An open letter to Christopher Kay

June 19, 2013

Dear Mr. Kay:

Congratulations on your appointment as President and CEO of NYRA.  I wish you the best as you face the daunting challenges ahead.

Like most horse racing fans, I have been disappointed with the direction in which NYRA has been heading in recent years.  While NYRA implicitly acknowledges the importance of the owners, trainers, jockeys and others who “put on the show,” those of us who finance the show feel we have been neglected and at times — such as when NYRA illegally overcharged us on certain bets, to name but one — abused.  While VLT revenues have been used to inflate purses to wholly unrealistic levels, especially for low level claiming races and races restricted to New York breds, I am not aware of any meaningful portion of that money being directed to fans and bettors in the form of decreased takeout or reducing the costs of admission, programs, food or other fan amenities.  I also am not aware of any meaningful expenditures to retain the existing (and declining) fan base, or to develop the new fans needed to sustain racing in the future.  One need only to look at your closest competitors, the casinos, to see why customers have fled racing in droves:  those establishments excel at customer service,  make their customers feel valued by not nickeling and diming them with admission and other charges, and by rebating meaningful amounts of money wagered to  even low rollers in the form of free meals and other comps.

You may think it unimportant to cultivate fans as long as you are receiving a portion of VLT revenues; I submit such a view would be short sighted.  First, casino gambling revenues are declining in most jurisdictions, due to saturation of the market.  If the constitutional amendment allowing “real” casino gambling in New York passes, VLT revenues will be, to say the least, negatively affected. In the shorter run, there already have been suggestions that the State will wake up and take the VLT monies used to subsidize racing to use for other purposes, especially if it perceives — correctly, in my view — that these monies are not being used to assure the long term self sufficiency of the sport.

If you decide, as I strongly suggest you should, to make one of the major goals of your tenure the retention of existing fans and the cultivation of new fans, you then have another major decision to make — whether your future fans will attend the races live, or watch and wager off site.  Other than on Belmont day and at Saratoga, I might suggest that the fans already have decided to stay away in droves.  Twice in the last year or so, I have been to Belmont on a Saturday, and I was joined by far fewer than 10,000 others.  Vast expanses of the facility were closed, and it resembled a ghost town.  If the future of horse racing is off-track, it might make sense to begin an ordered shrinking or decommissioning of the little-used facilities at Belmont and, certainly, Aqueduct.  Year round racing may serve the needs of horsemen, but does it serve the needs of NYRA?

Off track or on, the most significant thing you can do to retain existing, regular bettors is to work to reduce the takeout which, along with  breakage, has made it virtually impossible for regular players to afford to stay in the game.  Do not buy the plea of  the politicians that “no one will notice another one per cent.”  That thinking has brought racing, and, in the context of taxation of businesses and individuals, New York, to its knees.  And please don’t tell me that the NYRA One rebates to large players reduce the effective take out.  While that program is a start, most of us cannot afford to bet anywhere near enough to qualify for those rebates.  If you can’t reduce the take out, throw players a bone or two:  how about free admission upon presentation of a NYRA One card, or the elimination of breakage on payouts into the NYRA one account.  Bettors who wager a certain amount over a year would be delighted to receive tickets to a pair of club house seats at Belmont or Saratoga.  I know that race books in Las Vegas provide significant comps to horse bettors; you could creatively offer a small portion of what they do.

The quality of racing also needs to be addressed.  Racing in New York has been dominated by races for New York bred horses, who race in a parallel universe where the purses are the same for comparable races for open company, but the quality is many, many levels lower — so much lower, significantly, that the horses do not run true to form and the races, therefore, often are unplayable.  One potential source of funds for reducing the take out is the bloated purses for such races.  If you are able, you should restrict use of New York Bred funds to pay bonuses to New York breds that win in open company, as many other states do.

Attracting new fans requires outreach.  Racing can be attractive on many levels – as a sport, as a gambling opportunity, and as an intellectual exercise in handicapping.  Appropriate marketing materials can be tailored to appeal to people with each of those interests, and free admission days, with free programs and handicapping seminars, could take some of the mystery out of the game for new fans.

If racing is to have a future, the interests of fans (i.e., bettors) need to be served much better than they are now.  Unfortunately, fans do not have an effective organized voice, as do the horsemen and their industry; however, the lack of such voice does not diminish the importance of fans to the survival of racing.  Throw the fans a bone or two and you will do a lot to get racing heading in the right direction again and to fix the terrible public image of NYRA.

