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    The long road to uncertainty  

    Posted: 1:00 am Thu, May 14, 2009
    By Liz Farmer 
    Daily Record Business Writer


    On a typical Saturday at Pimlico Race Course, longtime Maryland horse racing reporter Dale Austin could walk into the racetrack’s press box and find it flooded with at least 25 or 30 reporters.

    “Pimlico was a red-hot place, the hottest in the East,” said Austin, who covered racing for The Baltimore Sun for 29 years. “You could go up to a window in Washington to get a ticket the day of a Redskins game, and, except for Opening Day, you couldn’t fill up the ballpark for baseball games. But there’d be 20,000 people at the racetrack in Maryland.”

    But that was in 1962.

    And since that time, perhaps the only thing that the horse racing industry nationwide and in Maryland has done is consistently miss the boat, falling further into obscurity and an uncertain future.

    Maryland’s prized Preakness Stakes, the second leg in the Triple Crown racing series and scheduled to run Saturday, was the pinnacle of Maryland racing in 1962 — and it still is today, those in the industry said.

    But the race day, which last year accounted for more than 11 percent of the annual wagering at the Maryland Jockey Club’s two tracks, carries with it today a sense of urgency as the lone peg holding up the rest of the sport in Maryland.

    And that peg is on shakier ground than ever before. The jockey club owner’s bankruptcy has caused politicians and officials to sound alarms about the Preakness leaving the state. Slot machines at tracks in surrounding states are boosting purses and drawing competition there, hurting the quality and competition of the daily races in Maryland.

    But the decline of horse racing in the state, a sport that many described as “the only game in town” for more than a century, didn’t start with slots. Nor is the solution just hanging on to Preakness without regard to the rest of the industry.

    “Racing in this country has been an evolution of bad management at the family level to bad management at the corporate level,” said Tim Rice, an industry analyst with Rice Voelker LLC in Louisiana. “When they had to start competing for customers, they didn’t know how to do it, and for the most part they’ve changed too little too late.”

    In its heyday, Maryland boasted six thoroughbred tracks. Pimlico, Laurel Park and the Bowie Race Course (now a training center) drew horses from up and down the East Coast, while tracks in Timonium, Cumberland and Upper Marlboro made up the state’s racing circuit.

    Horse racing then held a monopoly on sports entertainment options.

    “It was the thing to do,” said former Gov. Robert L. Ehrlich Jr., who said his parents took him to the races at Timonium for family outings. “But horse racing is no longer taught to young people in the state.”

    As televisions became more commonplace and families were welcoming sports into their living rooms, that’s when some say the industry made its first big blunder.

    “In the early days, racing was hesitant to have any television [broadcasts] because then people wouldn’t come to the track and they wouldn’t bet,” said Cricket Goodall, executive director of the Maryland Horse Breeders Association.

    Rice points out that during that time, professional football, baseball, basketball and later NASCAR were jumping on television contracts with broadcast networks. Sure, people were watching games without paying for tickets, but the sports were becoming part of mainstream culture and remaining current with a young audience.

    “They decided it was a threat to the business, and I can’t tell you what backward thinking that was,” Rice said. “They lost an opportunity to advance the sport.”

    In fact, it wasn’t until the 1980s that the horse racing industry really got into the game with simulcasting, where tracks broadcast races from other locations around the world. Bettors could place bets on those races at the tracks or via phone and later the Internet.

    While it did contribute to declining attendance at tracks, it still kept people — and their wallets — involved in the game, albeit from the comfort of their homes.

    Today, wagering in Maryland from simulcast races accounts for more than 80 percent of the total handle at the state’s tracks. According to the Maryland Racing Commission’s 2007 annual report, betting on out-of-state races at Laurel accounted for 83 percent of the track’s $153.5 million handle, and at Pimlico, it was 81 percent of $103.9 million in total wagering that year.

    But before horse racing accepted simulcast wagering, it was dealt another blow as states began legalizing gambling in the form of lotteries.

    The Maryland State Lottery Agency was formed in 1973 — the same year Secretariat won the Triple Crown — and gave bettors another way to scratch their itch. There were now more options than ever before for those who liked the thrill of sports, gambling and, most of all, convenience.

    Up until then, said Rice, if you wanted to gamble legally, the choices were Atlantic City, Las Vegas or the corner bingo hall.

    “That’s changed dramatically,” he said. “Now you have regional casinos with shows, all you can eat buffets, etc. That’s hit the business.”

    Rice and others pointed to the marketing of regional casinos as one-stop entertainment shops and their coddling of customers with rewards cards and gift certificates for birthdays as another missed opportunity for racing.

    “Racetrack owners just assumed their players were dedicated,” said Rice. “They thought they could charge for admission and parking and overpriced concessions and get away with it.”

    Meanwhile, Maryland thoroughbred tracks were closing — Cumberland Race Track in 1961, the Upper Marlboro track in 1972 and Bowie in 1985 — and track ownership began consolidating. Tracks, which once operated as family-owned hamlets, were now pooling resources under one corporate umbrella.

    Joe De Francis, whose family bought Laurel in 1984 and Pimlico in 1986, called the transition one of moving “from the dark ages of total autonomy into an era of great interdependence.” Churchill Downs Inc. began buying up properties around the country, he said, and at the time consolidating seemed the best thing to do to enhance profitability.

