Archives for July 2009

WILL YOU BUY THIS BOOK?

The July 29, 2009 Wall Street Journal has a review (“Trouble at the Track”) by Ray Kerrison of a new book by Jim Squires titled Headless Horsemen (Times Books, 249 pages, $25). Mr. Kerrison is the racing columnist for the New York Post.  Mr. Squires is the former editor of the Chicago Tribune, owner of Two Bucks farm with his wife, and breeder of Kentucky Derby winner Monarchos.

According to Mr. Kerrison’s review, Mr. Squires implies, based on rumors and innuendo, that:

  • Secretariat’s racing performances may have been aided by steroids. The sources for this revelation are “oldtimers.” The corroborating evidence is that the colt had trouble settling mares early in his stud career.
  • The late Frank Whiteley, who trained Damascus and Ruffian, may have owed some of his success to using cocaine on his horses. The evidence here is: “Denigrators of the late Frank Whiteley [1915-2008], the surly magician who trained Damascus and Ruffian, ­sincerely believe that his magic came from sniffs of ­cocaine and say they know people who say they saw Whiteley coming out of the stalls brushing the white dust off his hands.”  In other words, someone told someone else and he or she told Mr. Squires, who is telling us.

Mr. Kerrison writes: “One wonders what Mr. Squires, in his days as the editor of the Tribune, would have said to a reporter who gave him such an accusing story based on hearsay and third-hand accounts. But in the world of horse racing —with its lax management and loose supervision—rumor and hearsay take on a life of their own. Mr. Squires presses on, revisiting the horse-doping suspicions that dogged Dr. Alex Harthill (1925-2005), the most gifted—and, to some, the most notorious—veterinarian in racing history. Mr. Squires finds Harthill’s successor in the current-day veterinarian Steve Allday, who was associated with many top horses in the 1990s.”

Also coming in for criticism are Ogden Mills Phipps and William Farish, who Squires alleges control the sport, along with other bluebloods. 

Thoroughbred auctions are said to be places where buyers are duped.

Racing no doubt has its share of problems and is need of reform and oversight. However, Mr. Squires’ book is likely not to be the catalyst to begin the process. There is a huge difference between making a case on rational facts and resorting to a whining diatribe based on hearsay by unidentified accusers referred to as “oldtimers” and “people.” Disparaging a racing icon like Secretariat and a Hall of Fame trainer like Frank Whitely serves no purpose at all.

Mr. Kerrison closes by commenting, in part:

“Mr. Squires has been a prominent reformer in the crusade against illegal drug use, only to be hit with the unthinkable. One of his horses last year was flagged in the lab for running with a banned substance, which resulted in the suspension of his trainer. Mr. Squires, furious and embarrassed, insists that his horse was the victim of sabotage calculated to silence him….He certainly hasn’t been silenced, but “Headless Horsemen” is long on complaints but short on solutions…”

If racing is so hopelessly corrupt and rigged, why not simply invest your money elsewhere?

I am going to read Mr. Squires’ book to make up my own mind about what he says.  But I’ll be getting it at the library rather than purchasing it.

Copyright © 2009 Horse Racing Business

Click here to read Mr. Kerrison’s Wall Street Journal book review of Headless Horsemen.

INTERVIEW WITH PROPICK RACING

ProPick Racing (propickracing.com) has one of the most creative and innovative business concepts in a long time for attracting new fans to horse-race wagering.   The esoteric nature of handicapping can be a real barrier to neophytes.   ProPick Racing takes much of this intimidation factor away.   Additionally, ProPick Racing may appeal to some experienced handicappers who like to wager but who do not have the time or inclination to thoroughly analyze races.

The ProPick Racing website is easy to navigate and is replete with information and insights from expert handicappers.

Following is an interview with ProPick Racing that explains its business concept and provides some details about the company.

HRB:   How would you describe ProPick Racing?

PPR:   ProPick Racing’s professional industry analysts evaluate horse races and post the best wagering opportunities on our website.   The site is tailored for novices and newcomers to Internet wagering on horses and utilizes many non-traditional marketing concepts to attract new players to an old sport.   The concept has been deployed on kiosks for installation in bars and wherever pari-mutuel account wagering laws permit.

