Archive for the ‘Betting Exchanges’ Category
Friday, January 15th, 2010
New York, NY – January 15, 2010 – Yesterday afternoon the office of Assemblywoman Margaret Markey issued a news release commenting on the plan to reinvent NYC OTB. There are several important issues of fact that must be clarified as we move forward in a productive dialogue on the issue of NYC OTB’s future:
1. NYC OTB does not propose introducing any “video gaming” machines as the Assemblywoman states. This term is typically reserved for video lottery terminals or other machines. We propose only technology that would allow wagering on horse races as you would be permitted to do at an OTB location.
2. The NYC OTB plan does not represent a “1200 percent increase in gambling outlets” as stated in the Assemblywoman’s release. New York City currently has over 6,500 licensed lottery vendors in a wide variety of outlets including grocery stores. A 1,200 percent increase would mean the introduction of 78,000 outlets. In fact, NYC OTB proposes to close over 60 percent of its storefronts and replace those wagering opportunities with kiosks in 1,300 locations that would allow wagering on horse races. Similar kiosks have been in use for some time throughout the state by Capital OTB, Suffolk OTB and Nassau OTB, in communities near to Assemblywoman Markey’s district.
Although we are in engaged in ongoing discussions with the legislature and stakeholders on this issue, there is no dispute that it is imperative that these kiosks be located in facilities where the laws and age restrictions on wagering can be enforced.
3. NYC OTB did not merge with any other OTB in 2007 as stated in the release. The state and the governor took over control of NYC OTB from the city and mayor.
Within two months, NYC OTB will close its doors, hundreds of New Yorkers will lose their jobs and taxpayers will be saddled with $600 million in obligations unless the legislature takes ameliorative action swiftly and decisively. NYC OTB has proposed a plan that will transform the business into an economic engine without a single taxpayer dollar. We look forward to continuing a productive dialogue with Assemblywoman Markey and her colleagues in the legislature.
Tags: Margaret Markey, NYC OTB, Paulick Report
Posted in Betting Exchanges | 2 Comments »
Friday, January 8th, 2010
Below is the entire text of the speech given by Sandy Frucher, Chairman of the NYCOTB. Read the text and then let us know what you think.
Oral Testimony before the New York State Assembly Committees
on Racing & Wagering
and Corporations, Authorities & Commissions
and
the New York State Senate Committees on Racing, Gaming & Wagering
and Corporations, Authorities & Commissions
on
the Future of the New York City Off-Track Betting Corporation
January 8, 2010
Presented by
Meyer “Sandy” Frucher, Chairman
New York City Off-Track Betting Corporation
1501 Broadway
New York, NY 10036-5601
Good morning Chairmen and committee members. On behalf of the New York City Off-Track Betting Corporation, the NYC OTB, of which I am Chairman, I want to thank the Assembly and Senate and the respective committee chairmen and members for this opportunity to testify.
I am here to ask you to rescue NYC OTB from insolvency. We have never received tax-payer money and we are not going to ask it. That would be wrong. We are however, $95 million in debt.
In a few weeks over a thousand OTB employees will receive notice that they will lose their jobs. In two months NYC OTB will run out of operating cash and close its doors. And so the first question you have a right to ask and I have an obligation to answer is why. Why should OTB be saved?
Let’s begin with why NYC OTB was created in the first place. It was set up as a public benefit
corporation—I repeat: public benefit corporation—to achieve three objectives:
One: To raise revenue for the state and certain local municipalities.
Two: To combat the hold of organized crime on horse-related gambling by providing a legal
alternative.
Three: To operate in a manner compatible with the well-being of the New York horse racing
industry—a venerable industry, and one with wide-ranging impact throughout the state’s
breeding and agriculture community.
It has succeeded at all three. Since inception, NYC OTB has consistently accomplished the mission articulated by the legislature.
It has contributed more than $2 billion to the city and state, has effectively eliminated criminal control of horse-related gambling, and has provided the racing industry with some $2 billion in supporting funds.
