08/14/2004 11:00PM

Round Table round-up: Rebate shops putting strain on racing's revenues


SARATOGA SPRINGS, N.Y. - Extraordinary growth in pari-mutuel handle through offshore and domestic rebate shops has not resulted in a net gain in revenue to the Thoroughbred racing industry, according to officials of a task force that is examining handle and purses.

Greg Avioli, the chief operating officer of the National Thoroughbred Racing Association and the chairman of the task force, said on Sunday at the Jockey Club Round Table Conference that although handle at rebate shops soared in 2003 to $1.2 billion - a 50 percent increase over 2002 handle - the sport's revenues suffered in the same time period. Avioli cited the results of a study conducted by a New York consulting firm, National Economics Research Association, for making a case that the racing industry will continue to lose revenue if handle migrates increasingly to rebate shops.

"Everyone has always said, 'Isn't all handle good handle?' " Avioli said. "The simple answer is no. The data that the task force collected made it clear that there has not been enough new handle to offset the revenue loss."

Rebate shops have become one of the most controversial issues in racing over the past five years. The shops, many of which are located offshore or on Native American reservations, reward big bettors with cash rebates on their bets, win or lose. Those rebates can hit rates as high as 18 percent on wagers with high takeouts, officials have said.

Rebate shops and their customers have maintained that their customers are new to horseracing or betting far more than before they received rebates, resulting in a net gain to horseracing.

Last year, purses distributed in the U.S. fell less than one percent, even as handle rose approximately one percent. The NTRA set up the task force, which has representatives from 23 different racing organizations, to examine the erosion in revenues that became apparent with the negative purse numbers. The task force is scheduled to release its formal report at the end of August or early September, Avioli said.

Despite the analysis, Avioli said he had few recommendations to racetracks and horsemen other than for tracks to be aware of how their revenues are collected. He also called on the racing industry to support measures that would bring more "transparency" to rebate shops, saying that the identities of their bettors were critical to understanding who is participating in racing's national bet-processing network.

Avioli spoke in the middle of the Round Table Conference, an annual presentation put on by the Jockey Club. This year's Round Table included updates by NTRA officials on the association's progress and goals, along with a keynote presentation from Tim Finchem, the commissioner of the PGA Tour.

Finchem focused on the similarities between the PGA Tour and the racing industry, and called on horseracing to embrace a coherent structure. The NTRA was formed along the lines of the PGA Tour and other league offices, but does not possess the "monolithic control" of league office for professional football, baseball and basketball "that is the envy of the PGA Tour," Finchem said.

Finchem is a former colleague of Tim Smith, the NTRA's former president who resigned at the end of July to pursue a top position at the New York Racing Association. Smith's resignation, effective Sept. 1, was noted by Jockey Club officials on several occasions at the Round Table. In his closing remarks, the Jockey Club's chairman, Ogden Mills "Dinny" Phipps, called for a recognition of Smith's accomplishments during six years as the only NTRA's president, a call that was greeted by a standing ovation.

Smith gave a brief presentation on the NTRA's accomplishments after six years, and assured the racing industry, which has sometimes been wary of national structures, that a national organization was in its best interests.

"Not one thing of consequence has been done in this industry in recent years by just one entity," Smith said. He closed by saying, "Believe me, it is working, and there are more opportunities ahead."