Friday, July 09, 2010

New York City OTB: New Face, Same Old Process

As a good friend and trusted HRI source said the other day, this is our government in action: Larry Schwartz, New York Governor David Paterson’s chief of staff, is the new and current Chairman of the New York City Off Track Betting Corporation.

In his first significant act, he appointed Greg Rayburn new NYC-OTB President and CEO Grey Rayburn after a 4-1 vote by the NYC-OTB Board of Directors. It’s not a stretch to think that he did so with the blessing of the state’s chief executive.

And since City-OTB is now a ward of the state, that means the process of finding new leadership for the beleaguered corporation was pretty much business as usual.

To be completely fair, however, Rayburn deserves the benefit of the doubt. He just might be able to lead NYC-OTB out of bankruptcy and ultimately achieve a good result. He’s done it before, this “turnaround pro,” so dubbed by the Wall Street Journal.

Rayburn’s portfolio includes terms as both CEO and COO of several corporations. He also had a cup of coffee as interim CEO of Magna Entertainment Corp., where he reported to Frank Stronach.

As a full time CEO at troubled mainstream corporations, Rayburn implemented new models and did plenty of streamlining. Figure that there will more job cutting at NYC-OTB straight away.

City OTB already has cut 30 percent of its workforce and is even down to about only 50 company cars in its fleet. Amazing what can be accomplished when nose is applied to grindstone.

If it were my responsibility, I’d be inclined to give Rayburn this chance, too. His specialty is restructuring bankrupt companies. Any man who can reorganize Magna, allow Stronach to remain in charge and retain his flagships Santa Anita and Gulfstream Park, deserves a crack at the OTB mess.

Even in the real world of the Great Recession, $125,000 a month is probably commensurate with the task. However, NYC-OTB is light years from the real world.

Frankly, this kind of money for a chief executive whose company is shorting the New York Racing Association--which provides OTB with its most popular product--$2-million a month, and owes it $20 million-plus, is beyond the pale.

What’s really obscene, however, was the manner in which the appointment was handled by Board Chairman Schwartz and three other two-legged rubber stamps in the board meeting at which Rayburn was nominated and approved.

The only NYC-OTB board member who lived up to his fiduciary responsibility was Steven Newman, a State Assembly appointee. Newman suggested a two-month trial period in which Rayburn’s restructuring plan could be evaluated before making the appointment permanent.

Newman, who favors merging the NYRA with all six of the state’s OTB, pointed out that Rayburn will make as much money in six weeks as outgoing President Ray Casey made in a year.

[You can watch Wednesday’s entire meeting, which took all of 13 minutes].

Parenthetically, Rayburn will earn as much as Neil Getnick gets from NYRA. Getnick is the red herring creator that helped save the NYRA franchise by taking the focus off corruption and shining a light on security issues, both real and imagined.

Getnick’s firm, along with NYRA security, monitors the controversial, largely unpopular, and questionably functional detention barns.

NYRA Chairman Steven Duncker applauded the appointment, saying he fully supports it, citing Rayburn’s experience at implementing viable reorganization plans. NYRA is NYC-OTB’s largest creditor.

Here’s hoping that Rayburn is worth every penny. He likely will start by implementing some of the recommendations made by Sandy Frucher, the Board Chairman who Schwartz replaced.

Frucher proposed that numerous betting shops be closed [none to date] and replaced by self-service betting machines in mainstream venues such as sports bars. Newman later said that he hopes that’s exactly what Rayburn will do.

While it’s not a novel idea, Newman wants to see elimination of redundancies, especially in the area of contract services for phone, tote and advanced deposit wagering operations.

It will be interesting to see if this proposed streamlining will include continuing to pay retail prices for consulting services and public relations, or whether those practices will be eliminated entirely.

Since November of 2009, OTB has been billed nearly a half-million dollars by a high-powered PR firm, absurd given the present reality. So, to paraphrase the great sage, Sarah Palin, “how’s that imag-ee thing been workin’ out for ya’?”