HRB:   When did ProPick Racing begin to offer its services online?

PPR:   Our initial soft launch was in December, 2008.   Our actual launch date was in March, 2009.

HRB:   In what city and state is ProPick Racing headquartered?

PPR:   Las Vegas, NV.

HRB:   Is ProPick Racing’s hub in Oregon?

PPR:   Yes, we use the Amtote Hub in affiliation with US Off-Track.

HRB:   What is ProPick Racing’s value proposition and how is it different from other advance deposit wagering (ADW) companies?

PPR:   ProPick Racing believes that winning encourages education, a complete reversal of the industry paradigm of education first.   Unfortunately, in the sport of horse racing, education can become very expensive.   By reversing the model, a novice can enjoy all of the excitement with a reasonable entertainment budget.

While other ADW’s focus on the experienced player, ProPick Racing believes that since it takes time to develop the skills necessary to place a winning wager, education actually becomes a barrier to new player acquisition.   We cater to this less experienced audience who may enjoy the beauty and action of the sport but may not have developed the skill set.   We offer expert advice from handicappers with proven results.   Our goal is to help people win, and then the experience of winning will increase their desire to learn more and participate more actively in the sport.   The more a player learns about the sport, the more enjoyment he or she will derive.

HRB:   Who conceived the value proposition?

PPR:   Tony Fontaine (the president of ProPick Racing).

HRB:   What is Mr. Fontaine’s career background?

PPR:   Mr. Fontaine received the Internet Innovator of the Year Award at the 3rd Annual Symposium on Internet Gambling Law and Management, the ‘Most Innovative Product Award’ from the River City Group, and most recently received William Shatner’s ‘Heartbeat of America Award’ for entrepreneurialism.

As an executive consultant specializing in Casino gaming, class II, his pari-mutuel race and sportsbook clients have included IGT, the Nevada Pari-Mutuel Association, Las Vegas Gaming and Scientific Games.

Prior to this, Mr. Fontaine was the Vice-President of Interactive Gaming for Station Casinos Inc.   He was responsible for development and implementation of a comprehensive online and interactive gaming strategy for the corporation.   In addition to managing the development of web-enabled casino, race, and sports-based products, Mr. Fontaine formed GameCast Live, a wholly-owned subsidiary of Station Casinos focused on live gaming applications for slots and table games over intranets and the Internet.

Previously, he was Vice-President of Applied Technologies for Alliance/Bally Gaming.   In this role, his exclusive charter was to pursue new delivery media for gaming; including server-based gaming applications and the use of Internet, intranets and closed-loop subscriber-based delivery systems.

Mr. Fontaine has over 30 years experience in marketing, sales, and engineering for high-technology companies, including Motorola, QMS/Imagen, SRS Imaging and Sun Microsystems.   He has spoken extensively around the world at seminars and conferences, including special technology seminars for the Nevada State Gaming Control Board.

HRB:   Is ProPick Racing’s profit model the same as for other ADWs that are compensated by the racetracks when wagers are placed with them?

PPR:   Yes, we never charge for picks or educational classes.   Information should be free if we want to attract a new market.   We just have to be smart enough to live with and succeed with the same low margins as other ADWs.

HRB:   Your analysts–Gary Brower, Mike DeAngelo, Richard Eng, Steve Klein, Kristin Sadler, Steve Schwartz, and Gary Smith–include some well-know handicappers.

PPR:   All of them are horse-racing professionals, many of whom have written books or articles for various horse racing publications.   We put a brief bio of each handicapper online.   We also publish the results of every pick they make, win or lose.

HRB:   ProPick Racing is privately held.   Is the intention to eventually do an initial public offering?

PPR:   This is a difficult time for the horse-racing industry.   There is public confusion about online gaming and complex restrictions on content placed on regulated operators by the industry itself that only add to the confusion.   Until there is more of a unification of purpose and acceptance of new ideas in the horse-racing world, it is premature to even speculate about the future of horse racing, let alone ProPick Racing.