New OTB facility

January 1, 2012

Having read about the soft opening today of OTB’s new facility at 711 Central Avenue, I swung by to have a look.  Like the old facility, the new one is divided into two areas — “grandstand,” where admission is free and payouts are subject to the 15% surcharge, and “clubhouse,” where admission is subject to a fee, but payouts are at track prices, and where there are dining options.

The grandstand was small, and obviously meant as a convenience for those stopping in to cash or buy tickets, though it did have seating and a number of large, flat-screen television monitors.  It also had, unlike some other OTB facilities, men’s and women’s rest rooms.  Were it not for the 15% surcharge, I’d rate this an acceptable outlet for racing fans.

The clubhouse was very nice — it had areas with tables, many individual carrels, and a bar, as well as an adjacent restaurant.  The look was not unlike one of the nicer Las Vegas race books, which was the goal.  If only admission, past performance information and drinks were free, as they usually are in Las Vegas, the place would be a dream come true.  Even without the freebies, though, the clubhouse looks like a convenient, pleasant place to spend a few hours enjoying horse racing and wagering and a drink or two and a meal.  I didn’t think the old Teletheater, which the clubhouse replaces, was that bad, but this definitely is a step up.

Whether it will be enough to attract new horse players, or keep existing ones, in the face of new competition for the gambling dollar we can soon expect in New York, remains to be seen.  The newspaper story announcing the opening speculated that some of the tables in the clubhouse may give way to slot machines, and I think that’s a real possibility.

Expansion of gambling in NY

September 9, 2011

Today’s Times Union carried an item about Mayor Jennings requesting VLTs for Albany and other upstate cities.  This comes on the heels of Gov. Cuomo’s appointment of a commission to study the possible expansion of casino gambling in the state.  Gambling is alluring to politicians because it’s a way of raising revenue without raising taxes, but will expanded gambling really provide meaningful revenue to the state and its localities?

Let’s go back to the 1970s, when Las Vegas had a virtual monopoly on casino gambling in the US.  New Jersey allowed the opening of competing casinos in Atlantic City, and, for a while, they appeared to be doing well – at least in terms of providing employment to area residents and revenue to the state.  Now, however, the area is not doing so well, primarily due to competition in neighboring states, especially Pennsylvania.  Even when things were going better than they are now, critics complained that Atlantic City residents did not get their fair share of the jobs or revenues, especially given the negative social impacts of gambling on their community.  Closer to home, Howie the Horse Samuels touted OTB as a solution to New York City’s problems.  For a while, perhaps, OTB made a positive financial contribution, but neighbors hated its parlors and it eventually went out of business, unable to turn a profit as the “world’s largest bookie.”  The rise of these two entities came during a time when they enjoyed a virtual monopoly in their markets; their decline came at a time when competition for a first constant, and later declining, amount of gambling dollars proliferated.

So what can gambling establishments in New York offer potential customers that their competition cannot?  To my mind, the only thing, at least under present law, is location.  As real estate investors know, location is an extremely important economic force for any business.  In New York, there are, I would guess, many thousands of residents who gamble outside the state.  Repatriation of their gambling dollars could have a substantial impact.

However, as the lobbyists for existing VLT properties realize, to attract significant numbers of casino patrons, New York has to offer real casino gaming – that means table games and real slot and video poker machines (other posts on this blog explain why the video poker offered at VLT facilities is far worse than the real thing, though its differences are not clearly disclosed).  Pennsylvania has transitioned from VLTs to full commercial gaming, and it has been successful – primarily at the expense of Atlantic City.   For New York to even lure its own residents from facilities in Connecticut, New Jersey, Pennsylvania and, in a few years, Massachusetts, it will have to offer something at least as good as facilities in neighboring states, and maybe, since many patrons of out of state facilities have developed loyalty to those facilities, something better.

Offering something better will require a complete overhaul of the constitutional and statutory provisions regulating gambling in New York, as well as an overhaul of the regulatory structure.  The regulations governing casino gambling in New York at present were designed for firehouse Las Vegas nights, and the agency that enforces those regulations is primarily concerned with horse racing.  VLTs are “regulated” by the Lottery, which partners with the racino operators, creating at the very least an appearance of a conflict of interest.  Fortunately, the head of the commission studying these issues in New York is knowledgeable and appears not to be afraid to stand up to industry influence.

If casino gambling is to proliferate in New York, the state also owes its citizens a duty to educate them on the hazards of gambling.  There are good materials out there – I was pleasantly surprised to see how forthright a guide from the American Gaming Association that I picked up in a Las Vegas casino was – and there should be time devoted in school to the economics of gambling, as well as to personal finance in general.  Our students are taught insufficiently about saving, the cost of credit, the cost of gambling, etc.

