PRESENTATION TO THE WORLD TROTTING CONGRESS
FRIDAY, NOVEMBER 26, 1999
10:00AM

THE IMPACT OF GAMING MACHINES ON THE RACETRACK
THE NORTH AMERICAN PERSPECTIVE

THE IMPACT OF ALTERNATE GAMING ON THE RACING INDUSTRY

Sam Johnson
President, Standardbred Canada

1.    INTRODUCTION

Good Day Ladies and Gentlemen!

I am pleased to bring greetings to all members of the Congress on behalf of the Canadian Standardbred Horse Industry.  In the past, Canada has been represented by two national organizations, The Canadian Trotting Association and the Canadian Standardbred Horse Society.  As of November 1, 1998 the two organizations were unified under the new Association, Standardbred Canada.

This morning I want to spend a little time discussing the impact of alternate forms of gaming on the racing industry as it related to Canada.  To accomplish this I will be reviewing some of the salient factors and developments that have shaped the Canadian Gaming Industry.  Namely, they are:
a.    Historical forms of and responsibilities for gaming in Canada.
b.    The development of alternate forms of gaming and growth of its products,
c.    A comparison of pari-mutuel wagering levels to alternate gaming wagering levels,
d.    Impact of alternate forms of gaming on racing and reasons for the decline of pari-mutuel wagering levels,
e.    Conclusions.

II.    HISTORICAL

1.    TRADITIONAL GAMING ACTIVITIES

Historically, gaming has been the responsibility of the Federal Government.  It is administered and supervised in accordance with the provisions of the Criminal Code, a Federal Government Statute.  And until approximately twenty years ago, the only form of legalized gaming was pari-mutuel wagering on horse racing.

For the past twenty years, the sale of lottery tickets, was added to pari-mutuel wagering as a legal form of gaming.

In 1979 the Federal government turned over the responsibility for other forms of gaming to the provinces.  That included casinos, video lottery terminals, lottery tickets, etc.  However, the phenomenal growth of alternate forms of gaming did not occur until the 1990's.  Although the 80's, did see the development of more lottery offerings, along with a multitude of scratch and win tickets, they were usually on a provincial or regional basis as opposed to a national program.  The most popular creation was the Sports Select lottery ticket which allowed the player to bet on outcomes of various sporting events including hockey and football.

2.    GOVERNMENT INITIATIVES AFFECTING THE DEVELOPMENT OF ALTERNATE GAMING IN CANADA

The development of alternate gaming products can be traced through a number of Federal government initiatives and agreements negotiated with the provinces.

In 1976 the Federal Government created a new crown corporation to be called Lotto Canada.

1978 Federal Government allowed provinces control of products under $10,000.  Federal Government retained control of all products over $10,000.00

1979 the Provinces launched Provincial and Super Lotto games.

1980 Federal Government withdrew from lotteries in exchange for an annual payment of $24 million per year with an inflation factor included.

1982 the first Lotto 6/49 draw was held.

1984 Federal Government established the Canadian Sports Lottery Pool Corporation and launched Sports Select.

1984 new government cancels Sports Select.

1985 Federal Government asks provinces for three annual payments of $100 million to cover the costs of the 1998 Winter Olympics.  The Provinces agreed, provided that the Criminal Code was amended to give the them exclusive control over lotteries.

3.      GROWTH OF ALTERNATE GAMING PRODUCTS

Since 1979 growth has not only occurred in provincial lottery programs, but also with other traditional forms of gaming such as bingo, the charity casinos, and raffles.  Enhancements have included super bingos for multiple vehicles, Satellite Bingo for prizes in excess of $250,000.00, raffles for luxury homes and cars, and the development of permanent facilities for charitable casinos.

However, more fascinating than these developments, has been the introduction by provinces, of new gaming products such as video lottery terminals in licensed dining and drinking premises, and the creation of Las Vegas style casinos, as opposed to the 1-3 day casinos strictly for charitable purposes.

And finally, the latest initiative, in part to lessen the impact of alternate gaming on racing and its declining pari-mutuel handle, has been the installation of slot machines at racetracks and the creation of Games Rooms.  Again this is on a provincial basis and subject to whatever financial agreements can be negotiated amongst the various stake holders i.e. the racetracks, horsemen's associations and racing and gaming commissions.

Video Lottery Terminals were first installed in a racetrack in the early 1990's at Assiniboia Downs in Winnipeg, Manitoba.
The first installation of Last Vegas style Slot Machines was at Northlands Park in Edmonton, Alberta in 1996.

In 1999 Slot Rooms were opened in Ontario at a number of smaller tracks and later at major raceways including Windsor Raceway, Mohawk and the soon to be opened complex at Woodbine.  There are currently, no slot operations at Racetracks in Quebec (which does have Video Lottery Terminals), Saskatchewan, Manitoba, British Columbia, or the Maritime Provinces of Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland.

