John Pricci executive editor John Pricci has over three decades of experience as a thoroughbred racing public handicapper and was an award-winning journalist while at New York Newsday for 18 years.

John has covered 14 Kentucky Derbies and Preaknesses, all but three Breeders' Cups since its inception in 1984, and has seen all but two Belmont Stakes live since 1969.

Currently John is a contributing racing writer to, an analyst on the Capital Off-Track Betting television network, and co-hosts numerous handicapping seminars. He resides in Saratoga Springs, New York.

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Thursday, September 24, 2009

On Fixing a Broken Simulcast Model

ELMONT, NY, September 23, 2009--I had a suspicion that someone involved with the thoroughbred industry was going to respond to Wednesday’s Morning Line blog penned by an industry insider exposing the shortcomings, legal and otherwise, on the subject of settlements.

Settlements are the monies paid by host tracks to their simulcast partners following a day’s betting activity at a particular track or the proceeds that simulcast “guests” owe the host tracks. How does this system work, exactly? What integrity and transparency issues are involved?

Leave it to Fred Pope. Pope never ducks a good argument. The Lexington-based advertising executive should probably have his own vehicle for commentary, not that he’s allowed his ideas to exist in a vacuum all these years. You may not agree with him. But you need to listen to what he has to stay.

The following, then, is Pope’s take on the settlement issue that was exposed by HRI’s industry source Wednesday. Pope’s edited e-mail thoughts to me in response to yesterday’s insider guest commentary.

“Your piece on the Settlement issues provided a new perspective on just how upside down things are in the racing business.…

“.…The question is, if the problems of the off-track business keep becoming more apparent and dire, is there a real world solution? How can we solve it fast enough to save racing and the infrastructure in our major markets?

“…You understand the history of wagering. I got involved in the Upside Down, off-track revenue model in 1995 when I created the NTA, a major-league style structure in racing.

“At the time I called the simulcasting market a "buyers' market" and came up [with] a business plan to fund the NTA primarily by a 50/50 split of off-track wagering like the Breeders' Cup [put] in place.

“If we could have broken the "buyers' market" then, we wouldn't be facing these problems today.

“….As off-track became more and more of the national handle I have watched the only numbers we have in a steep decline from the original deal with the tracks. The percentage of purses from handle has been cut in half while takeout went up four percent.

“…. My solution to correct the IHA is by breaking the back of the ‘buyers' market,’ by establishing a national ‘price floor’ of 50% to the host event. That means tracks would trade evenly and other bet takers would be charged a fair amount over time.

“The federal government will not allow Thoroughbred racing to fix the off-track model itself. If host tracks, and/or horsemen, try to set a higher price for the host product, that is price-fixing.

“But the federal government can fix the problem for racing nationwide overnight. Just like the milk industry, where dairy farmers produce too much milk and buyers drive down the price below what it cost to produce milk, Congress put in a price floor on milk products.

“Milk price supports raise the price of milk to the consumer, but a price floor in racing would not change the consumers' price.

When the IHA was passed in 1978, we needed bricks and mortar OTB's to accept wagers and provide a dedicated facility to watch the races. But that distribution channel is history. Phone and internet bets have bypassed the protected facilities and cannibalized their customers while contributing hardly anything to the sport.

“We need a distribution system now where it doesn't matter where the bet is made, or how the bet is made, a fair amount goes to those producing the product.

“We cannot tell the producers of the product they must continue to distribute through outmoded bet taking operations simply because they did so last year. Apple should be allowed to sell its I-phone direct, not forced to sell it through Amazon because that's how phones were sold before.

“The technology is there…. our best situation is for the Host Track to accept wagers DIRECT. That means a provision in the federal law (IHA) to eliminate barriers at state level in every state that allows parimutuel wagering. Today, kickbacks called Source Market Fees are forced on the ADW's by each state… those would be eliminated by law, making the cost of bet-taking lower.

“…..To the settlement issue, the Host event can accept account wagers and pay back winners from the same pool; no middle men. The Host can contract with existing ADW's or establish its own. YouBet has said in the past they can make a profit with 5% of the wager.

“At the point that this would happen, a national body in racing could establish a state-of-the-art, national tote with one number to call.

“With $13 billion in national handle at an average takeout of 20%, there is $2.6 billion in revenue from wagers. About $1 billion in gross purses this year, including my estimate of $400 million from slots…. making the purses from handle only $600 million, at best. Deduct the $600 million in purses from the $2.6 billion and you get $2 billion for the tracks' share and BET-TAKING Expenses.

“Where that $2 billion ends up, who knows?

“In 1985, purses from handle, $600 million, were primarily on-track and there were no slots contributions.

