Thursday, February 23, 2012

Flashback: "If I was Kentucky Racing Czar"

We read Bill Finley's article on slots today. He details the potential lost hundreds of millions of dollars of purse money in Ontario and Pennsylvania, and wonders what went wrong.

Bill also looks at the Kentucky situation and says:

"Kentucky racing interests have to learn from the mistakes made elsewhere. And so far it doesn't look like that is happening."

He goes on to say that we never wrote slots deals correctly by offering nothing to customers; we just "stuffed it all into purses" and never thought about the future.

A HANA board member wrote a post in May of 2009 here, and with Kentucky looking to perhaps finally get casino gaming and slots, we thought we'd re-run it. Now that we know now, what we know now, this article we think is was pretty darn good. Keep in mind it was written three years ago, while the ink was not even dry on other racing slot deals.

No the Kentucky slots and casino bill may not pass this month, or even this year, but keep in mind: It's never too late to plan for when it does.

May 14, 2009 HANABlog: If I Was Kentucky Racing Czar

Kentucky racing, and its problems competing with neighboring slots states is well documented. Short fields have plagued Kentucky for some time. Ellis Park may run only a short meet, Churchill cut a day a week recently, and Keeneland, despite wonderful racing and great takeouts, suffered a 20% drop in handle.

The simple fact is that we have not written slots deals correctly, and now we are paying for it. There is no one alive who believes that for racing to grow, places like Indiana and Penn National should be taking entries from the Bluegrass state. By flooding the supply of racing at places people do not watch, or bet with little demand, we are hurting racing. "If you supply it they will come" is not a policy for growth, it is a policy for self-destruction.

How do we ensure that Kentucky and its mass appeal to grow racing is protected for years to come? For that, I am a Kentucky Racing czar for a day, and I have a magic wand.

1. I get slots passed. I am fully confident this will happen. The people of Kentucky will not let racing flounder in this fine state, with its tradition for racing. Headlines across the world, as well as lobbying, is going on as we speak. It will happen.

2. I write a slot deal that makes sense; one that focuses on demand, as well as supply. Deals in Pennsylvania and elsewhere were based on a flawed business model. They increased the supply of races, and the supply of dates, watering down the product. When you increase supply and flood a market with inferior product without decreasing prices (i.e. takeouts) your business will not grow. This is ECON 101 and just because we run brown horses in a circle does not mean we are exempt from the rules of business. Why slot deals were written like this putting ALL the money into supply and expected to work is beyond me. The fact that this is the way we still write these deals is even more disconcerting.

The 'New Slots Deal For Kentucky' is a blueprint for the future. We change this up to ensure growth in 2010 and beyond.

* Instead of 10% of slots to purses and 10% of revenues for tracks like almost all jurisdictions, this split is changed. 1% of revenues are sent to a central slush fund (my Czar office) to market and grow racing in Kentucky and outside its borders. Several issues like horse safety, uniform drug policies and other racing centric, pro growth items can be led by the state, for the game overall.

* 1%-2% are sent back to the horseplayer. This is done with player rewards, rebates, giveaways and so on. We have to decrease takeout in 2009 if we expect to grow. Our game is too expensive for gamblers in the 21st century and with new revenue, it must be used to make the game more attractive to bettors. In addition, the "slots drag" has had a horrible effect on handles. Right now at Churchill there are people leaving the track after a hit, they grab a form and can't wait to bet tomorrow. With slots that same person might take those winnings and shove them in a slot machine, losing his bankroll for tomorrow. This drag must be addressed with pricing.

* 1%-2% are mandated to go to the facilities and to promoting the game on the Internet, as well. We need to ensure our customers have a wonderful place to play the races, whether at home, or at the track. What can people like Wolf Kratzenberg do with a set, expanded marketing budget at Turfway? Let's find out.

* The rest go to profits and purses, just like they should. We need to up purses, and with core business falling (remember, at EVERY jurisdiction that slots have been installed, handles suffer), profits have to be funneled back into the companies and horseman involved.

3. I resist the urge to increase racedates and work to make this a reality. Every jurisdiction who has slots has increased dates massively. This waters down the product, decreases field size, and decreases handles. We are back to square one, we have hurt racing, and we have done exactly what we said we would not do.

If we leave dates the same as they are in year one, with this new revenue the following can happen:

* Ellis Park runs a regular meet, but with a ~40%-50% bump in purses. This meet competes more favorably with nearby meets, attracting full fields.

* Kentucky Downs purses skyrocket for their short meet. With some marketing work, and with these big purses attracting solid stock, there is a chance this boutique turf meet can be a jewel in racings landscape for generations.

* Keeneland's meet grows leaps and bounds. With solid revenues, purses will attract the very best, and more quality races can be added. Because this track is a focus of TVG, we are exporting the very best of racing to the entire betting world. This grows our sport, inside Kentucky and beyond. Keeneland's brand is protected and insured.

* HRTV at Churchill is met with the same as Keeneland. Amazing racing, beamed to the world.

Increasing dates and watering down the product will not help racing in the long run. It must be resisted at all costs at the flagship tracks if we want to use slots money to grow the sport. The "B" circuit is there for these horseman with subpar stock. We have to promote and focus on the best, to be the best. Slots were never intended to be an income redistribution scheme, they were put in to grow racing.

So as Czar there is my blueprint:

* Give the demand side some of the slot money through player rebates and lower takeout
* Promote with a central organization as well as mandating the tracks use some of the money to promote
* Resist the urge to grow dates, allowing for Kentucky the potential to offer the highest purses and best racing in the country
* Kentucky becomes a leader once again, in a sport that clearly needs strong leadership.

The status quo is clearly not an option. I know some of this is considered 'pie in the sky' to racing insiders. But therein lies the problem - this ideal is common-sense to most other businesses and would have been enacted years ago. Other businesses are not wrong, we are, and we have to do something about it.

This is an opinion piece at HANAblog. We offer anyone who wants to discuss the issues to send us their thoughts. If we like them and they offer out some good discussion, we will print them. We want to hear from everyone in racing, because if we do not work together, we can not move forward. If you'd like to sign up with HANA, please do. We are but a click away.


Anonymous said...

Will Mr.Damon Thayer take a call from HANA?Or maybe send him and others an email.

I believe Keenland and churchill cannot have takeout higher than 19%.Let's ask Mr Thayer not to sign any bill that does not lower the takeout and set aside money for advertising.

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