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RACING TO THE INFORMATION SUPER HIGHWAY

by William S. Giauque
The Florida Horse, March 1994

"Everyone agrees Thoroughbred racing is moving, along with
the rest of the world, toward the Information Super Highway.
This is the route of choice among futurists, including vice-
president Al Gore, movie fanatics, home-shoppers,
intellectuals, MTV viewers, realists, virtual realists and
assorted racing industry leaders.  Just about everyone on
earth would like to get their product or message on this
electronic expressway.

While everyone is excited about this rapidly expanding
vehicle of marketing, communication and entertainment and
while everyone agrees some splendid attractions and financial
rewards may be found via the Information Super Highway,
finding the on ramp to the Information Super Highway may not
be as easy as one would think.

And a few people are going to be wary of where this fibre-
optic highway leads.

What if it led to the society described in E. M. Forester's
short story:  The Machine Stops.  In Forester's view of the
future everyone lived alone in underground cubicles where all
needs---air, food medical care, etc.---were delivered
pneumatically to the cubicles.  Since all communication was
conducted over electronic carriers, people never saw one
another "live", as they incorrectly say on television.

Forester does not tell us if the people in his futuristic
society enjoyed home betting, but if they did it didn't
matter since the machine began to lose power and only the
computer knew how to repair it.  And, of course, the computer
refused to admit a problem existed.

The computer in The Machine Stops sounds somewhat like the
past leadership of the Thoroughbred industry as described by
Maury Wolff, consultant to Racing Resource Group in
Alexandria, Virginia.

"This industry was very poorly served by the people who were
running it.  Life is unforgiving of those kind of mistakes."

Racing's leadership is changing.  Recent developments like
widespread successful simulcasting, the naming of the
Thoroughbred Racing Association Racing Commissioner, the
announcement of a national pick-seven are all signs that
racing is shaking off old leadership, seeking cooperation
among its factions and attempting to compete with new forms
of legalized gambling.  The concern is, has it changed in
time.
Some will be fearful of the changes.  In times of change,
some will always fight against innovation.

Some will fear that getting our product on the Information
Super Highway and into the homes of hundreds of millions of
people around the world does pose risks, perhaps the risk of
leading somewhere like Forester's fictional society where
people home-wager and only a couple of surviving super tracks
provide the live racing for distribution via the electronic
expressway.

Wolff does not fit in with these doomsayers, but he is
fearful for racing's future.

"If racing does not do something soon in a meaningful sense,"
Wolff warns, "(racing's leadership) will have to abandon the
field of play."

In contrast to those who are fearful that simulcasting and
home wagering might drive many tracks from business and put
many breeders out of business, Wolff is not only convinced
that simulcasting and home wagering are good for the
industry, but that they might save the small, marginal tracks
rather than destroy them.

"Simulcasting is the critical element in controlling cost.
Live racing is very expensive:  it is the most expensive
gambling product.  Simulcasting provides racing with an
opportunity to get cost under control.

"The fact is simulcasting has kept a lot of tracks in
business, Atlantic City is a classic example.  Tampa Bay
Downs would be another example.  Without the year-round money
provided by simulcasting, they would be a lot closer to the
brink.

"From that point simulcasting is clearly a good thing."

Simulcasting has made a dramatic impact on the industry in a
short time.  Only a little over 10 years ago, the only major
simulcast was the Kentucky Derby.  In those days, basically,
if the track in your area was not open, you had no racing.

Now, using Birmingham Turf Club as an example, a racing fan
can go to his local track and watch and wager on races from
New York, Florida, Chicago, Louisiana, Arkansas and
California.  One generation before that the only racing a fan
saw was live, and if he didn't grow up in New York or
California, he didn't see very many of the great horses.  If
he grew up in Birmingham, he didn't see any racing.

"Through modern technology, you can see every important race
in the world," Dick Hancock, executive vice president of the
Florida Thoroughbred Breeders' and Owners' Association said.
"The secret is to take advantage of the opportunity and
protect our live racing market."

Simulcasting can generate great sums of money.  Negotiations
on simulcast revenues center on how much should the receiving
track receive, how much should the sending track receive, and
how much should go to purses at each track.

Hancock believes "about" 50 percent of the simulcast revenue
to the sending track should go to purses.

