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Lawmakers sit by as offshore sites poach gamblers and take profitsout of the country

Posted on Thursday, May 18th, 2006

May 16, 2006.
DAVE PERKINS TORONTO STAR

Woodbine turns 50 years of age this year, looking brighter and more inviting, if less populated, than ever. The proprietors of horse racing, both thoroughbred and harness, have seen their product both struggle and flourish over these past five decades. They have presented numerous vivid moments in Canadian sporting history and they’ve seen the game come to life, at least financially, in recent years on the shoulders of slot machines.

But it’s safe to say the Woodbine Entertainment Group, which runs both equine shows, has never confronted a threat to its continued existence quite like the one it is facing now. It’s the Internet, more precisely offshore gambling websites that are poaching away the big bettors - the whales, in the jargon - with such trinkets as Porsche Boxsters, while fostering the spread of underage gambling. Meanwhile, our governments both allow the practice to flourish, which sends hundreds of millions of gambling dollars out of Canada permanently, and leave the racetracks virtually defenceless in what Woodbine’s head man, David Willmot, calls "a commercial Wild West."

"We’re a victim of a government that won’t enforce the laws on the books, yet won’t allow us to compete,” said Willmot, CEO of the Woodbine Entertainment Group, the crew once known as the Ontario Jockey Club that thought, by importing slot machines to the racetracks, it could revitalize the long, honoured and honourable game of horse racing. It mostly worked that way, too, and horse-race wagering peaked in 2002. Then Internet gambling sites began courting the lifeblood of the game - the bettor - by offering incentives and cash rebates the tracks simply can’t match. Willmot said he estimates WEG outlets have lost $100 million in action alone each of the past three years, lost dollars not replaced by increases in other revenue streams. More than 100 online sites take action on Woodbine races without authorization, operating in countries outside the scope of Canadian law.

"We finally get our act together as an industry, begin marketing racing, fix up the plants, improve our customer service and then we lose control of (betting revenues),” Willmot said. "And because the government has yet to come to terms with the new world order of the Internet, billions of unregulated and untaxed dollars are being pulled out of indigenous businesses across North America.”

Here’s what happens: Racetracks conduct parimutuels betting on the races. Most tracks, at least in North America and some overseas, are linked in what is called simulcasting; you can go to Woodbine and bet races in Hong Kong, Los Angeles or Florida, etc., and vice-versa. The betting money goes into the common pool and a percentage is withheld by the track, which puts up the purses for races, waters the flowers, heats the building, pays taxes and usually makes a small profit. Depending on the racing jurisdiction and type of wager (win-place-show, exacta, trifecta, etc.) the amount changes. It ranges from 15 per cent to nearly 30 per cent and averages about 20 per cent. The other 80 per cent is returned to the winning bettors.

Internet bookmakers have no comparable costs to racetracks. They have software to buy and chipheads to run it and a few agents to handle the phone calls, but no purses, taxes, flowers, etc. They usually operate in the Caribbean, Central America or the Channel Islands and have varying levels of regulation. Some of them pay a 5 per cent fee to participate in the simulcast system.

With low overhead, they make enormous profits, simply on the difference between the 5 per cent and the 20 per cent. They can afford to lure bettors with cash rebates - a professional at WEG tracks, speaking without identification, says it is 6 or 7 per cent on every dollar wagered. A man who puts $1 million through a system in a year, which is something like $20,000 a week, well within reach of any professional gambler, starts with a "profit” of $60,000 or $70,000. Tax-free, if the finance minister is listening.

"We have lost almost all of our large bettors to the Internet,” Willmot said. "We have a few left, but only a few. I know for a fact (one of the Internet companies) has agents throughout racetracks across North America, poaching customers. One of ours was offered a Porsche Boxster just to bet with them.”

"You can do better than a Porsche Boxster,” said the gambler, who added that some online bookmakers impose limits on the amount of money won on individual races. They include $25,000 (U.S.) for races at The Meadowlands in New Jersey and $5,000 (U.S.) for races at Woodbine. Many professional gamblers have numerous online accounts, to spread the action around and beat the limits.

Online bookmakers who pay the 5 per cent fee are called "rebaters” and Willmot said it is racing’s own fault that it allowed them into the game in the first place.

"Certain racetracks thought it was new money, that they would be getting 5 per cent where before they got zero. They didn’t realize that the rebaters would circle back in front of them and take away their own customers,” he said. "The bookmaker who buys the signal for 5 per cent gets access to the parimutuels pools. He pays track odds and keeps the difference in percentage, whatever it is. No wonder he can pay rebates and still make a lot of money. And he takes no risk.”

The bookmakers also have the option of what Willmot calls "booking the dumb money and laying off the smart money.” In other words, if a sharp professional gambler likes a horse seriously, they take his action and then bet it back into the pools legally, thereby lowering the odds on the horse and transferring all risk. If it’s a big-time loser throwing money around, the `maker can book the bet.

