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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