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Horse racing is betting on Internet wagering: Md. industry chief De Francis says it could attract youth
[May 15, 2006]

Horse racing is betting on Internet wagering: Md. industry chief De Francis says it could attract youth


(Baltimore Sun, The (KRT) Via Thomson Dialog NewsEdge) May 15--Horse racing's problem is obvious: a decades-long slump in attendance and wagering at the track.

Horse racing's solution might be less obvious: Get people to stay home -- and bet.

In a seemingly paradoxical and counterintuitive turn, online technology, which would appear to discourage going to the races, is being viewed as a potential life-saver for a sport on life support.

"Over the 25 years I've been in this industry, not one day has gone by when I haven't heard people complaining that our customer base is getting older and we can't attract young people," said Joseph A. De Francis, chief executive officer of the Maryland Jockey Club and executive vice president for operations of interactive betting channels for parent Magna Entertainment Corp. "And this gives us an opportunity to expand into the youth market unlike any we've ever had before."



When the 131st Preakness Stakes is run Saturday at Pimlico Race Course in Baltimore, advanced-deposit wagering -- the broader category of which online betting forms the greatest share -- is expected to make up a growing portion of the bottom line. So-called ADW handle, meaning the money wagered, comes from bettors using telephones and other interactive devices as well as computers.

Last year, ADW handle accounted for $39 million, or nearly 8 percent of the total for racing at Pimlico and Laurel Park, according to the Maryland Jockey Club, which runs the tracks. Nationally, of the $14.6 billion wagered on horse racing in 2005, approximately 88 percent was off-track, and ADW handle was about $1.16 billion, according to data published by the Oregon Racing Commission.


During this year's Kentucky Derby Day, Youbet.com -- the largest provider of Internet racing content in the country -- processed nearly $5.6 million in wagers, a 34 percent increase over 2005.

Horse racing and online wagering officials say the near-term consequence of online betting is an increase in the racing industry's overall handle. But just as important, they contend, is that in the long run, people who are introduced to horse racing via the computer will be enticed to see the real thing more often.

Racing hopes to follow the lead of poker, where card-playing Web sites, along with televised tournaments, inspired a rejuvenation of poker playing at brick-and-mortar casinos.

"If you find a shoe that fits -- steal it," said Youbet.com CEO Chuck Champion. A publicly traded company based in California, Youbet.com handled about $395 million in wagers last year, according to the company's annual report. Youbet.com's business plan calls for the company to retain 6 percent of the handle, and tens of millions of dollars were passed on to the racing industry last year.

Champion said a number of strategies employed by offshore gambling sites, which often include betting opportunities beyond horse racing, such as team sports and casino games, provide other lessons. One is to offer a nongambling version of a Web site (usually designated as a .net rather than a .com) to educate the public with tutorials and play-money games. Such Web sites also allow operators to get around federal bans on advertising for Internet gambling, especially on television.

Youbet.com has introduced such a .net version.

"Our sport is harder to understand than poker," Champion said, referring to the nuances of handicapping.

De Francis, who oversees Magna Entertainment's similar Web site, XpressBet, said people unfamiliar with poker usually would be too intimidated to play in a casino, but the online playing experience gives them the confidence to try the real thing.

"I've seen people come to the track -- you'll see them at the Preakness next Saturday -- and these are smart people, but they're not regulars, and they don't know what to do. They don't know what an exacta is, what across-the-board means, what a furlong is -- and they don't want to look foolish," De Francis said. "If they learn about these things online in their home, then we may have new fans."

Some are not convinced that online bettors will become regular railbirds.

Hall of Fame trainer D. Wayne Lukas, a spokesman for Youbet.com, is sold on the benefits of online wagering for his industry but wonders about its impact at the track.

"We thought simulcasting would help with attendance, and I'm not sure that happened," he said. But he said online wagering is a necessary adaptation.

"We always worry about handle, but there's also the issue of a fan base that we have to grow," he said. "I had always said that people relate to the horses. But now, the thing that young people relate to is the technology."And technology is what drives online horse wagering. The most sophisticated Web sites offer a menu of entertainment and information choices. A Web visitor can view the racing charts for dozens of racetracks, watch the races -- both live and on replay -- and wager on the outcomes.

"As we head toward what technology people call convergence between the computer and the TV, what we have at the end of the line is a product that appears to be ideally tailored for horse racing," De Francis said. "Where someone goes online, and with a high-resolution LCD screen, can see the post parade and get all the information needed to make an informed wager."

Still, there are obstacles posed by legal complexities at home and by illegal (in the United States) competitors offshore.

While the horse racing industry contends that federal legislation enacted in 1978 and amended in 2001 gives the green light to online wagering in states where it is legal, the Department of Justice holds that pre-existing statutes make the practice unlawful.

Last month, a Justice Department lawyer told a congressional subcommittee that the department is undertaking a civil investigation of a potential violation of law on interstate horse betting.

A department spokesman said there have been no prosecutions involving horse racing advanced deposit wagering operators.

Web sites also have varying approaches for individual states. For instance, Youbet.com will accept wagers from bettors who live in all but 11 states. TVG.com, owned by publicly traded Gemstar-TV Guide International, takes wagers from bettors in only 12 states. Both take bets from Maryland residents.

And there is formidable competition from offshore Internet sites that generally operate without U.S. legal constraints. One of the most popular, Bodog.com, which has a marketing partnership with Preakness-bound Brother Derek's racing team, reported in a news release a 100 percent year-over-year growth in betting volume for the Kentucky Derby without being specific about the figures.

De Francis concedes that offshore Web sites are "killing" the onshore competition because they offer rebates, give bettors the chance to gamble on other sports and extend credit. And little of the millions made offshore finds its way to the racing industry.

Still, he considers regulated online wagering important for horse racing.

"It's really the future," De Francis said. "When you look at the [wagering] numbers, you see us going from zero to something that's beginning to be significant. And if you plot that curve, there's no telling where the numbers will be in 10 years."

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