- 1 day ago
In the second installment of the TDN Business Hour, the conversation focused in on one of the most vital components of the racing economy in America today: the reliance on casino-funded purse subsidies. While states like Kentucky and Arkansas have seen a renaissance fueled by gaming revenue, other jurisdictions face an uphill battle. From the ongoing quest for subsidies in California to the defensive front against decoupling in Florida, the industry is at a crossroads. Host Najja Thompson, Executive Director of the New York Thoroughbred Breeders, explores these questions with Louis Cella, Damon Thayer and Bill Nader.
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00:00What's really driving the economics behind purse structures and thoroughbred racing today?
00:04And what are the benefits and the pitfalls?
00:08Welcome to the TDN Business Hour.
00:10I'm your host, Najah Thompson.
00:12And on today's episode, we'll be discussing casino revenue and its impact in thoroughbred racing.
00:17Joining me for the discussion are Damon Thayer, Louis Sella, and Bill Nader.
00:23We hope you had a great Derby week, and thank you for joining us.
00:32Joining us now is Louis Sella, the fourth generation owner and president of Oakland Park.
00:36On top of a successful season, Louis, thank you for joining us today.
00:40Great. Thank you for having me.
00:43Today's episode is focused on casino revenue, of course, historical horse racing, which Oakland Park was able to start successfully.
00:51Can you take us through that journey and how you've been able to implement historical horse racing machines to the
00:56benefit of racing?
00:57Well, like all tracks, if you're going to stick around in the business, you have to evolve, you have to
01:05change, you have to go with the times and see what you can do.
01:11Casinos were popping up all around us.
01:15We tried to get a casino in 1994, 1996.
01:18We got our teeth kicked in from the surrounding casinos, and so we were up against a wall.
01:24Either we were going to fail like so many tracks have done, or we're going to have to do something.
01:28So we kicked our feet up on the desk and dreamed a little bit, and we decided, what is the
01:34allure of these casinos?
01:36Well, they're slot machines.
01:37Well, why can't we make an electronic form of horse racing?
01:41Because that's what we can do and create a product.
01:45And that's exactly what we did, and obviously, so many years later, it saved racing in so many jurisdictions, including
01:52Arkansas.
01:54Was it a big fight in the legislature for you in Arkansas?
01:56Was it something that was embraced overall in the state capitol, or did you have to fight to get that
02:02implemented along the journey?
02:04Well, interestingly, no, because we did it the right way.
02:09We educated them.
02:11We started with our racing commission, went to individual racing commissioners and explained to them,
02:19here's the rule book for parimutuel wagering on horse racing.
02:22All we're doing is doing parimutuel wagering on horse racing, but in electronic form.
02:28So very little tweaks had to be done.
02:31One of the benefits of slot machines is that they have a very low takeout.
02:35Well, in Arkansas, we have a ceiling, not more than 10%, not more than 21%, pardon me, not more than
02:4217% for win play show, not more than 21% for exotics.
02:47But it doesn't mean we can't lower it.
02:49So we actually lowered it to 10% on the first iteration, just like a slot machine.
02:55And the very first iteration, we actually showed the horse race, the last furlong.
03:02And the frustrating thing for us is that every single penny on instant racing went back into the sport.
03:11We took maybe 5% for research and development.
03:17Every single penny went back to the sport.
03:21Greed took over in our industry, and the racing form didn't participate, and other tracks didn't participate with the simulcasting.
03:29And we gave so much money to various tracks that participated.
03:33We had instant racing agreements, simulcast agreements that gave monies back to the tracks.
03:41And unfortunately, today's versions don't really have all that, is my understanding.
03:48But that's what it was when we started.
03:50It was for the industry.
03:52Oakland's a unique situation because you're still able to get the fans in the stands, crowds of 30,000 and
03:58more each day and each weekend,
04:00compared to other jurisdictions where you've seen elevated persons but not really fans at the track.
04:06Can you talk about the continued marketing efforts and just really some of the betting implementations you've been able to
04:12implement
04:12to make sure that fans still come out to the races and still develop racing fans day to day?
04:18Well, it starts with the fans.
04:20The fans have to want to come to the track.
04:23In so many racing jurisdictions today, they're run down, they're beat up, they don't spend money on the infrastructure,
04:32they don't have modern food and beverage outlets, they don't do those things that are fan-friendly.
04:39That is the first thing on our mind.
04:41Everything we do is for the fans.
04:43You have to have the facility, you have to have the fans, you have to have the product.
04:47The product comes with the purses.
04:49So we're lucky, we're fortunate.
04:52We have a casino, but even though we have a casino, so much of the purses are generated from that
05:00that we have an agreement with our horsemen that make it go to purses.
