Part 2: Why Can’t Horse Racing Partake In Ontario’s Sports Betting Boom?

Written By Dave Briggs on December 9, 2022 - Last Updated on January 19, 2023
For 20 years the OLG has acted more like horse racing's predator than its partner. Now it has barred tracks from adding retail sportsbooks.

The horse racing industry’s pleas to let it offer retail Ontario sportsbooks continue to be ignored. And there appears to be one main culprit: its supposed partner, the Ontario Lottery and Gaming Corp.

In part one of this two-part series, PlayCanada explored the Toronto-based Woodbine Entertainment Group’s attempt to make horse racing available for betting on legal Canadian gaming sites.

That could happen early in 2023.

Opening retail sports at racetracks is less imminent.

Horse racing’s case for retail sportsbooks

Woodbine has long pushed to open retail sportsbooks at its tracks and teletheatres across Ontario. Despite thin margins, Woodbine CEO Jim Lawson told PlayCanada it is an effort worth making.

“We recognize there aren’t huge margins in retail sportsbooks,” Lawson said. “At the same time, with our goal of bringing people in, growing horse racing and exposing them, we just think we are such naturals that we can bring people to the casino properties and have them sit there in a sports lounge and watch horse racing and bet on sports.”

The OLG has been empowered to decide where retail sportsbooks can go. So far, it has only authorized them for the province’s casinos. The first kiosks launched in October.

Now sportsbooks are at racetracks, with racing getting nothing

As a further affront to the horse racing industry, four of the casinos that now offer retail sports betting are located at racetracks in Ontario. Yet, none of the revenue from them goes to horse racing.

Great Canadian Entertainment operates 10 retail sportsbooks in Ontario. Two of its sportsbooks are in casinos on Woodbine properties — Woodbine Racetrack and Woodbine Mohawk Park. The other two are at Grand River Raceway in Elora and Flamboro Downs in Hamilton.

Lawson said Woodbine has lobbied to open sportsbooks “for seven or eight years.” He said Woodbine’s preferred partner is the OLG’s Proline.

“We felt — and we still feel today — that we had the expertise, the experience, the cash flow, the policies and [sports betting] falls closer to our horse racing betting than the casino operators and that’s true everywhere else in the world,” Lawson said. “But somehow the OLG didn’t think that we should be doing it and we still don’t understand that. I don’t know whether it’s politics or what, but they’ve certainly saddled up to the casino operators and we don’t understand why the casino operators would have preference to do that as opposed to us.”

Michael Copeland, Woodbine’s president commercial, said Woodbine was “upset” and “caught off guard” by the OLG’s move to give retail sportsbooks only to casinos.

“We didn’t think it was fair treatment and we expressed that to them,” he said.

Yet, it’s all part of a long history of the OLG working against, not with, the province’s horse racing industry.

OLG is clear: Horse racing got its money

PlayCanada requested an interview with an OLG executive for this story. Failing that, PC requested a response to two questions:

  1. Why has horse racing had been shut out of having retail sportsbooks?
  2. Will venues other than casinos offer retail sports betting in the future?

Tony Bitonti, the OLG’s director of external communication responded by email with the following:

“Regarding your question about sportsbooks in other venues, at this time, OLG is focused on enabling casino service providers to offer sports betting at Ontario casinos.

“It’s important to know that OLG has a long-term funding agreement in place to support Ontario’s horse racing industry and remains committed to helping build a more sustainable future for the benefit of rural businesses, jobs, and communities.

“The funding agreement provides up to $105 million annually over 19 years. The payments began in 2019.”

Read between the lines and the answer seems clear: horse racing got its money. There will be no more.

Lawson responded to that statement by saying, “it has not been a great relationship” between horse racing and the OLG.

Woodbine does receive “lease” payments from the casinos operating on its property. Except, every dollar Woodbine receives is then deducted from its cut of the funding agreement.

Plus, that funding agreement is a direct result of the OLG scuttling its own highly-lucrative Slots at Racetracks Program in 2012. That move dealt a severe blow to horse racing in the province.

SARP was extremely lucrative, its demise a mystery

The brief history of SARP is this:

In 1999, the Ontario government tasked the OLG with expanding gambling. The plan was for the OLG to establish and manage slot halls at the provinces’ (then) 16 racetracks.

Horse racing contributed mightily to financing the infrastructure. Since the start of SARP, Woodbine alone has spent some $200 million on infrastructure costs to help build casinos on its sites that it does not operate.

Through the 12-year history of SARP, the sport received a 20% cut of slot revenue to offset cannibalization of horse betting customers and pay for the rights to use private racetrack space for slot machines.

At its peak, SARP produced annual revenue of some $1.1 billion for the Ontario government from its 75% cut. A 5% share netted the municipal governments where tracks are located some $90 million a year. The horse racing industry collected about $345 million a year for its 20%.

