Thoughts On The Agenda Interview With OMAFRA Panel

I've developed quite a few thoughts after watching the Steve Paikin interview a couple of times.

First off, some ommissions and misinformation.

No mention of the fact that the OLG is now in direct competition with horse racing. It is an obvious conflict of interest. Ontarians only have so much is discretionary funds, especially those who are inclined to gamble.

Been over this one before, but calling the money the horse racing industry received under the SAR program tax payer dollars or a government subsidy is completely wrong. It WAS a business partnership, that helped both the government and racing industry out when it was drawn up, and the money collected by tracks and horsemen were not taxpayer dollars, but their share of gambling losses from customers. However, since the business agreement has been made null and void, any new deal will probably wind up being a subsidy (from tax already collected). Purses were subsidized, but not with taxpayer dollars, but the government got away with propaganda that even Paikin has bought into.

It still bothers me the fact that the $345 million that the tracks used to get will not automatically wind up in the government coffers as much of it will wind up as profit for the new operators. Something that was not mentioned in the interview or by the Liberal Party during their horse racing bashing propaganda campaign.

I still don't get how the panel can conclude that the SAR program was wrong, yet they concede that new forms of gambling such as Instant Racing or sports betting (which they didn't mention in the interview, which means that the OLG has probably told the committee forget about that one) or a lottery similar to the V75 is needed to sustain the racing industry in Ontario. Seriously, what is the difference if racing gets additional funding from slot betting at their establishments or Instant Racing betting at their establishments? The only case on the SAR program being wrong is the fact that there was absolutely no incentive to anyone from racing management to horsemen groups regarding growing the horse racing customer base. One could argue that the OLG didn't want the racing industry to grow their base either, but that might be giving the OLG too much credit.

The amount of money available has turned into an inside joke (watch the interview below). It is a secret. But I believe there is a cap number, and it has been OKed by the government. There is some confusion, because $50 million over three years was initially offered to replace the $345 million per year that will be taken out. The panel stated that $50 is too low (over a year or three years?) and $345 million is too much. It makes me believe that the cap could be close to $150 million a year.

I do like the new deal going forward in that the focus is now on growing the customer base and attracting new Horseplayers. This concept was completely forgotten, even before slots were put into Ontario tracks. The industry is going to be forced into being competitive with other forms of gambling, and if they take it seriously, it means we will see take-out reductions which will lead to higher gambler satisfaction from customers.

Questions, Questions, Questions!

Are they serious about giving 100% of wagering revenues to fund purse accounts and have the government subsize the racetracks (paying for everything from backstretches to utilities to management bonuses?). If a track has no upside financially to make a profit, then their only incentive to keep the track open is to employ their personnel. Sounds way too altruistic. And if this is true, the direction of racing in Ontario will have the horsemen actually running the tracks (something that doesn't sit well with me because horsemen groups tend to be completely ignorant when it comes to growing the game through new customers and increased handle).

The other thing that may happen with Woodbine, Mohawk and the Great Canadian Gaming tracks is that they could become the casino operators. That would allow them to be profitable, but then if that is the goal, why would they care or focus on horse racing? Good for the OLG, bad for racing.

The government will most likely come up with benchmarks for racetracks in order to keep their subsidies in place. But how long will the new deal be, and is that enough time to sustain horse racing?

$150 million a year should be enough for tracks that still want to operate in Ontario to operate. For example, it is estimated that Fort Erie which operates for 7 months a year with 75 plus racedates and an active backstretch costs around $10 million to keep their lights on without taking purses into account. This brings up another interesting question. Since around $5 million from wagering (home market wagering and signal fees from exporting their product) winds up in the purse account, under the old deal, some of that came from a split with HPI and close to another $5 million from wagering went for track operations, does this mean that Fort Erie will get around $10 million to put into their purse account if the panel allows them to race next year?

Currently, tracks get less than 50% of horse betting revenues, while horsemen get around 50% (into purses and breeding programs). Are tracks going to sign a new deal giving them 100% (after provincial and federal taxes)? One thing about a new deal is that allows tracks to play with takeout rates easier (as the 2% extra that went to horsemen put a damper on experimenting in the past since it was on each bet and not on gross revenues). But who will have the say on betting if the horsemen get all or most of it? Again, that is a scary thought.

Any hoot, it is December 5th, 2012 and there are still no dates for Ontario racing in 2013. There has to be some concrete news coming out very very shortly.

Here is the TVO video if you haven't seen it yet: