18 February 2012

Looking At Slots At Tracks In Ontario

Here are some stats.  Except for 2012 race dates, the numbers are from the OLG's website for the dates of April 1, 2010 to March 31, 2011.  The first number is the total revenue (money lost at the casino by gamblers) in millions.  Next are the 2012 race dates for that track, followed by what the track gets in millions, what the horsemen get in millions, followed by what the OLG employees get in millions, and finally, the amount of OLG employees at that track's casino:
·        Ajax 168.6 40 16.9 5.1* 14.7 332
·        Clinton 12.3 19 1.2 1.2 4.4 92
·        Dresden 13.3 23 1.3 1.3 4.6 87
·        Flamboro 120.8 188 12.1 12.1 11.0 223
·        Fort Erie 29.8 81  5.3** 3.0 12.0*** 225***
·        Georgian 127.0 103 12.7 12.7 14.3 328
·        Grand River 43.7 65 4.4 4.4 7.2 161
·        Hanover 22.2 30 2.2 2.2 4.8 97
·        Hiawatha 29.6 44 3.0 3.0  7.4 140
·        Kawartha 65.9 96 6.6 6.6 9.1 177
·        Mohawk 153.6 98 15.4 15.4 11.9 240
·        Rideau-Carleton 142.3 159 14.2 14.2 13.9 268
·        Sudbury 49.4 62 4.9 4.9 8.0 148
·        Western Fair 101.8 123 10.2 10.2 14.4 330
·        Windsor 41.1 88 4.1 4.1 10.5 211
·        Woodbine 588.4 297**** 58.8 58.8 32.7 715
·        Woodstock 24.6 23 2.5 2.5 4.7 91
    * Ajax horsemen do not get 10% of the revenues (why?  Not sure)  ** Fort Erie racetrack receives more than the 10% from slots (that higher amount is a subsidized amount to stay alive)  ***Fort Erie seems to have an exceptionally high slots payroll compared to other tracks (this doesn't appear very efficient), the same is true for the amount employed by the OLG in Fort Erie.  This makes Fort Erie the least profitable track for the government of all racetracks.  ****Woodbine race dates include both thoroughbred and harness.
    Now, let me attempt to clear up some misconceptions that seem to be out there.  One question that seems to be out there is who owns the slots:  The building is renovated by the track owner. OLG is provided a "base building" area to build out their slot facility. They do everything from the carpets to the fixtures to the slots to the paint, etc. Think of it as an unfinished basement that they get to move in and finish.

 The arrangement between tracks and the OLG with regard to slots is definitely profit sharing.  Even in OLG documents, the OLG refers to the amount tracks and horsemen receive as "revenue" not "subsidies."   The only exception would be the additional amount Fort Erie receives (this is due to run out at the end of this year, and if not renewed, Fort Erie will most likely be toast even if the government were to forget about the Drummond Report suggestions.

     Historically, this slots deal was win win for both tracks and the government.  The government of Ontario was convinced that it could raise their revenues by bringing in one armed bandits into Ontario.  By locating the slots at racetracks took care of a lot of image problems the government would have faced if they were to put slots in stand alone facilities (it would be like building crack houses, a very tough sell).  
      Racetrack locations made a lot of sense.  This is where people came to bet anyway.  Tracks for the most part were accepted as legitimate gambling businesses by the people of Ontario.  This was worth something to the tracks, and still is.  So is the lost revenue that slots takes away from the core business of the tracks.  Over the years, horse racing has lost many fans to alternative forms of gambling.  No, they shouldn't be compensated for most of that, however, the government got into the slots business for two reasons, and one was to help the horse racing industry.  Slots took away many horse racing customers, who were still losing their money at the same location they used to, just in a different room.
      This actually hurt racing's growth potential even more, as dummy money (slot players are the least sophisticated of all the gamblers) shifted from horses to slots, making it a lot more difficult for core Horseplayers to keep their bankrolls going.  Many left to more price sensitive games like poker, blackjack, sports betting, and exchange wagering.  Now, racetracks and Horsemen are also to blame, as they were making more money bottom line thanks to slots, they forgot about their core business.  They kept track takeout extremely high (Ontario harness tracks have notoriously high WPS takeouts, while Fort Erie has ridiculously high double and exactor takeouts, for example), while tracks also created more high takeout pools.   
     There is a question as to why a government should be involved in gambling.  I realize many states and provinces have state and provincial lotteries, but is that really what governments should be doing?  Shouldn't their role be collecting taxes (cigarette taxes, HST, provincial taxes, etc.) and not being directly involved in revenue producing businesses like gambling and alcohol?  

