(CHICAGO, IL – February 7, 2011) Before Gov. Chris Christie came to Chicago on Friday to bribe Illinois businesses to move to New Jersey, he signed an assisted suicide bill for his state’s horse racing business, or so some people would have you believe. The bill makes it possible for Garbage State racetracks to engage in exchange wagering - the enormously popular, computer-required product that’s changing the game of gambling.

One such person is a former consultant for the European Pari Mutuel Association, Carlo Zuccoli - a flamboyant Italian (is that redundant?) who pens the Internet site nelrossodelluovo.com about horse racing in the UK, a country where Betfair is killing the bookmakers’ trade and lowering the cash contributions from punting that go to support purses.

“Ciao, horse racing in America,” said Zuccoli, sarcastically. He considers exchange wagering a curse - an invention that provides “peanuts” financially to the racetracks, drains money from the tote, encourages race-fixing and won’t maintain liquidity if the commissions negotiated are anywhere near what US tracks should demand.

North American racetracks made a crucial mistake decades ago when they began selling their product to off-track horse racing retailers at rates that are too lean to compensate for revenues lost by the exodus of gamblers from their premises. “We have to have a partnership where they have a vested interest in our success and we have a vested interest in their success,” observed Stephen Burn, the smooth-talking president of TVG - the new owner of Betfair, in a telephone interview. “But, equally, we can’t keep putting the price of the product up in a way that marginalizes fans,” he added.

The number of fans at racetracks has been dwindling for nearly four decades and even Burn will admit that exchange wagering will do little to help attendance. Nevertheless, the Betfair czar argued unconvincingly that players will begin taking their laptops to the races, that they’ll use smart phones to make wagers from their seats and that his company’s sponsorship of stakes races boosts the gate. “Racecourses in the UK are seeing their hospitality program numbers through the roof,” he remarked, in what was his biggest overstatement – an unfounded “credit due here” appropriation.

Regardless, attendance has always been the responsibility of racetracks, so Betfair shouldn’t be charged with the job of creating fans. Perhaps someday the sport will experience a true divide – a small number of fans, who come out to the track for the animals, the food and the ambiance, will stand apart from the gamblers, who hole up in their homes with computers – but it’ll be a shame if it does. Or is that what the sport has come to already?

Of the two fan groups in horse racing’s future, it’s the gamblers who most crave exchange wagering. They will pay commissions for winning that are tiny in comparison to current takeout rates in the pari-mutuel system. An exchange enables a player to back or lay horses at fixed odds, avoid breakage disparities and hedge bets while races are being contested. Betfair will create a rebate program to attract “whales” in order to protect its liquidity during the start-up stages. The company is convinced it will draw younger players into the game because of the concept’s dynamism.

Demographically, Betfair’s customer base is a generation younger than the racetracks’. The sport has been attempting to attract the emerging computer-savvy, tech-oriented audience through social network marketing for a half dozen years; it seems to be making little headway with this initiative. But Jeff Platt, president of HANA, the 1800-member strong community of horseplayers, believes Betfair’s technology – dedicated to serving the gambler with lower takeout - may produce better counts.

“Look at the music industry,” offered Platt on the telephone, using a most unfortunate analogy. “Along comes a group like iTunes and they totally revolutionize the music industry. Now you have millions of people downloading just the songs they want for 99 cents a song and you see growth in the music industry,” he argued, making the common mistake of automatically connecting low prices with a sounder business.

For the record, music sales have plunged to $6.3 billion from $14.6 billion in the last decade, according to the Recording Industry Association of America. Creating availability of product and lowering prices have not helped record sales, but have harmed them. Musicians and singers are reacting by developing Internet stores for products that bear their names, pumping up the volume on concert touring (including the concert ticket prices) and stretching their resources out into other realms of entertainment like never before. What Platt could have said, with more thought for the good of the game in mind, is that the industry will have to learn how to live with exchange wagering and prosper with it. That, not the price of a download, is the big issue in this.

“It’s unclear if the betting exchanges have helped or hurt racing in the UK,” said Alastair Donald, managing director of the International Racing Bureau, from a perspective that’s completely opposite, at least, geographically, from Platt’s. Horse owners and trainers will have something to say before they give it their imprimaturs. “Betfair has had a lot of bad press, but most of that press is the bookmakers who were keen to see it fail,” Donald noted. Burn explained it slightly less diplomatically. He said, “What (our competitors) don’t like about it is that they didn’t invent it.”

Betfair is science, as inevitable as GroupOn or stem cell replacement. If the world is able to produce something new, it produces it. When people want something, you make a mistake by not letting them have it Betfair claims three million customers. If all goes as planned, those in New Jersey will be able to bet Monmouth on Betfair this summer.

“This is a chance for racing to get on the front foot instead of the back foot,” Burn believes, not perplexed by the criticisms faced. Zuccoli, stressed to the max by what’s already gone on, said, “The exchanges are the most incredible invention in the last 50 years, technology-wise – no question about that. But they are the instrument of the devil.”

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