There are numerous Casinos in operation throughout Canada, however, they are under the control of the Provincial Gaming Commissions.  Furthermore, there is no consistent model for their operation from province to province.  In Alberta the Casinos are still operated under the sponsorship of charitable societies, in that sponsoring societies receive a percentage of the take for a specified term, normally, two days of operation in return for supplying some volunteer help.  In Ontario casinos are operated under the supervision and sponsorship of the Provincial Gaming Corporation.  The same is true in Saskatchewan, Nova Scotia, and Quebec.  In some provinces there are also casinos operated by native Indian Bands under the supervision of the provincial Gaming Commission.

CHARTS ILLUSTRATING THE GROWTH OF ALTERNATE GAMING COMPARED TO THE PARI-MUTUEL HANDLES FOR THE SAME CORRESPONDING YEARS

Since Casinos are operated under the supervision of Provincial Gaming Commissions, and because of their relative newness, national gaming levels are not readily available for comparison purposes.  However to illustrate the growth of alternate forms of gaming and their impact on pari-mutuel wagering levels, the province of Alberta has been selected for comparison purposes.

There are approximately 6000 VLT's operating throughout Alberta in licensed dining and lounge facilities.

As of 1999 there are approximately 2851 Slot machines operating at Casinos and Racetracks in Alberta.

As a note of interest in Alberta in 1998 alternate forms of gaming excluding Bingo grossed $4.0372 Billion compared to a gross pari-mutuel wager of $141.2 million.

When compared to the national pari-mutuel wager, the province of Alberta gamed more than twice the pari-mutuel wager on alternate forms of gaming in 1998.  One can only speculate what the ratio would be with national totals for alternate forms on gaming.

Statistical Information Sources:

1.    Alberta Liquor and Gaming Commission
2.    Alberta Racing Corporation
3.    Canadian Gaming News
4.    Canadian Pari-Mutuel Agency
5.    Statistics Canada

III.    IMPACT ON RACING

In general racing throughout Canada has been in a downward spiral or at best in a status quo condition for the past twelve years with an annual wager of $1.6 to $1.8 billion.  This is in spite of the introduction of simulcast racing which provides the bettor with a varied menu of facing products on which to wager..
It would be too simplistic to conclude that wagering on horse racing has remained stagnant or declined simply because of the introduction of alternate forms of gaming although it can be argued that they are the major cause of the state of the industry today.  However, there are other factors inherent in the industry that have impacted its performance over the years.  They include such factors as:

1.    Complexity of the betting process;  potential bettors do not know how to read a program, past performances and consequently, how to select a horse on which to place the bet.

2.    Slowness of operations;  today's fans want action on an instantaneous and continual basis.  A race every twenty minutes becomes a boring form of entertainment.

3.    Lack of a national, provincial or local profile in the media;  there is a real reluctance of all forms of media to be associated with gambling.

4.    Failure to attract new fans.  Racetrack attendees tend to be middle-aged and older.  Young people do not view the track as an entertainment facility.

5.    Lack of upscale facilities.  Many facilities have not been modernized and are not considered an entertainment venue for couples.

6.    Lack of a variety of entertainment options.  Racetracks have traditionally offered live racing, today they also offer simulcast racing but the total entertainment complex must add other products and activities, i.e. dining, slot rooms, etc.

7.    Failure on the part of the industry to realize it is in the entertainment business.  Racetracks at one time had a captive audience from a legalized gaming perspective.  Today there are many venues which offer gaming opportunities, but racetracks in general have failed to offer their product and sell it to the public and thus attract the discretionary entertainment dollar.

8.    Failure to become customer friendly and service oriented.  Racetracks have a notorious reputation for not being customer oriented.  Many are now addressing this issue.

9.    Failure to market its product and programs.  Comments regarding the captive audience apply to the lack of innovative plans to market and advertise the racetrack as an entertainment venue.

10.    Integrity of the sport.  Although racing is probably, the most regulated and supervised sport offered to the public, its image is tarnished by use of illicit drugs, race fixing scandals and other less than desirable behaviors.  The public will not tolerate this type of behavior.

11.    Accessibility to wagering outlets.  Racing is severly limited in its ability to deliver its product.  The introduction of Off-track Betting Parlors and Racing Tele-theatres has helped take the product to the people;  however, it does not compare to the distribution system afforded lottery tickets or VLTs.  Internet wagering and or home wagering must become a reality  if racing is to be competitive.

IV.    CONCLUSIONS

1.    Alternate forms of gaming are totally outperforming pari-mutuel wagering.

2.    Ease of playing, lack of restrictions, variety of product offering, quickness or gratifications, attractiveness of environment, and appeal to women are all factors contributing to alternate gamings rise in popularity.

3.    Although racing has a long history in Canada, it has failed to maintain a mainline sports profile for the last twenty years.  Because media coverage has been limited to race results in local daily newspapers, and trade journals it is literally an unknown form of entertainment to the last two generations.

4.    The racing industry must address wagering accessibility, integrity, quality of product, presentation of product, customer service, marketing, and facility modernization.

5.    If racing is to continue to develop, it must become part of the mainstream gaming environment, not only as a participant, but also as a recipient of revenue from alternate forms of gaming offered on its sites.