Racing industry needs slots at the tracks

March 22, 2010

If the Maryland Jockey Club heeds The Sun's advice ("Their own worst enemy," March 21) to end its fight against a slots parlor at Arundel Mills Mall and simply take some slots subsidy money and run, it might seal racing's doom in this state.

The Sun's editors are quite correct to note that Magna Entertainment blundered in failing to ante up for a slots license in the first place. It is also clear that this attempt to remedy that blunder is politically complicated and risky. Unfortunately, it's one of the few avenues left that holds real promise for the industry's revival.

The first key step in that revival is to attract sizeable new private investment in racing facilities that will enhance the amenity levels experienced by patrons. That is unlikely to happen unless the tracks can be transformed into multi-dimensional entertainment destinations. Slots are an integral part of that equation. With them customer traffic increases, enabling increases in the quality of all facilities (including restaurants, shops, bars and other recreational options -- some tracks feature golf ranges and poker rooms). Simultaneously, higher volume spreads fixed costs more broadly and makes them less forbidding to investors. Such synergies are a crucial element in virtually all the tracks that have thrived in recent years.

What is more, completely "decoupling" racing from slots (as The Sun recommends) carries both economic and political risks. The disappointing pace of slots development in recent months makes clear that, absent prospective synergies from combined racing and slots facilities, investors (the Cordish company aside) are reluctant to invest very much (if at all), greatly reducing anticipated state revenues. Further, if all slots parlors are ultimately seen as rivals of racing venues rather than partners, it doesn't take much imagination to suppose that the subsidies now on offer will eventually disappear.

In sum, the Jockey Club is doing what's needed to get the slots development process better aligned with the long-term interests of its industry and Maryland taxpayers. If its efforts fail, we're likely to see thoroughbred racing in Maryland go from "bankrupt" to "liquidated."

Stephen J.K. Walters, Baltimore

The writers teaches sports economics at Loyola University Maryland.

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