HRB:   Yours is certainly a unique approach.    Moreover, it takes a company very confident about the quality of its handicappers to be so transparent about their wins and losses.   Thank you for your insights.

ProPick Racing has great potential to recruit new fans to pari-mutuel wagering on horse racing.  

Copyright © 2009 Horse Racing Business

INTRIGUE IN THE BUCKEYE STATE

Governor Ted Strickland of Ohio, a Democrat, was steadfastly opposed to expanded gambling in the Buckeye state as recently as June 2009.   Since his election in 2006, he has promised to veto any bill that the legislature might send him permitting racetrack slots.   In addition, he campaigned against a 2008 ballot initiative that would have installed a casino in Clinton County.   The Ohio Senate, with the Republicans in the majority, has also opposed alternative gaming, while the Ohio House has supported racetrack slots since the Democrats gained control in 2008.   The Ohio State Racing Commission, whose members are all Strickland appointees, have strongly supported racetrack slots.

With a huge budget deficit and a looming cut in state services, Strickland had a 180 degree change of mind if not of heart.   In a compromise agreement with Senate Republicans to break a budget deadlock, the legislature crafted language enabling the governor to permit Ohio’s seven racetracks to each install 2,500 video lottery terminals.   The operation is to be under the auspices of the Ohio Lottery Commission.  

This rapid turn of events has created flux and questions and the fallout is likely to greatly affect the fate of racing entities in Ohio and states surrounding it.   The many “what ifs” and “what will they do” would perplex a soothsayer in predicting how things will eventually shake out.   Here are the major contingencies.

1.  The governor and the legislature are about to be challenged in court, mainly on the basis that any expansion of  gambling must be sanctioned by Ohio voters in a statewide referendum.   A nonprofit named the Ohio Roundtable and a couple  of church groups have already promised as much.   Ironically, the United Methodist Church is a leader in the anti-slots movement and Governor Strickland is an ordained Methodist minister.   The Ohio Supreme Court may quickly dismiss legal objections or the justices might agree with the plaintiffs.   Even if the constitutional authority of the governor and the legislature is ultimately upheld, the case could drag on.   Moreover, there is the possibility that the antigambling forces will sponsor and win a statewide vote repealing the work of the governor and legislature.   In that event, racetracks would have to give up slots and take a heavy loss in the process owing to the machines that were purchased and the facilities that were remodeled or built from scratch  to accommodate slots.

2.  A casino initiative is planned for Ohio for  the November 2009 ballot.   It would allow for a total of four casinos–in Cincinnati, Cleveland, Columbus, and Toledo–and 20,000 slot machines.   A key player is Dan Gilbert, who is the founder of Michigan-based Quicken Loans and the majority owner of the Cleveland Cavaliers NBA franchise.   Should the casino referendum be approved, then the quasi-geographical monopoly on slots enjoyed by the racetracks would disappear.     Six of Ohio’s seven racetracks are located in the metropolitan areas of Cincinnati, Cleveland, Columbus, and Toledo and the other track, Lebanon Raceway, is considering a move to near Dayton.   The racetracks would still have a lucrative franchise, just not as valuable.

3.  Prior to the slots authorization by the governor and the legislature, Penn National Gaming (owner of Raceway Park harness track in Toledo and an Indiana casino near Cincinnati) was reported to be in favor of the November casino initiative.   Now, with its harness track in line for slots, Penn National Gaming’s top management has a decision to make regarding supporting or not supporting the November ballot initiative.   (Penn National Gaming hugely funded the campaign to defeat the 2008 ballot referendum on the casino in Clinton County because it would have competed against its Indiana casino.)   Interestingly, Penn National Gaming  did not join with management of the other six Ohio racetracks when they recently wrote to Governor Strickland to embrace his slots plan.   If Penn National Gaming assists in funding a winning marketing campaign for passage of the casino ballot initiative and then does not secure the casino license for Toledo, it will have seeded competition for its own racetrack.