But I am not seeking your help as a reward to NYC OTB for doing what the people of New York State asked it to do. Nor am I asking you simply to perpetuate what many regard as a sclerotic bureaucracy—the line everybody loves is that we are ―the only bookie in the world that loses money.
I am asking you to save NYC OTB because of the potential, profound repercussions if it is allowed to die.
We are talking about jobs throughout the racing industry and the agricultural community of horse breeders plus jobs in the supporting infrastructure for those communities: studies have shown this industry represents at least 35,000 – 70,000 jobs, many of which would be impacted if revenue provided by NYC OTB ceased to flow.
It is worth noting here that both DC37 and the Teamsters have signed memoranda of understanding and are willing to make substantial sacrifices to save us. We sincerely thank them for their support of our efforts.
A shutdown of NYC OTB would also of course mean the end of the revenues that it has traditionally generated. And it would cost the state and/or city between $650 and $700 millions for shutdown cost which includes pension and employee welfare benefits.
None of this is sensible. It is why the Governor charged the Board and management of NYC OTB to find another way, and it is why we filed for protection under Chapter 9 of the Bankruptcy Code, so that we would have the breathing space for a comprehensive review of the alternatives before us. We have now completed that review; it showed us three alternatives.
One is to shut down, resulting in the repercussions I’ve just described.
The other is to scale back the existing NYC OTB model, continuing to operate at a loss without any hope of reinvestment or reinvention of the organization—and resulting, almost surely, in the same repercussions that a shutdown would produce.
The third is to remake NYC OTB into an efficient, profitable, 21st-century organization that doesn’t just survive, but that grows, prospers, and infuses new life into those three original and worthy goals.
To do that, we must change the model that has stopped working, and that in turn requires action by you, the legislature.
We have a plan to renew and reinvent NYC OTB. I will outline for you the highlights of the plan along with our key principles. More detailed information about the plan is contained in our full submission.
As we implement our plan, we will adhere to the following core principles:
1) Realize we are a public benefit corporation and exist to maximize revenue that supports the
equine industry, the City, and the State.
2) Treat our employees, many of whom have dedicated their careers to us, with fairness, dignity and
respect.
3) Not require any taxpayer money from the State
4) Act in a transparent fashion and cooperate with our fellow stakeholders.
5) Rationalize a system that has long been irrational and fit it into a comprehensive wagering policy of the State.
6) Be sustainable over time.
In summary form, the major components of the plan are as follows:
1) Reduction of headcount by approximately 55% through early retirement, attrition, and severance.
2) Closure of approximately two-thirds of our existing branches.
3) Creation of a utility service corporation for all the regional OTBs and tracks that will eliminate redundancies and save money.
4) Establishment of five modern flagship entertainment centers, one in each borough.
5) Introduction of new technology to replace shuttered branches, improve the wagering experience, retain customers and build a new revenue stream.
6) Use private financing, not public money, to address our deficit, fund transitional costs and
finance the capital costs of building the flagship facilities through the issuance of bonds under
section 611 of our enabling statute.
7) Create a level playing field by criminalizing unlicensed out-of-state ADWs and internet pirates that take away business and violate the State Constitution.
We cannot achieve all this unless the State Legislature acts swiftly and decisively.
The most critical legislative changes required to secure NYC OTB’s viability is the modification to the legislative distribution scheme. NYC OTB will pay for the product and services it receives, at fair market value, as part of its operating structure. All other payments to the industry will be from the residual. Without this change there can be no refinancing and thus no OTB!! This is a zero-sum game.
The second change is to authorize the introduction of internet technology to substantially replace the outdated bricks and mortar model.
I believe that following a changeover to the legislative distribution protocol described above, a closer alignment of the in-state, on-track interests and those of NYC OTB will be achieved and a stable equilibrium point assuring NYC OTB’s future financial well-being will result.
Thank you for your time and attention. I would be happy to answer any questions you may have.
