Odds On Racing - Harness Racing

Symposium Update
University of Arizona’s Race Track Industry Program Symposium

December 4, 2007

As horse racing and wagering become more global, issues related to regulation, reciprocity, medication, licensing, and wagering are coming to the forefront.

Efforts to achieve uniformity and cooperation on an international level were addressed during two panel discussions Dec. 4, as part of the 34th Symposium on Racing and Gaming presented by the University of Arizona’s Race Track Industry Program.

Matt Iuliano, vice president of registry at The Jockey Club, explained the efforts of the 64-member International Federation of Horseracing Authorities to seek consensus on matters ranging from the basics — such as the definition of a Thoroughbred — to the more complex regulations regarding medication.

Iuliano said there was general unanimity in many of the 28 articles covered in the IFHA’s International Agreement on Racing, Breeding, and Wagering, but more work needs to be done in other areas such as medication. He noted that because the United States could not agree to the wording in the agreement regarding anabolic steroids and furosemide, it “carved out those provisions and excluded our endorsement.”

Dr. Ted Hill, a racing steward with The Jockey Club and at the New York Racing Association, outlined efforts of two international groups to address various regulatory issues between countries. Hill recounted some of the matters discussed during this year’s Asian Racing Conference and the International Stewards Conference.

Hill noted how a complex incident of multiple disqualifications during a single race was reviewed by stewards from different countries and how the final outcome would have been handled by each.

“One of our objectives is to investigate the possibility of producing a draft article to harmonize the approach to incidents of interference for approval by the international racing community,” Hill said of the efforts by the international group of stewards.

Hill said he does not endorse some efforts to remove stewards from making the initial decisions related to medication violations. “In most cases, stewards are in a better position to make the decision” on what fines or suspensions should be applied in medication actions, Hill said.

Other areas of concern to the regulators include reciprocity between countries involving disciplinary actions against jockeys and trainers, and model rules, Hill said.

Progress toward commingling of betting pools across international borders highlighted the panel discussion geared toward international wagering.

“Global commingling is an issue because racing is increasingly more international,” said Maurits Bruggink, executive director of the IFHA who has led that organization’s efforts to promote international commingling and to halt unauthorized betting operators.

Bruggink said one of the IFHA’s major priorities is to establish a global exotic bet, noting that the first step toward that goal was the implementation this year of global trifecta wagers. He said the global exotic bet could become reality in early 2009.

“We are the only truly global organization dealing with horse racing,” Bruggink said.

“I’m pleased with the progress the industry is making in that commingling is the proper direction,” said Ken Kirchner, who moderated both international panels. Kirchner, president and chief executive officer of FalKirk International, previously was a senior vice president of the National Thoroughbred Racing Association and Breeders’ Cup. In that capacity, he managed the organization’s wagering and simulcasting, including expansion of the wagering platforms into other countries.

Two other panelists noted progress being made on developing new forms of wagering to help racing offset competition from Internet and sports betting, and also outlined the obstacles facing racing as it seeks to grow handle.

Bobby Chang, head of betting services and systems for the Hong Kong Jockey Club, said wagering in his country is heavily taxed. Also, credit betting isn't allowed, and there is a ban on outbound commingling of wagers.

Nigel Roddis, international director of At the Races in the United Kingdom, explained how his country has the greatest diversity of betting opportunities on horse racing, with 10,380 betting shops in Great Britain. He said many bettors still prefer wagering on racing even when faced with other options.

“Racing is the product that gets new punters into betting shops,” said Roddis, whose company runs the most-watched horse racing television network in Great Britain and Ireland.

Among new wagering venues, Roddis pointed to the concept of “in running” wagers that are popular among sports bettors as being a possible option for horse racing. Under that concept, a wager is placed while the game, or in this case horse race, is under way. Roddis said many of today’s bettors “want a quick fix,” and that the era in which handicappers spend hours poring over data and trying to determine the outcome of race is “gone for most people.”

He said pari-mutuel models for wagering are “tired,” and that the industry needs to be more flexible in considering new ways of betting.

Racing jurisdictions worldwide are increasingly looking to overseas markets to find additional betting revenues, but those efforts will likely run into significant problems because of a worldwide problem: Few, if any, racing jurisdictions are creating new horse racing customers. That problem, which was apparent from the comments of the speakers on two panels focusing on international racing at the University of Arizona Symposium on Racing and Gaming on Tuesday, creates an unusual set of issues for countries facing the decision of whether to expand the number of foreign simulcasts available to their native customers.

Given that horse racing handle in nearly all countries is stagnant or declining, what is the overall effect on revenues to domestic industries by shifting business to a foreign product and sending some of those betting revenues overseas?

Currently, racing jurisdictions are reacting in different ways, according to the panelists. In the United States, many racetracks are aggressively seeking a foothold in the estimated $110 billion foreign market for horse racing, in part to address flagging handle figures at home, where betting has stagnated at $15 billion. This year, for example, 20 countries allowed their bettors to wager into commingled pools on the Breeders' Cup, with much of the handle coming from Europe.

But those countries have problems of their own. In the United Kingdom, according to Nigel Roddis, international director for a company that buys foreign simulcast signals for the British betting market, horse racing's share of the domestic betting market has been declining for a decade as bookmakers and betting exchanges increasingly diversify their betting products. The new products, including electronic casino games, typically have higher profit margins than horse racing signals, and as a result, the companies are pushing their customers to the more profitable games at the expense of racing, which typically charges its customers approximately 20 percent of each bet.

In addition, betting exchanges like the highly popular BetFair have created innovative new ways for gamblers to wager on horse racing, Roddis said, at a much lower return to the racing industry than if the betting was concentrated through more conventional businesses. As a result, horse racing jurisdictions around the world have seen their revenues decline even when betting grows through the alternative source.

Still, Roddis said, betting companies have no option but to embrace foreign simulcasting, because without offering new products, horse racing customers will be increasingly drawn to new games that offer cheap, constant action. The hope, Roddis said, is that by adjusting to the new preferences of bettors and the growth in overall gambling, horse racing will ultimately be able to maintain or even increase its revenues by drawing new customers from the ranks of the people who have only just begun to gamble on other games.

But that contention still leads to questions about what the incentives are for countries to offer foreign simulcasts to their bettors if the expansion will only exacerbate domestic problems. The situation is perhaps best illustrated in Japan, where betting handle has been in a freefall for a decade, declining from approximately $17 billion in 1997 to $12 billion in 2006. Japan prohibits betting on foreign simulcasts, principally to protect its own horse racing industry, and what incentive does the country have to siphon off betting revenues to another country when the domestic business is in such trouble? So far, Japanese racing officials have given no indication that the country will be opening up anytime soon.

Hong Kong has similar restrictions in place, but the country is gradually attempting to loosen those prohibitions in an effort to embrace international simulcasting. Betting in the country is run by a state-owned enterprise, and foreign simulcasts are limited to 10 races a year. But the Hong Kong Jockey Club is lobbying the government to increase those numbers in the belief that globalization will increasingly demand the opening of foreign markets, according to Bobby Chang, the HKJC's head of betting services and systems.

Still, that effort is nowhere near as aggressive as the HKJC's attempts over the past decade to get its signal into other countries. Currently, 10 countries take bets on all or a portion of Hong Kong's 78 racing programs, including the United States, despite the almost complete lack of a reciprocal arrangement with Hong Kong. And that's because of the contradictory incentives inherent in the system: Countries have far more to gain by getting their signals out than allowing more signals in.

For information on the panels and speakers, click the link below:
http://cals.arizona.edu/rtip/symposium/symposium_2007_info.html