05:04So we have a very high purse structure, about $900,000 or more a day for our 65-day season,
05:13which is a lot of money.
05:15So now the horsemen across the country, they want to come.
05:20And in staying ahead of the curve, are there new measures going forward that you're looking
05:24forward to implementing?
05:26I know the hotel right next to the track is something that you just can't not enjoy and
05:31experience, especially if you've got a room overlooking the track.
05:34What other measures are you looking to continue to go forward with in ensuring that our game
05:40and sport will continue to grow?
05:41Well, we've done many things.
05:44For instance, almost 10 years ago, in 2017, we started the show bet bonus.
05:52Like instant racing, if you're on track, we lowered the takeout on our on-track show wager
05:58down to 10%.
05:59Well, guess what?
06:00It now represents over 20% of our on-track handle.
06:04No one's close to that.
06:06One track actually is, Keeneland.
06:08They started the show bet bonus last fall, and their show bet has grown to around 16%
06:16today.
06:17No other track has it.
06:18They're single digits.
06:19So the importance of that is to reward our fans to come to the track and bet the favorite
06:28because you know you're going to get that much more money back.
06:31And it makes it fun.
06:32You're selling the sport of horse racing.
06:34We have over 100 high-def televisions showing every sport under the sun, including horse
06:40racing.
06:41And we have Topgolf suites.
06:46We have hatchet throwing, darts, shuffleboard, all sorts of things.
06:52But our families come there all the time just to do that.
06:57So we're always keeping the fans in mind.
07:00And by the way, we have a great product called horse racing going on on the other side of
07:04the grandstand.
07:06So they get to see that.
07:07They get to constantly get reintroduced to that sport.
07:11Yes.
07:11And I have to give you credit for the Torpedo and a bobblehead, which I got about 10 texts
07:16in New York.
07:17Am I going to be in Arkansas, Oakland that weekend?
07:20So I would have to give you credit and your team for coming up with the incentives that get
07:26people enjoying the day and at the track.
07:28Just to close out before we wrap up, can you talk about that Oakland handicap, which not
07:33only was a great race, but as you were walking the track and you saw the anticipation, the
07:38fans, was that a moment, one of many, that everything came together to fruition, the plans
07:44with historical horse racing, with the machines, getting bettors on the track, the hotel?
07:49Did it all coalesce in moments like that where you had a great competition at the races?
07:55That's why we're in this business.
07:57It's simple as that.
07:59To see these great horses, and don't discount the fourth, fifth, and sixth finishers.
08:06They're awfully good horses by themselves.
08:08But to have the three best around the turn and coming in, and we had a late crowd.
08:13And that's what's so much fun about Oakland.
08:15Our fans are the best.
08:17They follow horse racing.
08:18They know what's going on.
08:19Well, we woke up to rain, and it was cold, and we had to cancel the infield, so things
08:26weren't so great.
08:28And we're going, gosh, is this going to be a bad day with low attendance because it's
08:33going to scare everyone away?
08:34Well, guess what?
08:35Starting at about the fifth race, an hour or so before the race, people were flying in,
08:40and we ended up having 35,000-plus on a cold, rainy day versus the apple blossom the week
08:48before, also a great, great race, when we had 45,000 people.
08:53But the weather was perfect then.
08:55So it's just like anything else.
08:56We're weather-dependent.
08:58But, yes, that's why we're in the game.
09:00When we can get a group of horses like that to compete and show off to our fans, again,
09:06it's back to the fan, to show off to our fans in the country how special this game is, that's
09:12why we're in it.
09:13Certainly.
09:14And I've heard about the burger at DeLuca's, as well as there are many great spots in Hot
09:19Springs.
09:20But to wrap things up, as we look towards the entire industry as a scope, do you think other
09:24jurisdictions are taking the right steps, Lewis, as you have at Oakland in making sure that
09:29any casino revenue that is obtained is rightfully being influxed in the industry without running
09:34to that pitfall where it's go too much in one direction, whether that be purses or incentives
09:41that are not really regenerating fans, just looking at it from a distance?
09:45Or do you think that everybody's rightly taking the time to make sure that these racing support
09:51payments are implemented in a way that can continue to grow our sport?
09:54No, I don't think they're doing a very good job at all.
09:57When Santa Anita boasts a huge crowd of 25,000 people for their Santa Anita Derby in Oakland
10:05had 75,000, Hot Springs, the population's 35,000, and you're comparing that to L.A., that's
10:13not right.
10:14When we have the fantasy for a million dollars going up against a race that's 250,000, that's
10:22not right.
10:24Our Derby is a million five going up against a race, the same points, the same aura.
10:30It's supposed to be a race that's 500,000.
10:33That's not right.
