| On August 13, 2001, California Governor Gray Davis reversed
a previous position, expressed last year in his vetoes of a series
of bills designed to provide a boost to the state’s racing
industry, and signed AB 471, a bill to allow account wagering on
horses in the Golden State.
This is the same Gray Davis who, in 2000, denied account wagering
legislation because it might lead to a major expansion of gambling
in California. The Gray Davis of 2000 is the same Gray Davis who,
in 1998, when he was racing toward the governor’s mansion
in Sacramento, enthusiastically backed tribal efforts to legalize
Indian casinos in the state. That, of course, was an okay major
expansion of gaming in the state because, well, the Indians in California
have had it tough for far too long (true) and because they, being
unerring trackers, fought their way through forests of lobbyists
to get to Davis’s fundraisers, dropping off lots of wampum.
The tribes had enough left to spend $68 million supporting a ballot
initiative in 1998 to permit tribal casinos (Nevada casinos spent
$27 million in opposition), which they won by a margin of better
than 2 to 1. When California’s attorney general said it would
have to be done all over again as a constitutional amendment, the
tribes found another $25 million or so (the Nevada guys were tapped
out and stayed home) and got another 2 to 1 win, all with Davis’s
public blessing.
Horse racing, a multi-billion- dollar industry in the state but
lacking the monetary firepower of the tribes (and with too many
registered Republicans and Republican fellow travelers in its ranks),
got short shrift from Davis when it sought to arm itself with the
account wagering handgun to fend off the Indian casino artillery.
Campaign finance reform, anyone? On that subject, check out a cartoon
by Tom Toles in the New Republic of December 3, 2001, which has
a host of people fleeing the U.S. Capitol while someone inside is
saying, I accidentally opened an envelope containing campaign finance
reform.
In Washington, that would qualify as a capital offense. Anyway something,
presumably effective lobbying by the state’s racing interests
persuaded the governor that account wagering was no longer a major
expansion of gambling (with the tribal deal done, there is probably
no room left for a major expansion), but a way of letting California
racing compete on a level playing field (apparently, the playing
field wasn’t tilted enough in 2000).
Grateful for small favors, the California racing community is waiting
to see what unfolds in early 2002 and beyond on the account wagering
front. By the way, account wagering in California is to be called
Advanced Deposit Wagering. Let’s see, we’ve gone from
bookmaking to telephone betting to account wagering to advanced
deposit wagering to. . . ? How about, Electronic Equine Risk Management?
Semantics aside, one thing California racing is already assured
of is disharmony on the advanced deposit wagering front.
The reason? The ongoing clash between Television Games Network and
its rivals or would-be rivals, one of which is Frank Stronach’s
Magna Entertainment Corporation. California, apart from being the
nation’s largest wagering market, is also home to a potential
war between two racing elephants, Magna and Churchill Downs, the
two corporations that are steadily acquiring the country’s
most valuable racing assets.
Magna owns Santa Anita and Bay Meadows, and wants to build a new
track near Sacramento to replace Bay Meadows, which will become
an office complex or whatever the real estate gurus decide is, in
their lingo, its highest and best use (obviously, race tracks don’t
meet that test). Churchill owns Hollywood Park and is a staunch
partner and supporter of TVG.
Magna owns The Meadows harness track in western Pennsylvania and
its Call-a-Bet account wagering platform, and was a partner in Philadelphia
Park’s ill-fated Racing Network venture. Magna has made noises,
since its formation, about getting into the account wagering business
in a major way, and has expressed its chagrin on more than one occasion
over the TVG effort to get exclusive rights to as many key racing
signals as possible.
(Monopolies are bad things unless you have one.) At the University
of Arizona’s Racing Symposium in December, a Magna executive
fired additional rockets at TVG, in effect saying that TVG was harming
the industry through its insistence on exclusivity arrangements
with tracks that keep their signals from being wagered upon through
other systems (i.e., what Magna offers or plans to offer).
Making this more entertaining is the fact that TVG’s production
facilities are in California and Magna’s largest race track
holdings are also there. Both organizations seem to have a lot at
stake as they try to seize the high ground in the potentially lucrative
California electronic wagering marketing. Seem is the operative
word, because no one has any feel for the scope of the account wagering
market, in California or elsewhere.
