Maryland Racing: A Canary in the Coal Mine

The racing industry would be wise to pay close attention to the goings-on in Maryland as legislators try to get the horseracing back in the barn. Not even the sliver bullet of slot machines may be enough to ward off the demise of a once proud and prosperous enterprise – Maryland Racing. With Magna Entertainment in Chapter 11 bankruptcy and the fate of the Laurel Park, Pimlico in the balance, Maryland is trying to devise a way to use state funds to prop up the only thing of real racing value left - The Preakness.

Governor O’Malley signed into legislation an emergency bill allowing the state to exercise eminent domain of the Pimlico Race Course and all right associated with the Preakness as well as the other racing properties of the Maryland Jockey Club. The state may be able to legislate that The Preakness stay put, but it cannot do that same for the horse breeders in the state who have been making a steady exodus to greener pasture for the past decade.

Unlike AIG, CitiBank and the other struggling financial institutions, horse racing in Maryland and any other states across the country isn’t too big to fail. But it’s one thing when a track like Great Lakes Downs closes and quite another when the second jewel of Racing’s Triple Crown is about to fall from its setting. Exhibit A – this year’s Pimlico meets has been reduced from 31 to 20 racing days in order to maintain a respectable daily purse structure.

Neighboring tracks in Delaware, Pennsylvania and West Virginia are fairing much better because slots, which make up the casino portion of the gambling amalgam known as racinos, are subsidizing the racing. And given the dominance of slots, perhaps the term racino should be replaced by “casino-racing”, because when you go there you “can see no racing”.

And this is the problem industry refuses to see. The slot revenues that are apportioned to horseracing have been a boon to the tracks and the horsemen, but it has done little to bring in new customers or significantly grow track handle. In fact, it may be having the opposite effect. A 2007 Baltimore Sun article on this subject indicated that after the first six month of slots at Philadelphia Park betting was down 20% at the track, and betting on live races at Delaware Park is down 40% since slots were introduced back in 1996.

Without the benefit for slot revenues, many tracks that are trumpeting success would look a lot like the state of racing in Maryland. If horseracing wants to grow, then it’s going to have to learn to stand on its own four legs as it competes for its piece of the gambling pie. And if you don’t think state governments won’t let the industry fail, than I have just two words for you – General Motors.