12/18/2012 10:23AM

Beyer: Maryland tracks, horsemen end war

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Maryland’s once-healthy Thoroughbred industry began its descent to minor-league status in the mid-1990s. When slot machines were legalized in neighboring states, horses and stables exited Maryland to compete for larger purses. Amidst the decline, Laurel Park and Pimlico suffered from bad management. Moreover, the tracks’ owners and their horsemen were constantly at war with each other, and they could never agree on any plan to revive the industry.

In view of this dismal history, people who care about horse racing can scarcely believe what has just happened. Maryland racing has not only been saved, but it is about to enter an era of growth and unprecedented prosperity. Dec. 14, 2012, will be remembered as the day that changed everything.

On that day, representatives of the Maryland Jockey Club and the state’s horsemen signed a 10-year agreement that establishes a new economic structure for the sport. They resolved the crucial issue (and other peripheral ones) that had divided them for the last two years.

When Maryland belatedly legalized slot machines and earmarked a portion of the revenue for horse racing, the Stronach Group – the tracks’ parent company – inexplicably failed to make a bid to get slots at Laurel Park. The slot franchise in Anne Arundel Country instead went to the Maryland Live! casino. Yet a percentage of money from slots – wherever they are located – goes into racetrack purses, and the revenue from Maryland Live! would give horsemen a windfall. But the Maryland Jockey Club was losing millions of dollars a year and had no incentive to operate more than a minimal racing schedule.

The track and the horsemen negotiated (often acrimoniously) for two years before they agreed on a logical plan. The horsemen ceded some of their slot revenue to management. If horsemen want to race more than 100 days per year – which they almost certainly will – they will pay a fee to the track for each addition day. Thus, the Maryland Jockey Club gets the chance to make a reasonable profit. (The two sides also resolved other long-simmering issues; the MJC will close the costly Bowie training center and will build additional stalls at Laurel.)

Tom Chuckas, CEO of the tracks, says the importance of the 10-year deal is that it allows everybody in the industry to plan confidently for the future. Purses at the tracks, already bolstered by revenue from Maryland Live!, now average about $245,000 a day. When new casinos in downtown Baltimore and Prince George’s County go into operation, that figure could approach $400,000 a day, putting Laurel and Pimlico in company with the nation’s elite tracks. Chuckas said, “Breeders can look ahead and breed Maryland horses. Owners can buy horses. And the Maryland Jockey Club can make plans for capital improvements. Now, it’s easier to make an investment of substance.”

Understandably, trainers, owners, breeders, and the tracks’ management are elated by their prospects. Yet the history of slot-machine subsidies in other states provides grounds for some skepticism.

At most of the tracks whose purses have been bolstered by slot money, the sport has not become more popular or self-sustaining. Thoroughbred tracks such as Parx Racing, Delaware Park, and Presque Isle Downs, as well as just about all of the harness tracks with subsidies, have few fans in the grandstand and unimpressive betting totals. Even committed racing fans pay little attention to them.
Most economists deplore what they call cross-subsidization, taking money from successful enterprises to prop up losers, and it’s hard to make a good case why states should force casinos to subsidize racetracks that can’t survive on their own merits.

Nevertheless, the Maryland horse industry is a special case; it deserves this help. The state’s tracks were profitable, and its breeding industry was an exemplary success, until Maryland was crushed by competition from tracks with slot money. The subsidy for purses at Laurel and Pimlico levels the playing field. And the nature of the Dec. 14 deal makes Maryland different, too. At operations such Parx, Delaware Park and Charles Town, which make huge profits from casino gambling, horse racing is largely irrelevant. But the Maryland Jockey Club won’t be in the slot business, and it has ample incentive to promote racing and to try to increase the sport’s business.

This will be no easy task. In the past, improving the decrepit facilities at Laurel and Pimlico might have lured more fans. But in an era when bettors watch can races on TV at home and bet by phone, Laurel and Pimlico aren’t going attract big live crowds except on special days. But if the Maryland Jockey Club wants to attract the attention of horseplayers, there is one thing that it could and should do: reduce the takeout.

Over the years, the Maryland tracks have sought to increase purses by extracting more money from every betting dollar. They used to take 15 percent from each win bet; now the rate is 18 percent. The takeout from trifectas is an exorbitant 25.75 percent. (By contrast, Kentucky takes 19 percent from its trifectas.)

Now that the industry is about to be awash in money from Maryland Live! and other casinos, there is no justification for squeezing every possible dollar from its customers. A substantial takeout reduction would appeal to simulcast bettors across the country and boost wagering on Maryland races. And it would contain an element of fairness. When a relatively small number of breeders, trainers, and owners are going to enjoy a windfall from the new economics of Maryland racing, the industry should give a small break to the betting public that has continued to support the game.

