Racino states draw breeders

A good indicator of the racing industry’s health in a given state is the number of mares it sends to the breeding shed.

This is a factor I try to illustrate whenever I explain Michigan’s situation to those unfamiliar with the industry. Because I am a strong believer in visual aids when giving a presentation, I decided to put together a chart to describe the breeding industry in the state of Michigan, compare it to other states in the region and explain the impact of alternative wagering on everyone involved.

It is no secret that horsemen are flocking to states with casino gaming at its racetracks. The fact will inevitably be brought up in any discussion about alternative wagering in a state that lacks it. However, the point is driven home when the figures are in clear sight.

Let’s have a look at the chart…

Thoroughbred Mares Bred in the Great Lakes Region by State, 1998-2009

X Axis = Year; Y Axis = Mares Bred *2009 figures are current as of 10/13/2009. Some reports are still yet to be received by the Jockey Club.

For a more detailed breakdown of the year-by-year breeding totals, a spreadsheet of the above data may be read here.

So what can we learn from these figures?

First and foremost, breeders are taking their mares where their foals can make the most money. The top three states listed in this sample are “racino states” (Because of its clear breeding advantage in the region, Kentucky was not included in the sample). The increased purse structure that comes with expanded gaming not only gives the horses themselves the best chance to earn a good living, it trickles down to the breeders in the form of incentive programs.

Also worthy of note is that in 1998, two of the three leading states (Indiana and West Virginia) actually bred fewer mares than Michigan. Today, both states breed several hundred more.

The clear exception to this rule is West Virginia, whose figures have actually decreased since installing full-blown slots in 2006. Two factors may be responsible for this. First, West Virginia installed slots at the same time as neighboring Pennsylvania. The 2007 debut of Presque Isle Downs, about 135 miles away from Mountaineer, also helped draw horses out of West Virginia. Second, the breeder’s incentive program in Pennsylvania is quite lucrative. Boosting the purses only made it that much juicier. Here, have a look for yourself…

Breeder’s Incentive Programs in the Great Lakes Region by State

However, West Virginia enjoyed a major boost throughout the first half of the decade. It was the first state in the region to adopt expanded gaming in 1999 when it installed coin-operated video lottery terminals. With the help of the VLTs, West Virginia pulled itself up from the dregs of the racing world to the point where the state actually led the region in mares bred in 2004. Despite the recent dropoff, West Virginia remains well ahead of the game from where it began.

Another conclusion that can be drawn from the data is racino states are drawing mares away from non-racino states. The poster child for this observation is Ohio, a state flanked by one armed bandits in Pennsylvania, West Virginia and Indiana. Eleven years ago, the Buckeye State accounted for a comparable number of mares bred to Pennsylvania and was well ahead any of its other neighbors (excluding Kentucky).

As more and more states allowed its tracks to install casino-style gaming, the breeding totals in Ohio began to plummet. In 2009, the state is in danger of breeding fewer than 200 mares, a figure that would have seemed unheard of less than a decade ago.

Other states in the region without any forms of alternative wagering, Illinois and Michigan, have also seen significant drops as their neighbors reaped the benefits.

Once the cornerstone of the Great Lakes region, Illinois has seen its breeding totals cut in half over the last decade. Michigan’s drop off has been just as drastic, with a decrease of over 40 percent in the last year alone.

As these figures demonstrate, the benefits of installing alternative wagering are quite apparent on the breeding industry of that state. The increased purses and breeder’s incentives make them attractive places for horses to send their mares, which in turn improves the reputation of that state’s racing industry. At the same time, neighboring states without expanded gaming will be adversely affected as its horsemen migrate to states where they can make the most money.

Racinos have the ability to shift the balance of power in a region. It is time for the state of Michigan to decide which side of the scale it wants to sit.

Positive signs?

Who knew all Michigan racing needed to get Lansing on its side with alternative wagering was a major economic collapse and a budget deficit the size of Montana?

The Michigan HBPA website reports…

PULL TABS AT RACE TRACKS: As the state scrambles to complete the budget process for 2009-10, discussions have centered around allowing tracks to offer  “lottery pull tab” machines to generate needed state revenue and assist the tracks in the challenge to stay in business. The MI-HBPA has supported for years additional gaming at the race tracks and are very interested in working with Lansing to develop a comprehensive plan for additional gaming. As expected, the “pull tab” proposal must follow the requirements set in the passage of Prop 1 in 2004. Pull tabs, as well as, VLT’s will need local and statewide approval.

