needs to do is give their smallest players the same rebate. It will keep them in the game longer, and then and only then do you have the foundations of growth. See "The Pie" over at the HANA blog.

10. Woodbine appeared in the US version of the Racing Form. Of course, this will help handle. It is amazing they were only up 6% when considering everything on this list.

Lets keep things in perspective here. Woodbine's $2.1 million daily handle isn't very good when compared with Hawthorne's $2.7 million daily handle. Hawthorne gives out less than half the purse money Woodbine does, so it deflates the racing quality argument that Woodbine likes to make. Hawthorne is available not just at major ADWs but all ADWs, especially the ones that give larger player rewards that savvy bettors tend to flock to. Hawthorne having a traditional dirt surface probably helps Hawthorne's cause at least a little as well.

There is also no mention about whether betting was up or down when it comes to Woodbine's customers playing other tracks. My guess it that it is down. Their practice of ramping up takeouts on triactors and superfectas, etc. at many US venues, which wind up shortchanging Woodbine/HPI customers, can only hurt them in the long run. Many players will avoid such bets, and may inevitably be driven offshore by Woodbine's utter callousness on this issue.

Woodbine with their quasi monopoly on Canadians should be doing a lot better. Perhaps, with David Willmot finally stepping down and being replaced by a younger and brighter individual (Nick Eaves), more betting incentives and initiatives will be made to attract more Canadians to play the horses.


For more on the topic of Woodbine's increase, which includes comments of players who either like or dislike betting Woodbine check out the 3 pages of comments at Pace Advantage. Here is a sample, by this dude named Dean:

"I lost respect for Woodbine several years ago when they raised their takeout from 14.75% to 25% on their pick 4. They did not tell anyone; it was a takeout raise of the worst kind.

But, their product is good, and this year let us remember that they offered out that huge seeded pick 6 (probably not a good idea with a $2 pick 6 and lack of whale money) but they did offer that low take bet. If next year they offer out a reduction in take, or a few other horseplayer centric items, I will gain a lot of that lost respect back (just personally as a player).

I think about six years ago now I think it was Maury Wolff, or maybe Andrew Beyer; they were speaking of Tampa bay downs. The quote from them was something like "excuse me about Tampa but with their huge takeouts I don't think they want me as a customer"

But now look at Tampa because they lowered takeout (and have for several years) and had a sea change in horseplayer respect. A lot of players love Tampa for what they have done and their handle is doing really well.

Anyhow, long winded crap from me that tracks can change and earn some respect, imo. All they have to do is try."

At Woodbine, The Monkeys Run The Zoo

Nick Eaves, President of Woodbine Entertainment, must be Willmot's puppet
At a recent gaming conference held in Reno, Nevada, Bill Eadington, a prominent gaming authority, stated that racing is in trouble, and that current models are not the way to go. Nick Eaves said "I'm not sure there is a problem. I think we're overstating the problem. The discussions should be about solutions and realities......
between 1990 and 1998, pari-mutuel wagering at Woodbine went from $930 million to $770. "In 2008, it is at $870 million."
**********************************************************
No problem? It looks like Woodbine has developed an aim low and always be satisfied philosophy. Lets look at gambling in Canada and compare it to parimutuel wagering at Woodbine: $13.6 billion in gambling money was lost by Canadians in 2007. In 1992, only $2.7 billion was lost.

And lets not also forget the fact that anyone in most regions in Canada can now bet through HPI. And thanks to their collusive contracts with most ADWs in the US, Woodbine has held a near monopoly on Canadian customers who want to wager on North American race tracks.

Of course, I stated "near" monopoly. Customer friendly sites that offer much lower rakes and takeouts have come along to spoil things for Woodbine and their culture of entitlement (a term that pops up in the Sadinsky Report).

Woodbine has failed to compete for new business, and has slowly lost their regular customers. One of the reasons their betting has somewhat stabilized is because of the secret deals they offer their biggest customers. All that does is increase the handle and keeps that customer playing at Woodbine. It does not create new business.