Written by John Pricci

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Friday, July 02, 2010

Quality Equals Quantity

SARATOGA SPRINGS, NY, July 1, 2010--For skeptics requiring more proof that good racing is good business, two tracks have shown that not every venue need follow the national trend of double-digit declines so prevalent throughout most of this year.

On Wednesday night--yes, Wednesday night--Indiana Downs hosted its richest race of the meet, the $200,000 Oliver Stakes. The result was handle records for a single race and a single card; $379,220 and $2,140,490, respectively, gains of $75,000 and $304.000 per category.

Located at 4200 N. Michigan Blvd. in Shelbyville, it probably doesn’t hurt that Indiana Live!, “the closest casino to Indianapolis,” stands at 4300 N. Michigan. Although called a casino, slots are the only action available for bettors preferring not to allow thinking to interfere with their gambling.

Said Indiana Downs general manager Jon Schuster: “This is exactly how it’s supposed to work on the racing side. Higher purses bring higher quality racing...” For the record, Indiana downs does not make attendance figures available.

Still, handle of $2.1 million on a Wednesday night in a small town in Indiana is impressive no matter how many people were in the building: No wonder neighboring Kentucky is concerned about its own economic future in the gambling business. Indiana slots are killing them.

In New Jersey, meanwhile, Monmouth Park keeps rolling right along. Judging the ultimate success of the “50-day for 50 million” session won‘t be known for months, but the numbers continue to be other worldly. Over 14 days of racing, total handle is up almost 130 percent.

Handle on track has more than doubled, based on attendance gains of 24 percent. Cynics point to the low per capita figures, significantly below triple digits, but Monmouth officials say it’s to be expected when trying to introduce a new audience to the racetrack. Makes sense.

This week, a team appointed by New Jersey Gov. Chris Christie to analyze the synergistic components of racing, gaming, and entertainment in the state was to have its results ready for review. Instead, it was granted a 30-day extension. The new deadline is August 1, Haskell Day, featuring Monmouth’s signature event.

Monmouth Park’s aggressive profile is being matched by the state itself. Two pieces of legislation were recently introduced in the legislature, one allowing online sports wagering, the other permitting betting exchanges, popular and very successful in Great Britain.

Leading betting exchange company Betfair, trying to make inroads inn this country, purchased the racing network/advance deposit wagering platform TVG last year. The tandem is co-sponsoring Monmouth’s second biggest event, Saturday’s prestigious United Nations Handicap for older horses on turf.

Legislation allowing betting exchanges passed this state Assembly unanimously this week. Exchanges have been viewed as too controversial here because in this form of head-to-head wagering, money can be made when horses lose. That has the industry scared to death.

What is not known is whether they fear possible collusion or whether they’re afraid they wouldn’t be able to recognize it when they see it. The system has been abused occasionally in Britain, but the perpetrators were dealt with severely and quickly.

The popularity and success of betting exchanges is based on its low commissions. Two bettors agree to play, or lay, a certain horse in a particular race after one has set the win odds to win. The loser pays nothing; the winner as much as 5 percent, or lower based on high volume.

Supporters believe that the exchanges could benefit racing by expanding the menu of available bets that attract new players to the sport. On its face, a horse-vs.-horse wager is easier for new bettors to understand while savvy players appreciate the lower takeout rate.

Whether it goes the exchange route and/or gets permission to conduct online sports betting, it is clear that New Jersey has bought into the model that tracks market the sport and gambling while the money comes from a distribution network that includes phone betting, state sanctioned simulcast venues and Internet wagering. Those monies will allow the state to fund the racetracks.

In the main, quality has not been as good as was originally projected. Despite huge purses being offered in the allowance ranks and racing dates that were halved, the horse shortage created by the downturn in the yearling market the past two years has hurt the sport’s higher classes nationwide.

Monmouth and Belmont Park have struggled to put on a top class show on a consistent basis. What’s in store at the upcoming prestige meets of Saratoga and Del Mar at this juncture is anyone’s guess.

Early July marks the beginning of racing’s busiest period. Controlling the supply side has helped Monmouth thus far and they are about to get into the prime portion of their meet.

The money they’ve saved on high class allowance races now can be used to lure better horses, such as Horse of the Year Rachel Alexandra who will race at Monmouth next Saturday instead of the Grade 1 Ruffian in Saratoga the following weekend.