The MI-HBPA is currently working on proposals for VLT’s and internet account wagering (ADW’s) on horse racing to assist in saving our industry. As the challenges grow with the approval for VLT’s in Ohio to maintain our horse population, we look forward to working with Lansing to get it right. Serious efforts need to be coordinated to develop a comprehensive package to generate state revenue and the needed revenue to save the racing industry.

A comprehensive plan will offer the state millions and save an industry with a 76 year history of being a producer without the need for state subsidies. The racing industry is willing to work with the state to support a much higher take than currently offered by the casinos throughout the state, at least double. The MI-HBPA is committed to working with all parties in developing a fair plan for all as we face extinction.

Additional gaming that belongs in a comprehensive plan:

1) VLT’s at all race tracks as Ohio, Penn, Indiana and West Virginia

2) Advanced Deposit Wagering (ADW’s) internet wagering on horse racing in Michigan currently is projected to be 60 million dollars, money leaving the state to wager on horse racing and the state, horsemen and tracks gain -0- from the activity, because wagering on the internet in Michigan on horse racing is illegal. So, it goes on with no controls, no revenue and continues to grow nationally. One ADW company in Michigan has enjoyed over a 50% gain in the first quarter of 2009 while our simulcasting wagering is in a nose dive and industry all but gone.

3) Intstant Racing machines to allow wagering on archived races.

Basically, with the race tracks involved in the gaming business, they should be allowed to compete fairly for the gaming dollar and offer any game that any competitor offers. Competition is good for the consumer.

While Pull Tabs would certainly be a welcome addition to Michigan’s racetracks, hopefully the state does not see them as a way to appease the industry and stop there. Pull Tabs are indeed very entertaining. I myself am a frequent player when I visit my local bars and dining establishments. However, Pull Tabs must be seen as a first step toward bigger and better things, not an ultimate solution. Pull Tabs are more of an impulse item, while casino-style gaming is a destination. Still, anything to boost the purse structure will be greeted with open arms.

One thing that strikes me as odd about the push for Pull Tabs is it appears the tracks must adhere to the demands of Proposal 1 to install the machines. However, if my memory serves me correctly, the Pull Tab machines in my local establishments were installed well after the 2004 election without any kind of electoral hubbub. Proposal 1 was written to stop Racinos, but I was under the impression it applied to everyone not granted immunity by its language. Surely the racing interests have people on their side better versed in the intricacies of Prop 1 than myself, but if the Double 6 bar in McBride, Michigan can get Pull Tabs without anyone raising a fuss, there is little reason to treat racetracks differently.

In related news, it appears Gov. Jennifer Granholm is (finally) on board with the possibility of implementing alternative wagering. Granholm was on WWJ Newsradio 950 Thursday to discuss placing an expanded gaming issue on a future ballot to help preserve the state’s education programs, namely scholarships for college students and laid off workers returning to school. The interview and a small write-up can be found here.

While having the governor publicly support the cause for expanded gaming is definitely a big positive for the movement, forgive me if I take a “wait and see” approach to her statements. Granholm’s track record with the racing industry has been less than stellar during her time in the executive position, most recently shooting down a bill to help restore supplemental funds to Michigan’s horsemen. Cuts like these would have been much easier to swallow if the governor had shown the same openness to expanded gaming then as she is now.

Until the talk turns into action, I approach all of these developments with cautious optimism.

For additional coverage on Gov. Granholm’s newfound support of racinos, a WLNS Channel 6 feature focusing on Sports Creek Raceway can be found here. The link to the video is in the upper left hand corner.

The Alternative Scene: Part Two – ADW, Card Rooms, etc.

The question of what forms of alternative wagering fall under the restrictions of Proposal 04-1 continues to plague Michigan racing as it looks to expand its product. Tizzy's Prospector is led to the Pinnacle winner's circle with Alex Estrada aboard.

Though slot machines got the winner’s share of my recent poll, they are by no means the only method racetracks are trying to expand their product.

Many tracks are taking their game online with advance deposit wagering, while others are expanding on the casino concept with card rooms or instant racing machines.

Though all three (and throw slots in there, too) are completely different ways to get action, Michigan appears to be stonewalled in terms of implementing any of them by Proposal 04-1.

The brilliantly written (by tribal/casino interests) proposal requires any interest outside of the tribal and Detroit-based casinos to pass local and statewide referendums before getting the go-ahead to install video lottery terminals. Though it was sold to the public in the 2004 election as a way for them to control gambling in the state, the ballot issue instead gave the casinos free reign to expand while handcuffing their competition – the racetracks.

But, like Mark McGwire, I’m not here to talk about the past. What I am here to talk about is how the proposal’s vague language affects the present and future of racing in Michigan. 

