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Leading the way, but falling behind
GRAND PRAIRIE, Texas - Jeff Greco, the general manager of Lone Star Park, knows many of the track's best customers by name. On a recent weekday stroll through the Las Vegas-style race book adjacent to the grandstand, Greco shook hands and proudly said: "This has to be the finest simulcast facility in all of racing."
It's hard to argue.
A week before Lone Star opened its 63-day live meet, business could not have been any better at the Post Time Pavilion, a 36,000-square-foot simulcast facility with a state-of-the-art big-screen video and audio system. And at Lone Star Park, gambling is not the only attraction.
In the parking lot, workers were busy erecting a soundstage for the track's regular Friday night concerts, alongside trucks that were unloading muscle cars for a weekend auto festival. At Lone Star's three-course, professional-grade skate park, a handful of teenage boys with skateboards were waiting for the afternoon session to begin. In the grandstand, construction crews were putting the finishing touches on $6 million in permanent improvements in anticipation of the 2004 Breeders' Cup World Thoroughbred Championships, which Lone Star will host on Oct. 30.
This is what makes Lone Star Park so unique and so troubling at the same time. With its wide range of attractions, which also include a 6,000-seat concert arena, it is the model operation for many in the industry. But it is also not immune to the complex web of problems confronting the sport today. In a way, Lone Star is a case study in how to do everything right but still be left with a variety of familiar and frustrating issues - a lack of outlets to place wagers, competition from slot-machine gambling in neighboring states, and infighting among industry players.
Despite all the work that has gone into designing and building the track, marketing its product to a sports-mad population in the Dallas-Fort Worth metropolitan area, and providing top-notch customer service, the live attendance and handle figures at Lone Star have steadily eroded since the track opened in 1997. The drops were never more drastic than in 2003, when Lone Star cut purses during a meet for the first time in its history in the face of a 10 percent decline in live wagering.
Lone Star's troubles are not just its own. Business at Texas's two other major Thoroughbred tracks, Retama Park in San Antonio and Sam Houston in Houston, has declined even more steeply. Sam Houston, in fact, recently closed its 2004 meeting with double-digit declines in ontrack wagering, out-of-state handle, and all-sources wagering.
Officials at Lone Star blame a bad economy for the declines, maintaining that the drops were a matter of timing and unrelated to any longer-term trends.
Magna Entertainment Corp., the racing conglomerate, bought Lone Star's operating assets in 2002 for $99 million because of the track's ability to attract new customers to the game. Lone Star officials estimate that 200,000 people visit the property each year without setting foot in the racetrack. The track has been successful in converting some of those people into racing fans, according to its officials. But the question is whether that will be enough to overcome the larger problems.
Lone Star opened a decade after Texas voters approved parimutuel wagering on major league racing. The track was largely financed by the city of Grand Prairie, whose voters passed a half-cent sales tax increase to raise $65 million for construction. Grand Prairie still owns the racetrack and its land and runs the concert arena; Magna's $99 million purchase included only the operating license and a commitment to a long-term lease.
By nearly all accounts, Lone Star's numbers have not been bad. Attendance last year during a 70-day meet averaged 8,628, one of the better numbers in the country. All-sources handle - which includes ontrack handle on the live product and simulcasts, plus out-of-state handle on the Lone Star signal - averaged $3,153,392. Purse distribution was $227,000 a day, more than competitive with tracks on the regional circuit but well below top tracks.
Several figures at the track make racing officials nervous. Per-capita wagering fell last year to $139, a meager figure for a major racing facility and one that has actually declined over the past five years, since its peak in 1999 at $144. Lone Star officials acknowledge that per-capita growth was built into their projections.
Most significantly for the marketing-heavy track, ontrack wagering on the live product has declined from $56.9 million during the track's inaugural season to $39.6 million in 2003, a drop of 30.4 percent. Those ontrack live bets are not being replaced by wagers on simulcast signals: Total ontrack simulcasting handle during the live meet was $40.8 million in 1997 and $44.3 million in 2003. Simulcast handle peaked in 2000 at $47.6 million.
Ontrack attendance has also gone down. In the track's inaugural season, 1997, average attendance was 9,763. The figure peaked the next year, at 9,808. But a steady decline followed, to 9,374 in 1999, 8,892 in 2001, and, finally, 8,628 last year, a total drop of 12 percent from the peak in five years.
Lone Star has changed its marketing focus in recent years to target potential gamblers. While the track concentrated on luring families during its first few seasons, the marketing department is now targeting older men with disposable income. Those are the types who typically fill racetrack grandstands and who now fill Lone Star's race book.