###
Tags: NYCOTB, otb, Paulick Report, Sandy Frucher
Posted in Betting Exchanges | 7 Comments »
Friday, January 8th, 2010
In a very descriptive article, Jerry Bossert has some choice words for the NYCOTB controversy. Instead of mucking it up with our writing, I’ll let the words speak for themselves.
"New York City Off Track Betting, the nasty parasite that some say sucks the blood out of horse racing…"
"Imagine if you ran a factory that produces shoes. You ship them to stores to be sold, but would get paid back only if the shoe store made a profit. This is what NYCOTB’s ridiculous plan is."
"End this political nightmare and give racing back to the tracks."
Click here for the rest of Jerry Bossert’s column
Then come back to the Paulick Report and let us know what you think.
- Bradford Cummings
Tags: bradford cummings, Jerry Bossert, New York City Off Track Betting, NYCOTB, Paulick Report
Posted in Betting Exchanges | 8 Comments »
Thursday, October 22nd, 2009
By Ray Paulick
Betfair, which revolutionized betting nearly a decade ago through the creation of exchanges pitting one person against another, has reached a breakthrough agreement with the Breeders’ Cup, providing Betfair’s two million-plus worldwide customers access to commingled pari-mutuel pools and allowing the company to offer live video streaming of the Nov. 6-7 world championships to its exchange betting players. The deal was announced in London Thursday by Breeders’ Cup president and CEO Greg Avioli and Betfair director of horseracing Stephen Burn.
The Breeders’ Cup will receive an undisclosed fee from Betfair as a result of the agreement, and the deal promises to bring international wagering on the event to a new level. Betfair, along with other exchange betting companies and overseas bookmakers, has previously offered wagering on Breeders’ Cup and other American races of interest (though supposedly not to residents of the U.S.), but the wagering or live video streaming has never been officially sanctioned by the host racetrack or association, and no revenue has ever flowed back to America.
This agreement also permits Betfair to use Breeders’ Cup logos and marks and to advertise and promote the championships to its customers.
Betfair already had a relationship with Breeders’ Cup through TVG, the American-based racing network and wagering company itbought for $50 million in January 2009, but that agreement did not permit live video streaming to Betfair’s customers, sanction exchange wagering or allow Betfair’s international customers access to commingled Breeders’ Cup pools.
Betfair recently signed a deal with many American tracks, permitting the company to offer commingled pari-mutuel wagering to its exchange betting customers and paying a fee to tracks from Betfair revenue on exchange betting.
“Our agreement with Betfair is an important milestone in our ongoing effort to grow the international simulcast wagering market for the Breeders’ Cup World Championships,” Avioli said in a statement. “As more and more international horses participate in our championships, interest levels and wagering handle from around the world continue to increase, allowing us to maintain the highest possible purse levels for the event.”
“Our partnership with the Breeders’ Cup is the beginning of what we intend to be a mutually beneficial partnership with U.S. racing,” said Betfair’s Burn.
According to a press release, international handle bet directly into the Breeders’ Cup pools on the 2008 Breeders’ Cup World Championships was $17.6 million, up 16% from 2007 and 34% from 2006 (the last year the event was held on one day). The Breeders’ Cup has targeted international wagering as an important revenue stream for future growth.
Betfair has revolutionized wagering through cutting-edge technology that enables players to choose their own odds and even make a bet after a race has started (those bets would not go into the commingled pari-mutuel pools). A press release said the company processes over six million transactions per day on a variety of sports and other events and games.
Typically, deals between horse racing associations and Betfair pay 10% to the racing industry from the company’s profits on horse racing bets. That’s a far cry from the percentage of betting horsemen and tracks get from the traditional pari-mutuel division of revenue, but Betfair offers the hope of dramatically increasing the amount of money wagered, thereby significantly lowering the effective takeout. It’s a balancing act, and only time will tell if a deal with betting exchanges like Betfair are a net win for the racing industry.
The Paulick Report took an in-depth at Betfair in January when the company acquired TVG. Click here for that article.