“In 2008, purses from handle are [the same] $600 million. After 24 years of growth in handle from $7.5 billion in 1985 to more than $15 billion at peak, racehorse owners' purses are the same. [See Power Point presentation for illustration].

“I have now presented the problem to every organization in breeding and racing. No organization, or no individual wants to hear about the problem, nor are they going to do anything about it. (italics mine).

“Why? Because purse money is not their money. There is no [effective] national organization for racehorse owners. No one has their back. TOC in California can do nothing about a buyers' market.

“There's a lot of fear-mongering going on that we cannot risk correcting the IHA. They point to the exclusive racing has on internet wagering but they don't understand racing makes hardly anything from it. If we have $1 billion in internet handle and the hosts only get 3%, that means $30 million is going to tracks and purses and $170 million is going to bet takers.

“Each percentage point of $13 billion in handle is $130 million. If we can get the percent to purses up from 4% to 8%, we'll have $500 million in purses the first year, and probably a like amount to host tracks.

“The breeders just suffered a 50% drop in the yearling market yet have no appetite to fix the off-track model. They don't understand that $500 million in new purses would help keep their customers, the racehorse owners.

“…. More important than purses, a new off-track business model would give racetracks a new lease on life and racing a future. Tracks would have an incentive to put on a good show. Today the incentive [for many] is to bet on other track’s races.

“[We’ve] got to bring a silver-bullet solution [to the problem] and correcting the IHA is a rifle-shot.”

This e-mail included a slide presentation which Pope used when speaking before the Thoroughbred Owners and Breeders Association. Those of you wishing to receive this graphic presentation, e-mail your request to . You will receive a copy at my very earliest convenience.

Written by John Pricci

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Wednesday, September 23, 2009

Industry Failing to Bailout Each Other

ELMONT, NY, September 22,2009--The e-mails keep coming, the problems in this corner of the world ultimately no better, worse, or different than anywhere else.

Or, as Bill Christine described it in his piece yesterday on a related issue, the racing industry is like a snake that eats its own tail.

In this case, the issue is how racing conducts its business and how the actions and reactions of elected representatives entrusted to make those decisions affects racing’s present and future policies.

One issue the manner in which host racetracks and satellite bet-takers pay each other in simulcasting situations, monies the industry refers to as settlements.

HRI has a friend on the inside in this segment of the industry. He sent a series of e mails that I am reprinting almost in its entirety, allowing you to interpret what it all means.

The following is an edited version of our insider’s words. What it reveals should be disturbing to everyone. The good news is that the problem is fixable. The bad news is that no one seems to have the will to do so. Our insider writes:

“As we all know, Magna is in bankruptcy proceedings. There is a major issue that the bankruptcy court is refusing to address… the issue of settlements to the guest tracks (OTBs, ADWs, etc.).

“This also pertains to the possible NYC-OTB bankruptcy [scenario] because of the monies they owe the tracks. A short explanation:

“According to one of my contacts, it’s my understanding that the courts have [essentially] lumped the settlement money owed guest facilities into the debt [that Magna owes all it creditors].

“In effect, that means affected outlets would only get about ten cents on the dollar, if anything, [on the money they paid winning bettors] because the courts do not seem to think settlements are that important.

“[An illustration]: I’m a guest bet-taker and my customers wager $100,000 on a particular track. For argument's sake, after the day's racing, our customers lost $37,000. We now owe the track that amount in settlement money.

“As a bet-taker, I would be required to wire the track $37,000 within 48-to-72 hours. Now comes the next day.

“My customers bet $100,000 on their favorite track only this time they won $210,000. In that example the track would be required to wire us the difference, a settlement to us.

“The problem is that the tracks hold on to the money for as long as three months, some longer.

“[It is] my understanding that the New Jersey Racing Commission came out with a ruling allowing their tracks to take a month to pay the settlements. That’s a two-fold problem:

“It becomes quite apparent that the settlement money due guest bet-takers are being used by host tracks for operating expenses, in effect an interest free loan. Meanwhile, the simulcast bet-taker must cover their liability to the wagering customer immediately.

“And this is where everyone… from racing commissions to track management to misguided, uninformed politicians… has dropped the ball.

“…. In the Magna case, we are talking millions that guest entities are owed, already having paid money to their customers.

“As for NYC-OTB, they owe close to 2.1 million in settlements to various host tracks. (It's not always a one way street).

“If this is allowed to proceed as is, numerous small racetracks, OTBs, and others already on the edge could possibly be put out of business by losing the use of the settlement money even for a short time.