Monmouth jacked up the purse of the ungraded Lady’s Secret by $250,000 and lengthened the distance to nine furlongs. Unlike Indiana Downs, you can bet you’ll find out just how many more people a Horse of the Year champion is worth.

Written by John Pricci

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Friday, June 25, 2010

Albany Foot Dragging Could Render Gaming in New York Irrelevant

SARATOGA SPRINGS, NY, June 24, 2010--This community dodged a bullet recently when the New York Racing Association was extended a state loan against future VLT revenue, the absence of which would have resulted in shuttering the tracks for lack of funds.

Of course, it was not a bailout, but money they had coming from New York State in the exchange for turning over the deeds to their three racetrack properties, the terms for which spelled out clearly in the franchise agreement of 2008.

Meanwhile, Saratoga Gaming & Raceway, a.k.a. “the harness track,” a highly successful venue since VLTs transformed the property into a regional and destination attraction, is facing a threat from without, the construction of a full-scale casino in the Berkshires of Western Massachusetts.

Saratoga Springs is located about 40 minutes to the north by car via Northway Route 87 from the state capital; the Berkshires are a little farther in another direction but is easily accessible via I-90 East from Albany.

The larger issue is that while Saratoga has close to 1,800 VLTs, Massachusetts would offer a full complement of table games.

"I'll see your big apple and raise you two oranges."

The highly successful Connecticut-based Mohegan Sun is mindful of a threat to its own operations, electing to get into Massachusetts gaming on the ground floor by building a casino near Springfield, one of three slated for the Bay State.

While there was some discussion at to when New York State might establish full-scale casino operations, there wasn’t a lot of confidence expressed at this week’s New York Gaming Summit that it would happen anytime soon.

New York legislators have not even written statutes permitting electronic table games, saying that since existing laws do not expressly forbid it, operators could proceed as they wish. However, gaming operators have been reticent to invest in any project on the basis of tacit approval.

An expansion of full scale gaming can’t happen until an amendment is written into the state constitution, a long, arduous and multi-layered process. So, until a Constitutional Convention is called, that won’t happen anytime soon, either.

At present, Senator Charles Schumer and State Attorney General Andrew Cuomo, the odds-on favorite to be New York’s next Governor, seem to favor expanded gaming.

Schumer has publicly made comments in support of casinos for the Catskills region while Cuomo, in a 237-page position paper, stated that he wants a comprehensive review of how all gaming in the state is conducted.

While New York needs to collect vast revenue to close its enormous budget gap by any means necessary, the audience at the recent New York Gaming Summit were told not to have confidence that expanded gaming would happen in the near future.

While full scale casino operations are perceived to be a relatively harmless way to collect badly needed revenue without burdening all of the state’s citizenry, Gaming Summit attendees were warned that economics wasn’t the only consideration with respect to expansion.

James Featherstonhaugh, a high powered, corporate litigator and partner in the Albany Law firm of Featherstonhaugh, Wiley and Clyne, LLP, was instrumental in the adoption of the state’s racino legislation and is part owner of Saratoga Gaming & Raceway.

At Tuesday’s conference, Featherstonhaugh counseled that competition among gaming operators was fierce, and that policy issues and morality were also considerations. In other words, politics would decide whether or not expanded gaming would happen in New York.

“I think there are going to be some major changes in the way gaming is looked at,” Featherstonhaugh said during the Politics and the Law segment. "The next governor wants to make a comprehensive review of gaming as a whole, including possibly a constitutional convention that could lead to full-scale casinos.”

While New York dithers about what it wants to do, Pennsylvania will introduce full table games next month and voters in Maine will decide on casinos via referendum this November.

But for New York, and especially Saratoga Gaming & Raceway, the threat is more menacing. When Massachusetts comes on line, it will be able to offer not only a full compliment of gaming but can spend more on its customers via player rewards programs.

Why? Because the tax rate in Massachusetts for a full-scale casino is 25 percent compared to New York’s 50 percent rate on video lottery terminals. In the long run, which state would be in the best position to succeed?

Written by John Pricci

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