Tags: betfair, betting, betting exchange, Breeders' Cup, Greg Avioli, Horse Racing, Paulick Report, Ray Paulick, stephen burn, tvg
Posted in Betting Exchanges, Bookmaking, Breeders' Cup, Wagering | 36 Comments »
Saturday, May 23rd, 2009
By Ray Paulick
Is Betfair developing a conscience? The world’s leading betting exchange, which recently dipped its toes into U.S. gambling waters with its purchase of the horse racing network and account wagering company TVG, has reportedly made a voluntary contribution to the Levy Board, the statutory group that disburses betting revenue from bookmakers, exchanges and the tote in the form of prize money for British racing.
The Guardian reported on Friday that Betfair recently made a voluntary payment of almost $2 million to the Levy Board in recognition of profits made by the exchange from clients outside of the UnIted Kingdom betting on British horse racing. The amount represents 10% of Betfair’s profits on such wagers.
Betfair has contractual obligations to the Levy Board on profits made from British punters, but this is apparently the first time the exchange made voluntary payments on gains from overseas clients betting on British racing. Betfair is based on Malta.
“We have sent a check,” Betfair spokesman Mark Davies told the Guardian, “as there is no statutory mechanism by which we can pay the levy in respect of our international business. We are doing this because we support British racing.”
That begs the question of when Betfair will begin to share its wealth with U.S. racetrack and horsemen (or , more simply,“Where’s ours?” as Australian-based pedigree consultant Byron Rogers asked when alerting me to Betfair’s voluntary payment to the Levy Board.) Though the betting exchange says it does not accept any wagers from the United States, it does offer betting on American horse racing to its international clientele. Currently, to my knowledge, Betfair does not share any profits from those bets with American racetracks or horsemen’s organizations. Negotiations have taken place between Betfair and Breeders’ Cup officials, as well as with the Thoroughbred Owners of California, but no revenue sharing deals have yet been struck.
It seems only a matter of time before American racetrack and horsemen’s organization officials link overseas wagering on American racing via Betfair to domestic contracts involving TVG.
Those who want to learn more about the relatively brief and exceedingly successful history of Betfair, a company founded in 2000 by Andrew Black and Ed Wray, might be interested in Colin Cameron’s new book: “You Bet— The Betfair Story: How Two Men Changed the World of Gambling.” Click here for details.
Copyright © 2009, The Paulick Report
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Tags: Andrew Black, betfair, betting exchange, Breeders' Cup, byron rogers, colin cameron, Ed Wray, Horse Racing, levy board, mark davies, Paulick Report, Ray Paulick, thoroughbred owners of california, You Bet the betfair Story
Posted in Betting Exchanges, International Racing, Wagering | 6 Comments »
Wednesday, January 7th, 2009
By Ray Paulick
Are betting exchanges a possible solution to the problems facing the U.S. Thoroughbred industry, which in 2008 saw its annual pari-mutuel handle fall for the fourth time in six years, dropping over 7% to a 10-year low? The Thoroughbred Owners of California thinks they may be, having recently signed a letter of agreement with betting exchange giant Betfair to have the UK-based company promote California racing abroad while TOC helps BetFair obtain statutory and regulatory approval to operate a betting exchange in California.
Betfair, which has been trying for several years to gain access to the U.S. market, is also believed to be a leading candidate to buy TVG, whose parent company, Macrovision, announced its intention to sell TVG last year. Though there are no confirmed suitors, others rumored to be potential buyers of the racing network and Advance Deposit Wagering platform include Churchill Downs Inc.; Marc Nathanson, a cable TV industry billionaire and father of TVG president David Nathanson; and an industry consortium that could include Keeneland, the New York Racing Association, former Hollywood Park chairman R.D. Hubbard, and Los Alamitos racetrack owner Edward Allred.
