Jim Lawson, CEO of Woodbine Entertainment, has worked tirelessly on behalf of the horse racing industry in an effort to make sure that we’re not left out when single event sports wagering becomes legal in Ontario on April 4th. Now that day is almost here, but sadly, at this point in time, the Ontario Provincial Government hasn’t included us in any way. All around the world people can walk into sports betting shops and bet on horse racing, but in Ontario that’s not going to be the case for the time being at least. Lawson holds onto the hope that this will eventually change, and explains how we ended up here to begin with. By Melissa Keith.

 

(L-R) John Campbell, Jessica Buckley & Jim Lawson

 

“When you go to bet on the Leafs on April 4th on PointsBet, you won’t be able to find horse racing on it, which is unfair, and it's wrong.”

~ Jim Lawson

 

As single-event sports betting becomes reality in Canada this month, it’s perplexing to look at Woodbine Entertainment’s place in the rollout. The horse racing entity that helped prepare the legal road towards the launch is strangely sidelined on April 4th, the first day single event sports betting goes live in Ontario. Woodbine is the largest player in the original Canadian sports betting market, pari-mutuel wagering on horse races, but its role is not so clear when it comes to other sports. 

“We have been at the forefront for the [racing] industry, not only in Ontario but in Canada, and I think that largely has to do with the fact that our HPI system is nationwide,” begins Jim Lawson, Chief Executive Officer for Woodbine Entertainment. “Especially during Covid, and emerging from Covid, so much wagering was going online. Quite frankly, the concern that still exists today, and has existed for years, ever since sports betting has been spoken about in Canada, is: If [single event] sports betting was legalized, what was the impact going to be on pari-mutuel wagering in the country?”

Lawson knows sports, having played for the American Hockey League’s Nova Scotia Voyageurs and been drafted by the Montreal Canadiens. He was also awarded the Canadian Football League’s 2019 Commissioner’s Award for his contributions as first independent Chair of the CFL Board of Governors and Interim Commissioner. He sees an overlapping customer profile shared by these games and horse racing: “The sports bettor is very similar to the horse racing wagerer everywhere around the world, not to the casino player. It’s not those people who come to Woodbine or Mohawk or any of the racetracks in the province and bet on slot machines. This is a different clientele, which is why I have so much problem with the government nod, currently, to allow casino operators to offer retail sports betting, but not the racetracks, not Woodbine Entertainment. It’s wrong, I’ll tell you that.”

Wrong to leave out Woodbine as a partner, but also wrong in its marketing focus, he adds. “In addition to being unfair, they’re missing the point: Their target customer is the same target customer that we’re trying to attract, which is, I don’t know what the percentages are, but the 20 to 30-year-old male is your big sports bettor, not only now, but for the future.” 

As pari-mutuel wagering declines with the gradual loss of Baby Boomers and their parents’ generation from the traditional customer base, the bottom line suffers at racetracks. Handles may look good at certain tracks, yet they will soon compete harder for every dollar as an onslaught of newly-legal betting options arrive on home turf. 

 

“If you go to Ireland, if you go to Australia, if you go to the United Kingdom, you see these retail sports betting shops offering horse racing.”

 

Lawson tells TROT, “We’re trying to replace the demographic that exists in horse racing today… That’s the [customer] that we can service, and that’s why it just frustrates me to no end that the Ontario Government is giving the nod to the casino operators who are servicing slot players and major card players. If you go to Ireland, if you go to Australia, if you go to the United Kingdom, you see these retail sports betting shops offering horse racing. They were originally horse racing outfits: William Hill, Paddy Power, bet365, Tabcorp. Those are all horse racing places that have merged into sports betting operators, the largest sports betting operators in the world.”

