Robert Scarpelli, the managing director of HLT advisory, launched the first session by discussing what he called, 'the major issues in horseracing from a non-horseracing perspective.'
"We really look at the horse racing sector similar to how we look at other sectors of gaming,” he explained.
“The growth is really coming from the casinos," said Scarpelli. “What’s really striking is that pari-mutuel, bingo and lotteries are flat.”
But where, he prodded, does horse racing really fit in this $15 billion industry?
“Really we focus on the win or the take, and it’s pretty stable. In the past 10 years the take has been around $400 million. That’s the money left over after all the customers have been paid. But it is, by the way, the smallest win level of all the other gaming sectors.”
Scarpelli does see a number of issues with the industry from a non-horse racing perspective, and he brought graphs and charts to quantify those suggestions.
“A lot of people say the industry is under-supplied. Actually, horse racing in Ontario has the most facilities out of any other gaming in Ontario. From a supply perspective, horse racing is highly accessible.
"Another standard argument in horse racing is that the introduction of other forms of gaming has really hurt the sector," he said, pointing to a chart that clearly indicates otherwise. "But from a wagering perspective, it’s hard to draw the conclusion that the introduction of other forms of gaming has had a negative impact on horse racing. If you offer all the products to all the customers, they are going to choose what products they want. If your product doesn’t appeal to your primary customer base, that’s an issue. The days of saying to the government, 'we need something because you impacted us' are over.”
In examining factors such as increased foreign product, Scarpelli was quick to dispell issues of competition.
“Part of the reason we’ve had an increase in foreign product is the increase in foreign product. If there’s a balance found, the appeal of Ontario product can increase in this province, and if you apply that across the country, then it can increase across the country. Out of all the jurisdictions in North America, there is only one jurisdiction that wagers more on its own product than foreign product, and that’s California.”
As money continues to be pumped in via the slot program, and customer wagering is decreasing, Scarpelli thinks that the policy-makers will be looking at this issue in the not-too-distant future.
"Who’s wagering on Ontario product? The historical base of the sector has been – we fund purses, they attract customers, wagering from customers should fund the purses." Interestingly enough, he points out, there is not one major event in Ontario that is self-sustainable – Queen’s Plate, Breeders Stakes, North America Cups, etc. That should be concerning to the sector.”
One key concern Scarpelli noted for horse racing was the revenue factor.
"The difficulties with horse racing compared to other sectors – pari-mutuel has the smallest profit level out of other forms of gaming. If a government wants to make money from gaming, lotteries and VLTs are the way to go. Horseracing is about 6 per cent profit out of the total revenue for the industry.”
He also suggested that horse racing is the most labour intensive of the sectors, with the least amount of marketing -- spending around 1.7% of revenue on marketing, in comparison to the huge dollars -- occasionally as high as 20% of revenue -- spent by casinos.
The next speaker was Mike Tanner, Executive Vice-President of the United States Trotting Association. Everything, began Tanner, has been in decline since mid-1980s -- except for one thing.
"Mutuel handle has dropped by about 25%, live race days are down 56% since 1985, registrations dropped from 18,000 in 1985 to about 9,000 last year, and we saw a decline in pari-mutuel tracks -- there were 46 in 1985 and we're at 39 right now. Purses should have taken a dramatic decline as well, but total purses in the United States up 53.97 per cent since 1985. If you look at the states with racinos, that number is even greater. It doesn't take a rocket scientist to figure out that we have a sort of upside-down economic model. We have this sysytem in the U.S. right now where we have the haves and the have-nots."
Tanner emphatically stated that this should be the best time to own a racehorse. "We have a sport in which you can participate in a hands on matter, and yet we have a participation issue!
"It's 2009, but racing looks a whole lot like 1969 or 1959 even. The world has changed and racing, at this point, really hasn't. We need to re-consider partial re-invention of the product. At this point I think we need to look at all sorts of things."
One of the things Tanner stressed was the need to concentrate on integrity.
"If people don't trust the system, they're not going to bet into it."