So far this year, Lone Star's simulcast numbers have shown an uptick. Just before the live meet opened, betting in the Post Time Pavilion, where per-capita wagering is about $380, was up approximately 5 percent compared with last year, according to Greco, the general manager.
"It's nice to have that kind of momentum going into the live meet," Greco said, "especially considering what happened last year."
The Pavilion is Lone Star's best effort to create big bettors, and judging by its business, it is succeeding. But those efforts are hamstrung by state prohibitions on offtrack betting and account wagering, two items that conservative voters have consistently rejected in public opinion polls. Those prohibitions have prevented the track from gaining access to Texas's far-flung population centers and from giving bettors a more convenient way to wager - at home. At this time, horse betting is allowed at only eight sites in Texas, the largest state in the continental U.S.
"The biggest problem with Texas racing is lack of distribution," said David Hooper, executive director of the Texas Thoroughbred Association. "We have all kinds of complaints from our members, especially those in west Texas, where you're literally three hours from the closest place to watch a horse race. But we have a very, very strong Baptist populace that is opposed to gambling of any kind, and you have a lot of conservative political districts."
It's not surprising that account-wagering operations, illegal in Texas, have picked off some of Lone Star's biggest players, in some cases with generous offers of rebates, Greco said. Two years ago, word of mouth in the Pavilion spread that an agent of a rebate shop was personally offering bettors a free computer and rebates on handle. Greco and Corey Johnsen, the track's president, said that several bettors took the offer, and they haven't returned. They said they were unable to identify the rebate shop.
"What really gets me is that we're at such a disadvantage," Greco said. "Those places don't have to fund live racing, they don't have to build these big race books, so they have so much more money to play with. We can't do those things and still run a live racetrack."
But some trainers and Texas racing officials complain that Lone Star has made its own mistakes. The track used to be affiliated with Television Games Network, the TV channel and wagering company that broadcasts live racing. Many Texas racing fans, owners, and trainers received TVG on small-dish satellite networks such as DirecTV and Dish Network, but after Magna purchased the operating assets of the track, the company pulled Lone Star's signal from TVG. Magna runs its own television network, Horse Racing TV, but its distribution is extremely limited.
"Not being on TVG has been a big negative," said Bret Calhoun, one of the leading trainers at Lone Star and seventh in the nation in wins.
Hooper, who lives in Austin, site of the small racetrack Manor Downs, said the decision to pull the signal from TVG has changed his betting behavior.
"I know, just from my own personal experience, if I went out to bet at Manor Downs, I was always taking home some tickets that I bet on Lone Star because I knew they would be on TVG," Hooper said. "Last year, that didn't happen. I don't bet if I can't watch the races." Hooper said that other owners in Texas had identical complaints.
Although betting is an obvious concern, many Texas racing officials are more worried about the impact of slot machines in neighboring states. Officials from Sam Houston and Retama, especially, have blamed slots-fueled purses in Louisiana and New Mexico for luring trainers and horses across the borders. In response, they have said that Texas needs slots to compete.
They may get their wish. On April 8, Texas Gov. Rick Perry announced a plan to cut property taxes and restructure the way the state's schools are funded. The plan includes raising as much as $1 billion though slot machines at Texas's eight racetracks, including Lone Star. So far, public opinion polls seem to favor the slots-at-tracks component of the plan - an incongruous outcome, considering opposition to offtrack betting and account wagering. Legislators, meanwhile, are mixed on the idea. Last week, Perry called a 30-day special session of the Legislature, beginning April 20, to address the plans.
Some owners and trainers do appear to be moving out of Texas. Applications for Lone Star's 1,600 stalls this year dipped by 13.2 percent compared with 2003, from 2,828 to 2,454, the largest one-year drop in the track's history, according to Larry Craft, the track's racing secretary. Part of the drop can be attributed to an expanded race meet at Louisiana Downs in Shreveport, a three-hour drive from the Dallas area. Louisiana Downs will open its live meet this year on May 14. Lone Star and Louisiana Downs used to overlap for about two weeks in the spring; this year, the overlap will be a little more than eight weeks.
According to Craft, Lone Star's horse population used to be divided into thirds: one-third came from Oaklawn Park in Arkansas, another from Sam Houston, and the other from Fair Grounds in New Orleans. This year, the third from Louisiana failed to show up in the same numbers. Instead, with purses up at Louisiana Downs and more racing days there, these horsemen stayed closer to their homes and history, Craft said, disrupting the traditional circuit.