10:35So if people remind or say, oh, it's Oakland, you always got to have a casino.
10:40We used to not have a casino, guys.
10:44We weren't given this.
10:46The philosophy is different.
10:48When we had instant racing, and in fact, prior to that, simulcasting, we started the
10:56first full-card merge pool simulcast in 1990 with Arlington Park.
11:01We thought outside the box.
11:03We went to Mr. Dutchess was and said, can we take your signal for the summer?
11:08And the lawyers for Mr. Dutchess was, oh, I don't know if we can do this.
11:12And we said, show us where you cannot do it, and then they couldn't.
11:16So we did it for the very first time.
11:18It represents now over 90% of the North American handle.
11:21It started at Oakland.
11:22How did Oakland come up with this?
11:25And more importantly, when we had our simulcast rooms today, we started just in a grandstand so
11:33many years ago.
11:34But we act like a casino.
11:36We act like a nice facility.
11:39With instant racing, we acted like a casino.
11:41We weren't a casino.
11:42We didn't have slots and all these other things.
11:45But we acted like it.
11:48So yes, tracks can do a lot better job sprucing the place up, making it very comfortable in
11:55today's world, and not just have concrete on concrete, but actually make it enticing so
12:02the family can feel safe and have fun and see racing and do other things.
12:08For instance, our food and beverage.
12:10We heavily subsidize our food and beverage.
12:13And we do that for a reason.
12:15We want families to come out and afford to have a hot dog and a Coke and not spend $12
12:21for a beer
12:22or $10 for a soda.
12:25So we heavily subsidize it.
12:27Now, people will say, oh, gosh, Oakland, you know, you have a casino and you can afford
12:32that.
12:32No, we can gig them.
12:34Go to any other racino out there.
12:37And to have our purses is, I guess what?
12:39We have zero purse subsidy from the state.
12:42Go to any other.
12:43I was shocked when I learned this.
12:46Go to parks.
12:47They're a casino, racino.
12:50I think it's something like 90, 95% of the persons are state subsidies.
12:55Gulfstream, state subsidies.
12:57California, the same.
12:58We have none.
13:00So we never have.
13:01So how are we doing it?
13:03And that's the frustrating thing is I go around the country or go up to the jockey club and
13:10they go, gosh, how'd you do it?
13:11But I'm going, you can do it.
13:13We're an open book.
13:14Come on down.
13:15We'll show you.
13:16Just like instant racing, Louie said, we'll show you how to do it because it works in our
13:21environment.
13:22And if it works for us, it ought to work for you.
13:26Definitely.
13:26Well, I appreciate the time, Louis.
13:28Really appreciate the innovations and the dedication that Oakland makes to his fans and
13:32to our entire game.
13:33So thank you for your time.
13:34Great.
13:34Thank you so much.
13:36Joining us now is Damon Thayer, CEO and founder of Thayer Communications and Consulting.
13:41Also a senior advisor to the Thoroughbred Racing Initiative.
13:44And of course, has over 20 years experience representing the 17th District in Kentucky as
13:50a state senator and majority floor leader.
13:52Damon, thank you for joining us.
13:54Hi, Naj.
13:55Thanks for having me.
13:56Always good to do things with the TDN.
13:59Yes.
14:00And today's topic, we're, of course, exploring casino revenue and its impact to Thoroughbred Racing.
14:06You were very instrumental in getting historical horse racing involved and supportive of the
14:11Thoroughbred industry in Kentucky.
14:13Can you tell us about that fight and that battle and what it's done to the industry?
14:17Well, it started back in 2009.
14:21You'll remember that Oak Lawn was the first to implement the HHR machines.
14:27Back then, they were known by their brand name, Instant Racing.
14:30And that year, I had tried to get a bill passed legalizing Instant Racing in Kentucky, and it
14:39died a quick death.
14:40It was alive on a Friday, ready to come out of committee.
14:44By the time I came back on Monday, the Family Foundation here in Kentucky had lit up the phones,
14:50and I didn't have the votes to get the bill out of committee.
14:54So I don't give up that easily, and I wrote a letter to the attorney general and asked him about
15:01the
15:02legality of the machines under existing pari-mutual law.
15:06His response was they are legal as long as they are regulated by the Kentucky Racing Commission.
15:13So the racing commission and the industry coalesced behind that attorney general's opinion
15:19and promulgated regulations to implement HHR.
15:24And then in 2011, Corey Johnson, who is a longtime friend of mine, he was president and part owner of
15:31Kentucky Downs.
15:32They were the first track to implement the HHR machines at Kentucky Downs 15 years ago.
15:39And we all know the success story at Kentucky Downs.
