Friday, August 24, 2012

Ontario Government Closes the Door on Horse Racing

Today the interim report by three former cabinet ministers in Ontario was released. Although the industry pinned some high hopes on a recommendation that the Slots at Racetracks program would be reinstated, that was not the case.

The points made in the document should, in my opinion, be read very closely by those jurisdictions that still have slots. We all know what this report details is currently happening in those jurisdictions, and it must be turned around and changed to survive.

Some highlights/lowlights (these are direct quotes from the 53 page report):
  •  Without slots revenue or a new revenue stream, the horse racing industry in Ontario will cease to exist.
  •  Absent some other new revenue stream, no Ontario racetrack has a viable business plan to continue racing operations after March 31, 2013.
  •  The horse racing industry should be based on conducting races that appeal to horse players.
  • Though it is outside our mandate to comment on the merits of the government’s decision to cancel SARP, we will nevertheless do so because so many people we spoke with advocated reinstatement of the program. It is the panel’s view that continuing SARP would be poor public policy. The program has contributed to a fractious industry that has lacked accountability, transparency, a common vision and a proper focus on the consumer. Continuation of SARP would allow the industry to keep evading the competitive challenges of today’s entertainment marketplace.
  • The program has provided far more money than was needed to stabilize the industry – its original purpose – and has done so without compelling the industry to invest in a better consumer experience.
  • The majority of purse money paid in Ontario does not come from horse players: it comes from slots players. In 2010, SARP funding made up 63.6 per cent of purses. 
  •  Horse racing generates expenditures, jobs, exports and tax revenues. Moreover, horse racing is a cultural asset for Ontario communities. Given the significant public good derived from horse racing, the province should pursue a gaming strategy that includes horse racing as a key component.
  •  The public interest also demands accountability for the use of public funds – but this has been weak where the Slots at Racetracks Program is concerned. As the Sadinsky report observed, while SARP at the outset referred to objectives such as enhancement of live racing and sustaining the agricultural sector, clear benchmarks were not established to monitor the achievement of these goals. The government simply paid over funds to the industry without guidelines or requirements, feeding a “culture of entitlement.”
  •  The panel believes SARP’s “no strings attached” approach is one reason the industry has come to think of slots revenue as “their money.” In fact, in the panel’s view, it is public money belonging to the people of Ontario and the government can redirect it to other purposes if it concludes this is in the public interest.
  • Fifty million dollars over three years is insufficient to build a bridge to sustainability. A viable, vibrant horse racing industry is simply not feasible today without public investment. The revenue currently available from pari-mutuel wagering – or from foreseeable growth of the wagering pool in the short term – is not enough to maintain the industry.
  • Ontario horse racing has benefited from government help since Queen Victoria granted 50 guineas for the Queen’s Plate in 1860. The panel knows of no jurisdiction in North America where there is a thriving horse racing sector without government assistance.
  • The panel is convinced it doesn’t have to be this way. In our view it is possible for Ontario to have a viable, world-class, right-sized horse racing industry, but only if additional revenue is provided either by the government directly or by allowing the industry to offer new gaming products. A sustainable industry can be achieved with significantly less public funding than now comes from SARP.
  •  Ontario’s horse racing industry is fractious and has proven capable of very little collaboration for the common good. This is partly due to the flow of slots money that has enabled the industry to function without pulling together. The panel concludes that the industry currently lacks the cohesion to save itself.
     
As far as the overall read goes, I found it did lack some clarity and there were some minor mistakes made. And of course, much of this could've been written over a decade ago. However, as much as we don't want to read it or admit to it, it possessed some inarguable talking points.

It's anyone's guess what will happen.  However, I think the structure of what will happen is something along the following:
  1. The Slots at Racetrack program is over
  2. The sport will no longer be supply side driven, but will rely solely on demand, with a potential subsidy.
  3. Transitional funding to help the industry reach the new normal will be higher than $50M per year.
  4. The industry as we've known it is over.. There will likely be four or fewer tracks, and those tracks will host short meets.
  5. There will probably be a massive dust up between thoroughbred and standardbred racing
  6. The industry will soon begin to move from anger and denial, to working within this framework, so some sort of 2013 racing season can develop.
I wish I had better news, or a more optimistic outlook, but it is what it is.


9 comments:

ITP said...

#5 will be an ugly mess and WEG will be in TB's corner.

#6 is a huge favorite not to get done in a meaningful way and if it is, it will be a supply sided total failure.

Leopards can't change their spots and everybody in charge is a leopard. Their would need to be a total industry revolution which is impossible because most of the possible revolutionaries are brainwashed having been fed the company line their entire lives. It's already neon-sign evident now as almost everybody is still asking for handouts instead of solutions.

Charlie Davis said...

I found this part to be very telling.

"The program has provided far more money than was needed to stabilize the industry – its original purpose – and has done so without compelling the industry to invest in a better consumer experience."

Basically, you had the chance, you blew that chance, you're screwed.

ITP said...

That's correct Charlie.

Even dolt politicians can see the obvious.

It's amazing how moronic and blind the entire industry was to that fact.

Anonymous said...

Thanks. Insightful post. Sad to see the industry go down.

Pacingguy said...

From what you posted, can you argue with their decision? Yes, there will be a huge shake out, but the sad truth is racing needs to look into the mirror to see who to blame.

Fish Finder said...

Sad day, but hopefully the "leaders" of the industry take note of the key words that were delivered:

invest in a better consumer experience!

no Ontario racetrack has a viable business plan

conduct races that appeal to horse players!

fractious industry that has lacked accountability, transparency, a common vision and a proper focus on the consumer

“culture of entitlement.”


Deal with these issues and you will survive in a sustainable form!

Eric Poteck said...

When one looks back on the OHRIA proposal submitted to OMAFRA, OHRIA should be totally embarrassed. It shows how far off base OHRIA was in understanding the crisis. OHRIA was in a position to lead the industry and they chose to maintain the status quo. Based on these two FACTS it is questionable whether OHRIA is capable of representing the industry any longer....

Tinky said...

Ontario racing was on the vanguard of the North American slot subsidies model, and has now reached the end-game.

The quote highlighted by Charlie (above) is the key take-away, and, as PTP suggests, every American racing executive should be required to consider it seriously, produce a comprehensive plan to address the problem, or find another job.

Candice Love said...

Eric...you are truly correct in your views towards OHRIA...they should be embarrassed. An organization that truly acts as bullies towards their own membership with a sense of entitlement that is very disturbing. If they happen to look in the mirror the only thing that they will see is their silk shirts and ties thinking they have done all that they can. True...they HAVE done all that they can and should be replaced immiediately before more damage is done. Hopefully this is very clear to the horsemen at this point.