© 2012 The Washington Post

chad mc rory More than 1 year ago
Andrew, I can't wait for your next column where you may salute Shivvy Parbhoo and Trinniberg along with making your apology to Jockey Willie Martinez. It's long overdue, Andrew...
scott benson More than 1 year ago
What did he say about willie martinez?
Cris McHenka More than 1 year ago
If they close Bowie for training and instead make it the retraining home for retired TB's it could be a model for the country. They have the stall space and could use the bunkhouses for grooms and the track kitchen for meetings as well as food for the help. The state was seeking a place to put a horse center. Well, now they have one ready made.
John Burton More than 1 year ago
This is good news for the Maryland horse racing industry - and a great start! A lot more will need to be done to bring back the excitement and pleasure of spending a day at the races. Others' suggestions such as making facilities more appealing and inviting, improving the hospitality skills of track employees, and innovative promotions would further improve the racing experience at Maryland tracks. Under Armour's owner and CEO should spearhead the search for 21st century leadership of the MJC-Horsemen collaborative efforts. The "fat lady" has been singing in the Maryland Horse Racing industry for over a decade. Her song was almost finished. Now, it appears, she has paused and there is a window of opportunity (until the state legislators lop-off funding as they have done in PA) for the MJC and MD horsemen to spark a renewal and ressurection of the industry. PLEASE, please don't blow this opportunity! Don't hesitate either because the funding from slts might not be here forever! - Former MD resident now living in PA
Rocky More than 1 year ago
Reduce tge takeout? Dream on.
michael More than 1 year ago
Excellent new for Maryland Racing. Time to learn from the past and understand why it failed in the first place. Decrepit infrastructure, poor very poor customer service. Surly tellers who were put out that you'd pick their window. I'm still waitig for my email question five years ago to be answered from Chukas about the poor management of their off track site. Reduce takeout, clean up Pimlico, and also DEDICATE SOME RESOURCE FROM EACH DOLLAR BET FOR THE RETIREMENT PROGRAM OF HORSES. Please!!
Philip Foran More than 1 year ago
So now that Mr.Stronach has flushed millions down the toilet you southern clowns figure out whats going on. Man o man Here I thought the American way was to help free enterprise go forward to benefit all concerned. Oh just thinking out loud but who has the best breeding outfit in North America and most of the best tracks owned by a non government outfit ? Makes the betting public sick to see these people still doing anything with racing. ya really sick. stick your Maryland racing you know where
Gil Schwartzman More than 1 year ago
I have gone to the race track since I was 13 and I am now 62. I have always loved Spring at Pimlico. I have been deeply disappointed over the last several years that the spring meet has been cut to the minimum. The actions taken on 12/14 are a great start but the industry needs to energize the fan base and create new fans. Watching a live horse race is incrediably thrilling. As a gambler, trying to figure out who will win is a great challenge. Now the industry in Maryland must face the challenge of energizing the fan base. I am convinced that with thought and inovation horse racing can return to to its preeminence in Maryland. If you do not believe it, just go to Saratgoa race track on any day that the track is operating in the summer. Everyday is an exciting party!! no more excuses, Maryland--make it happen!!!
MICHAEL More than 1 year ago
An industry being subsidized by their competitor will NOT SURVIVE. PERIOD! The casinos couldn't care less about thoroughbred racing. If this niche industry cannot promote itself and stand on it's own then the handwriting is on the wall.
wolves More than 1 year ago
right on, Michael...and I'll take it a step further....the tracks don't give a damn about racing, either....if they started making 50 mil per annum with slots, why would they give a damn about racing....only because their slots are contingent on racing.
Kenneth H More than 1 year ago
I also agree. Eventually the subsidizing will end and where will we be? I predict that 20 years from now there will only be a half dozen major race tracks in the country and that all the smaller tracks will cease to operate.
Rocky More than 1 year ago
Try to give the racetrack attendee something for their money. $5 beer and $3 hotdogs don't cut it. I live 40 miles from Sarasota dog track where I can bet horses also. If I drive it costs me $12 for gas ( free gate pass) and I usually spend $15 on food and drink. Plus 2 hours driving time. Thats $27 I could bet with on TVG etc.and never leave the house. I still go cause I like the people there and have fun interacting with friends. Daily door prizes would award patrons and keep people there for more than a few races. With competetion from casinos and the internet and TV , the tracks have to give the patrons a reason to come. Reduced take - outs would also help. Would you play in a poker game where the house chopped 20% of every pot ???? Rocky
Chris Jones More than 1 year ago
Rocky, I am in Bartow and used to go to Oldsmar for Tampa Bay Downs, but now I just stay home and play thru TVG.
Mark D More than 1 year ago
Its simple math. Reduce the takeout by 50%. Wagering will increase 300%. Why these idiots can figure that out is beyond me.