15:42But then there were a series of court actions where the Family Foundation, you know, there are four families
15:50except for the families who are supported by the 100,000 jobs the horse racing industry provides in Kentucky.
15:56That was a little political jab there in case you missed it.
16:02The court consistently ruled in favor of horse racing.
16:06We went through circuit court, court of appeals, and the Supreme Court, and they all ruled that historical
16:13horse racing machines were legal under the pari-mutual statutes.
16:17But then in the fall of 2020, the Supreme Court reversed itself.
16:21It decided to be against it after it was for it, or they were for it before they were against
16:27it.
16:28And their ruling was that now, after 10 years of investments by racetracks and purse increases for horsemen,
16:37that they were reversing their decision and that the General Assembly actually had to pass a law legalizing HHR.
16:45That was a stealing moment for the industry where everybody united, racetracks, horsemen, breeders,
16:53jockeys, jockeys, you name it, everybody united to try to get that bill passed in 2021.
16:59And it was just a simple language change, you know, a little sentence about that big inserted into the statute
17:06where the definition of pari-mutual wagering is located.
17:11It just said that races run on, or wagers on previously run horse races.
17:17And that bill passed in February of 2021.
17:23And as I look back on that, I mean, only five years ago, it was a major fight.
17:30And, you know, now Kentucky's gone from strength to strength.
17:33We have the best year-round purses in the country.
17:35I'm really proud of the efforts.
17:37And, you know, I think that the future of racing and breeding here in Kentucky is strong.
17:43But my one caveat is I'm a big believer in the need for regional markets in other states racing to
17:51be strong.
17:52And I'm currently working in Florida, Virginia, and Iowa, and some other places, too, hopefully soon,
17:58to strengthen racing in those states.
18:00I want us to continue to be a national sport.
18:03I want us to continue to have racetracks and legalized pari-mutual wagering in 35-plus states.
18:10Definitely, and it's thanks to your good efforts, especially in Kentucky, with the historical horse racing battle.
18:16But can you talk about some of the framing issues?
18:18I know our critics would like to refer to those payments as subsidies versus what the industry is able to
18:24do overall with that revenue.
18:26And how does that relate to decoupling legislation outside of Kentucky in the regional markets
18:31and your efforts that you've put forward in bringing that fight to Florida and other states
18:36and trying to get support in other jurisdictions?
18:38Yeah, Naj, I hate that word, subsidies.
18:42I think of it as supplements for purses, partnerships between racing and gaming.
18:48And that's how we framed it in Kentucky and framed it in Florida.
18:52These historical horse racing machines are absolutely driving the horse racing and breeding ecosystem through the roof here in Kentucky.
19:00That means tax revenue for local cities and counties and schools, and it's sending almost $100 million a year from
19:13HHR alone into the state general fund.
19:15So it's a really good success story.
19:18When Mark Cassie called me up in early February of 2025, right after I had retired from the Kentucky State
19:26Senate,
19:26and he asked me if I could come help them down in Florida, it's really the same argument from state
19:34to state, from jurisdiction to jurisdiction.
19:37Horse racing plays a major role in the economies of states.
19:40It has a huge effect on agribusiness and tourism.
19:44In Florida, the research shows it's 33,000 jobs, $3.5 billion economic impact.
19:54And really, the talking points are the same, from New York to Florida to Maryland to California to Kentucky, Texas,
20:03and everywhere in between.
20:04The horse racing and breeding industry support green space preservation, and it supports the creation of small businesses.
20:14When Mark Cassie and David O'Farrell and John Green, Aaron Wellman, and Barry Eisenman hired me to advise the
20:21Thoroughbred Racing Initiative, we were under the gun.
20:23We just had to kill that bill.
20:25But when we killed the bill officially on Oaks Day last year, we then pivoted to educating, especially senators,
20:34because we knew that the bill always had the skids greased in the House by Gulfstream Park.
20:43We knew that our strength was in the Senate, and we really worked with those senators to increase their education
20:49level.
20:50And we turned several of them into advocates for our industry, and that worked really well.
20:55And those talking points, when you can back them up with numbers and human stories, and when 50 people show
21:02up in Tallahassee to testify against the bill, it really makes an impact.
21:07And, you know, that's the model we're going to have to use to save and preserve this industry on a
21:12state-by-state basis, much like you've done in New York.
21:16No, I appreciate that, Damon.
21:17I'd also like to ask you, with the money that is influxed into the industry due to the revenue payments,
21:24do you think we could be using it better overall?
21:27So to say, should the majority of it be spent to purses or to breeding development funds?
21:32Or what about our marketing efforts when you're attending racetracks?
21:36And are we doing or can we do a better job in getting and obtaining new fans, in a sense,
21:42instead of just focusing solely on purses or awards for, you know, participation among breeders and participants who are already
21:50competing in our game?