Because of the ballot’s less than specific wording, it could, and has, been argued that any of the aforementioned forms of alternative wagering fall under Prop 1’s umbrella. The amount of money and labor required to get such an issue on two ballots has hindered efforts to get any kind of expanded gaming off the ground in Michigan. 

Obviously, this takes millions of hypothetical dollars out of the pockets of the Michigan racing industry. However, according to Michigan HBPA Executive Director Gary Tinkle, it is holding back tens of millions of actual dollars as well.

In an email exchange with Tinkle, he said over $50 million was wagered by Michigan residents through ADW services in 2008 despite their illegality in this state. While some online wagering services allow users to play Pinnacle or Hazel Park, Michiganders are not legally allowed to bet on races in their home state (or anywhere else, for that matter) unless it is at the track itself or by simulcast. Tinkle said because these wagers are not  legally recognized, Michigan’s tracks, the state, and the horsemen do not get a cut from the monies wagered as they would from a simulcast bet.

The situation is further complicated by the actual location of the wagers. Though the person placing an online wager may reside in Michigan, the hub in which the bets are actually placed is in a state where online wagering is allowed (I keep hearing about this hub in Oregon. Must do good business). This brings about the dilemma of where the bet actually originated.

Is the stay-at-home Michigan handicapper in the wrong if he plays a race out-of-state and his money never has to enter his own state limits? Apparently yes, but there are so many gray areas to Michigan’s ADW laws that the definition of what is and isn’t kosher might depend on who you ask. Either way, things would be much less complicated (and I would be more likely to actually know what I was talking about) if Michigan were just allowed to legalize ADW already.

Another alternative wagering option that has found its way into some racetracks are card rooms. With the World Series of Poker and movies like “21” bringing card games into mainstream consciousness, tracks like Canterbury Park in Minnesota are capitalizing on the popularity.

Though Proposal 1 explicitly outlaws “table games” at the racetracks, Great Lakes Downs played host to poker games for two or three years before it shut its doors in 2007. The defunct Muskegon track apparently found a loophole by hosting charity poker games with the proceeds going to some worthy cause instead of the purse pools. To my knowledge, the only money the track got out of the deal was a fee for renting the space – a far cry from the money brought in from established card rooms.

The one flaw that hurts the viability of card rooms is it’s the only alternative wagering option that can be done just as well without having to go to a casino or racetrack. Though some games are dependent on dealers, such as blackjack, the current big-ticket game, poker, is played for real money in garages, basements and game rooms around the world. One can grab a beer, go to the weekly poker night in his buddy’s basement and lose 20 bucks just as easily as he can go to the local racetrack’s card room, and he doesn’t have to worry nearly as much about his personal conduct.

An interesting option gaining steam both nationally and in Michigan is instant racing. The machines allow users to wager on stripped-down versions of previously run races on a device resembling a self-service terminal. Oaklawn Park in Arkansas was the early adopter of the new form of wagering and saw its purses and field sizes rise. An interesting piece on instant racing can be found on The Thoroughbred Brief, written by guest poster John M. Lockwood, Esq. outlines some facts and issues surrounding the games.

The challenge facing instant racing machines is state Supreme Courts don’t seem to know what to make of them. As Lockwood’s editorial notes, some states have ruled them as pari-mutuel wagering the same as the actual live races and gave them the go-ahead. A recent push to get instant racing legalized in Michigan banked on rulings like this, but so far, little has come from it. Other states have labeled them a closer relative of  the slot machine and treated them as such.

Of the three alternative wagering options discussed in this post, instant racing would appear to have the least immediate drawing power. People know what poker is and most can wrap their minds around online wagering. Not much explanation needed. Putting a sign out front that reads “Instant Racing”, however is not quite the slam dunk. Some advertising or other form of public education would probably be needed to get the person on the street both aware and interest in what instant racing has to offer. The risk seemed to work in Arkansas, other racetracks might not be so lucky.

Like slot machines, there is still a sense of trial and error associated with these forms of alternative wagering. In most cases, the results appear promising, but the permanent effects of expanded gaming on the racing industry remain to be seen. When a track can perfect the balance between the races and the alternative wagering without making one of them a sideshow, that operation stands to make a good deal of money.

The Alternative Scene: Part One – Slot Machines/Racinos

Racetracks like Indiana Downs have seen significant increases in purse structure since adding new forms of alternative wagering like slot machines, but can the good times last?

In a poll that went about three and a half months longer than planned, the readers of this blog voted convincingly that slot machines are the most important form of alternative wagering for the long-term health of the racing industry. 

The voting was neck-and-neck between slots and advance deposit wagering in the poll’s early goings. As time wore on, slots pulled away to an insurmountable lead. 

