Cutting stakes purses at Arlington and the new simulcast market

When the press release came in last Friday afternoon, I was shaking my head – “Arlington Park trims $725,000 from stakes purses.”

I have a soft spot for Arlington. Located in the northwest suburbs of Chicago, Arlington is a modern, majestic facility with great sight lines, immaculately maintained grounds, good customer service, and one day a year of world class racing.

If you enjoy turf racing, a live visit on Arlington Million day carries my strongest recommendation.

Unfortunately, for much of the other 90 days of Arlington’s meet, the racing product does not live up to the facility. Low purses are the primary problem.

But faced with an approximate 20% decline in out-of-state handle so far at its 2010 meeting, Arlington had to do something. The decision came down to cutting overnight purses or trimming the stakes program.

In a joint decision with the Illinois Thoroughbred Horsemen’s Association, Arlington decided to decrease the purses of 11 stakes – nine of them graded – and cancel another. Untouched by the changes were the three Arlington Million Day Grade 1’s and Arlington’s substantial Illinois-bred stakes program. Click here for the original story and the list of changes.

The decrease in graded stakes purse money at Arlington is part of a disturbing national trend. It is not easy to breed or buy a graded stakes horse, and the expenses of a racing stable are considerable. Owners should reap a considerable financial reward for winning a graded race. Does the 60% winner’s share of $100,000 for a Grade 3 or $150,000 for a Grade 2 cut it?

Earlier this week, Daily Racing Form’s Marcus Hersh wrote a story that suggested the purse decreases could cost Arlington an appearance by 2008 champion female sprinter Informed Decision.

I spoke with Arlington President Roy Arnold on Wednesday about the difficult decision his track faced and a number of national issues. Arnold said the primary reason for the drop in out-of-state handle was a three-to-four week period during which Arlington’s signal was not offered in New York.

Arnold: When New York City OTB was not making statutory payments and using bankruptcy to justify that, New York racing officials took some steps, including ceasing to approve out-of-state simulcast contracts. It was an internal New York issue, and we were one of the fist tracks to fall victim to it.

It was not helpful to be cut out of the biggest pari-mutuel market in the country. We were not alone, but when you’re trying to get momentum early in a meet, it can affect you disproportionately. It affected our pool sizes, and that probably affected the decisions of some bigger gamblers who look for a certain pool size to play. We had planned on a drop of 5 to 10% due to national conditions, but there was no way to predict this.

Arnold said another factor at work is the decreased racing schedule for the less-is-more super meet experiment at Monmouth Park in New Jersey, which has been very successful at drawing out-of-state simulcast bets.

Arnold: When Monmouth and other tracks who do not have gaming announced they were going to consolidate their schedules, cutting Thursdays from their live schedule, my initial response was good! Because I’m operating on Thursday and it’s a chance for me to gain handle.

But here’s what I think is happening. Race fans are first and foremost local, then national. That’s my observation in Illinois definitely. We have a very robust fan base, one of the best in the country, but when there is not local Illinois content, they do not come and bet out-of-state simulcasts unless it’s a big event.

So as racing jurisdictions consolidate their live race dates, their fan wagering is declining on out-of-state product because few of those people are going to the parlors or the track to bet when there is no live product. They’re turning into weekend-only players.

Even though Arlington is still doing very well on Thursdays – we’re one of the top three tracks that day and have been for the last few years – we’re still down from last year.

I asked Arnold if he thought Arlington is one of the many tracks losing out in the simulcast wars to Monmouth, which has enjoyed a serious upgrade in field quality and size thanks to its experimental higher purse structure.

Arnold: I think the jury is still out on Monmouth’s approach in the long term. What we think we’ve seen is the interest in Monmouth is overall driving the market higher on Friday, Saturday, Sunday, but it’s disproportionately going to Monmouth and negatively affecting the other players.

Now we’re all for what Monmouth is doing. From a marketing standpoint, Monmouth has drawn interest back to the sport. But is it sustainable? Belmont is still out-handling Monmouth, and Belmont’s horsemen are earning what’s being paid out. Monmouth’s horsemen are not.

I’m a little bit concerned about others following suit, consolidating dates further, and not recognizing we’re moving our core players from five or six days a week to three. This consolidation of race dates represents a major change in the market…

The latest report shows that 29% of our purse money nationally is coming from enhanced gaming. That is really disturbing. I believe in sound business principles. We can’t be looking for a silver bullet. I think at the end of this year there will be a lot to discuss at the racing symposium.

Here is what Arnold had to say regarding the decision to cut the stakes purses instead of overnight races.

Arnold: Bottom line, we were given a choice between a reduction in the stakes program – to the minimum purse levels to maintain the current grades – or to decrease purses for the horsemen that provide 95% of our races.

We want to do everything we can to maintain purse level for those horsemen who stable here. So that meant we only had one place to look – the stakes program. It was a clear decision.

Couldn’t the purse cuts further lower the quality of stakes fields at Arlington?

Arnold: We love Mr. Sheppard and we certainly hope he comes and runs here with Informed Decision. But the case can be made that if you have a strong horse that takes a pass, you might actually end up with more horses. I would prefer to have Informed Decision here. But the reality is if we lose her, we might go from a good 6 or 7-horse field up to a wide open 10 or 12. From a wagering perspective, it could actually be better for us.

We think we’re a great place to run. You see a Rachel Alexandra run some place because the distance and time is right based on the larger goals for their campaign. Our condition book hasn’t changed. The horsemen who were looking at a race here, the purse money is only one and maybe not even the major factor in their decision to run here. And if it’s a turf race, we still think we’re in a predominant position as far as offering the best turf track in the country. A lot of horsemen run with us because they like Arlington and they like being treated first class. None of those things have changed.

While siding with the local horsemen on the purse issue, Arnold stressed to them the importance of field size.

Arnold: We used this opportunity to remind our horsemen that the nature of the pari-mutuel system is that you earn purse money as you go along, and field size is the most important factor. There’s no getting around it.

You must have a race card that provides the wagering public with the opportunities they’re seeking – not only adequate field sizes but interesting propositions in the multi-race wagers. If you can card consistently good field sizes and place the races properly – turf races and allowance races for example – on a day-to-day basis, the public will wager with you.

The good news is that our field sizes are coming back remarkably. We have an average field size of nine (today), and on Friday our average field size is ten.

Looking to the future, Illinois racing is still waiting for casino impact fee money the state legislature approved years ago.

Arnold: We’ve got $17-18-million currently in escrow for the purse account pending the outcome of an appeal by the casinos. That’s very frustrating to have that much money sitting in an account that has been earmarked for us to offset the impact the casino industry has had on he horse racing, yet we cannot access the money.

We’re going into the fifth year of that law and we continue to work our way through the legal process to gain access to those funds. As much as there is a dark cloud right now, we’re looking for a silver lining, and we think by maintaining solidarity with our horsemen we can power through to next year. Despite everything I’m still optimistic there is a future for Thoroughbred racing.