21:52Well, that's an excellent question.
21:54And I'm a marketing guy by trade.
21:56I started out in the business working at racetracks in four different states and then the Breeders' Cup as a
22:02PR and marketing and operations guy.
22:04And I run my own bourbon company, Kentucky Senator Bourbon, and I always wish we had more money to spend
22:12on marketing, both in our little company, but in racing in general, marketing guys are always going to say, absolutely,
22:21we need more money for marketing.
22:23I will say this, here in Kentucky, the way the legislation is structured, there is a big emphasis on purses
22:29and breed development programs.
22:32And I think that's important.
22:33You know, the four P's of marketing are product, price, place or distribution, and promotion.
22:41And you've got to have the first P right.
22:44The product has to be good in order to have it priced well, distributed well through ADWs and simulcasts.
22:54It has to be presented at nice, clean racetracks that people like to go to.
23:01And then the promotion, the fourth P kicks in.
23:04So I think we've got the product here in Kentucky.
23:07We do spend money from the KTDF on certain marketing executions.
23:14They're limited by statute.
23:16At the end of the day, though, it is up to the racetracks to do marketing to try to drive
23:21attendance.
23:23But I think we can always do more.
23:26And, you know, especially in your state, New York, you're going to have a new facility opening up that we're
23:31all really excited about.
23:33Maryland next year is going to have a new facility.
23:35I think the whole industry is watching really with high expectations for the new Belmont and the new Pimlico.
23:44And hopefully Naira and the Maryland Jockey Club will engage with fans beyond Belmont Stakes Weekend and Saratoga and beyond
23:53the Pimlico Racing Week to try to drive attendance into those new facilities.
23:59We are sort of spoiled here in Kentucky.
24:03We've got a new facility at Turfway.
24:06You know, Keeneland just opened up new dining areas.
24:09And obviously it's one of the nicest facilities in racing.
24:13Churchill Downs has spent over a billion dollars, probably more, on upgrading its facility.
24:19So, you know, we're a little spoiled.
24:22But hopefully in New York and Maryland, you'll get a little spoiled, too, because of the new facilities you've got
24:27coming online out on the East Coast and the Midland.
24:30Yes, no, Kentucky is certainly the model.
24:33And thanks to your help, Damon, other states are fortifying their battle in keeping and making sure that casino revenue
24:39will continue to flow through to the industry directly.
24:43I'll lastly ask you, what do you think is our best defense mechanisms?
24:47Of course, yourself, through your consultancy firm and through the Thoroughbred Racing Initiative.
24:52What can states and jurisdictions do best to defend our territory and make sure that these payments continue to flow
24:59and support the industry?
25:00Well, you're going to you're going to give me a chance to preach here, Naj, because I've been saying this
25:05since I retired from the Kentucky State Senate.
25:07I've done speeches and op-eds and podcasts.
25:12Everybody who lives in America is represented in their state capital by one House of Representatives member or House of
25:21Delegates and one senator.
25:23Unless you live in Nebraska, they have a unicameral legislature.
25:26So you just have one senator.
25:27But in the other 49 states, you've got two people who represent you in your state capital and they want
25:34your vote and they want the votes of our industry.
25:38What I've been saying to everybody who cares about this wonderful industry and this terrific sport.
25:44I mean, I remember when when Nick Zito won the Kentucky Derby with Strike the Gold, he enthusiastically said this
25:51is the greatest game played outdoors.
25:53And he was right then and he is he is right now.
25:56Now, we need to tell that story.
25:58I urge people to reach out and get to know your legislators in your state capital.
26:05Invite them to the racetrack.
26:06Invite them to your farm.
26:08Go first.
26:10Go go see them in their state state capital office.
26:13If you can build up that rapport, exchange phone numbers and then try to get them to come and see
26:20the races or your farm or your vet clinic or your van company.
26:25Or your operation.
26:27So they feel a connection to it.
26:29Because in every state, all you really you don't need to befriend all 100 members of the legislature and here
26:37in Kentucky, 138.
26:38But if you can just find a couple of advocates who were willing to go to bat for this awesome
26:45industry, that's really what it takes.
26:47And that's that's what happened here in Kentucky.
26:50I was able to recruit some very strong allies to join Matt Cook and David Osborne in the House and
26:58and Senator Schickel and me in the Senate to really turn into advocates for the horse industry.
27:03And we did it in Florida, too, with people like Senator Jason Broder, the Senate designate Boyd, Senator Danny Burgess.
27:11They're now our allies.
27:13They understand our narrative.
27:15They understand our talking points.
27:16They've met our people.
27:17They see the passion.
