12/10/2013 3:25PM

Kay gives glimpse into future of NYRA at racetrack symposium

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TUCSON, Ariz. The New York Racing Association’s new marketing strategy of focusing on the “guest experience” at its three tracks is working and the association’s board remains on target to restructure and “reprivatize” the non-profit by late 2015, NYRA’s new chief executive, Chris Kay, said during a speech opening the University of Arizona Symposium on Racing and Gaming on Tuesday morning in Tucson, Ariz.

Kay said that measurements of handle, attendance, and per capita spending at the Belmont fall meet and ongoing Aqueduct winter meet showed positive results for NYRA’s new marketing strategy, which he said borrows from his former experience at Toys ‘R’ Us and Universal Parks and Resorts. While attendance and handle were down slightly at the marquee Saratoga meet, Kay said that per-capita spending on food and beverage and merchandise at the meet was up 15 percent, calling that a better measure of the track’s performance.

“Attendance doesn’t spend money,” Kay said. “People do.”

The Tuesday speech by Kay was his first public presentation to the racing industry as chief executive of NYRA since being hired by the association’s board in the summer, when not counting presentations he has made that have been live-streamed over the Internet as part of NYRA’s new policy to televise its board meetings. Kay was tabbed by a board that was restructured following the state takeover of the non-profit late last year at the behest of New York Gov. Andrew Cuomo.

Kay did not drift far afield on Tuesday from his presentations to the NYRA board, except in two instances: the first mention that NYRA is attempting to position itself for the possibility of the legalization of exchange wagering, and his first expansion on what the “reprivatization” of NYRA two years from now might entail.

Kay briefly stated that NYRA was preparing for exchange wagering as part of a series of comments on the company Global Betting Exchange, which NYRA recently hired to run its account-wagering platform. While Global Betting Exchange is known for setting up betting exchanges for overseas clients, NYRA officials had previously stated that the company was being hired for its expertise in online betting systems and had declined to comment on whether the company would develop an exchange-wagering platform for NYRA.

Exchange wagering, which was pioneered by the British company Betfair – also the owner of Television Games Network in the U.S. – is legal in some foreign jurisdictions, and two states, New Jersey and California, have passed laws allowing for the practice. Those laws require agreements with horsemen and tracks before the platforms can be launched, and so far racing constituents in the two states have not yet signed on, citing integrity concerns and a business model that, while beneficial to bettors, returns far less to horsemen and tracks than the current pari-mutuel system.

Exchange wagering allows bettors to post prices on horses and accept bets at those prices. Under the system, one side is betting on a horse to lose. Survey after survey has indicated that U.S. racing’s largest problem is the perception of its integrity, and critics of the system have said that the implementation of exchange wagering could further complicate racing’s ability to market its product because of the perception, right or wrong, that bettors could conspire with racing participants to hold horses, a far easier task than getting a horse to win.

Of course, Kay may have mentioned the possibility of exchange wagering as part of a strategy to begin to drum up interest in the “reprivatization” of NYRA. NYRA and state officials have not made clear what the state is planning for NYRA at the end of the three-year term of the restructured board, but it’s widely believed that the association will be put out to bid. The possibility of exchange wagering on NYRA’s product could entice betting-exchange companies into the mix.

Kay and other board members have recently said they will focus on making NYRA profitable, at least on paper, without the benefit of counting the tens of millions of dollars of revenue derived from statutorily required payments from a casino located on the property of Aqueduct Racetrack. But any plan to make NYRA profitable – and attractive to a private company – would almost certainly entail the overhaul of New York’s racing statutes, which contain carve-outs of NYRA’s revenue to a host of constituents and put hurdles in front of any plan by NYRA to open OTBs in New York City’s five boroughs.

Kay said during his speech that NYRA is reviewing the state’s laws for any changes it deems necessary to return the association to a cash-positive position, as well as reviewing the requirements for its real estate holdings (the state owns the deeds to the land as part of an earlier bankruptcy restructuring). He also said that a consulting group hired by NYRA is evaluating “various scenarios for each property” and “weighing the return on investment” for those scenarios. One of those scenarios could include the closing of Aqueduct.

But beyond that, Kay did not offer any further details on reprivatization, other than to promise a lot will be “new” after three years of state oversight.

“We have an opportunity to create a new structure, a new business plan, a new set of revised regulations, and a new corporate governance for a new state of racing for New York,” Kay said.