Woodbine was an early advocate for the legalization of Canadian sports betting: Former CEO David Willmot had lobbied for it as far back as the 2000s. While ProLine parlay tickets had launched in Ontario in October 1992, single-game bets remained unavailable, except via offshore providers not legal in Canada. In 2012, without the backing of Woodbine however, the House of Commons approved Bill C-290, the first recent bill seeking to make single-game betting legal; the Senate never allowed it to proceed. Then, Saskatchewan Conservative MP Kevin Waugh introduced Bill C-218, ‘An Act to amend the Criminal Code (sports betting)’ in February 2020, which made its way to second reading one year later and received royal assent on June 29, 2021. 

“We could see that this was gaining momentum,” recalls Lawson. “The time had come, especially during the pandemic, that we needed to generate, as a country, additional sources of revenue, and that [single event] sports betting was going to find a way to finally become legal.” Woodbine seemed to be a logical partner for the new gambling product, but ambiguous barriers which prevented teaming up in 2021 remain unresolved today, on the brink of the official launch. 

“The management and control of sports betting in Ontario goes to the provincial lottery corp, which is the OLG,” explains Lawson. “In particular, the OLG [Ontario Lottery and Gaming Corporation] is responsible for the retail sports betting, which is currently in addition to their own ProLine product in convenience stores. They’re saying today that retail sports betting is going to go to the casinos. The horse industry should have, does have, and in particular we [Woodbine] have, a major, major problem with that… I think there’s going to be a time where if we don’t have our whole Champions network [off-track wagering parlours] allowed to conduct sports betting, the horse racing industry is going to be materially damaged by the fact that we can’t generate that sort of retail sports revenue from our retail outlets as well.”

 

“There’s no question everywhere in the world… that the advent of legalized sports betting is going to cannibalize and take away dollars from the pari-mutuel horse racing dollars.”

 

Companies currently licensed to run online sports wagering in Canada include PointsBet Canada and Score Digital Sports Ventures. “PointsBet and theScore, now owned by Penn National, I want to point out, both of them are foreign entities,” notes the Woodbine CEO. “PointsBet is a public company in Australia that also trades in the United States, but these are foreign entities. And here’s my big problem: There’s no question everywhere in the world - New Jersey has been the most recent example - that the advent of legalized sports betting is going to cannibalize and take away dollars from the pari-mutuel horse racing dollars.

“Back in August, when this legislation was being legalized, I personally met with the Attorney General’s office and said, ‘You know, we, the horse racing industry, fought strongly against this in 2013 and it stalled in the Senate and it never passed. This time around, we, the horse racing industry, are prepared to cooperate with you and support legalized sports betting because we see that the government needs revenue; we think it’s inevitable; we think it’s the right thing to do.’”

Later, Lawson recalls noticing a striking omission and dangerous loophole in the legislation. “When Kevin Waugh was coming forward with the Private Members Bill it didn’t mention anything about horse racing. It just meant legalized, single-event sports bets, which if it had gone in on the basis that Kevin Waugh had proposed it, it would have allowed PointsBet, theScore, and others to offer fixed-odds wagering on horse racing. I have to tell you, if they were going to reap all the revenue and maybe be the major… [way to bet] horse racing, which has happened in Australia, they would have put the horse racing industry out of business in Canada.”

The Attorney General of Canada stepped in. “Much to David Lametti’s credit, David listened and talked this through and said, ‘No, we can’t let that happen. We understand your concern now.’” 

Previously, politicians “really did not understand how popular fixed-odds wagering had become, and the fact that fixed-odds wagering is now more popular in Australia than pari-mutuel wagering,” explains Lawson. “Then they developed a bill which was done in-part with discussion directly with myself and Woodbine people. Then, the Ministry of Justice came forward: They decided to pull their bill, and I don’t know whether it was for political reasons or expediency reasons, maybe both. They let Kevin Waugh’s bill go ahead on the understanding, and I spoke to Kevin, that Kevin was open to an amendment to his bill, which would protect horse racing.  

 

"So the federal government, much to their credit, and I’m giving a big shoutout to the Ministry of Justice, they protected horse racing. They stepped up; they protected us.”