27:19So become become an advocate for the industry.
27:22That's my number one message.
27:24We we all have our our horseman's groups and our and our breeders groups and our racetracks that lobby in
27:29our state capital.
27:29And that's incredibly important.
27:31We need that people can if you're aligned with one of those groups, work with that group to try to
27:38get to know legislators.
27:39But the best thing you can do is get to know your own personal legislators, build that relationship, advocate for
27:46our industry, whether we're we're going on offense, trying to change statutes to improve the economic model.
27:52Or as we found in Kentucky, we were on defense.
27:55You just have to be prepared.
27:57You just can't show up when it's time to break the glass and pull the fire alarm.
28:02Definitely.
28:03Damon, thank you for your time and the good work you're doing for our industry.
28:06Really appreciate it.
28:07Thanks, Naj.
28:07It's a passion.
28:08And I'm going to continue doing it every day.
28:11Now joining us is Bill Nader, president and CEO of the Thoroughbred Owners of California.
28:17Previously to joining the TOC, Bill was an executive in Hong Kong at the Hong Kong Jockey Club and as
28:23well at the New York Racing Association
28:24and previous positions all across the industry in horse racing in North America.
28:29Bill, thank you for joining us today.
28:31Great to be with you.
28:33We're talking about the issue of casino revenues and, of course, its impact of Thoroughbred Racing.
28:38And in California, it's a unique situation where, of course, your handle determines what gets put back directly in the
28:46industry.
28:46Can you talk about the current restrictions you're facing and what you're working on to try to get casino revenue
28:52implemented in California?
28:56Yeah, well, it's been our Achilles heel for quite a while.
29:01When you look at, you know, I was still working in New York when we were able to get VLTs
29:08approved at Aqueduct.
29:10And that was a that was a turning point in New York.
29:13We know what's happened in Kentucky and Arkansas and some other states.
29:19I actually was involved with in Virginia with with HHR coming back there to reopen Colonial Downs in between my
29:28two stints in Hong Kong.
29:29So in California, it's much more tricky to navigate that landscape as tribal gaming has a pretty good stranglehold on
29:41what's permissible in the state of California.
29:45So we've worked on a couple of things in the interim, trying to get a runway to, you know, keep
29:52us moving in the right direction.
29:55And one of the things that had to be done when I first arrived here, when we looked at, you
30:02know, what the economics were within the state of California, trying to support two full time circuits.
30:07We had racing full time in Southern California and also another circuit in Northern California, Golden Gate and the fares,
30:17the fair circuit.
30:18It was just too much to to really, you know, with with the single source income that you alluded to
30:26at the top of just pari-mutual wagering, driving commissions to the racetracks and also to the purse account.
30:35It was too big of a load to carry.
30:36And so we did have to consolidate.
30:40And now we look for the second layer, which would be to get some kind of approval, whatever that might
30:48look like.
30:49And there was an attempt that I think got a lot of attention in January, where here at Santa Anita,
30:57they put in 26 what we call racing on demand terminals.
31:03And within two days, the Department of Justice came in and took those, took those terminals out on California Cup
31:12Day, which was, I think, Saturday, January 17th, right when the California Cup Derby was being run.
31:19The timing was just right to that moment.
31:24And there'll be a day in court, we would expect coming up next week, where maybe we would get a
31:31schedule as to, you know, what that's going to look like in terms of the legal challenge that the industry
31:38is putting forward through Santa Anita, through First Racing,
31:41to say that racing on demand is a paramutual wager that we're entitled to, and that it is legal, in
31:54our view, and see where that might go.
31:58Yes.
31:59And speaking to that point, can you kind of paint the picture if California continues on a trajectory where casino
32:06revenue will not be interjected into the industry?
32:10What does that picture look like in the next three to five years, in your view?
32:14Well, that's a fair question, because we know we're not a slam dunk, but we know we have to really
32:21fight for what we believe we're entitled to.
32:25But absent that, I think we've already taken mitigating measures to restore the foundation in California.
32:33And that was a tough decision for us, because it meant that we did have to consolidate, and that we
32:42did have to reduce our footprint to really just Southern California.
32:46The way it's structured here, you know, over the, you know, past several decades, any wagering that takes place in
32:56Northern California, that revenue remains in Northern California to support live racing.
33:03And whatever happens in Southern California, whatever wagering takes place in the Southern part of the state goes to support
33:09live racing in Southern California.
33:11Well, the other part of it that I don't think people really understood meant that, let's say, a track like,
33:23a fair like Ferndale, which is a half-mile track that would run two or three weeks in the summer,
33:30was running opposite Del Mar.
33:33And all of the money wagered on Del Mar in Northern California, while racing would be conducted at Ferndale, would
33:41remain in Northern California, and they would not pay a nickel to Del Mar for the content, right?