Let’s have a look at the results…

Which form of alternative wagering is most important to racing’s long-term health?

Slot Machines – 58% (123 votes)
Advance Deposit Wagering – 22% (46 votes)
We don’t need no stinking alternative wagering – 8% (18 votes)
Instant Racing – 6% (13 votes)
Card Rooms – 3% (6 votes)
Other – 3% (7 votes)

Total votes: 213

“Other” answers (some of the answers could be placed in one of the categories above, but because they were placed in “other,” I am keeping them here):
– “table games, that’s what they want, only slots is not the answer”
– “telephone/Internet wagering”
– “All of the above”
– “exchange betting”
– “Simulacast”
– “Racino”
– “nothing we’re dooooooooomed”

There is no question slots have had an impact on the racing industry, and will continue to do so. Just look at the career path of Kentucky Derby winner Mine That Bird. 

The classic winner started his career at Woodbine, enjoying slots-enriched purses on his way to nabbing the Sovereign Award as Canada’s top juvenile. His earnings in Canada alone were enough to secure him an invitation to the big dance at Churchill Downs, which removed the pressure from taking the road to Louisville going through New Mexico.

Mine That Bird worked his way through the Derby preps at Sunland Park, which would have been a laughable strategy only ten years ago, and is unorthodox at best today. With the help of alternative wagering (mainly casino-style gaming) in 2009, the Sunland Derby offered a purse of $900,000, among the biggest prizes offered to three-year-olds in the country.

The race was not graded, and Mine That Bird finished off the board, but his eventual win in the Kentucky Derby put New Mexico in a position to become a legitimate path on the Derby trail. The little Birdstone gelding that could’s success has spearheaded the campaign to get the Sunland Derby designated a graded stakes race, officially making it more than a cash-grab race for Derby wannabes.

Simply put, without casino-style gaming, Mine That Bird is clunking around the California allowance ranks, Calvin Borel doesn’t tearfully celebrate his biggest upset on national television, Sunland Park still runs cheap Quarter Horses, West Side Bernie wins the Kentucky Derby and nobody goes home happy.

The story doesn’t end there. Just recently, the connections of Mine That Bird spurned the Haskell Invitational, and a rematch with Preakness winner Rachel Alexandra, to challenge the West Virginia Derby at Mountaineer. If Mountaineer were still in the slums of the racing hierarchy, as it was before the implementation of slots, a trip through the hills of West Virginia wouldn’t have even crossed the minds of team Mine That Bird (even if the gamble did blow up in their faces, leaving with a third-place finish).

Alternative wagering, slots in particular, does not only give gamblers more options at the racetrack. It also leads to horsemen having the option to try their charges in spots previously considered no-man’s land for horses with any class. Mountaineer landed a Kentucky Derby winner. Charles Town landed Commentator for the Charles Town Classic. Last year, Hoosier Park enticed Pyro, once considered one of his crop’s heavyweights, to enter the Indiana Derby. There is a $1 million race in the middle of Pennsylvania for crying out loud.

Even if for a brief moment, racinos can draw the big horses to come to your local track and thrust it into the national spotlight. If a few curious onlookers become serious followers of the sport, the track will be ahead for the day – and all thanks to a room full of retirees mindlessly hitting the “spin again” button.

However, the honeymoon between racing and slots may soon be coming to an end.

Many racino tracks are still struggling to find an identity for themselves, especially when the quality of racing has yet to catch up with the caliber of purses being offered.

Despite becoming a beacon for horsemen from non-racino states (just take a look at all the Michigan-based connections racing at Presque Isle Downs), Pennsylvania still faces issues with keeping the balance between the racetrack and the casino. Further complicating the situation is the radical discrepancy between the money the live handle kicks into the purse structure versus the purse money generated by the slots (as high as 20-to-1 at Presque Isle). According to the article linked to in this paragraph, Pennsylvania racing’s heavy reliance on the slot machine dollar paired with its difficulty generating its own funds could be seen as a sign of blood in the water by other groups looking to profit from gambling monies.

Though it has been confirmed at Prairie Meadows, an Iowa racino, that live racing actually boosts the slots revenue, the track plans to restructure its schedule for next year, with plans to jettison standardbred racing and ask for fewer Thoroughbred dates. While purses have steadily risen, live handle has steadily dipped despite being one of the first racetracks to adopt casino-style gaming.

The racetracks of today are the lab rats in the study of the miracle cure known as slot machines. Tracks with slots get the medicine – tracks without get the placebo. Early returns appear positive, but the side effects are still being discovered. Little is known about the long-term effects slot machines will have on the racing industry because they have only been around for the short-term. Proponents say slots will bring racing to an even playing field with competitors and will encourage the breeding of better competitors, while others worry the bottom line will eventually drive the “Rac” in “Racino” to become a full-blown “Cas”.

