13 November 2012

The Case For Fort Erie And Some Quick Math

A couple of weeks ago OMAFRA released the "Final" Report by the Horse Racing Transitional Panel, as the panel attempt to come up with a solution to keep horse racing going in Ontario.

The Final Report turned out to be a "blue-print" to move forward, not what the industry needs at this time, which is real numbers, real dates, and solidified game-plan.

The bottom line after reading the report is I would not consider small ownership of a racehorse in Ontario on the thoroughbred side, and when it comes to standardbreds, I don't need a horse as a pet.

Under the new blue print, the only standardbred people who have a shot at breaking even are owner/trainer/drivers (not owners or trainers or drivers). The reality is that as a gambling game that needs to depend on horse race betting to survive, it has as much of chance right now as the rotary phone business does. Sky high takeouts have murdered their customer base, and the sense of entitlement from many of the horsemen that led to them not even springing a pittance of their portion of the slots revenues in the past to market their product has helped Ontario harness racing lose a generation of potential Horseplayers. To be fair, most racetracks did very little to try convert slot players to horse race bettors either.

A horse racing lottery is pretty much the only thing that can save harness racing, unless the impossible happens and they get the slots revenues back.

Sports betting has a low margin associated with it if done properly, and if done the Pro-Line way, it will attract very little volume. As for Instant Racing, it sounds like a good idea, but it won't compete very well with slots. Instant Racing has been successful has been places that don't have slots near them. But if the horse racing industry gets all or most of the cut, it could help some, and if put in certain locales like Fort Erie (which do not have slots anymore), it could be the difference in making racing viable and not dependent on a government subsidy.

Speaking of Fort Erie....

The Report basically treated thoroughbred B racing as not important, allocating only 30 racing days, and then to make things even worse for the thoroughbred industry, it seemed to not care if racing continued at Fort Erie or moved to Ajax instead.

This nonchalant attitude towards B racing makes me wonder if the panel is really focused on the future of horse racing in Ontario. Now I'll explain:

Horse owners are great for horse racing and the economy of Ontario. The more the merrier. Horse owners generally lose money, even with the large purses in Ontario, so they are collectively adding disposable money to the backstretch. They also tend to bring newbies to the track too, something that racing sorely needs.

Now lets say an owner (or even better, a small partnership) buys a horse for $15,000 and after a few attempts, finds that their horse can't handle the polytrack or is just noncompetitive against Woodbine horses. What is the option? Sell the horse real cheap to someone who will take it to the States? Take it to the States themselves (and find out that isn't why they got into horse ownership to begin with, that they want the option to view their horse race live)? Or race it in a limited 30 race date campaign at Fort Erie, or even worse, Ajax Downs?

All the above options will lead to the owners getting out of the game almost as quickly as they wrote their first check to get into the game. Less owners means less buyers. It inevitably means less breeders and less Ontario breds. Pretty soon it will just be a Woodbine full of Kentucky bred horses. The short fields we see today for higher claiming races, where certain trainers enter two horses to make a 6 horse race go, only to scratch one on race day, making the race close to unplayable will become more and more common.

The future will be bleak. Less race dates, less horses. It will become a Sport of Kings again, because only Kings will be able to afford to race, and betting handle will go sideways at best.

How about the argument that B racing could just be added to Woodbine like the old days when their was only one circuit in Ontario? Not feasible. Horses ran a lot more back then, so a smaller population worked OK, and owners didn't pay $85 a day plus another $400 a race on drugs back then either. Unless 5 claimers can run for $22,000 purses, it just won't work, and again, there is no alternative for horses who can't poly.

Fort Erie makes all the sense in the world to exist, as does a season of at least 52 dates (racing at least twice a week from May 7th to October 29th next year). Day rate at the Fort is generally $50-$55 a day, making it somewhat affordable for smaller outfits, or cheap enough for a bigger Woodbine owner to keep their horse filling races in Ontario.

Fort Erie has an established backstretch that can hold over 1,000 horses. Many A horses are stabled at Fort Erie, many two year olds that either can't get a Woodbine stall due to too much demand at Woodbine or as a place that is much calmer than the Woodbine backstretch (again, an option for a high strung horse).

Ajax Downs does not have a backstretch that can accommodate B thoroughbreds. This means that horses will need to ship in to race and not be able to train there regularly. So lets say that an owner can't get a stall at Woodbine and has to run off the farm to get into a claimer. That horse will have zero chance of beating a horse stable at Woodbine dropping down from 10 claiming, for example. In other words, it wouldn't happen, so those potential off the farm horses and owners will disappear very quickly.

Another huge knock against Ajax is that it is a 5 furlong bullring. Bettors would much rather play a mile track than a bullring any day of the week. Off topic, I commend Charles Town for lowering takeout in order to help grow their business (and it works) but they are still at a disadvantage due to size of their course.

The thing that is reportedly holding Fort Erie back is track ownership. I don't see the government giving Nordic Gaming a profit for letting horse racing run, and I don't see Nordic Gaming allowing horse to race if they don't get some money. I hope I'm wrong, or I hope that the track is sold soon to a company that is interested in owning a racetrack.

The report stressed that handle must eventually pay for at least the purses. Again, with sports betting, a share in a new lottery and Instant Racing, taking into account that Fort Erie handles 400k-500k a day right now, there is potential that it could be self reliant.

Sure, takeout needs to be drastically reduced, especially on exactors and doubles which are currently over 26%, if Fort Erie is to attract serious bettors as well as cultivate new local bettors. I'm not sure that the racetrack can be optimally managed by the EDTC as they just don't seem to understand or focus on the bettor. They've done an OK job keeping the track from sinking, but more is needed going forward. Perhaps, I should cut them some slack as they have been operating on a beer budget knowing 2012 could be their last year. Alternatively, it might be better if Fort Erie was managed by Woodbine (Woodbine needs Fort Erie to exist as explained above) or even a bettor friendly HBPA (I think they might get the fact that they need to attract bettors in order to survive the future, and they definitely understand the horsemen side of things).

Quick Math

The Report gave Woodbine 160 days. Woodbine has found out that Thursdays are not economical (and they optimally fill cards for four days of racing a week as opposed to five) and have done away with them the last half of this season.

In 2013, if they were to race from April 5th to December 15th and race 3 days a week in April, and four days a week the rest of the year, plus 4 holiday Mondays, they only need 148 dates.

According to the numbers presented by the panel and taking into account that they state racing needs to be more communal going forward, there is a surplus of $4.8 million in purse monies which can be directed to B racing instead. Fort Erie makes around $5 for purses from their home market bettors a year (this is based on over 70 race dates), so lets assume 60 race dates, cutting the Woodbine surplus to $4 million (because of less race dates) and Fort Erie to $4 million, there is $8 million available for purses. Fort Erie could comfortable run 60 days with $130,000 available each day. At over $14,000 a race, they should have no problem filling races better, attracting bigger fields, and this would snowball in even more wagering.

To succeed, Fort Erie needs to run a niche racetrack. $4,000 to $10,000 claiming races only. They also need to give incentives to have larger fields and take away incentives to fill short fields. This can easily be done by only allotting 70% of base purse amounts to fields of 7 or less, adding 10% of the base purse to each betting interest above 7. This means a 12 horse race, which will attract a lot more betting, will run for 120% of the base purse. Besides gearing a purse structure to more betting, I think that the owner of horse who beats 11 horses should get more than someone whose horse beat only 6 horses at the same class level.

Fort Erie is the only answer to sustain thoroughbred horse racing in Ontario, but the problem is whether the question is really being asked. Horse racing is now in direct competition with the OLG after all.