He further stressed how thrilled he was to be and to be working in conjunction with Standardbred Canada, as collaboration, he said, is so important in facing these issues.
"Same with the thoroughbreds," noted Tanner. "We are so much more similar than we are different."
Next up was CPMA's Rande Sawchuk, who discussed an update of the currently in-progress review of Canadian pari-mutuel wagering. The focus, he said, was on "what we are doing and what is the governance model that we have in place."
The review was all encompassing, he said, but only focused on that small section of the industry that the CPMA has a view toward. This review then culminated into a package of proposed changes, released May of last summer.
"My attendance here has more to do with the fact that you are having a meeting than with the fact that we have achieved something," stated Sawchuk. "What we are busy doing now is articulating in policy language the recommendations we have come up with over the last few years.
"We are a little bit behind where I would like to have been at this point. After we do finish this internal process, the proposed language with come back, and I will introduce it to our Minister, walk him through it, and then we will have contact again with you."
Sawchuk confirmed that the changes are consistent with all the things that have discussed over the last number of years. "We recognize that there are a number of very specific regulations that limit what a betting theater can be, for example. Other than that, there has been a modernizing theme. This has been a federal initiative, a long, slow-moving process at times, but it really is a collaborative effort, and I think it will culminate in some meaningful change."
Standardbred Canada's Darryl Kaplan wrapped up this first session. Looking back at last year, Trot's editor-in-chief began his presentation by pointing out that everyone left the inaugural wagering conference with motivation in mind. "We left there saying we wanted to accomplish some things," he pointed out, and so he focused his attention on giving an update on the Standardbred Wagering Action Plan, beginning with the Research Committee.
"We didn't want to reinvent anything, we didn't want to another study. We wanted to take all the information that's out there and see what we could come up with. One of the ideas that came out of that was a festival. We felt that after that study was done, that there needs to be some sort of national brand. In March we introduced Adrenaline. We consider this a marketing initiative and also business development."
Kaplan showed a fictional schedule in 2015, and emphasized that the main thing about Adrenaline was a plan of self-sustainability. "It is our target to have another city identified and announced for Spring of 2010, and we hope that Adrenaline will be able to move right across the country."
The next update was on the development of the Canadian product. "For the longest time, people have talked about the need for a Canadian product," he said. "We can't have just one racetrack operating like in Sweden. "But if we are going to have four or five operating, we can at least put them into one signal and be able to do all the great things that Sweden can do -- the marketing, the branding, the betting exchange, You can't do a betting exchange with 15 products -- they need a focus."
With the groundwork in place, Kaplan stressed the need for collaboration and co-operation from racetracks and horse associations. "The bottom line is that we need to work through it and make it successful."
Kaplan then introduced the plan for a national product -- Canada One -- with an overview -- he mentioned operating races daily from 6-12 hours between 12pm and 12am EST, using full race cards from 2-4 racetracks each day, taking all simulcast signals from across Canada and delivering one feed to simulcast partners, and creating an umbrella brand.
Benefits of this national product initiative, Kaplan suggested, include an increase in distribution and handle, a decrease of costs, the creation of a foundation for future wagering initiatives, and the building of strong brand for harness racing. "We think that the national product is a very good way to put it all together," he said.
Other initiatives he discussed included a Canadian betting exchange, an innovative multi-leg, multi-track racing series with a target launch of 2010, a national, lottery-style wager, new distribution models, and an investment in innovation committee.
Kaplan also posed a hypothetical question. "What are the chances of harness racing being self-sustainable in 2050?"
According to Trot's May State of the Industry issue, the consensus answer was 60-1 that in 40 years we will be self-sustainable. "That's pretty amazing to me," he said.
"We then asked the next question," he added. "What are the chances of their being NO harness racing in 2050?"
Consensus answer was 58-1.
"So we will not (likely) be self-sustainable, he said, but we will (likely) still have harness racing." This, he pointed out, is an interesting statement.
In a provocative closing, Kaplan made reference to a poignant quote from Helen Keller: "the most pathetic person in the world is someone who has sight, but no vision."