National HBPA Panel Discusses ADW Wagering

Jennie Rees, a communications specialist and advocate who counts the National Horsemen's Benevolent and Protective Association among several clients, filed this report on a March 9 session of the National HBPA convention in Las Vegas.

Racing has undergone a transformative change since grandstand and backside telephones were locked during the races for fear people would bet through bookmakers.

Wagering on mobile devices today is Thoroughbred racing's clear growth leader. But the challenge is how to gain enough purse revenue from betting through the advance-deposit waging platforms that have siphoned off players who previously used a mutuel clerk or self-bet machine at a racetrack. Now even handicappers at the track frequently are betting on their phones—and that typically makes a huge difference in how much of the proceeds goes toward horse owners.

So the panel entitled "Today's ADW Growth and What It Means For Our Future" was a highly anticipated discussion on the March 9 second day of the National HBPA Convention in Las Vegas.

Horsemen get a much smaller percent from a dollar wagered through an ADW, typically 3% or 4%, versus a rough figure of 12% if that dollar is bet on live racing through a track betting terminal.

Michele Fischer is a vice president with tote company Sportech, which processes $11.6 billion globally a year in wagers. While exact numbers are difficult to come by, she told the Horsemen's Benevolent & Protective Association assembly that best estimates from available data suggest that 35% to 40% of handle on American racing now is conducted through ADWs, with their computer, phone and mobile conduits. 

"I'd say in the next few years we're going to see it being closer to 60%, 75%," she said.

U.S. adults owning smartphones jumped from 35% of the population in 2011 to 77% in 2016. In 2013, an estimated 64 million people used a mobile device to gamble. That number could be 164 million by 2018, Fischer said, citing research sources.

"This isn't something we should be concerned about. We should be embracing it," she said. "I'd say in the next year or two you might see an app where you ask your digital assistant like Siri or Alexa, 'Alexa, please bet $5 on this track, this race,' and she confirms your bet. It's just going to grow.

"These are really interesting things for us to think about—and for you to think about. How are we addressing this? For so long, a lot of racetracks had VLTs (electronic slots) supplementing purses. We really weren't fully feeling what this shift meant for purses as far as percentages you receive, whether (betting) was on-track or off-track. This issue will become more and more important as we see purse supplements from VLTs  shrinking. We have to figure out if our model a good model. Is it sustainable for purses moving forward?"

Eric Hamelback, the National HBPA's chief executive officer, said in introducing the panel that change must come in order for horse owners to get a fair share of betting on their product.

"Continued status quo will mean the continued decline of our industry," he said. "True and effective change can be achieved, but only through racehorse owners and their horsemen's groups coming together cooperatively with pooled resources, ideas, strategy and, if necessary, forcible change."

"Our pari-mutuel revenue model has not kept up with the technology," said Ed Fenasci, the Louisiana HBPA executive director who moderated the panel. "... We need to come up with better options to formulate an equitable revenue-sharing model with the industry stake-holders."

Fenasci added this observation on ADW companies, which include industry track titans such as Churchill Downs-owned TwinSpires.com, The Stronach Group's Xpressbet.com, and the New York Racing Association's NYRA Bets.

"Now, I don't want to set up the ADW companies as the enemy or the boogie man or anything evil," he said. "They are managing our customer relationships now. We find ourselves in an age where, if they don't have some financial incentive, why would they develop a cool app to let you bet on your phone and make it convenient for our customers?

"I'd argue that we need to make it as convenient as possible." 

Fischer cautioned that the industry is price sensitive on both sides.

"I work primarily with racetracks, OTBs, and ADWs providing them services," she said. "So I'm really aware what they face trying to make the numbers work. And I grew up in the horse-racing industry, I've owned horses and understand how challenging it is to make money. What we all have to remember, for any sport, the more points of distribution we have the better—the more places and eyeballs on our sport. That's one thing we need to work toward: having racing in every bar, having racing up in every restaurant you go in, versus just in a few places."

Back in the days of locking up phones at the track, racing had a monopoly on legal gambling. That's long gone. But for now it still has a monopoly in the United States on legal gambling online, Fischer said. That figures to change, with the explosion in the gray area of fantasy football and increased efforts to legalize sports wagering.

"It's only going to become more competitive," Fischer said. "We're waiting now in the U.S. Is sports betting going to be legalized? Nobody knows. But that, too, is going to push horse racing online when we start seeing sports, start seeing casino games online. But right now we have a monopoly online. We all have to figure out how do we work together to strengthen it, to make sure that money goes to purses. Because we saw what happened when casinos opened. And I'll tell you, sports wagering is not going to be subsidizing racing."

Veteran industry consultant Dick Powell said horsemen and racing do have a card they can play when going to state legislatures.

"The only language we need to talk is jobs," he said. "We still have a labor-intensive business that start to finish employs a lot of people."