Two years ago, WEG began its own Internet and telephone betting, a system called Horse Player Interactive, although it can’t match the rebates offered elsewhere. This year, the service has been expanded at Woodbine, offering free wireless Internet connections so that on-track customers can bet into their account off their BlackBerries or cell phones. WEG can monitor the wireless access and if someone is logging on to an offshore betting account, they can be shut down.

Willmot also said Woodbine looked into setting up its own offshore company, registered in the Channel Islands, but was told it would contravene federal gambling laws.

"It isn’t only us feeling this,” Willmot said. "Las Vegas casinos are beginning to have the same frustrations on sports betting, poker and table games. You can play any game, for money, at home. You don’t have to travel.

"The only solution is to legalize it, regulate it and tax it. There’s just no other way around it, `’ Willmot said. "You legalize it and you can at least control it. You can begin stopping the underage gambling by playing hardball with the credit-card companies. Right now, everyone recognizes the number of underage kids playing poker on the Internet is right out of control. My son’s at university (and knows someone) who got $40,000 in debt just from playing online poker.

"These companies are just rubbing our government’s noses in it, with their advertising. It’s like they’re just daring anyone to do anything about them and our governments don’t seem to have either the will or the way. In the U.S., at least they have the will to do it. In Canada, we don’t even have that.”

U.S. lawmakers have been more aggressive in fighting Internet gambling and have at least pressured some credit-card companies, including Visa and American Express, to prohibit customers from using the cards to authorize start-up money at some Internet betting sites. In Canada, the issue is more complicated. Ontario’s official policy is that it is not involved in Internet gambling, although both Ontario and federal politicians held a closed-door meeting a couple of weeks ago to discuss the ever-growing issue. The federal government has shown no interest in prosecuting even those who advertise Internet gambling. An Indian reserve in Quebec has been openly running illegal gambling, including Internet sites, but the feds, because of past tensions, show no sign of interfering. How can Ottawa enact changes in the Criminal Code when it refuses to enforce the ones it has now?

Unlike years past, where racing got itself into most of its own trouble, this has nothing to do with hubris or missed marketing opportunities. Woodbine and other tracks are presenting themselves better. This year, Woodbine will suffer the short-term loss in betting while it installs a new $10 million Polytrack surface, one bettors love for its consistency and one that is less demanding on thoroughbreds and cuts catastrophic equine injuries by up to 90 per cent. Gamblers love the surface and will bet more, the theory goes.

Too much of any increase, though, will leave the country, never to return, because the cork is out of the Internet gambling bottle and won’t ever go back in. Racing, with centuries of history, won’t have much of a future if this process, with our lawmakers’ tacit approval, continues to accelerate.

Free Woodbine horse racing tips, picks & odds. Bet on Woodbine horse racing - bonus and rebates.

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Woodbine’s 2006 Meeting Opens on April 1

Posted on Wednesday, March 22nd, 2006

By GREG MELIKOV, HW Contributing Writer

Woodbine, the only North American track that can stage standardbred and thoroughbred racing on the same day, launches its 2006 thoroughbred meeting on April 1. That’s two week earlier than last year.

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Harness Racetracks in to become Racinos

Posted on Tuesday, March 7th, 2006

Bay State racetrack owners would walk away with hundreds of millions of dollars in added profits under a controversial proposal for Vegas-style gambling now steadily gaining support on Beacon Hill.

Lawmakers are preparing to hand over a gold mine in the form of gambling licenses to dog and horse track owners at prices that critics say amount to bargain basement deals.

Track owners could acquire a license to operate 2,000 slot machines for about $25 million under a state Senate bill that passed last year.

The return on investment: A staggering $200 million in estimated annual revenue for each track.

The proposed $25 million buy-in is but a fraction of the hundreds of millions of dollars that huge casino operators have shelled out to operate similar slot parlors in Pennsylvania, a new study shows.

The debate comes as state lawmakers prepare to vote later this month on the slot proposal, which is seen as having the best chance in years of passing. Track owners in Revere, East Boston, Taunton and Plainville - as well as their employees - are lobbying fiercely, arguing their struggling racing venues can’t survive without slot machines.

‘‘You spend a few million on lobbying and political contributions, and you get a $300 million to $400 million license,” said Jeff Hooke, a Maryland investment banker and activist who says all gaming licenses should be auctioned to the highest bidders.

But track owners and a key State House player who crafted the Senate bill contend such criticism is off base.

The tracks have committed to making big upgrades to their properties, noted state Sen. Michael Morrissey, (D-Quincy). Gary Piontkowski, head of Plainridge Racecourse near the Rhode Island border, estimates he and his partners will spend nearly $200 million in capital improvements.

And the tracks will have to turn over as much as 60 percent of their slot machine largesse to the state - one of the highest such tax rates in the country.

Bay State harness racetracks like Plainridge to become racinos for $25M license fees - Las Vegas style slot machines.

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A Bit O’Gold is Canadian Horse of the Year

Posted on Wednesday, December 21st, 2005

A Bit O’Gold, a winner of three stakes in seven starts with earnings of nearly $600,000 in 2005, was named the Sovereign Award winner as Canadian Horse of the Year.

Read full story: "A Bit O’Gold is Canadian Horse of the Year"...

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