More from Eaves: “You have to invest in your product, too, and not only in the brick and mortar sense of the word, but invest in the customer. Keep the ones you have and get new ones.”
*****************************************
How is Woodbine keeping old customers? By having a 28.3% takeout on triactors? By offering a piddly rebate to their HPI customers? How are they competing for not only their old customers, but new customers? Glitz doesn't do it. The reality is that 1 in 1000 HPI accounts show a profit over any 365 day span makes playing at HPI a joke. There is absolutely no buzz created, and no reason other than convenience to play there. And convenience by itself doesn't grow the business in the long run, especially in today's internet age.

Eaves said it is more difficult for racetracks to keep the customers they have when there are other gaming options at the facility. He said that more racing customers bet on other forms of gambling versus casino players who try racing.
***************************************
D'uh. Thanks for finally stating the obvious. Give Eaves a banana, he has earned it. So how will expanding casino gambling increase the amount bet by customers on parimutuel horse racing? Lets face it. Woodbine is now in the casino business. They've given up on trying to grow horse racing, but they will never admit it.


Eadington on the other hand knows his stuff as he states facts about slots and horse racing, and basically explains what is happening at Woodbine, without mentioning Woodbine: “Racing is overshadowed by the revenue that slots generates...This is the challenge racing has. It has to overcome that fundamental that the racing customer is diminishing in importance. Over time, you will see management who are specialized in managing a gaming operation."

Eadington also brought up this point: (contrary to the general perception that horses, horsepeople, owners and breeders are the foundation of the industry), "the demand from customers is what is essentially important. That is the essence of the argument that must be dealt with or else you are swimming upstream and the current will push you back ultimately....Legislators are going to look at racing and say, 'is this worth saving?' The vulnerability is very, very strong. Especially under these harsh economic times, you'll see a lot of revisiting of this whole model."



Fort Erie Update
Dalton McGuinty lent Fort Erie Mayor Doug Martin an ear yesterday
Martin came out of the 45 minute meeting optimistic, but he has been optimistic about just about everything in Fort Erie lately, so I take with a grain of salt.


Another article states Fort Erie Needs More Horses.
George Smitherman, Ontario's Minister of Energy and Infrastructure, said "they need to focus on finding ways to attract more people to come and watch them race."
**********************************************
To get more horses at Fort Erie, you need more owners. To get more owners, you need bigger purses. That is why the government needs to increase what Fort Erie gets on slots from 10% to Nordic and the horsemen each, to 17.5%-20% for each.

That keeps Nordic breaking even, and the increase in purses will get more owners to bring horses to Fort Erie, and get more owners into the business again.

Small owners and partnerships need a better chance of breaking even. The more small owners there is, the more of a chance they will bring friends and family back to the track.

I want to add that the rule where you don't get the full purse on Ontario breds once the horse is claimed is another huge deterrent to potential owners. It also helps create less owners in the long run.

That rule needs to re examined by someone who understands how to grow the industry. It really isn't very well thought out.

For example, what incentive does a new claiming outfit have in claiming an Ontario bred over an American bred? None (unless it is good enough for Ontario sire races). And they feel like they are getting ripped off if they buy the Canadian bred on top of that.

Many outfits will buy try to buy the horse after the race if interested in order to bypass the rules, and that isn't what the game should be about.

And to stay on the point of growth and buying Ontario breds at sales, the more owners there is, the more likely yearlings will go for higher prices. The reality is that most new owners enter the game via the claiming route first. If they are successful or even break even, they may start dabbling in the CTHS sales.

What is needed is state bred claiming races which give yearling purchasers more of an out when risking money at a sale.

Increasing the amount the lower end Ontario breds are worth will push up what all Ontario breds are worth collectively. Why is Ontario one of the only jurisdictions that doesn't run state bred claiming races?

