Letter to Horsemen from Rick Hiles, President KHBPA.
Recently, I am sure you have heard rumblings about our decision not to send the simulcast signal to the various advanced deposit wagering companies until horsemen receive a more equitable share of the revenue. This decision was reached after careful consideration regarding the overall health of the racing industry.
To every horseman it is all too familiar. “Handle is up, yet purses to decline.”
If a racing jurisdiction has not been fortunate enough to pass legislation providing a supplement to purses from slot revenues, inevitably purses will remain stagnant or decrease.
Quite often we are asked to explain how wagering can substantially increase while purses do not keep pace. It is simply due to the changing betting patterns of the wagering public. Where once people interested in betting came to the racetracks to watch and wager on horses, now for the most part they bet from remote locations or via the computer.
Initially, horsemen and racetracks were encouraged with the broader distribution of the racing product. Eventually, horsemen began to notice an alarming trend, the influx in betting did not result in appreciable purse increases. The dramatic handle increases from remote off track locations where horsemen do not receive an equitable share of wagering has created quite a dilemma.
Most notably, advanced deposit wagering (ADWs) companies, an innovative concept where betting patrons are encouraged to wager via the internet or by phone and view the races on television is the fastest growing segment of the racing industry.
Since its inception, ADWs recognized the distinct possibility that there would be a significant downturn in wagering at racetracks. Early on they initiated “bettor poaching fees,” later referred to as “source market fees,” to address the erosion of betting at the racetrack where horsemen receive a larger share of the wagering dollar. Later ADWs decided to increase the host fees as opposed to source market fees, but in the end while ADWs enjoyed immense profits from siphoning off betting patrons at the racetrack, horsemen continued to experience a decline in purses.
Experts continue to lament that the model is broke, but no one seems to have an answer on how it should be fixed. Exacerbating the problem is that now several racetracks have entered into the national ADW business. Therefore, while the ADWs flourish and racetracks profit from their ownership of the ADWs, horsemen’s problems with a lower share of the wagering dollar are compounded. With this backdrop, horsemen have decided that the time has come to restructure the model to assure that horsemen are receiving an equitable share of wagering revenue.
It was never our intention to alienate the betting public, we are simply attempting to assure that horsemen can continue to provide the quality of racing with reasonable purses that everyone richly deserves.
Rick Hiles
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