 

“So Kevin Waugh’s bill was amended specifically, and I think it was the only material amendment, if not the only amendment, to say that sports betting did not include… horse racing. That meant the only wagering on horse racing that could occur legally in Canada was pari-mutuel, so that protected the horse industry. So the federal government, much to their credit, and I’m giving a big shoutout to the Ministry of Justice, they protected horse racing. They stepped up; they protected us. They understood the issue. By the way… that means that fixed-odds wagering is [still] illegal.” 

Fast forward to 2022: “Now we’ve gotten to the stage where this is filtering down to the provincial governments in each province for the management and control of this.” Federal protections are in place for horse racing, yet this is not the case at the provincial level. 

“We at Woodbine, we’ve been involved for a year - involved in the legislation, involved in the planning of this,” says Lawson. “We’ve met with probably every major sports betting operator that’s coming into this country… These are all horse racing companies, so they love horse racing. It’s part of their product around the world. So the intention always was, they would be able to offer it [betting on racing], but they would have to come and negotiate with us to get it on their terms, because legally, they’re not allowed to do it - it’s only allowed to be pari-mutuel.

“The only people who have pari-mutuel licenses are the racetrack holders. The only company that has a pari-mutuel license in Ontario is Woodbine, which we do for all of the racetracks in Ontario. So right now, the intention, and our expectation, was that we would interface with these major sports betting companies: They would come to us, as they already have, half a dozen or more of them have come to us and said, ‘We want to offer horse racing’, and we’ve been sending out term sheets and negotiating with these very sports betting operators to allow them, on financial terms acceptable to us, to carry the horse racing online.”

To be clear, any sports betting company operating in Canada can only act as a conduit for pari-mutuel wagering on races supplied by Woodbine (and we’re not just talking about  races from Woodbine Racetrack and Woodbine Mohawk Park). 

Combination Race/Sportsbook

 

“For example, if MGM or Caesars or bet365 wanted to offer horse racing, as part of their menu of products, it would be our product - they would merely be the host,” explains Lawson. “They wouldn’t be doing sports betting on horse racing; it would be on our tote system and we would simply integrate our system with their system, so when a bet goes, it would be a pari-mutuel bet… therefore, it would be on-side with the Criminal Code… They’re simply the host site for it and we would do it both on their system and on HPI [Woodbine’s Horseplayer Interactive ADW site]. These are things that with technology today, the bets are traceable and separable, so there’s no commingling of funds, so they’re not really doing it at all, they’re just hosting for us.” He refers to the arrangement as “seamless” for customers. 

 

“This is taking much more time [than it should]. We should be doing this as of April 4th and we still haven't got the traction with the provincial government that we’d hoped. When I said I had one really big point today, that’s it.”

 

Unfortunately, as it stands, horse racing won’t be immediately available on the new Ontario sports betting apps. Lawson says it’s more than unfortunate that the worldwide template for integrated racing/sports betting hasn’t been approved yet in his province. “This is taking much more time [than it should]. We should be doing this as of April 4th and we still haven’t got the traction with the provincial government that we’d hoped. When I said I had one really big point today, that’s it.”

He doesn’t foresee the delay lasting longer than June 2022, if that long. “I think it will happen. I think it should happen. I’m just very frustrated because it doesn’t appear [as of March 11] it’s going to be in place for April 4th, and that’s a real disservice to the entire horse racing industry. It’s going to hurt us because we’re going to fall behind the eight ball, and we should be up and running on April 4th.” 

Woodbine is a good corporate citizen, argues Lawson, perfectly equipped to be a part of the rollout. It’s not looking to become an independent sports betting licensee, only to ensure horse racing is available on other sports apps connected to HPI. “We have worked harder at this than anyone. We’re Ontario-based. We’re a non-profit. We’re putting the profits back in to support the horse racing industry,” he tells TROT. “Yet, here we go: We’ve got all these foreign companies that are going to be ready to go and make all sorts of money out of sports betting… April 4th comes along and we’re not allowed to integrate our product with them, which is what we’ve been planning for over a year.” 