Back to Smitherman:
"It's not just about having a race track in operation for the purposes of subsidizing horses running around a track."
*****************************************
Reality check: Without slots Woodbine would be close to dead today, and probably every harness track in Ontario would be out of business. The industry needs subsidies to survive, much like many farming businesses do as well.

Not that slots are that great, I've seen studies that state where ever slots pop up, parimutuel betting decreases on average 30%. And that is a lot, considering that when two people go to a track and one person bets slots and the other horses, and they both lose $100, the track and horsemen only get $10 each from the slots bettor, but they get around $48 each from the race track gambler.

High takeouts which have persisted in the industry coupled with losing horseplayers to slots (unsophisticated bettors), has made it near impossible for sophisticated horseplayer to become long term winners or even allow them to break even. Thus the shift from horse racing betting to games that offer a lower rake or takeout like online poker sports betting and exchange betting.

This is changing as more and more players are clued in when it comes to rebating on horse racing. But will Woodbine or Fort Erie follow the trend and go that way?
Fort Erie doesn't even have their own ADW. That alone could make them another half a million plus a year.

Also from the article:

'Niagara Falls MPP Kim Craitor said some new opportunities have arisen that are being pursued.

"There are a number of players who have come on board and want to be part of the solution, so it's not just going to be the government," said Craitor, not wishing to go into further detail because things are still being worked out. "That track has to be made into an entertainment complex, a place where people want to go."

The property, he added, needs to offer a broader attraction. The days of going to a track just to watch horses race are gone. Craitor said the government is looking at the entire industry, not just what is happening in Fort Erie.'

*****************************************
Again, other forms of gambling can have a cannibalistic affect on parimutuel handle. However, if other forms of gambling bring in players who wouldn't have been there to begin with, that is another story.

Sports betting, even making it parimutuel, could work to get Americans to come over the border to bet on the Bills and Sabres, for instance. These bettors may also play horses as well, while waiting to see if they win their sports bets.

I'm leery of table games like blackjack and poker because of the proximity of the Buffalo casino and Niagara Falls. These games might just take away people's horse racing money, and if the government gets an 80% split on the money made, well that will hurt the purse accounts and what the track makes even more.


Reminder: the HANA bettor friendly countdown continues. Click here, as the Top Five are just around the corner.

Exchange Ideas

The biggest problem facing horse racing growth today is the fact that they fail to compete to gain new customers while also failing to compete to keep old customers.
The racetrack isn't the place to be anymore for the gambler and internet has made the world a lot smaller.

Gambling is growing worldwide, but gambling on horse racing has been on the decline, not just due to the global recession, but prior to that, betting on horse racing has dropped in real dollars, despite the fact that one can gamble from anywhere anytime today.

I expect 2009 to be way worse than 2008 when it comes to parimutuel horse racing. The economy is in the pits, more and more players are being turned off horse racing as it is perceived as strictly a losing proposition by the masses (at least those who don't bet at rebate shops), and credit card deposits are going to become scrutinized by card companies, while more and more addicted gamblers have no more room to deposit to an ADW. The other factor is that horsemen groups are demanding more of a cut, reducing the amount players receive from rebaters. More price sensitive players, who account for a large percentage of the handle, may just either cut back or continue to leave.

Horse racing is in dire need of a major pricing change. It needs to show the masses that the game is beatable in order to attract new young blood to play.

I've often said that horse racing needs a poster boy in North America, a big winner who bets horses and consistently wins.

Poker has quite a few, and new heroes are made every now and then as well. Like Poorya Nazari, a Canadian who recently won $3 million by becoming the PokerStars Caribbean Adventure Champion. How many gamblers reading this right now can't help but think "this could be me?" Anyone thinking of gambling will be attracted to poker and not give horse racing an afterthought.
And poker is easy on newbies as well, because the game has a relatively low rake (or takeout). The cost to become a poker addict isn't all that great. And the low rake gives the player much more time for the bankroll to last, than does horse racing.