33:47So that's the trick in this.
33:49There were 25 days of racing with Golden State Racing at Pleasanton at the end of 2024.
33:55And then they threw in the towel, and then CARF, which is the California Authority of Racing Fairs, shortly thereafter,
34:04in early 25, they came out and said they weren't interested in continuing with the fares, and it's simply unraveled.
34:14But at that point, the revenue then that was generated in Northern California on races that were run in Southern
34:22California and races that were run on out of state, then were channeled to Southern California to support racing in
34:30California.
34:31And with that, we were able to race purses.
34:35Last year, every overnight race in California, beginning on February 28, 2025, had a higher purse than the prior year.
34:47So that's when we started to see an uptick.
34:50So we're working on whatever we can to keep that foundation in place.
34:56And from the upside of the consolidation, we've channeled all of that money to the overnights.
35:05We've done very little with the stakes races because we realize we only have, from an incremental increase in what
35:15we have been able to add to the purse structure,
35:20we'd be better off to direct it to the overnight races, to the bread and butter races, and that would
35:28be the best use of that money.
35:29So with that, you haven't seen really, with the exception of a few races, the stakes races have remained intact.
35:39There have been some increases to a few races, but moreover, it's really been to the overnight.
35:46So now we're at a point where, you know, a maiden special weight race, if you use that as a
35:52benchmark, you know,
35:55over the first quarter of the year in Santa Anita was 70,000, which was much higher than what it
36:02had been previously.
36:04And a maiden special weight at Delmire in the summer will be at least 80,000, and the two-year
36:10-old races on the dirt will be $100,000 maiden special.
36:16So for a state that really doesn't have ancillary revenue and we're surviving on a single stream,
36:24I think we've done everything we possibly can to make sure that the value proposition to retain owners
36:34and also help support racing here in California, that we're doing everything that we can.
36:41Yes, I certainly agree.
36:42And I've seen what Doug Burge has done as well with some of the incentives that the CDBOAs has implemented
36:49to try to get that involvement.
36:51Coming from Hong Kong, where, of course, it's just been a booming industry.
36:56And, of course, you've got the revenue source and the fans.
36:58How do you have you dealt with the comparison of the current situation in California to where you have been
37:05in Hong Kong,
37:06where racing is, quote-unquote, blooming, and in bridging the gap between the two regions
37:11and focusing on primarily the sources that you are now,
37:15what measures have you also been able to institute coming from Hong Kong to California
37:21in making sure that marketing and betters are well-satisfied with the product?
37:26There's an incredible obligation in Hong Kong to really meet the expectations of not only the Jockey Club,
37:37but also what's expected by the government.
37:41It's not a government-run operation,
37:42but I believe the annual contribution to Hong Kong government from the Jockey Club in Hong Kong
37:52is $2.6 billion annually.
37:55So, well, it might not be government-run.
37:58It's the biggest single taxpayer in Hong Kong.
38:01And you have a racetrack at Happy Valley that is like a racetrack right in Central Park, New York.
38:07The land is so valuable.
38:10So to be able to keep that racetrack in operation, it's got to deliver.
38:16There's only racing there 40 days a year, Wednesday night racing.
38:24And it really punches above its weight because on a Wednesday night,
38:33the average handle on a race on a Wednesday night will be equal to what would be a weekend race
38:39at, say, Chateau.
38:40So it's a phenomenal business model where you just can't duplicate it.
38:49When I went there, I think I stayed quiet, Naja, for about three months before I really felt like I
38:56really had a grip on it.
38:57And then I was able to then, I think, you know, be at 100% to do my job.
39:03But it takes a while to really understand it.
39:06First of all, to be, there's no breeding in Hong Kong, so all the horses are imported.
39:11I'll just give you a couple of bullet points.
39:13So that's one.
39:14And two, if you're an owner of a racehorse in Hong Kong, you have to be a member of the
39:19jockey club and you have to have a permit that's issued by the jockey club to import a horse.
39:26And that permit is awarded once a year in an annual ballot where there may be, there may be, sorry
39:35about that, say, 1,000 applications for 400 permits.
39:47So 600 of the applicants are going to be disappointed and have to wait for the next year.
39:51And no single person can have more than four horses at any one time, no matter how powerful you might
39:56be.
39:57So they're spreading that opportunity.
40:00Now, the turnover or what we call handle is just incredible.
40:08But I always like to point this out as sort of a comparison.
40:14The jockey club has three betting products.
40:17One is horse racing.
40:18And so every off-course betting branch, there are about 100, and all the account wagering, and everybody has an
40:25account pretty much, bets through the jockey club.