Sports wagering will undoubtedly hit Canadian racing hard, right in the handle. “I can tell you, ultimately I think what you’re going to see is the major ADWs in horse racing over the next five and ten years will disappear,” says Lawson. “I’m not even sure HPI is going to be around in five or ten years. It may be more of a sports betting app that we’ve integrated with all the major sport operators, so you go on our site, but it might not be Horseplayer Interactive - it might be Sportsplayer Interactive. You would go on our site, and the lead will be horse racing, but you can bet on the Leafs and the Raptors and so on. I think this is where the world is headed. We’re not there yet, but our Dark Horse app is one that we built to make sure it accommodates sports betting; the technology is there to do that.”

For the moment, ‘Sportsplayer Interactive’ is hypothetical. “We don’t want to be approved as a sports betting operator,” confirms the CEO. Woodbine and horse racing as a whole cannot compete with the promotional blitz of the sports betting operators, either. “These are mega-companies,” he advises, to be treated as such: “The top five or six of them will come into Ontario and spend $75 to $100 million [each, annually]. Our marketing budget is about ten percent of that. So you’re going to have $750 million to a billion dollars being spent on marketing in the province of Ontario over the next year.” Partnership with these entities is obviously crucial. 

Why isn’t building racing’s pari-mutuel handle enough? “The pari-mutuel model does not work,” Lawson says emphatically, describing the bind that tracks today face: “Every time we race Thoroughbreds… we’re better off not racing. Every time we race, we pay out more in purse money than we make in wagering, so that has to be addressed. I’m not confident that it will ever be addressed.” Slots and now sports betting represent a financial lifeline for infrastructure-heavy racetracks, which have suffered because successive waves of legalization have eroded their one-time monopoly of the Canadian gambling landscape. 

Racing’s past role as supportive collaborator sustained it while boosting the popularity of slots. “Woodbine was bankrupt, basically, before the Slots at Racetrack Program [SARP] came along,” recounts Lawson. “We built up the Slots at Racetracks Program from zero dollars and we changed our [business] model: We stopped charging admission. We stopped charging money for parking. We changed everything. We invested heavily alongside the OLG in the fixtures and the furniture and the slot floors; we did all the food and beverage. We helped build the business from zero [in 1998] to 2012, when it was doing close to $700 million in slot money at Woodbine [alone].”

“We were a big part of that. We were a big part of providing the location for what was the best slots site in North America at the time, on a dollars-per-slot basis. And the [Provincial] Liberal government turned their backs on us. They canceled it; they thought it was too much money, and they didn’t replace the money. Then they decided that they weren’t going to be in the business anymore, and they decided to privatize it.”

Racetracks were not allowed to become equal partners in the SARP, adds Lawson. “We wanted to operate the slots floor and the gaming floor at Woodbine and Mohawk. The OLG told us we couldn’t operate yet, that they didn’t want us to bid on it, and so they shut us out of land-based gaming. Now that’s why you see that Woodbine has this large amount of money coming to us under our lease, at both Woodbine and Mohawk. That’s what makes the industry work, given the very deficient business model that the pari-mutuel model provides.

“They said we weren’t going to be allowed to operate the slot machines and the card games at Woodbine and Mohawk. We went out and negotiated deals as if we were going to bid, and ultimately all rent money - which is not really ‘rent’ money at all - replaces the amount of money that we would have received had we been a partner at Woodbine and Mohawk, based on the projections for gaming. Very few people understand what I just told you. Effectively, the Ontario government - the previous Liberal government and the OLG - shut Woodbine out of operating the slot machines and card games. And that’s why this is so important to us: The [pari-mutuel]  business model today doesn’t work… Yes, we have a long-term funding agreement, but we’re still fighting to keep our head above water and it’s only going to get worse with sports betting coming in.”