The answer is likely somewhere in the middle, but as it stands right now, there is only one way to find out.

A poll running this long deserves a post just as lengthy. To help preserve your eyes and attention spans, I am splitting it up into two separate entries. The next post, examining some of the poll’s runner-ups, will be up whenever I get around to writing it. Keep your eyes peeled.

Exploring the alternatives

The implementation of alternative wagering would likely speed up the construction process at Pinnacle Race Course. Caught In Traffic is led out of the paddock with Federico Mata aboard.

The proverbial toothpaste is out of the tube.

The number of states seeing their purses skyrocket from slot machines and other casino gaming is growing with each passing year. 

Just as many racetracks, if not more, are going online for new sources of handle, offering advance deposit wagering for those of us who like to play the races but fear natural sunlight.

With so much competition for the gambling dollar from casinos, lotteries, neighborhood poker games and elsewhere, it appears the days of racing being able to thrive on its own product alone are becoming numbered.

Even Kentucky, the Thoroughbred capital of the world, is working toward legislation to implement slots into the state’s racetracks. 

The implementation of alternative wagering is also widening the gap between functional racing facilities and ones that struggle to keep the lights on.

Michigan, for example, has no alternative wagering options outside of simulcast and is suffering because of it. 

In 2004, a ballot proposal, largely funded by the state’s Native American tribes and three casinos in Detroit, was convincingly approved forcing the state’s racetracks to jump through a ridiculous and costly number of hoops to even get a chance to install slots or table games. In the same proposal, the tribes and Detroit casinos included a clause making themselves immune to the restrictions and free to expand their gaming operations in any manner they wish. To put the final nail in the coffin, the proposal was retroactive, killing a Video Lottery Terminal bill that was making its way through State Congress when the proposal was written.

The proposal was marketed as a way to empower the people of Michigan, allowing them to control where new gaming could and could not go. As any good Snake Oil salesman will attest, the first step in manipulating the masses is giving them a false sense of empowerment. Despite what a federal judge said earlier this year, a fast one of epic proportions was pulled on the people of Michigan in 2004.

Online wagering on Michigan tracks is also prohibited to its populace. Michigan residents are allowed to set up accounts and send their money to tracks across the globe, but can not wager on the ones in their own state. A person who lives on the other side of the Ohio border just a few miles from Pinnacle Race Course can fire up their Xpressbet account and play the races in his or her underwear. Meanwhile, the Michigan racing fan living in the state’s upper peninsula, a good eight-to-ten-hour drive from New Boston, is out of luck. There is something backward about outlawing something to the group that could benefit from it the most.

Through all of this, the number of tribal casinos in Michigan has swelled to 17, with at least two more in development. This does not include The Great Lakes Downs property recently purchased by the Little River Tribe of Ottawa Indians in 2008, which currently sits in administrative purgatory while the Tribe attempts to get a gaming license on non-tribal land.

The Michigan Lottery has also expanded quite freely, and since its inception in 1972 has ballooned to over 20 different drawings, Club Keno, Pull Tabs and countless instant ticket games; all of which are allowed to expand their presence into gas stations, bars, restaurants and elsewhere. The Michigan racing industry is literally being regulated by its competition.

Racing in the state of Michigan can not be expected to survive it is not allowed the same rights of expansion as other gaming outlets in the state and other racetracks in neighboring states. 

Because of the state’s unwillingness to provide its racing industry with the tools it needs to compete on a level playing field, Michigan’s horsemen are leaving in droves. With Pennsylvania’s Presque Isle Downs and two recently slots-enriched tracks in Indiana so nearby, many horsemen are sending their mares to foal in those states to take advantage of their generous breeder’s incentive programs. Others are simply pulling up the stakes and moving their entire operations to states with alternative wagering.

It is sad to see them go, but when a $7,500 claimer can run for double the purse elsewhere, one can hardly blame Michigan’s horsemen for going where the money is. If Kentucky approves slots, it will only give them another place to race for lots more money than they could here. The effects the massive loss of horsemen in this state could have is staggering.

I will now step down from my soapbox and allow you to step up onto yours for the next poll question: Which form of alternative wagering is most important to racing’s long-term health?

Though I use Michigan as an example, the question applies to the sport as a whole.

Slots make the purses nice and big, but is it just a bubble that will eventually burst? Account wagering allows players to wager from anywhere, but could it someday render live handle obsolete? Is there something out there no one has considered?

Personally, I think Michigan could use whatever it can get.