40:29So there is no FanDuel or DraftKings or, you know, NairaBets.
40:33It's all Hong Kong jockey club.
40:35Hong Kong jockey club runs the tote.
40:37Hong Kong jockey club does the food and beverage.
40:40So at every touch point, Hong Kong jockey club really doesn't have outside contractors doing the work.
40:50It's all under their umbrella.
40:52And there's no regulator.
40:54The regulator is the jockey club.
40:58So the government puts a lot of trust into the jockey club to make sure it delivers, you know, a
41:04first-class experience end-to-end.
41:06And the jockey club does that.
41:09But the betting products are horse racing, the lottery, and sports betting.
41:15And the lottery, even though if you win the big jackpot, and it can get big, it's tax-free.
41:24The government won't take a single percentage point or a single dollar.
41:29But the people in Hong Kong reject it.
41:31They don't really bet on the lottery because it's a game of luck.
41:34Their preference is horse racing, which is a game of skill.
41:38And culturally, it's so much more part of the DNA.
41:43And it really does work.
41:45The money is channeled responsibly through wagering through the Hong Kong jockey club.
41:50And then it's returned not only in what I referred to earlier about the $2.6 billion, which we call
41:57in Hong Kong betting duty.
41:59Here we would call it tax.
42:01But beyond the betting duty, Hong Kong jockey club is the fifth biggest charity donor in the world.
42:08And so when you look at Hong Kong, and it all comes from the jockey club, when you look at
42:13the footprint in the landscape in Hong Kong, and you see all of the contributions the jockey club has made
42:22in Hong Kong by channeling gaming demand responsibly through the club, and then returning it to the community, you see
42:28it in the form of education.
42:30You know, universities in Hong Kong, parks, arts and entertainment, hospitals.
42:40These are the things where they really show that it's a tremendous model.
42:45And, you know, it was developed a long, long time ago.
42:48But the architects of that I give great credit to because they really put something together that makes it not
42:56only sustainable, but from a standpoint of social license.
42:59I mean, they really do everything to make Hong Kong a better place to live, to work, to, and to
43:07be.
43:08Whether you're a Hong Kong resident or a tourist coming in, the added value is phenomenal.
43:15Yeah, that is really unbelievable.
43:17And transitioning back to California, do you think the state would be uniquely positioned to adequately interject casino revenue to
43:26the state since you've been having to do without it for so long?
43:30I guess I'm trying to ask you, certain other jurisdictions you see where it's been exorbitant purses or exorbitant breeding
43:39supplements where it kind of sends the industry, in a sense, that could be out of whack.
43:45But since California has had to, I guess, you know, right-size the industry, first of all, now, if you
43:51get that casino revenue implemented with the racing on-demand machines, do you think you're adequately in a position to
43:57make sure that the money injected will be distributed in a way that will promote growth and betting and more
44:03participation overall?
44:05Yeah, we haven't gotten that far yet, but yeah, the short answer would be yes, we would.
44:11We haven't rolled up our sleeves to say, okay, how would, you know, what would be the distribution of proceeds
44:18if we were able to do that?
44:21But if you look back to even 2010 and say, you know, what were purses like in California compared to
44:28other states?
44:29I mean, we were right there, obviously, with, or even in a better position than some of the big states,
44:35like we know today, Kentucky, New York, Arkansas.
44:39I mean, California was right there.
44:43And now if you look at it today, so today now, you know, we're, you know, we look at it,
44:51when you talk about that, I look at New York that has over, say, 17,000, you know, VLTs and
44:58Kentucky, which has nearly 9,000 HHR machines.
45:01It's all about distribution.
45:03So the key would be for us to be able to open that door to get the widest possible distribution
45:11so we can get the highest possible revenue to do it in a responsible way, which would be on our
45:18pari-mutual footprint, which, by the way, dates back to 1933.
45:21When you step onto the property at Del Mar or Santa Anita or Los Alamitos, that these are responsible destinations
45:31that have been the home of legal wagering for 100 years.
45:35And all we're asking for now is to potentially expand our menu while staying in our pari-mutual lane to
45:43offer a different type of content.
45:47Definitely. We wish you the best of luck in that advocacy. And personally, please let me know how I can
45:51be of help, Bill, but always fighting for California.
45:54We want to see California doing well. And we need that as a media market, as a participants, to be
45:59a part of racing for the long term. So thank you.
46:02I appreciate that. I do. And good luck with the new addition to the GDN. I think it's outstanding. And
46:08I've enjoyed watching it last week in particular.
46:12Thank you, Bill. Really appreciate it.
46:14Thank you again for joining us for today's edition of the TDN Business Hour.
46:18We really appreciate the time. We look forward to seeing you again next month.
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