At first glance, it would seem that account wagering is simply a
more convenient version of off-track betting, but one with several
built-in limits, at least as currently practiced. Customers have
to keep funds in their account in order to use it (no credit transactions
allowed), and if they want to see races on television, they need
either a satellite dish or access to a cable TV system that carries
a racing channel, usually as a premium service.
TVG’s goal of widespread cable distribution of its programming
is proving to be elusive, and the only people willing to pay for
it, either via a dish service or as a premium cable channel, are
hardcore bettors or industry participants. If TVG is to significantly
enlarge its customer base, it needs to get its picture shown on
basic cable in major markets like those in California.
The Magna complaint was expressed more expansively in a recent Washington
Post column by Andy Beyer, who griped that customers are getting
shortchanged by having to subscribe to more than one account wagering
service in order to maximize the variety and quality of available
product. Beyer’s concerns, as a customer, are understandable.
He would like to have freedom of choice when it comes to the product
he wagers upon.
Instead, he, and other account wagering customers, must have multiple
accounts in order to have access to all available U.S. signals.
Beyer wants one-stop shopping that lets him watch and wager on whatever
his wagering interests call for at the moment. In his view, exclusivity
is a dirty word, implying that any available wagering platform is
incomplete and therefore incapable of properly meeting customer
desires.
Looked at from the standpoint of the account wagering operator,
this is simply about competition in its rawest form. If you want
to watch certain television programs you have to watch the networks
that exclusively present them. For most people, this is not a problem,
since they have access to the basic technology to switch channels
routinely.
With account wagering, channel switching means paying for far more
expensive technology, assuming it is available to the customer.
TVG has lots of sophisticated delivery technology, but it has outrun
the capabilities of many of the nation’s cable systems. Additionally,
TVG has another technological problem that is more problematic in
current market conditions. If a customer wishes to place a bet,
he or she cannot do so through a human being.
Unlike other systems, there are no operators standing by to take
your call. Unless you have access to premium digital cable, the
top-of-the-line TVG software, which lets you bet by television remote
control, is unavailable. TVG’s technological capabilities
are superior and its television presentation is innovative, but
the customers aren’t ready to embrace either at this point,
because they cannot. So, what have we here?
The newest kid on the block, the one with the big-buck investors
behind it, has lots of techno toys and no effective means to deliver
them to its would-be customers. The older models have the more comfortable,
if antiquated, technology, but they have virtually no way of getting
their pictures to a mass audience. And, as Beyer noted, none of
the systems makes the complete product line available.
If TVG can hold on long enough, the evolution of the Internet into
more common in-home usage could provide the mass distribution methodology
needed to get to a wide audience. At the moment, then, it is doubtful
that the California account wagering war will be much more than
a lot of sound and fury among competitors who lack the ability to
develop a critical mass of customers. It is possible, perhaps probable,
that the limitations of mass market communications technology may
eventually force the various account wagering operators to make
peace with each other, at least with regard to signal availability.
Having exclusivity over certain tracks’ signals is of little
value when so few people can see their races or bet on them in a
comfortable way. Governor Davis’s concern over account wagering
representing a major expansion of gambling in his state is wildly
overblown; racing should be so lucky. With all its caveats, though,
account wagering is here to stay. It is horse racing’s version
of the ATM, or more appropriately, on-line banking. It isn’t
everyone’s cup of tea, and will likely evolve more slowly
than hoped for by its loudest advocates, but it is also not simply
a gimmick that will fade when a different mousetrap is marketed.
Customers value convenience, and off-track betting, whether by phone,
computer or OTB facility, is a necessary and meaningful component
of horse racing’s future. We are not bothered by the cries
of foul coming from account wagering operators. This is, after all,
an industry just now peeking out from under a protective shell it
and its regulators concocted over a long time period to protect
it from internal competition. In our struggles to protect what we
have, we often ignore the larger competitive environment in which
we exist.
If account wagering often seems complex and confusing, that’s
because it is, and it also signals the dawn of a new era for our
sport, one in which product adaptation will be the key to survival
and growth.
The only certainty is that the way we do business in the future
will be different from the way we’ve done business in the
past. Let’s hope Gray Davis is right, and that we can use
account wagering to effect a major expansion of gambling on horses.
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