ARE MILLENNIALS THE DEATH KNELL FOR CASINO VLTS?

Video lottery terminals, or slots for short, are an important source of purse revenues in horse racing.  Moreover, some states have become increasingly dependent on slots and table games to fund operations.

The Wall Street Journal (November 7, 2017) ran an article titled “Northeast States Bet on Gambling,” which led off:  “The proliferation of legalized gambling in the Northeast is showing no sign of abating with states and developers continuing to push more casinos, in some cases to help fund state budgets and ward off competition.”

For example, although Pennsylvania is already the second largest gambling market in the United States, its governor signed a bill last week to increase the ways its residents can gamble, such as online, slots at truck stops and airports, and as many as 10 satellite casinos with up to 750 VLTs and 30 tables.  New York, Ohio, New Jersey, and Maryland have also been aggressive in expanding gambling.

For some time, I have wondered whether the popularity of VLTs may have peaked and will go into a long downward spiral.  This may be dead wrong, but it is a possibility, as younger generations age, in particular the largest segment of the U. S. population—the Millennials.  While there is no precise definition of Millennials, it refers approximately to people born between 1980 and 2000.  This group came of age in an era of the Internet, mobile computing, smartphones, social media, and online streaming.  How many of them will go to slots parlors as they get older is an open question.  Will they find it to be slow and boring?

New Mexico recently reported its operating results for video lottery terminals for fiscal year 2017.  Revenues were $226 million compared to $241 million in 2016 and $265 million in 2015.  This equates to a decline of 14.7% in the past two years.  Is this the beginning of a trend that will spread?  Or is it an islolated case owing to the downturn in the oil and gas industry?

I once thought that VLTs will gradually lose popularity as baby boomers are replaced by far more computer-savvy younger generations, who won’t go to casinos to play “passe” slots, an entertainment of choice for dad, mom, granddad, and grandma.  Now I am less sure because of what has happened recently in the U. S. book publishing industry.

Nearly a decade ago, Amazon introduced its Kindle e-book reader and quickly took market share from print books.  The future looked bleak for traditional paper books and brick-and-mortar bookstores.  In 2013, for instance, print books in the United States were down year-over-year about six percent.

Then, suddenly, the trend reversed itself.  In 2015, e-book sales decreased by 15% and declined another 17% in 2016.  By contrast, print book sales rose 5% from 2013 to 2016.

Predicting the fate of most technologies is dicey at best.  Just as the demise of traditional book publishing and conventional bookstores has not occurred, so too the gaming technology of slots in brick-and-mortar casinos may survive and even prosper in the future.  Many governors, legislators, and horse-racing interests had better hope so.

Copyright © 2017 Horse Racing Business

AN UNPRECEDENTED BREEDERS’ CUP STATISTIC FROM DEL MAR 2017

The overall pari-mutuel results from the 2017 Breeders’ Cup were routine.  Handle from all-sources wagering (on-track plus off-track) on the two-day event was $166.1 million, which was an increase of 5.5% over the total handle in 2016 at Santa Anita and an increase of 6.8% over the aggregate handle in 2015 at Keeneland.

However, obscured in the all-sources figures, is a truly amazing statistic having to do with on-track wagering.  I took the two-day on-track betting on the Breeders’ Cup in each of the last three years and divided it by the corresponding two-day attendance to derive a per-capita betting statistic.  Following are the numbers:

Per-Capita Betting

2017 Del Mar $375.59 (on-track handle $25,181,317, attendance 70,420)

2016 Santa Anita $175.07 (on-track handle $20,742,847, attendance 118,484)

2015 Keeneland $218.31 (on-track handle $20,663,054, attendance 94,652)

Thus the Del Mar per-capita wagering was a multiple of 2.15 over Santa Anita per-capita wagering in 2016 and 1.72 times greater than the per-capita betting at Keeneland in 2015.

In the 34-year history of the Breeders’ Cup, nothing has approached the magnitude of per-capita handle that occurred at Del Mar in 2017 and the size of the year-over-year increase.

The weather would not be a factor because Santa Anita had the approximate conditions in 2016.  The quality of the card was also unlikely the cause in that American Triple Crown winner American Pharoah ran his last race in the Breeders’ Cup Classic in 2015.

Whatever the reason, it is safe to say that the attendees at the Del Mar Breeders’ Cup were unrivaled in Breeders’ Cup history in terms of their willingness to open their wallets to bet.

Copyright © 2017 Horse Racing Business

BREEDERS’ CUP PURSES, 1984 vs. 2017

The Breeders’ Cup inaugural came on November 10, 1984 at Hollywood Park with seven races.  The purses were extraordinary for the time with a range of $1 million to $3 million.

Consider how much the seven races paid in purses in 1984 compared to 2017 and how much the 1984 purses would be worth in 2017 dollars, in other words after accounting for inflation.

In 1984, five of the races had purses of $1 million:  BC Juvenile; BC Juvenile Fillies; BC Sprint; BC Mile; and BC Distaff.  One million dollars in 1984 is equivalent to about $2.4 million in 2017.  In 2017, four of these races have purses of $2 million, with the exception being the BC Sprint at $1.5 million.  The BC Turf had a purse in 1984 of $2 million and this is the same as $4.7 million today, with an actual 2017 purse of $4 million.  The BC Classic was a $3 million race in 1984, which is worth $7.1 million in 2017 dollars, and pays a purse in 2017 of $6 million.

The seven races in 1984 had total purses of $10 million in contrast to the $26.5 million in purses today spread over 13 races.  Twenty-six and a half million dollars in 2017 would be equivalent to $11.3 million in 1984.  Thus the purses for the original seven Breeders’ Cup races have all decreased in value in real-dollar terms over the years, while the total purses awarded have increased in both nominal and real dollars.

The Breeders’ Cup board has opted to run more races rather than maintain the real monetary value of seven races.  As a result, the purse for the feature race—the Breeders’ Cup Classic—is much smaller than the purses for the Dubai World Cup and the Pegasus World Cup Invitational.

Whether the Breeders’ Cup card would be more appealing to the public, especially the television audience, with fewer races–worth more money and run in one day rather than two–than the current arrangement is arguable.  In my view, seven rich races run on Saturday with the BC Turf and the BC Classic held in television prime time on the east coast would be better in terms of attracting fan interest.

Copyright © 2017 Horse Racing Business