Poker is a lot easier to grasp as well. Not nearly the high amount of nuances are needed to become good at poker. Horse racing takes a lot of work in order to become good at it. And even if you are good at, it is highly unlikely you will win. You'll might only lose 5-10 cents on every dollar bet, instead of the average 20 cents. Why would anyone new be attracted to bet horses under current conditions?


Horse racing does have poster boys though...say what?
Thanks to Pull The Pocket for discovering the fact that there are at least a couple of players doing more for horse racing than every marketing department in North America put together can. The problem for North American horse racing is that these players are exchange bettors.

First Poster Boy: Adam Heathcote. A 23 year old from across the pond in London, England. He has a goal to make 150,000 pounds (around $300,000 Canadian) in 2009 betting through Betfair. He has only been playing for around a year and a half. He has a blog (Horse Racing Trader) that he updates regularly regarding his quest. As of January 14th, he was up over 8,000 pounds on the year, which is slightly higher than needed to achieve his goal.

Then there is Betdaq and Betfair Racing Trader This anonymous player had a goal to make 100,000 pounds, while starting with 1,000 pounds in 2008. By mid December, the gambler went over the revised goal of 120,000 pounds.

Sure, we have the odd blog touts in North America, who give out their selections and bets almost daily, but what is sorely missing are anything that resembles goals with actual dollar amounts. Why? Because nobody wants to make a complete fool out of himself or herself. Every bettor knows that thanks to 20%+ takeouts, a goal of breaking even would be a difficult enough feat.

I just wonder how many new players have been inspired by the two exchange bloggers cited above. I'd say many.

Exchange betting doesn't mean people will win, even if they become good, but the possibility is really there, and that is what is important. Lets face it, most exchange bettors will lose. Betfair keeps around 3.5% of what is bet on average, and Betfair cannot lose, much like a track cannot lose taking a bet (except for the odd minus pool which I don't think happens at Betfair). Still, because of low commission and churn, players get a huge bang for their buck and are highly likely to continue to play, and tell others about it.

North America needs to do two things. Reduce the takeout to 10-12% everywhere. And secondly, it needs to set up their own exchange, where the tracks that get action get the bulk of the 3.5-5% commission lost by players.

See also, Interesting Winning Bettors-At Racing!



The North American Horse Racing Industry Can Blame Itself for It's Demise...
Good article, read it. Especially something us Toronto born horseplayers can really relate to.
Horse racing is a gambling product not an entertainment one. Racing execs either want to pretend this isn't the case or still "think" they can dupe the public into believing it isn't the case.

Here is an excerpt that is further proof that Woodbine Entertainment could do itself a favour by cleaning house:

In 1996 when Woodbine was to host the Breeder's Cup, the union that represented the ticket takers went on strike. David Willmot, the President of Woodbine Entertainment, considered withdrawing his bid to host the Cup. Upon hearing this I contacted Mr. Willmot and told him that if he did so he would pass up a golden opportunity to win a new generation of fans, and once again reclaim the families that would witness the great racing of the championship day. He in turn invited me to the offices at Woodbine to discuss the issue, telling me that he is indeed interested in the fans that became disenfranchised and that my demographic was exactly what they were trying to win over (20-30 something families with young children). We discussed numerous concerns, from lack of things for families to do, small field sizes, high takeouts, disassociation of the horsemen from the fans, lack of perks for larger horse bettors and many other issues. I mentioned about 20 issues, and he agreed with every single comment I made. In fact he told me of his grand plan to make Woodbine into the ultimate Entertainment complex. He envisioned family areas, slots for the single women who didn't want to attend the races, new betting options, perks for the regular attendees, lower takeouts for those who bet more and a better form of entertainment for all who come to the track. While off-track betting and racing on TV were starting to grow, Willmot agreed that the only way to get the next generation and those afterwards interested in horse racing again was to woo them back to the track. Only seeing the product live would win over those who aren't familiar with it. He listened to my arguments and comments, agreed with all of them, and implemented none. Yes, slots were added to the track, but those were already in the works prior to the meeting. Parking and admission prices, were dropped, but that was only because they couldn't charge people to play the slots. New betting options were added, but only ones that weren't winnable. I was talking about ideas such as horse matchups, and Woodbine instead opted for pick 7s and superfectas. As far as a place for women and children to enjoy themselves, Woodbine offers little; and on my travels to other tracks throughout the U.S., I noticed there was nothing for families there either. Plus, for the loyal race goer there are still no perks for them. In fact the only perks offered are for those who bet at teletheaters or by phone. Betting at the track gains the bettor nothing.

