Slots-enhanced purses hurting field sizes

TUCSON, Ariz. - In 2009, the number of Thoroughbred racing dates in Pennsylvania is expected to reach 650, nearly double the number in 2005. The reason for the expansion is the requirements of a law that legalized slot machines at seven racetracks in the state, despite the fact that at the time the law was passed, only two Thoroughbred tracks and two harness tracks existed in Pennsylvania.

Managing that number of live racing dates and its impact on field size and purses in the Northeast and Mid-Atlantic regions is already a concern to racing officials who spoke at the University of Arizona Symposium on Racing and Gaming on Monday. In fact, the situation underscores the sometimes counterintuitive problems presented by the rapid growth of slot machines in racing nationwide.

Purses at Philadelphia Park have doubled since the introduction of slot machines, which has resulted in a squeeze on stall space and a one-horse increase in average field size, according to Sal Sinatra, Philadelphia's racing secretary.

But Philadelphia's gain has come at the expense of other tracks. The nationwide foal crop has been static, and field sizes across the country have not been increasing, so the principal losers have been tracks in other Northeast states, especially in New Jersey and Maryland.

Recently, officials of tracks in Delaware, New Jersey, New York, and Pennsylvania met to discuss the field-size problems presented by Pennsylvania's slot-fueled growth in the hope that the racetracks could coordinate their racing programs to maximize field size and present attractive races to bettors, who have consistently favored races with large competitive fields. But that strategy is likely to run up against the incentives presented to trainers whose primary responsibility is to earn purse money, and slot-machine revenues are skewing those incentives in ways that guarantee declines in field size over the long term.

That dynamic is becoming apparent in Canada, where slot-machine revenues have resulted in a more than two-fold increase in Standardbred purses over the past 10 years, from $80 million in 1997 to $180 million in 2006. Horsemen have cheered the increases, according to John Walzak, the president of the Ontario Harness Horse Association, but those same horsemen are now resisting track-supported cuts in racing days because of a decline in field size at the province's racetracks.

Recent studies of field size in relation to purses have proven that the higher the purse, the smaller the field. In part, that inverse relationship is being skewed by the relatively small fields for stakes races on the dirt, but the same dynamic begins to play out at a lower level with the subsidies provided by slot machines on overnight racing programs.

If a horseman needs to make $40,000 in order to break even with a horse and can make that amount of money in one race, then the horseman has an incentive to wait to enter a race until the horse has a very good chance of winning. Slots subsidies have created more and more of those opportunities, and as a result, field sizes will likely continue to decline as horsemen shop for races that offer less competition.

Reducing the number of race dates might break this cycle, but horsemen consistently oppose such reductions, and legislators have shown no indication of backing down from mandating minimum purse days as a condition for giving racetracks monopolies on slot machines.

In fact, William Oderle, the representative who ushered through slots legislation for Delaware's three racetracks, said at the symposium that racing will not protect its slot-machine monopolies without writing minimum-dates provisions into slots legislation, as no legislation will find support without the politically powerful argument that slot subsidies should support agribusiness.

Account-wagering discussion

The dominant subject on Tuesday morning at the symposium was account wagering, a segment of the wagering market that is perhaps the only bright spot on racing's current economic landscape. However, the double-digit growth in account wagering has also created some significant sources of frustration for fans as companies scramble to protect their marketplace turf and their share of account-wagering revenues.

On Tuesday morning, Ron Geary, a Louisville businessman who recently purchased Ellis Park, called on the racing industry to eliminate some of those problems by creating one central account-wagering operation that would allow bettors to wager on any signal in racing. But a subsequent panel illustrated why such a concept seems to be a distant pipe dream.

Scott Daruty, president of TrackNet, a company created by Churchill Downs Inc. and Magna Entertainment earlier this year to market simulcast signals, said racetracks needed to take back control of their racing signals from third-party account-wagering companies, but that policy has resulted in one of the largest sources of frustration this year for account-wagering customers. As a result of TrackNet's emergence, the signals available to the various account-wagering companies went through a significant realignment, upending an established market.

Daruty was followed by Gary Sproule, interim chief executive officer of Youbet.com, who said his company wanted access to all signals through contracts that would split revenues equally among account-wagering companies, horsemen, and tracks. Sproule's comments appeared to illustrate the biggest problem in racing: With handle stagnant and more third parties at the table to distribute racing signals, there just isn't enough revenue to go around.