“It has become a trust and integrity problem…. Another example: What happens to an Emerald Downs type track if a customer hits a $3.5 million PK-6 carryover at Santa Anita? The customer is paid immediately, as usual.

“Say it takes Santa Anita takes three months to send Emerald the settlement money. On the brink, Emerald is out $3.5 million and possibly in very deep financial trouble… the way many tracks are now.

“Settlements cannot be lumped with the rest of a host track’s liabilities in a bankruptcy proceeding. The settlement money belongs to the wagering customer.

“Tracks should be required by law to wire settlement money back in a timely fashion just as the guest entity is required to do.

“In the Magna case, one entity is owed close to $2.5 million; another is owed nearly $1.7 mill. in settlements from Magna.

“This is an issue the industry wants to keep quiet. Remember that ADW firm that went bankrupt and closed up owing their account holders money?

“This is a problem that is an epidemic in this industry. State racing commissions have known for years this practice has been going on, the holding back on the payment of settlements.”

Written by John Pricci

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Saturday, September 19, 2009

Young Derby, Super Past

SARATOGA SPRINGS, NY, September 18, 2009--Time was when the Super Derby the made Bossier City, Louisiana the Racing Capital of the World for a day.

I can remember the inaugural won by the accomplished though never appreciated Temperence Hill. Has it been 29 years already?

Joe Cantey’s horse was ridden by Eddie Maple, the first of his three Super Derby victories. Maple, inducted into the Racing Hall of Fame this year, rode the other two for his main man Woody Stephens and a former Stephens assistant, Phil Gleaves.

Stephens won that one with Belmont winner Crème Fraiche. Gleaves won it with that year’s Travers winner, Wise Times.

And other recognizable trainers won it, too, among them Wayne Lukas (twice), Charlie Whittingham, Carl Nafzger, Jack Van Berg (twice) and Richard Mandella. You’ll also find their plaques hanging in the pantheon on Union Avenue.

Yeah, this race used to be a real big deal. It was won by winners of the three American classics, Kentucky Derby winning Sunny’s Halo and Derby and Preakness winning Sunday Silence, Alysheba, of course, three year‘s after Van Berg won it with Gate Dancer.

Back in the day, the Super Derby’s million-dollar purse, also a big deal back then, made it Louisiana’s richest race, it was Grade 1 and was contested at 10 furlongs.

Then, beginning in 1984, the year Breeders’ Cup made its debut, trainers started using the Super Derby as a prep for the Classic and was not the stand-alone event it once was.

The Super Derby was run at a mile and a quarter until 2002, and again in 2005. Alysheba and Tiznow, also inducted into the Hall last month, is among its roster of winners.

Tiznow used the race as a successful Classic prep and a springboard to the Horse of the Year championship.

Institutions such as the Derby, Travers, Classic and Jockey Club Gold Cup notwithstanding, classic-distance racing has fallen out of favor with modern horsemen and nine furlongs has become the preeminent route of choice.

It’s no small irony now that Louisiana Downs is a racino the purse is lower than it was at its inception. But then handle ain’t what it used to be, either.

Seven horses were entered in today’s race, a $750,000-added Grade 2 event. Five of the seven are either graded stakes or graded stakes-placed.

Among the graded stakes are a pair of G2 winners, West Virginia Derby winner Soul Warrior and UAE Derby speedster Regal Ransom. The former, conqueror or Kentucky Derby hero Mine That Bird, is one of two entered by Steve Asmussen, the other being uncoupled mate Uno Mas. The latter has trained very well for Richard Migliore and Saeed bin Suroor, who won this race with another Godolphin entrant, Essence of Dubai in 2002.

Asmussen is holding a strong hand, as if this weekend should be any different. Soul Warrior, scratched from the Pennsylvania Derby on Labor Day, appears realistically spotted to repeat and is the 2-1 early line favorite. Uno Mas won the local prep for this, the August 15 Prelude Stakes.

An interesting entrant is Massone, shipping in from Del Mar for Ron McAnally and Garrett Gomez. The Menifee colt was bred by Arthur Hancock, who won the Super Derby 20 years ago with Sunday Silence.

There’s a certain symmetry with Massone, however, in that McAnally and Gomez have never won this race and their colt never has run on dirt.

But trainer Al Stall Jr., who won this race last year with My Pal Charlie in a stakes record for the distance, 1:48.36, will seek a repeat with Blame, a late developing winner of the restricted Curlin Stakes last out at Saratoga.

Freshened briefly, the son of Arch, who won this race 11 years ago, is working very much on schedule with jockey Jamie Theriot taking the re-ride. It looks very much like a like-father, like-son scenario in Super Derby 29.

Written by John Pricci

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