Betfair, a privately held company, was founded in June of 2000, using a technologically advanced platform permitting individuals to go online and bet against one another on a wide range of events, including horse racing, sports, politics and even reality television shows. By taking commissions of 2%-5% from winning bets, the company offers extremely low takeout and has built enormous volume: it claims to have over one million customers from 140 countries, with 100,000 or more active players in a given week. (UPDATE: Betfair said in October 2008 that it signed up its two millionth customer; see comments section, below) Its wagering platform handles over five million bets per day. In 2007, Betfair had 42 million English pounds in earnings before interest, depreciation, taxes and amortization on revenue of 240 million pounds. According to its annual report (which can be seen here), Betfair has 110 million pounds cash on hand.
CONCERNS ABOUT BETFAIR
The problem many see with Betfair is that the company pays a small percentage for the rights to races on which it handles wagers. In England, for example, it pays a bit over 10% of gross profits on racing wagers. In some cases, however, it pays no fees at all, as is currently the case with racing from the U.S. Betfair currently accepts bets on American racing, but only from customers outside of the U.S., and it does not have rights to any video signals. Betfair is acutely aware of concerns from racing interests in the U.S. who believe betting exchanges would cannibalize pari-mutuel betting and decrease revenue to tracks and purses. It addresses some of those fears in this pamphlet, which was designed to appease the racing industry in the United Kingdom.
Another concern raised about Betfair centers on wagers it accepts that a specific horse will lose, prompting worries about race-fixing. But Betfair has cooperated in several investigations involving horse racing and sports betting, giving authorities access to detailed betting information as part of its memorandum of understanding.
Drew Couto, the president of TOC, said the letter of agreement with BetFair was signed last month. He believes wagering will continue to suffer unless the industry distances itself from Albert Einstein’s definition of insanity: doing the same thing time after time and expecting a different result. “That really describes our industry’s approach to this sport and business over the last decade,” Couto said.
“Going forward,” he added, “we have to face two very important realities. “First, we have allowed the sport to basically disappear. It’s no longer a sport, but simply a justification to gamble and wager, and as a wagering proposition we know it’s not the most attractive. We have to go back and make it a sport. We have to give the sport some structure to have it make sense for the fans, make some very serious fundamental changes to focus on the sporting aspect of racing. We have left it largely to the tracks to be the stewards of the sport, and they only care about the financial side.
“Second,” Couto said, “we have to adopt new ways our fans can participate. New wagers, betting exchanges. We have to embrace these new ways of playing as ancillary to the way we currently operate, so it’s new and fresh. That includes tournament-style wagering that was approved by the RCI (Association of Racing Commissioners International) last summer. If we don’t begin to do things differently and find new ways to operate, we are bound to be the definitive example of what Einstein said.”
CAN RACING DEVELOP ITS OWN BETTING EXCHANGE?
Chris Scherf, executive vice president of the Thoroughbred Racing Associations of North America, a racetrack trade organization, for years has advocated that North American tracks consider developing their own betting exchange. He sees the trend in downward handle as a serious crisis.
“We’ve got to look into pricing (the takeout charge on pari-mutuel bets), the product that’s being provided and the convenience factor for wagering,” Scherf said. “We need to make the same kind of concerted effort on handle that is currently being made to improve the safety and welfare issues. Track by track, you can get swamped in a million problems, but this has to be at the top of the pile. We are losing bettors. What do we have to do to change that aspect of the business, the part that provides us revenue? Of course, the entire debacle of cutting off signals in the last year (due to contractual disagreements between tracks and horsemen over ADW splits) was extremely detrimental to any kind of sustained gambling business.
“The problem,” Scherf said, “is we’ve got tracks and horsemen both saying they need more money in this economy. But the first thing we need is an engaged gambling public, and they should be at the top of the list.”
Scherf said he is “somewhere in between fear and welcoming” Betfair into the industry. “We had no master plan for how ADW would fit in and now we are trying to retrofit it, which is causing a lot of angst and problems. We need to spend more time developing a strategy (for exchange betting), though it’s difficult to do that when you have a wide disparity throughout the industry in resources and markets.”
Lonny Powell, an industry consultant based in Lexington, Ky., who previously served in executive positions with racetracks (including head of Santa Anita Park), the ADW company Youbet.com and as president of the Association of Racing Commissioners International, said BetFair has done a good job of “mainstreaming themselves” in recent years by sharing more of its profits with the racing industry in Europe.