    Some say that if De Francis’ father, Frank, had lived longer, that could have made the difference for Maryland racing. Frank J. De Francis’ policy of aggressive promotion and refurbishment is largely credited with reversing declining attendance at Maryland tracks in the 1980s.

    Before his death in 1989, he had talked of rebuilding the Members’ Clubhouse that burned down in 1966 and restoring the property to its glory days as the place to be seen.

    “He had great dreams for Pimlico,” said Joe Kelly, resident historian of Pimlico and a longtime racing reporter. “I really believe if he had lived, there’d be a different Pimlico.”

    Also, in 1995 Delaware became the first state to bring slot machines to mid-Atlantic racetracks, followed by West Virginia in 1997. The slots boosted both revenue and purses at those tracks.

    “As we saw consolidation taking place on a national basis and saw slots growing up around us on a regional basis, we saw it was not going to be feasible for Pimlico and Laurel to continue indefinitely,” De Francis said. “It became obvious we had to join forces with either Churchill or [Magna Entertainment Corp.].”

    Goodall also noted the state’s declining gambling revenue took a toll on its once-prized thoroughbred farms because the incentive to breed and race in Maryland was not as great. At last count, she said, Maryland’s incentive fund was $4 million — Pennsylvania’s, which introduced slots in 2006, was $25 million.

    “If you’re in a business and trying to make a business decision, it’s not even a close call,” Goodall said. “If you can make five or six times more money racing in Pennsylvania, you’re probably going to do that no matter how loyal you are to Maryland.”

    In 2002, De Francis and his sister Karin sold Laurel and Pimlico to Ontario-based Magna, now the largest owner of horse racing tracks in North America. Some say another opportunity was missed during that time.

    “I think Magna has dropped the ball on advertising,” said Kelly. “Pimlico is a promoter’s dream — no other track in America can advertise what it has in Preakness.”

    But since coming to Maryland, Magna, which filed for bankruptcy in March, has lost more than $600 million from its struggling operations. Greater access to capital was clearly not going to be the answer for Maryland’s tracks, and the industry pushed for slots.

    Ehrlich, who as governor from 2003 to 2007 was a proponent of slots, called that push one of his “single largest frustrations as governor.” A bill legalizing slots at Maryland tracks passed three times in the Senate during his tenure and each time was defeated in the House of Delegates.

    Michael E. Busch became speaker of the Maryland House of Delegates after then-Speaker Casper R. Taylor Jr., a slots proponent, lost his Allegany County seat in the 2002 election. Busch said he opposed slots legislation at that time because he believed it was too favorable to racetrack owners at the expense of the state.

    “It seemed an unjust enrichment that [track owners] should have entitlement to a slots license,” Busch said, noting the House did pass a bill in 2005 that allowed 9,500 slots at three non-racetrack locations and Laurel Park, but that legislation was not reconciled with a Senate bill designating 15,500 slot machines at four tracks and three other locations.

    Busch acknowledged that slots in Maryland would have taken a different path if Taylor had remained speaker. But he wouldn’t speculate where horse racing would be if slots had passed here sooner.

    “I think the racing industry is in transition everywhere, not just Maryland,” he said. “Churchill Downs doesn’t have slots, and they’re probably the foremost in the country with the Kentucky Derby and the Kentucky Oaks [races].”

    Last year, voters approved a constitutional amendment to allow slots at five locations in the state. But six months later, a recession has been declared, the owner of Laurel and Pimlico is bankrupt and no slots bids have been approved while the one bid for slots at Laurel was rejected.


    Ehrlich noted slots can still save the industry here, but the way in which it was passed has once again put Maryland a step behind by limiting the locations and having a 67 percent tax rate on proceeds.

    “You can’t say the lack of bidders here is just the economy, because you see more bidders in other states where the tax rate is reasonable,” he said.

    Many believe that Maryland is still years away from seeing its first slot machine, and in the meantime, preserving the thoroughbred tracks here has become paramount to keeping the industry alive. Goodall and others said there is now too much racing in the mid-Atlantic and tracks are struggling to fill up their fields with quality horses.

    If states could coordinate with each other to form a racing circuit, as Maryland tracks did in the first half of the 1900s, instead of independently deciding their own racing seasons, the effort could help pool demand from racing fans, she said.

    But she and others said that interstate collaboration would take an extraordinary effort as yet another one of racing’s handicaps is that it has no overarching governing body or commissioner like other professional sports.

    “Each state is regulated differently, and it’s a very disjointed and bumpy industry to try and bring together,” Goodall said. “But you definitely need a cohesive person to unite the industry, to herd the cats to get them in the right direction.”

    Others also believe that if Maryland can hang onto the Preakness Stakes while the racing industry waits to see revenue from slots, horse racing here can survive with the help of loyalty and tradition.

    “This sport’s been here since the 1700s and the infrastructure here is still incredible,” said Kelly, the Pimlico historian. “You don’t just kick that out the window.”

    But unfortunately for those in the industry who produce the product — breeders, owners and horsemen — the decision making from the powers that be has always come too late. Whether it was track owners with television and marketing, or governments with regulation and slots, the key turning points have been missed.

    That, to some, is the most frustrating part of Maryland’s racing story.

    “It’s a combination of people thinking they knew better, but they hold the fate of many, many people in their hands,” Goodall said. “It is sort of unfortunate when you feel you’re not the decider of your own destiny. They do understand now, but it’s taken some blows to get their attention.”