07/07/2004 11:00PM

No time for the short-sighted

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NEW YORK - Horse racing and Pennsylvania appeared to hit the jackpot this week when legislators in that state voted to authorize 61,000 slot machines and cut racetracks and horsemen in on the profits. Jackpots, however, often end up paying out a lot less than their winners expect.

The idea that Pennsylvania will be running $50,000 maiden races at opulent new tracks anytime soon seems more than a little far-fetched. Slots proponents who filled legislators' heads with those sugarplums based their projections on the rest of the region remaining status quo, but the Pennsylvania decision is likely to change the rest of the landscape. Maryland and New York now have new motivation to get their own stalled slots efforts through the political process, and Delaware and West Virginia will probably expand the scope of their existing operations.

It's a matter of when, rather than if, you will be able to play slots at every facility with a dirt oval between Buffalo and Baltimore, including new ones that will be built solely for that purpose. The money will dissipate among numerous locations. Also, since a state legislature can take away as quickly as it can give, there is no guarantee that the generous slices being served to racing in Pennsylvania will last very long.

Pennsylvania politicians who got the slots bill passed, led by Gov. Ed Rendell, did not embrace the machines because of any fondness for gambling or deep concern about the purse structure at Philadelphia Park and Penn National. They are looking to reduce property taxes statewide by over $1 billion, a feat that would weigh heavily in their re-election efforts. The next time their terms are up and the state needs yet more money, as states always do, one of the first places they will look to loot is the share of slots revenue being used to prop up racing.

What the racing industry needs to do is use some of the current bounty to plan for a future when the gold rush may be over. Simply dumping money into purses indiscriminately - as slots tracks such as Delta Downs and Sunland have done with unnecessary and gaudy new races on an already overcrowded national calendar - will be good for a few winning owners but will do nothing to increase the attractiveness or viability of racing for existing or potential new customers.

The depressing truth is that racino tracks currently awash in money are not creating any new racing fans. You walk through the slots areas at these places and can see that not a single machine player is even vaguely aware that there are horses running around outside. A handful of people sit in the stands watching horses, the lifetime horseplayers huddle around televisions in the simulcast room, and the rest of the patrons don't know or care whether the nearest racetrack is 1,000 yards or 1,000 miles away.

It will be interesting to see if Churchill Downs or Magna Entertainment does things any differently when their tracks start getting into the slots business. Both companies claim to be vigorous and heartfelt believers in the future of horse racing rather than opportunists who will eventually pave over their winner's circles to squeeze in another bank of dollar slots.

Will they use the slots operations to try to interest people in racing? Will they create new machines that involve live racing and tie into the parimutuel pools? Will they finally bring a day at the races into the 21st century in terms of creature comforts, technological enhancements, and the level of customer service and rewards that casino customers enjoy? Will they use any of their windfall funds to experiment with reducing takeout and make the parimutuel window at least as attractive a proposition as a one-armed bandit?

Doing these sorts of things is not just a nice thing to do to help out poor old horse racing. It is prudent long-term investing for a rainy day when these companies may well end up again being more reliant on racing than they expect. In addition to the prospect of revenue splits being changed by legislators in the future, there is the very real possibility that racinos could suffer the same fate as another industry: racetracks.

Thirty years ago, racetracks had a similar business profile to today's anticipated new racinos - a virtual lock on the legal gambling market, die-hard customers, a privileged relationship with government. It looked like a great business. Then other new forms of gambling entered the market, customers found more convenient ways to wager closer to home, and only simulcasting kept the whole enterprise afloat. You can't simulcast a slot machine.

Will today's largely deserted racetracks be the next generation's largely deserted racinos? The chances of that will decrease if racing spends some of its short-term windfall on improving and promoting itself for the future.