Horse racing is betting on Internet wagering

Md. industry chief De Francis says it could attract youth

May 15, 2006|By BILL ORDINE | BILL ORDINE,SUN REPORTER

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.

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