The scheduled termination of Ontario’s slots-at-racetracks program by the province’s ruling party glaringly demonstrates the tenuous alliance between horse racing and video lottery terminals (VLTs). Governors and legislators in several American states that presently channel a percentage of slots proceeds to purses are also questioning the wisdom of continuing to do so.
Augmenting purses with VLT revenues is almost surely not a long-term solution to compensate for waning pari-mutuel handle because what government gives government can take away. In a time of growing state fiscal crises, it will be increasingly difficult for racing advocates to make the argument that racing should be underwritten in order to support the underlying agribusiness.
An executive in charge of a racetrack would assuredly make a business decision to accept VLTs if proffered; when pari-mutuel wagering declines, slots provide a different source of income. In the short term, racehorse owners and breeders would also be better off with VLTs, since purses would be improved.
The stagnation of pari-mutuel wagering in North America is a result of intense pressure from an assortment of gaming and entertainment enterprises. The quasi-monopoly that racetracks once enjoyed was a golden goose while it lasted, but when gaming alternatives proliferated, the former racetrack monopolists struggled to compete and ceded the lion’s share of the market.
Similarly, today, VLT subsidies to racing tend to provide a false sense of security from external forces. Hence racetrack executives do not have the same degree of urgency, as they otherwise would, to make the pari-mutuel product more attractive.
The dilemma for racing interests is that what is best for the industry in the short term is likely not what is best for it in the long term. One could find solace in the oft-quoted stoic view of John Maynard Keynes that “The long run is a misleading guide to current affairs…in the long run we are all dead.” That seems to be the majority perspective in racing because the industry has pushed for and embraced VLTs at every opportunity.
Yet events in Ontario and elsewhere portend that the long run has arrived, or is looming, in several important venues. Consequently, the racing enterprise in North America will, of necessity, become less and less dependent on VLT subsidies and the pari-mutuel product will have to succeed on its own. Racetracks that offer customers an attractive pari-mutuel value proposition and ambiance will endure and racetracks that do not will vanish.
The denouement is likely to be a considerably downsized but markedly stronger racing and breeding industry capable of standing, economically, on its own merits.
Copyright © 2012 The Blood-Horse and originally published therein. Used with permission.