“It’s here to stay,” Powell said of Betfair and exchange betting. “When I was in the ADW world, I wished they would just go away, but I don’t feel that way anymore. We’re like an ice cream store that only sells vanilla, but you can go over to Baskin Robbins and get 33 flavors. We need variety.”
Powell, who said he is optimistic the industry will find a solution to its present challenges, believes racing interests should look at developing their own betting exchange. “If the industry could somehow take this wagering crisis a little more seriously and rather than find ways to kill something, find ways to make it work, we can grow the gambling dollar,” he said. “A Betfair type of platform can be operated by U.S. racing interests. The economic model that Betfair offers is flawed, but we all agree our current model is flawed, too. I’ve got to believe a Betfair type of platform would work. Our product is stale, and our wagering levels are stale.”
INTEGRITY ISSUES REMAIN A CONCERN
The reason for declines in handle go beyond a limited product line, said Mike Maloney, a professional gambler in Kentucky who has become an outspoken advocate for horseplayers at industry conferences and who served as an ad hoc member of a Kentucky Horse Racing Commission Task Force. “We are at a very significant crossroads in racing,” Maloney said, “probably the biggest one in my lifetime. The financial crisis is magnifying our problems, but the problems have to be dealt with before racing can recover. The economy may improve, but racing’s problems will still be there.
“Our customer base is aging, and they’ve lost a lot of their faith in the integrity of racing,” he said. “As they age, they aren’t being replaced. The second problem is the takeout is too high. We can’t attract new players and are having a hard time holding on to existing ones. It’s exacerbated because the takeout keeps going up. With competition from other gambling opportunities, you can’t get away with that any more. It’s roughly 5% in other forms of gambling – sports, table games, trading options – but it’s 20% for us. New York just raised takeouts; trifectas are 26% now, and I just refuse to play it. Kentucky wants to raise takeout. What other business in this economic climate would consider racing prices?
“Third,” Maloney said, “racing integrity problems are real, and they are not exaggerated. If anything, they probably are underplayed. Trainers who use drugs to cheat; unsecured wagering pools with outdated technology; unregulated participants allowed access into those pools. People are just beginning to learn about some of the problems in these areas. In the last couple of years the light is being shined on them. These are serious problems that need to be dealt with. Big players realize they can’t trust the pools they are playing money into.”
Finally, Maloney said, the corporate mentality of many racetracks has hurt the game. “There is a disconnect with customers with some of these racetrack holding companies. They don’t really understand their business, and there’s too much short-term bottom line thinking; cutting costs, worrying about the next quarterly report, and too little thought about long-term improvement of the product.”
Maloney, who called betting exchanges a “two-edged sword” because of how they would cannibalize pari-mutuel betting, said the industry has had a wake-up call after being “rocked by betting and drug scandals and threatened” by the federal government. “This crossroad we’re at, what we do from here, will determine the fate of racing.”
(Do you have an opinion on how the industry reverses the trend in declining handle? We’re interested in your comments below and in your thoughts about betting exchanges, the subject of the Daily Paulick Poll, which can be found on the left-hand column of the Paulick Report home page.)
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Tags: advance deposit wagering, ADW, association of racing commissioners international, betfair, betting exchange, chris scherf, churchill downs, david nathanson, drew couto, edward allred, gambling, Hollywood Park, horse race gambling, Horse Racing, horseplayer, integrity in racing, Keeneland, lonny powell, los alamitos, marc nathanson, mike maloney, New York Racing Association, nyra, pari-mutuel wagering, Paulick Report, powell strategy & solutions, professional gambler, R.D. Hubbard, Ray Paulick, RCI, santa anita, Thoroughbred industry, thoroughbred owners of california, thoroughbred racing associations, toc, tra, tvg, youbet
Posted in Account Wagering, Betting Exchanges, Industry Organizations, Industry Reform, Regulatory Issues, Wagering | 37 Comments »
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