**********************************
Things have changed further since 1996, making the idea of attracting newbies by getting them to the track even more difficult. It is so easy to gamble on more competitive forms of gambling from home, lotteries have been growing in popularity, and slots has made the idea of family outings a near impossibility, as one of the parents is likely to be attracted to the slots, thus breaking up the family experience that was once found in the 60's and 70's.


New Horse Racing Time Waster from Addicting Games
A new easy to play horse racing game has appeared at addictinggames.com; Racehorse Tycoon. I like the part where you get to choose the horse's diet. Your choices include beers, cakes, burgers, or cheese:) I usually choose beer since vodka injections aren't on the list.
And the best part of the game is that you can play and after an hour or two, you haven't lost a dime.

Save Fort Erie Rally: And The Verdict Is "We Don't Know Yet"

A crowd of around 150-200 ready for the January 15th due date decision as to whether racing will happen at Fort Erie in 2009:



MPP Kim Craitor, not looking very happy, tells the crowd to blame him for the due date of January 15th, as he was confident he would have a deal done by today. He says he is still hopeful that a deal with the government will happen soon enough to give the horsemen enough time to make arrangements to stay at Fort Erie:


I think almost everyone is in agreement that Nordic needs to go. They can't have a clue how to run the business if their expenses are really losing $12 million a year (that is supposedly before interest charges on an alleged large loan). When tracks like Beulah and River Downs can run 100 days a year each without a $4 million buffer from slots, and most likely do not lose money (though I don't know for sure), either Ontario makes it impossible for businesses to make money, or the track is poorly managed.

Problem is that Nordic has allegedly asked too much for the place. If slots remain open without racing, they most likely would be profitable, so they don't seem to be in any rush to panic. If the slots close, then they have a white elephant, and they will still have to cut checks for things like property taxes. And right now, I don't think Nordic aka El-Ad aka Delek is prepared to write any checks whatsoever.

How much is a business, with no income and 300 plus acres of industrial land, in a community that will be partially disbanding, that can't even support 3 grocery stores right now, worth?

The only two answers to satisfy horsemen right now will probably come from a government bail-out. But Nortel didn't get a bail-out when they recently asked.


The other solution has David Willmot biting the bullet and buying back the track. He can ride in on his white horse, and show how much he really cares about racing in Ontario. Woodbine Entertainment is, after all, a non profit organization, right? They are supposed to be the leaders in HORSE RACING in Canada, not slots, not casino games, and not sports bars. A track that loses two or three million a year should easily become profitable under Willmot's fine team (OK, maybe that is asking a lot), but they can still afford to take a $3 million a year hit and still offer huge purses at Woodbine.

Lets not forget that when the OJC sold Fort Erie for $10 and assumption of a $3 million debt to Nordic, Woodbine was struggling themselves. The only thing Woodbine struggles with now is catching up to the 21st Century when it comes to competing for todays gambler's business.


One thing is for sure, lack of horse racing in Fort Erie will completely devastate the town's economy.

I know other solutions are being brought to the table. But their viability and the time it takes to implement any of these might not save Fort Erie in time for a 2009 season, at the very least.

For instance, Fort Erie Mayor Doug Martin is going to Toronto on Monday or Tuesday with some sort of plan, though he and EDTC GM James Thibert didn't elaborate on what it was.

See also Town Bringing Fight For Racetrack To Toronto