The AGCO (Alcohol and Gaming Commission of Ontario) and Ministry of Finance haven’t provided guidance on how to make sports/racing “coupling” happen. Sports wagering at physical locations will begin parallel to the online debut, on April 4, with Woodbine similarly unable to offer it at brick-and-mortar tracks and Champions outlets. “The sports betting demographic is the same group of people as the horse racing demographic, and that’s what the government has missed here: They’re handing the retail sportsbooks to the casinos, but casinos don’t run sportsbooks,” says the Woodbine CEO. “I acknowledge there are sportsbooks at the casinos in Las Vegas, but let’s step back and think: Where are the sportsbooks in the world? Paddy Power in Ireland; William Hill in the United Kingdom - those are the real sportsbooks around the world. 

“Even if you go into the United States, the biggest sportsbook in the United States right now, by far, is at the Meadowlands Racetrack. Jeff Gural is making a killing because in a different sort of way, he’s participating and sharing. This again hurts the Ontario horse racing industry, because we’re competing with Jeff Gural for the best horses, and now he’s making all this money because he runs a large sportsbook at The Meadowlands.” 

Lawson says he can see that model working at Woodbine, Woodbine Mohawk Park, WEGZ Stadium Bar, and select Champions locations like Greenwood. “I continue to be dismayed that we weren’t the obvious choices to host sportsbooks,” he adds. “By the way, we’re not looking for exclusivity. If the casino wants to set up a sportsbook inside Woodbine, in their premises, we’re happy to have them do that, but please don’t tell us we can’t do it - we’re in the sports betting business. That’s what we do.”

“It seems so obvious, I’m at a loss for words. I don’t know why it’s not approved,” he shares. “There couldn’t be a better place in this province than allowing a sports betting lounge at WEGZ in Vaughan. We do $25 million [annually] of pari-mutuel wagering there. We will triple that or quadruple that, to the benefit of the horse racing industry and a partner - we probably wouldn’t run it, we’re not a sports betting operator… We would do something with a bet365, or even OLG and call it the ‘ProLine Sports Bar’, rather than WEGZ.” 

Why this location? “All you have to do is go to WEGZ [Stadium] sports bar in Vaughan and see who’s going there. That’s the demographic that’s going to bet on sports, not the demographic that’s going to pull slot machines at Woodbine.”

Fixed-odds wagering is also inching towards acceptance in Canada, in his view. The question is just when and how. “I think it’s on the horizon. It would necessitate an amendment to the Criminal Code… We’d have to be careful that we were doing it in conjunction with the government to ensure that horse racing is protected, however that happens, so that every fixed-odds wager that goes on in the province, that Woodbine and all the racetracks have a share in that revenue. It’s not going to happen very quickly. I think the reason it’s going to happen is because the marketplace is going to demand it over time.”

Horse racing is often accused of overdependence on subsidies. Is developing greater independence the goal for Woodbine? “Absolutely. That’s been my goal for six years, to try and do that,” notes Lawson. “That’s why we’re developing our real estate. That’s why we are taking such an aggressive approach on working with these sports betting operators. We need to generate alternative sources of revenue, because if it’s left simply to pari-mutuel wagering we’re never going to dig ourselves out of this hole and we’ll be on this subsidy forever from the provincial government. And that’s what makes this even more dumbfounding for me: They should be trying to help us get out of this, so they’re no longer subsidizing us.”

Slots players never had much in common with horseplayers, so when slot machines brought these customers to racing venues there was never much potential to cultivate future racing bettors. Lawson says poker players, sports bettors, and horseplayers share enough common ground that there is already crossover, but racing has suffered from regulatory barriers to exploring that natural synergy. Now is the moment to position racing alongside other fast-moving, statistically-driven games whose fans may find themselves won over by the ultimate athlete - the racehorse. Otherwise, there are few avenues by which a complete newcomer is likely to discover horse racing today. 

“Oh, I think [sports betting] can absolutely elevate [racing],” agrees Lawson. “If we’re mainstream and these companies are all spending $75 million a year on marketing, it’s a real potential rejuvenation for us, and that’s why it’s got such great potential.” 

 This feature originally appeared in the April issue of TROT Magazine. Subscribe to TROT today by clicking the banner below.