     I'm a firm believer that the slots, the OLG and LCBO should be privatized, but I also believe that they should continue sin taxing these revenues so that they don't lose out in needed revenues to pay for health care, education, police, etc. etc. etc.   
     But as former PC Minister John Snobelen points out, the Ontario government is addicted to sin.    In fact, the government is looking for a partner to bring in Online gambling to Ontario.  Funny, the Liberal politicians probably won't refer to their new partner as being subsidized when they wind up taking away "potential" revenues from the government thanks to revenue sharing agreements.  The reality of online sports betting, slots and poker run by the government will be harsh enough when it comes to clobbering slot revenues to tracks even more.  The one good thing that came out of the Drummond Report is a potential wakeup call to the industry:  It is time to compete as a racetrack!  It is time to compete for Ontario's gambling dollars.  Slots are part of the competition. A gambler that loses $200 at the track on average churn has made the track and horsemen $180, while someone who loses $200 playing slots has only made the track and horsemen around $20 on average.

I would definitely vote for Snobelen if he ran for anything.  Check out this short video on the subject of slots and Ontario racetracks.
I find the Drummond Report a tad out of touch with reality.  It is almost like Drummond is insulted that convenience stores make money off selling Lotto tickets.   I'm surprised he didn't give a recommendation that cigarettes should be sold at other locations too so as to avoid "subsidies" paid to store owner.  

As for Fort Erie. You can see by the numbers that they are the least efficient track in Ontario. However, if the argument is made that horse racing in Ontario is important, a B track is desperately needed. Every circuit needs a track that serves as an out for horses that can't compete in the big leagues. B tracks keep the breeding industry alive, and keep owners in the game (as it would become too complicated for owners when it comes to horses that can't compete at Woodbine to "HAVE TO" ship their horse to the States to be competitive. It would cause too much of a glut of unwanted horses on the market as well.

Either Fort Erie needs to be subsidized or Ajax (not crazy about bullrings) would need to take over as the B track, or Woodbine would need to race 7 days a week allotting two days to B races.

Fort Erie is too beautiful a track to close down. But if the government is starting to turn its back on the racing industry in any way, this could easily be their last year. On the other hand, we are only talking an extra two or three million a year to keep it operational. Seems like a tiny amount of dough in the big scheme of things, and it would prevent Fort Erie from turning into a ghost town.

An argument could be made, and really should be made, that the one thing unfair about slots is that some locations are much better than others, and perhaps money should be pooled and distributed on the basis of wagering generated. There really should be incentive to get wagering on horse racing up at individual venues.

One more thing. Looking at the comments from Woodbine reps, it appears that they believe Woodbine, despite the fact Woodbine and Mohawk wind up with half the $340 million earned by racetracks in Ontario, is safe from any potential damage the government may do to the horse racing industry in Ontario. I wonder if Woodbine knows whether they will get expanded gambling, or if they have assurances that a Toronto casino will not be built.

The only gripe I have with all that money Woodbine gives out in purse money is the purse monies for major races. It could successfully be argued that half a million to million dollar international races do not pay for themselves from wagering on the racing product. Therefore, quite a lot of slots money is given to outfits that may come to Ontario for a week or even less than that. But on the other hand, the government doesn't seem that concerned that the slots money winds up in the hands of Ontario horsemen. To me, that is really what a realistic report should have focused on. Slot money going back into the economy is good for the people, good for taxes, and therefore good for the government. There should be a major preference to Ontario residents over US outfits as well. I don't think that is the case right now.

UPDATE: Bill Finley lays blame on the lack of growth in harness racing in Ontario on the Horsemen. They rejected a growth plan. He also suggests that a massive takeout drop should be experimented with.


Eric P said...

There is absolutely no evidence that 'Horseplayers have shifted to slots' That is a fallacy and to argue such will not help the cause.

Cangamble said...

Hi Eric. I've wandered through slot areas and I've seen familiar people (trainers and bettors) putting in money into the one armed bandits. Have I done a survey? No. But I wouldn't call it a fallacy either.

Cangamble said...

I also should add that I am also pretty sure that back in the days before slots, there were quite a few blue haired ladies in the stands.

Eric P said...

If it could be shown empirically that Horseplayers have shifted to slots, you can bet the industry would be producing such studies.....

Cangamble said...

Eric, since when has the industry done any analytical studies when it comes to betting horses or betting slots? The industry opened the doors to the slots and just counted the money.

Anonymous said...

The Bill Finley article mentioned in your last paragraph should be
MANDATORY reading for all horsemen in Ontario. (and perhaps the Ontario finance minister should be forwarded a copy)

Read, weep and wake up guys!!

bullring said...

Snobelen I believe was once the Minister of Education appointed by Mike Harris. Odd that, considering he never finished high school himself.

Reading that article made me think that the horsemen and tracks were forced to accept slot revenue.

Also, by "privatizing" the LCBO do you mean shifting from a government run monopoly to a privately run monopoly ie. The Beer Store? Or do you mean loosening the liquor laws in Ontario? These are two very different things.

Cangamble said...

I mean letting non government business have the ability to buy the existing liquor stores and/or allowing alcohol to be sold at grocery and convenience stores. No more LCBO (the government) involved in the sale of alcohol.