W. B. Rogers Beasley, sales director for Keeneland
Association, pointed out, "Widespread simulcasting is less
than 10 years old, closer to five.

"The issues of simulcasting will continue to be debated,"
Beasley said.  "We are still feeling our way through the
problems of how to conduct simulcasting.  It is an evolving
process.  Horsemen certainly deserve a fair share of the
revenue, but race tracks are a big capital investment."

Negotiations for sharing the revenue aside, simulcasting can
provide a substantial boost to race track earnings and
purses.  Gulfstream Park in Hallandale, Florida is a case in
point.

A recent article in Daily Racing Form declared that
Gulfstream Park had become the first "Super Track" of the
simulcasting era.

Handle at the South Florida track is up more than 200 percent
over last year.  More than 250 sites receive Gulfstream
simulcasts including Woodbine in Canada and Aqueduct in New
York.

"I compliment Doug Donn (president of Gulfstream) for what he
is doing in New York and Canada," Hancock said.  "By selling
his signal for two years at a low price to Canada, he built
up demand for his product.  This year when Canada did not
want to meet his price, the consumers raised hell, and
Gulfstream is in Canada again."

Ontario Jockey Club handles more than $1 million a day on
Gulfstream races.

New York is adding part of the Gulfstream card to Aqueduct's
live races.

"I am encouraged by what is happening at Gulfstream," Ken
Dunn, president of Calder Race Course, agreed.  "Doug (Donn)
has done a tremendous job of praying to the snow god."

Dunn referred to bad weather in the Midwest and specifically
in New York which has caused cancellation of more than 10
days of racing, making the Gulfstream simulcasts a lifesaver
for New York racing while pumping big bucks through the
commingled pools in Florida.  Purses have been increased 25
percent during the Gulfstream meet.

Partially due to increased handle resulting from
simulcasting, major tracks offer purses of $20,000 to $25,000
for maidens, and one astonished observer noted Gulfstream
cards allowance races with purses in excess of $40,000.  The
major California tracks occasionally offer $60,000 allowance
purses.  This money would have been offered only for stakes
horses a few years ago.

In California, where intrastate simulcasting is continuing to
expand, bringing bigger and bigger purses to North America's
most lucrative racing, some trainers hate to see their
runners break their maidens.  The reason:  The purses are so
big a maiden can earn substantial money running second and
third while avoiding the competition at the allowance level.

Simulcasting may be racing's first and immediately most
important vehicle on the Information Super Highway, but
recent developments may indicate that racing is on the verge
of greatly expanding its use of the electronic expressway to
distribute its product.

The Thoroughbred Racing Associations (TRA) recently announced
a weekly national bet.  The new pick-seven wager is scheduled
to begin this spring.

The TRA also named Brian McGrath to the new post of TRA
commissioner of racing.  It is hoped that this can evolve to
a position of power in North American racing; a position
powerful enough to allow McGrath to facilitate cooperation in
organizing racing on a national level.  Ideally, McGrath
would also dramatically increase racing's ability to use
television as a marketing vehicle.

A combined outcome of the racing commissioner and the pick-
seven could be a national television show featuring the races
in the national pick-seven.

When optimistically looking forward to a national television
show coordinated with a national bet and the possibility of
home wagering on a national racing network, the innovations
of the past 10 years are valued but pedestrian.

It may be true that Thoroughbred racing is only now making
its best effort to finding the on ramp for the Information
Super Highway and the future of racing.

The national pick-seven, with a base wager of 50 cents, is
expected to have a weekly handle of $500,000.  The pick-seven
will be on stakes races and high class allowance races from
around North America every Saturday.

Winning perfect tickets will divide 63 percent of the net
handle.  A consolation payoff of 30 percent of the net handle
will be paid to those ticket holders with six winners if
there is a perfect ticket or to those with the most correct
selections if there is no perfect ticket.

If there are no perfect tickets, the win pool will be carried
over to the next week.

The remaining seven percent of the handle will go to a
jackpot provision of the national pick-seven.  This money
will carry over each week until a single bettor wins with a
perfect ticket.

"The new national wager is supported by the large race tracks
and small alike," Dunn said.  "The jackpot could reach $30
million in one year.

