Wednesday, June 8, 2016

The Small State-Small Track Conundrum

There was some news out of Michigan horse racing today. A bill passed the House that would outlaw all internet wagering in the state on horse racing. For those who use a letter in front of someone's name to decide whether to cast blame or praise, well, you can't do that in this case, because the vote was 104 to 4.

The reason is the same given for passing many policies such as this, falling revenues.
  • From a high of nine tracks in the state, only two remain — Northville Downs and Hazel Park Raceway — and staying in business has been a challenge. In 1999, horse racing generated $13.2 million in revenues to the state on wagers of $416 million and boasted of 42,300 jobs across the farms and tracks. By 2015, according to the state’s annual horse racing report, those revenues had shrunk to $3.5 million on wagers of $106 million.
Although this is clearly anti-consumer - through restricting choice and increasing prices - most industries who lobby for such policies, do so because there is little other choice. They're not competitive in the open market, so they have to get the market changed.

There are a few other tactics that can be used to help, but really, they are all anti-consumer. There's not a lot one can do when the demand for a product in a state has fallen so rapidly.

Short-term the state, if the Bill is signed, should see a revenue increase. Long-term, as customers find other ways to bet (a good deal of Michigan's bigger players will suddenly be cozying up to Grandpa for his out-of-state address), and other things to spend discretionary income on like the new-and-improved Greektown Casino!, revenue will continue to shrink.

For the horse racing industry as a whole, these policies are especially damaging. If states like Texas, Michigan and others continue to enact exclusionary policies, or high priced source market fees, it shrinks the betting base for national horse racing in one fell swoop.

There are no easy answers; such is the way it is in small track, small state live horse racing.


Anonymous said...

Look at the old days when you had to go to the track to place a bet. Racing was flourishing during that time and with those rules.

Only since we allowed people to stay away from track have we had big problems.

We need every state to make people go back to track to makes bets. Then racing will flourish again.

Cangamble said...

Anon. Times change. There is plenty of competition now for one's gambling buck, and in most instances one doesn't have to leave the home.
This type of thing has been tried in Texas, and last I've seen, it hasn't helped them one bit. All it does it disenfranchise the horseplayer. At best, they will bet less. In a worst case scenario, they will find another form of gambling that is convenient for them.

Anonymous said...

Grandpa’s out-of-state address is immaterial, though he may be tempted to book your action if you bet through him. Otherwise, the location of your computer/smartphone and thus you is clearly visible to anyone bothering to look. Adware knows your city immediately. Sounds like a visitor to Michigan won’t be able to bet by phone via his/her normal account, either.

Michigan racing looked dead in 2009 with only 12,000 horse racing-related jobs reported then. You can blame the state for a lot of that:

I don’t even see a short-term benefit since the great bulk of betting there is on out-of-state product already. A lot of existing internet money will just evaporate since people can’t and won’t get to the tracks; there’s no account wagering in the state. Michigan casinos and the lottery are winners again.

Anonymous said...

This seems to be a case of the government and tracks killing the not so golden goose. Both tracks are in the Detroit metropolitan area. There's a lot to Michigan (upper and lower peninsulas) that is nowhere near either track. By requiring people to visit the track to gamble, it's going to create a stampede of what..a dozen people? Hope the tracks have enough staff to handle the crush.

That Blog Guy said...

There was an attempt to legalize ADWs in the House bill but it had to be pulled to get the bill passed. By the bill passing, the harness people get access to the $1 million or so in the Hazel Park harness purse account for use at Northville and they should get a greater share of the simulcast revenue since they get all the money wagered at their track (commission) be it thoroughbred or harness racing.

From what I have been told, they will be trying again soon to get ADWs for the tracks. While not ideal, it would be better than nothing.

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