Racetrack slots: A cautionary tale

It appears that the Kentucky thoroughbred industry will soon start reaping the benefits of racetrack slot machines. On Wednesday, a Senate subcommittee in the Bluegrass State approved a bill that will allow voters to approve as many as seven casinos in the state. There are several more hurdles that have to be cleared before racetrack slots come to be in Kentucky, but it seems likely that racetrack gaming is going to happen there.

The latest news put a big smile on the faces of many a Kentucky owner, trainer, breeder and racetrack operator, but before they go into full celebration mode they ought to take a moment to consider what’s going on in Ontario and Pennsylvania. In that state and province, racing is in turmoil and horsemen there realize a lot of that has to do with the many mistakes they made when it comes to racetrack casinos.

In both places, the casinos are pumping millions into the pots for both thoroughbred and harness races. It’s gotten to the point where the money derived from pari-mutuel betting has almost become meaningless when it comes to purses. The problem with that is that the tracks and horsemen are totally at the mercy of politicians.

The same politicians that signed bills that provided the sport with a huge windfall from casino gambling can just as easily change those laws and pull the plug on the gravy train.

To the surprise of no one, it’s starting to happen. Pennsylvania Governor Tom Corbett wooed the racing industry as a candidate and promised he wouldn’t touch their slots money. It was a bald-faced lie. Earlier this month, he submitted a budget that called for an annual cut of $72 million from the slots fund that currently goes to racing. If that happens, purses at the Pennsylvania tracks will be decimated.

It’s even worse in Ontario. There, an economist named Don Drummond, who was enlisted to help solve the province’s economic problems, suggested in a report that the horse racing industry should no longer receive any money from Ontario’s casinos.

It’s OK to feel sorry for racing people in those places, but only a little bit sorry. Everyone entered into these slots agreements with blinkers on, so eager to get their hands on their piece of the millions the “suckers” would lose at the slots machines that they never thought past tomorrow.

Two major mistakes were made.

No one sat down with their political friends and insisted on language that set in stone what racing would get from the slots. They should have insisted not only on their cut but also on guarantees that their cut would never be tampered with or reduced. Instead, they sat back and put their trust in the politicians. Did they really think they would never get stabbed in the back by the likes of Tom Corbett?

And they got greedy. Virtually every penny of the slots money went to purses, which did nothing for the sport other than put a lot of money into the pockets of owners and trainers. There were millions out there and had just a small fraction of them been used to promote the sport, lower takeout or attract new fans racing could have enjoyed a renaissance. A renaissance would have meant that the sport wouldn’t necessarily have to rely on slots subsidies.

In Ontario, at least someone figured that out. Standardbred Canada put together a plan calling for just 5 percent of purse monies in Ontario to go to a marketing program. That would have given them $180 million to spend on rebuilding the sport. The horsemen rejected the plan. Now, they’re faced with losing all of the slots money and with nightly betting handles so feeble at some of the tracks that they may soon be competing in races worth $1,000.

As it is, particularly in Pennsylvania, virtually nothing is spent on marketing racing. Casino interests run the tracks in Pennsylvania and they understand where their money comes from. It’s slots and not horses, so they have no interest in promoting a side of their business that adds next to nothing to their bottom lines. The result has been that Pennsylvania horses are running for huge purses but in front of empty grandstands and in races where the betting pools are anemic.

Kentucky racing interests have to learn from the mistakes made elsewhere. And so far it doesn’t look like that is happening. They’re going ahead with this without a vision, plan or guarantees. The existing legislation doesn’t include the kind of language the sport should demand, language that ensures that the industry will always be protected. In fact, no one seems to know how much will be given to the racing industry from the gaming revenue. Nor has anything been mentioned about forcing the racetracks to use some of the money to promote racing. Has anything been said or written about some sort of safeguard against Kentucky politicians deciding someday that maybe the money should be spent on something else besides horse racing? Not that I have seen.

Getting gaming at the Kentucky racetracks can benefit the sport greatly, and racing interests there are right to be fighting for it. Just remember, though, you’re dealing with politicians and executives who care a lot more about making money than the good of horse racing.

Watch your backs.

Originally Posted on ESPN