4.  MTR Gaming Group owns Mountaineer Casino Racetrack and Resort in Chester, West Virginia, Presque Isle Downs and Casino in Erie, Pennsylvania, and Scioto Downs (harness track) in the Columbus, Ohio, area.   MTR Gaming Group is no doubt opposed to the proposed November Ohio casino ballot issue.   On the other hand, the slots authorization is a two-edged sword.   Scioto Downs will gain slots but MTR Gaming Group’s West Virginia and Pennsylvania properties will be damaged financially by slots at  Cleveland’s Thistledown (Thoroughbreds) and Northfield Park (Standardbreds).   MTR Gaming Group’s racinos in Chester and Erie are very dependent on Ohio customers.  Whether stock market investors see slots in Ohio as a net gain or a net loss for MTR Gaming Group looks to be the former.   On July 10, 2009, the day when Governor Strickland and the legislature came to an agreement on slots, MTR Gaming’s stock opened at $2.35 per share and closed at $3.48 per share for a 48% gain.

5.  River Downs in Cincinnati could be a big winner and Kentucky’s racing industry a big loser.   River Downs is only 14.7 miles away from Kentucky’s Turfway Park, across the Ohio River, 90 miles from Keeneland, and 107 miles from Churchill Downs.   A racino at River Downs might be the death knell for Turfway Park (thanks to the gift from the Kentucky Senate in keeping slots out of Kentucky) as racing and slots customers in the Cincinnati metroplex, including Northern Kentucky, gravitate to the River Downs racino.   At the moment it is uncertain how much Ohio purses will be augmented by slots.   If the horsemen are treated well and purses increase dramatically, then convenient River Downs will likely be a favored place for Kentucky stables to race.   Incredibly, a down-on-its-luck River Downs reinvigorated by slots could detract significantly from the quality of summer racing at Churchill Downs.   Think about the lure to sports and racing fans from Louisville and Lexington of a day at River Downs followed by a Cincinnati Reds game at night.

6.  Thistledown near Cleveland is soon to be auctioned off  by the bankrupt Magna Entertainment Corporation.   Suddenly, with the prospect of slots, Thistledown’s market value has escalated.   Thistledown is likely to recover from the verge of extinction to become a healthy going concern once it is able to compete on more even terms with racinos at Mountaineer Casino Racetrack and Resort (which has both slots and table games) and Presque Isle Downs and Casino.   However, a buyer has to value Thistledown not knowing whether a new casino is coming to Cleveland, depending on how the November ballot comes out.

7.  The Cleveland-area racetracks–Northfield Park and Thistledown–are within seven miles of one another and the Columbus-area racetracks–Beulah Park and Scioto downs–are nine miles apart.   This proximity should assure a battle royal.   If Ohio voters in November 2009 approve casinos for Cleveland and Columbus, the competition will escalate even more.   

8.  Assuming that the slots installations are not slowed by legal challenges, how soon the racetracks can get them up and running remains to be seen.   The governor’s goal is to have them functioning by at least May 2010 so that the state can apply its slots revenues to the budget, which would be much quicker than other states (e.g., Pennsylvania) were able to do so.   One of the racetracks is planning on temporarily housing slots in its grandstand while it builds a state-of-the-art slots/hotel complex adjacent to the track.   It ambitiously wants to have slots open to the public by the end of 2009.

How these matters turn out should have a profound effect on horse racing in Ohio and contiguous states.   Fortunes will be enhanced and impaired in the process.

Copyright © 2009 Horse Racing Business

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Specifics of the slots legislation:

• Each racetrack must pay a $100,000 nonrefundable application fee and a $65 million licensing fee.   The first payment on the licensing fee is due in mid-September 2009 with four installments thereafter.

• Licenses will be awarded for a 10-year period.    A racetrack must agree to make at least $80 million in facility improvements within the first five years of operating slots.  The initial year’s investment must be at least $20 million.

• Half of the net revenues generated by the slots will go to the state of Ohio, which is one of the largest percentage cuts in the United States.   Part of the state’s revenues will be used to cover operational costs and the remainder will go to school funding.    Horsemen’s groups will negotiate directly with racetracks to determine the portion of slots revenues that will go to purses.