"The national pick-seven is a perfect vehicle for the
development of a national television show featuring the races
comprising the wager.  And a weekly TV show would make it
easier for a race track to sell its local market.

"ABC and Hearst Corporation have already expressed an
interest in a national racing show.  Of course, they are not
looking for today but down the road at the revenue home
wagering could generate."

It could also become a climactic event on a national horse
racing network which features home wagering.  Of course,
talking about it is easy, selling it to commercial television
or developing a racing network is a monumental task.

However, it is the kind of job the TRA had in mind when they
hired McGrath with his extensive sports/television
background.

McGrath was president and CEO for ISL Marketing, a marketing
firm which developed millions of dollars of sponsorships for
recent Olympiads.  He also developed strong working
relationships in the television industry while holding
positions with Viacom International, Columbia Pictures and
Coca-Cola Television.

"The decision to have a commissioner of racing is an
important step forward," Dunn, a TRA member, said.  "Instead
of volunteers meeting four times a year as we have in the
past, we now have a man who can pick up the phone any time
and contact decision makers in TV and marketing.

"He can focus on one essential goal and get it done."

Travel to the information expressway becomes even more
difficult for racing when the route is placed on the map of
the modern gaming world.

Not long ago casino gaming was confined to Las Vegas.

Increased cost of government programs and a slow economy
through the 70s, 80, and into the 90s, combined with the
public's resistance to new taxes, cleared the national
legislative conscience in regard to gaming.

The first wave came in the form of lotteries.  Where once the
national legislative conscience opposed gaming as a vice,
they now, in most states, not only allow gaming in the form
of lotteries, but they actually use about one-third of gross
lottery revenues to promote this form of gaming among their
constituents.

For decades legislatures around the nation have accepted tax
revenues from Thoroughbred racing, but in most states the
first nickel of state money to promote racing is still
waiting to be spent.

The second wave of gaming to appeal to legislatures as an
easy source of revenue has come in the form of casino
gambling whether land-based or on riverboats.

A part of the second wave is an aggressive effort on the part
of Native Americans to operate casinos on tribal lands.

While lotteries and all flavors of casinos may not be
competing with racing for access to the information highway,
all are clearly competing for the same gaming/entertainment
dollars.

And if wagers on horse racing can be sold over the
information expressway, lotteries and games of chance may
also be played in the manner.

"We must prepare for the new forms of competition," explained
Hancock.

Speaking of issues his board of directors has under study,
Hancock said, "The consumer is going to dictate what is going
to happen in any business.  if the consumer wants land-based
casinos, they will probably get them."

Several groups in Florida are currently conducting signature
drives to get the casino question on the ballet this fall.

"We must be ready for the competition whether it is casinos
or new baseball franchises."

The FTBOA board and Hancock are hopeful that the Florida
legislature realizes the advantages of the Thoroughbred
industry to Florida.

"The state is looking for jobs, economic impact, tax revenues
and open space," Hancock said.  "In rural areas like Ocala,
54 cents of every tax dollar collected goes to the
infrastructure for capital investments and services.

"In urban areas $1.56 is required for the infrastructure for
every tax dollar collected.  Supporting our industry is a
win-win situation.  Breeders' incentives get people to own
farms, employ workers and maintain open space.  All of this
and parimutuel racing generates tax revenue at the rural
rate."

Because of these circumstances, Hancock and the FTBOA board
members are hopeful that the legislature will see the
dollars, jobs and sense of the horse industry for the state
of Florida.

"But to government," Hancock warns, "the product is
irrelevant.  The jobs tax money and cost are what is
important.

"We need to have a fair shake in the face of new forms of
competition," Hancock said.  "We need the opportunity to
market our product in the form of home wagering, or if
casinos come to Florida our product needs to be there in the
sports book."

No matter what happens with the tracks and legislature,
racing must market its product successfully to the consumer.

"The consumer is going to dictate what is going to happen in
any business," Hancock explained.  "We have to change our
product to meet the consumers' needs."

Wolff concurs, "The key to understanding everything about
racing is that is was a monopoly gambling game.  It is not a
monopoly now.  The consumer did not have a choice and now he
does."

THE FLORIDA HORSE (March)
F. J. Audette, Publisher
P. O. Box 2106, Ocala, FL 34478
Telephone:  [phone]
Fax:  [phone]