The program was so lucrative it was the leading gaming sector in the province in 2011. It out-paced the revenue from the lottery, which took in about $800 million. SARP also exceeded the revenue from the province’s four commercial casinos, which were struggling to break even at that time.

Death of SARP was decimating to horse racing

Yet, in 2012, the province announced it was cutting SARP entirely. The stated goal was to turn slot operations over to the private sector.

“I think what happened is the government, realizing that the 20% was too valuable, decided to turn their backs on the horse racing industry and decided they didn’t like the deal, that it was too lucrative,” Lawson told PlayCanada recently. “In the spring of 2012, I thought we had a deal to take that 20% down to 16% or there abouts… and it didn’t proceed, and they proceeded to terminate the deal all together, which left us in a terrible spot.

“I don’t think the government at the time anticipated, nor understood, the ramifications to the economy, to the jobs and everything by essentially pulling out the rug from underneath the horse racing industry.”

At the time, economic studies said Ontario’s horse racing industry supported between 25,000 and 30,000 full-time equivalent jobs. The cancellation of SARP struck rural communities particularly hard.

“My history on this is that we helped [the OLG] build a great business and they pulled it away,” Lawson said.

SARP’s demise had an instant impact on horse racing. Without the cut from slot machine revenue:

  • Purses dropped by 35%
  • Race dates fell 39%
  • The number of licensed horse owners dropped 31%
  • The number of licensed racing participants declined 28%
  • Breeding numbers also plummeted precipitously when it became increasingly difficult to break even racing horses. Lower numbers of horses led to shorter horse fields which led to lower wagering on horse racing.

Standardbred racing at Woodbine Mohawk Park

Integration with the OLG has never materialized

Realizing, too late, that ending SARP killed jobs and hurt rural economies, the same Liberal government — under new leadership — tried to make amends.

There was a short-term funding deal to help stave off the industry’s collapse.

Then, in 2013, premier Kathleen Wynne said horse racing would integrate with the OLG.

It was more akin to a shotgun wedding. Yet, the OLG’s oft-expressed idea at that time was this:

It would allow horse racing some additional gambling products to offset the loss of SARP.

“I can tell you which side of the table I sat at in my office with the chair of the OLG and he had a pencil in his hand and he wrote down about 12 items, how we were going to be able to make up that revenue to get us somewhere towards where we needed to be to get back to where we were,” Lawson said. “All of those items on integration were listed.”

Some 10 years later, not one of those ideas — nor any others for that matter — have been implemented.

Instead, what “integration” evolved to be was a hefty annual cash payout to the industry and some OLG help on marketing horse racing. So much for additional gaming products that would allow horse racing to avoid a direct handout. So much for adjusting for inflation for a deal that has 16 years left on its terms.

Further, the OLG barred Woodbine from the bidding process to operate the casinos located on Woodbine’s own land.

Instead, the OLG gives racetracks lease money to operate casinos on racing property. In Woodbine’s case, Lawson said the money has, “no resemblance to commercial rent. It was really the dollar amount that we suggested we would need to not bid” on running the casino on its property.

Lawson: OLG didn’t want the competition

Lawson stressed that Woodbine wants to work with the OLG. He just believes the OLG doesn’t want the gaming competition.

“I think they felt that if they shared revenue with us on the lottery side, that all it was going to do was cannibalize their own lottery product. I think they felt if they allowed historical horse racing [machines] — something that we fought for over, over and over — that it would, in effect, take away from slot machine money.

“It’s been a very, very frustrating relationship for the horse racing industry.”

Horse racing would prefer another option

Further, while grateful for the funding agreement, Lawson said Woodbine would prefer not to be part of it. Instead, he said horse racing just needs an equal chance to compete in the gaming sector.

“We, Woodbine, don’t want the government subsidy. We don’t want the government looking over our shoulders on everything we do. While we’re a non-profit, don’t forget we’re a private corporation. And we want to run ourselves independently,” he said.

“We’re always going to be regulated and need to be regulated by the AGCO. We understand that, but we would prefer not to be part of the funding agreement and with that goal in mind, we would hope that the government would find a way to get us there… and increase our revenue through sports betting, through historical horse racing, through lottery participation, through retail sportsbooks, through all these sources that we talked about eight years ago, in terms of integration.

“If those had come to fruition, there’s a good chance that we’d be very close in the next year or two to being off that funding agreement altogether.”

And horse racing in Ontario would have a sustainable future.

Photo by New Image Media
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Dave Briggs

Dave Briggs is a managing editor and writer for Catena Media. His expertise is covering the gambling industry in Canada with emphasis on the casino, sports betting and horse racing sectors. He is currently reporting on the gaming industries in Canada and Michigan.

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