For me, a blackjack and video poker player, a local VLT parlor will have no allure.  However, a casino with real 9/6 Jacks or Better and a good blackjack game where the dealer stands on soft 17 and doubles after splitting are allowed will definitely keep my gambling dollars in the Albany area, if not in my bank account.


December 8, 2010

This may be premature, as NYC OTB seems to have at least the proverbial nine lives, but I say good riddance to NYC OTB. Its sleazy parlors degraded the sport of kings; its surcharges ripped off the innumerate gamblers who patronized those parlors, and it was a dumping ground for “my leader sent me” pols who ran it into the ground. Much of the same can be said for the other regional OTBs throughout the state, which also were denied a bailout, though none is threating imminent closure.
I was a NYC resident when “Howie the Horse” Samuels was touting OTB as a cure to all the government’s fiscal woes (this was not long after the nuclear power industry’s advertising campaign touting electricity “too cheap to meter”). The visionaries at NYRA wanted nothing to do with OTB, believing that no one would bet on horses without being able to see the horses live and up close.
However, the task before State government, NYRA and the surviving OTBs is to look forward, not backward, and do what’s necessary to save a dying industry.
First and foremost, all the above-named players, as well as the horsemen and horsewomen, need to recognize that the fan — and particularly the betting fan — is the engine that drives the whole racing machine. The fan has been abused for far too long with poor races (particularly in NY bred races), small fields, high takeoouts and facilities that are, in most cases, not customer-friendly. No wonder they have flocked to other forms of gambling offering free parking and admission, generous comps, and, in some cases, a much better opportunity to come out even or ahead at the end of the year.
Among the things that need to be done are:
1. Cut the takeout. A good place to start would be to cut back the NY bred program, and return the cost savings to the bettors in the form of reduced takeout. Instead of funding $55,000 purses for $10,000 claimers, provide small but meaningful bonuses for NY breds that win open races.
2. Move from a parlor-based off-track betting model to an internet-based model. Stream the product via satellite and internet, and pay selected sports bars and restaurants to carry the signal.
3. Provide free handicapping information. This seems to work well in Las Vegas, where horse betting is the most profitable product most sports books offer.
4. Realize that year-round racing in NY is unsustainable. Before the racino deal, it would have made sense to close Aqueduct, sell the land, and give everyone the winter off. I don’t know if Aqueduct can remain as a racino only, but the possibility should be explored.
Even with all this, it’s possible that horse racing is a sport whose time has come and gone (with the possible exception in NY of Saratoga). If so, should the government keep it going at taxpayer expense? Although I’m a fan, I hate what racing in NY has become, and would reluctantly say it should not.

More on (Moron?) gambling in NY

August 29, 2010

A recent item in the Times-Union reveals that the $125,000-a-month genius hired to turn around OTB is considering nothing but the usual tired alternatives:  closing; getting rid of employees through early retirement; or filing for bankruptcy and abrogating existing collective bargaining agreements.   Other items have reported that he’s planning to close several unprofitable branches and, in keeping with hallowed New York tradition, rat out on existing debt to the tracks.

What’s missing from any of the accounts I’ve read is any plan to grow the business by offering new products, other than kiosks in bars to replace the closed branches and a new “sports bar”.  The kiosks will save lobor costs and may expose the OTB product to more people, but other reports that OTB may sell its on-line and phone betting operations – which seem to me the likeliest areas of potential growth – would more than offset any gains realized by the kiosks.

Where’s the talk of bringing in new players (or at least stealing existing players from other betting venues) by eliminating the surcharge?  By offering free wagering information?  By offering the best comps/rebates in the industry?  Or by offering free admission to state-of-the art, no-surcharge facilities as New Jersey has done?

The assumption underlying the founding of  OTB and the New York racinos  is that offering any kind of gambling to a public theretofore devoid of options will instantly result in lots of business.  That may have been true when OTB was established, but it certainly isn’t true now.  Gambling is a very competitive business, and the horse racing end of  it – the context within which OTB operates – has been losing ground for decades to other forms of gambling.  The cost-cutting plans that Mr. Rayburn is offering will do nothing more than postpone the inevitable.

OTB needs someone more proactive and consumer-oriented at its helm if it is going to survive.  I’ll be glad to make myself available for the bargain price of $100,000 a month, which will, if nothing more, save OTB $300,000 in salary the first year.