12/09/2003 12:00AM

Bet-processing due to get an overhaul


TUCSON, Ariz. - The Jockey Club has reached an agreement with Scientific Games Racing Inc., the largest bet-processing company in North America, to jointly develop a new bet-processing network that supporters say will enhance the security of the country's electronic wagering system and dramatically reduce delays in posting final odds.

Alan Marzelli, president of The Jockey club, described the project on Tuesday during an interview in Tucson, where he was attending the University of Arizona's Symposium on Racing.

If successful, Marzelli said, the agreement will change the way the racing industry can transmit bets and calculate odds. But, he said, the overhaul will not be a success unless the three other bet-processing companies in the United States - AmTote, United Tote, and the Las Vegas Dissemination Company - also participate and wagering sites make financial commitments to upgrade their equipment.

The new project is a product of recommendations made earlier this year after a review of the network by several consultants, including a company headed by former New York City Mayor Rudolph Giuliani. The review was intended to address last year's Breeders' Cup pick six scandal, which exposed serious security flaws in the way the racing industry processes its wagers.

The project puts The Jockey Club at the forefront of upgrading the betting network, which has long been a goal of Marzelli. He has spearheaded several technology projects over the last decade that were designed to improve business procedures while simultaneously giving The Jockey Club more control over the industry's data.

Marzelli said that the agreement was a "first step" in a network overhaul based on the Scientific Games's recent work in designing new hardware and software that would allow bettors to make wagers from cell phones and personal-data assistants. He said The Jockey Club would begin discussions soon on involving the other totalizator companies.

"We feel we now have a computing platform in the new Scientific Games Racing platform that will enable us to fulfill the recommendations of the Giuliani Report," Marzelli said. "Our next step is to create a system that validates it."

Scientific Games Racing was formerly known as Autotote. The company accounts for approximately two-thirds of the market share of North American handle on horse racing.

Current system has flaws

In the current network, bets from wagering sites are transmitted at specific time intervals to local hubs and collected into pools. Each hub calculates prices based on its pool data and then forwards that information to the racetrack where the live race is taking place, called the host site. The host site then consolidates all the information from the hubs to arrive at final odds on wagers, which can lead to delays in posting the final odds of up to one minute at some locations.

The failure to transmit bets immediately was a key factor in the Breeders' Cup pick six scandal, allowing a ticket to be changed after four races had already been completed. The delays in calculating odds have infuriated horseplayers and invited suspicion that wagers are being placed after races have already started. Those fears were validated several times this year when betting pools failed to close due to malfunctions in the network, and mutuel employees or individual bettors were able to place winning bets after races were run.

Under the system envisioned by The Jockey Club, each bet will be transmitted at the time the wager is placed through a vast network directly to the host site, which will continually update the odds at a negligible delay. At the same time, the wager will be sent to a central database at The Jockey Club, providing a way to independently verify the bets that are being sent to the racetracks and to analyze betting patterns for security and marketing purposes.

For the project to be successful, betting sites would need to upgrade their communications networks so that they could transmit wagering information to every live racing site in North America, a potentially costly project. Marzelli said that he could not provide an estimate for the cost but said that The Jockey Club would be contacting racetracks about the upgrades.

The Jockey Club will develop a business plan for its central database by the end of March 2004, Marzelli said. He declined to provide estimates for the cost to build the database, citing uncertainties over several factors, but he said that the cost would not present a burden to The Jockey Club.

A way to painlessly pay for project

Marzelli said he believed that the other tote companies would participate in the project despite the costs because it would fundamentally improve the business of betting. He suggested that the tote companies would be able to fund the upgrades through tote fees paid by racetracks for their services, which typically average anywhere from .25 of handle to .50 of handle, depending on the site's volume.

"The agreement with Scientific Games is nonexclusive, and it will be to everyone's benefit if there is one protocol," Marzelli said.

Many racing officials have criticized totalizator companies since the Breeders' Cup scandal for failing to upgrade their computer systems and keep pace with other industries. Other racing officials have said that racetracks bear some of the blame for playing the totalizator companies against each other during contract negotiations in order to secure low rates for the companies' services.