Life After Pari-Mutuel Wagering

Moderator Jeremy Pierce allowed horseplayer Dean Towers to launch Wednesday's first panel of the Standardbred Wagering Conference, Life After Pari-Mutuel Wagering

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"The thing about gambling is that you need to make money," Towers said, grinning, "and horse racing doesn't do that very well."

He referenced a blog online penned by a young man in the United Kingdom labeled the '0 to £150,000 challenge.' Towers said that by playing betting exchanges, the man is making about 1,000 pounds a day despite the fact that he knows nothing about horses and has never been to the track.

"So you can win at this game," Towers stressed, "and that's a compelling argument to many bettors out there."

He went on to discuss the potential of offering fixed-odds betting at the 'B' tracks in Ontario and across the country. "It's something I thing definitely should be looked at, if it's all packaged in the right way. This is [an] ROI-driven marketing, something the pari-mutuel system cannot do."

"But there are obviously restrictions based on legislation," asked Pierce, turning the discussion over to lawyer Michael Lipton of QC Elkind & Lipton LLP Barristers & Solicitors. "So what do we need to do?"

"In my view," offered Lipton, "they (betting exchanges and pari-mutuel wagering) can co-exist and it's very important that they do. I think the future lies in the fact that you are going to have to develop new products. And it comes down to the question of modifying the criminal code." Lipton went on to explain the differences in federal and provincial legislations, both of which are involved in some capacity, in monitoring horse racing.

"In order for you to change the way in which you have any form of betting," Lipton suggested, "you have to look to the criminal code. It's a federal legislation, but the pressure to change those regulations should come from a provincial level."

Pierce then introduced Mark Davies, managing director of Corporate Affairs at Betfair, who took the stage to explain their betting exchange system -- how it works, what it offers, and where it's going.

"I think that if 50 per cent of the bad stuff said about Betfair were true, none of the founding group would have had anything to do with it," he began, with a grin.

"I've spent a lot of time working with governments, and I've spent a lot of time explaining to them that we are basically a technology company. We are catering to a demographic that I don't understand, and that you might not understand, simply because these people live their lives in a very, very different way that you and I do. These people are internet savvy, and ultimately, the customer today will go find the product he wants at the price he wants, even if it is not offered in his jurisdiction. It doesn't really matter what is being offered to the customer, it's what the customer is looking for."

"Integrity in sport is best dealt with transparency," added Davies, in response to an earlier comment. "And I always tell people: it's not the path of least resistance that someone with a criminal mind will take -- it's the path of least detection."

The concern is corruption, the concern is money laundering, he pointed out. "But every move that you make is being tracked by us. The exact details of each bet as it goes through the process, he explained, are recorded with a great deal of information in real time."

"Tell us where you are now," Pierce prodded, "and where you hope to go in the future."

"The question that's always asked is if we are going to release our betting exchange in the United States," Davies replied, "and at the moment, we have no plans to do so, though we are keeping our ear to the ground on a federal and a state level. In regards to Canada, I can say that we are always cognizant of the legal situation in each country, and we always take the advice of the leading lawyers in each jurisdiction.

"We believe we reach out to a new customer segment that racing, I believe, is not otherwise reaching. Our view is that we think we have a product that makes sense, and we are happy to come in and talk to anybody who's interested."

"Is the gross profit model the only way to run a betting exchange?" Towers asked, noting the concern of racetrack owners around lowering takeout and decreasing their profit margins overall as a result.

"Empirical evidence around the world undermines that argument (that operators will lose money by lowering takeout) quite dramatically," Davies responded emphatically. "Lower margin is where horse racing has to go in order to compete with all the other sports out there. Even if you are concerned about lower margin, what you should probably throw into the mix are the people who get involved at the margins because of the lower margins.

"The short answer to your question is that it (the gross profit model) is the only model that works," he added. "We don't believe that low margins are something to be scared of, but if you are scared of it, you need to take into account the number of new entries to the market on account of having adopted a system that caters to what they want."

"There is no debate about the commercial viability," added Nick Eaves of Woodbine Entertainment Group from the audience, "and customers are speaking with their wallets. But how can we get it here if the government regulations are so restrictive? What are our options?"

Eaves asked what the industry is going to do to try and harness this energy? He encouraged, quite strongly, the industry as a whole to approach provincial and federal levels of government with an explanation and a plan and tell them that this is what you need.

"I can tell you that one of every two accounts that will open with us today will be opened from outside of the UK," Davies explained, in closing. "And one in two accounts that opens up places its first bet on soccer. In our view, the biggest threat to racing today is losing market share. For price-sensitive punters, horse racing is not an attractive book."

For more information on Betfair, you can visit its website or pick up a copy of a book being released today -- You Bet: The Betfair Story -- how two men changed the course of history.