"It's the overlap more than anything, because our purses are still going to be comparable to those in Louisiana," Craft said. "We've lost some of those people who were from Louisiana, people who have homes there, who have a lot of Louisiana-bred horses. But that's where they were to start with. They live there."
Lone Star officials responded by recruiting trainers at Sunland Park on the New Mexico side of El Paso, hoping to draw horsemen who are thriving on Sunland's slots-enriched purses. So for the first time, Craft said, a sizable contingent from New Mexico will race at Lone Star this spring and summer.
Johnsen, the president of Lone Star, said he did not believe that Sunland's rising purses - or the pending purse increases at Magna's Remington Park in Oklahoma, which will install a type of slot machine this year and raise purses to about $200,000 a day - would hurt racing at Lone Star.
"During our 2004 season, there will actually be a positive effect on Lone Star Park because of slots at Sunland," Johnsen said. "Those horses were not able to compete with our horses before, but with those purses, now they can. And I think you will ultimately see a lot more strength on the circuit because of the slots, especially when you throw Remington into the mix. When trainers can make more money for their owners, everyone will benefit."
Craft said that he has altered Lone Star's conditions this year in a way that reflects lower-quality horses. The bottom claiming price during the 2004 meet will be $4,000, compared with $5,000 last year, and for the first time, Craft will write races for 5-year-old maidens. Lone Star had previously cut maidens off at 4.
While the jury is out on the net impact of slots on Lone Star's racing program, the Texas breeding industry is definitely suffering at the expense of New Mexico and Louisiana. In 2003, the number of mares bred in Texas dropped from 3,598 to 3,112, according to Jockey Club statistics. The number of stallions in the state dropped precipitously over the same time - 422 to 360 - although national figures indicate that the stallion industry as a whole got smaller. In Louisiana, however, the number of mares bred in 2003 rose from 2,272 to 2,656, and in New Mexico, the number of mares bred increased from 1,210 in 2001 to 1,465 in 2002, the year that slot machines began to fuel purse increases.
Calhoun, a Grand Prairie native who has 50 stalls at Lone Star and 30 stalls at Louisiana Downs this year, said it is inevitable that field sizes will drop because of the exodus from Texas. Field size has been one of Lone Star's most impressive statistics, and since field size is directly linked to wagering - economists have estimated that each additional horse in a race results in an additional 10 percent in handle - betting on Lone Star's live races will likely suffer if the track finds it difficult to fill races. During the track's inaugural season, field size was 10.0, in part because Lone Star cards races with 14-horse fields. Over the past seven years, the figure has eroded 7 percent, to 9.32 in 2003.
Taken together, the declines in field size, attendance, and wagering are changing people's minds about ontrack slot machines, sometimes referred to as video lottery terminals or VLT's. Charles England, who has been mayor of Grand Prairie since 1992 and backed the track's construction and its Breeders' Cup bid, said that Lone Star's ability to be a catalyst for development in the city is being threatened by the out-of-state competition.
"I'll be real honest with you," England said. "As the mayor, I have a lot of concerns about slots being in our city and that they are done right. Slots are not something that I envisioned when it was built. But I also didn't envision slots at Louisiana Downs and at Remington Park. That made me stand up and take a new look at it."
Johnsen said that Lone Star's purses could be the best in the country if slots are legalized, considering that the Dallas-Fort Worth market makes up a sizable component of the $1 billion market for slots in Shreveport, just across the border. He said purses would likely grow to $450,000 a day, at the least, if slots were legalized, putting the track on equal footing with Saratoga, Belmont Park, and the Southern California tracks.
Johnsen also said that many Texans traveling to Louisiana casinos were spending money that they might have bet on Lone Star's races. But if that is the case, then wouldn't a casino in Lone Star's back yard further erode the racing handle?
"Not if all the entities - the horsemen, the breeders, the track - share in the revenue from VLT's," Johnsen responded. "And at least we will have the gamblers on our grounds and have an opportunity to make them horse racing bettors. If someone is going to Shreveport to gamble at a casino, we have no chance to get him at all."
Calhoun said that if slots do come to Lone Star, the track will need to refocus on its core product, parimutuel racing, while trainers should be cautioned to stay competitive.
"Slots are something we've got to have if we're going to compete with everyone else in the country," Calhoun said. "But we have to be careful. You have to use them as a tool. You can't just sit back and rely on them. The mistake people make is that they get all this money from VLT's, and they don't upgrade their stock, and the racetrack doesn't promote racing. So what happens when the state comes in five years later and says, 'We're only getting 15 percent from these VLT's? We're taking 25 percent now.'
"Next thing you know," Calhoun said, "you got a bunch of cheap horses that no one wants to bet on anymore."