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Tuesday, August 31, 2010

OTB D-Day (Again)

Greg Rayburn's plan to reorganize NYC OTB by turning over its internet wagering business to the tracks and concentrating on the parlors seems counter-intuitive these days; like a record company ditching their MP3 business and focusing on CD's. But what do I know; I don't make $125,000 a month. Rayburn says that their labor costs are too high to make that business profitable. And, if he can't reach an agreement with the union by today, he'll look to rip up the corporation's labor contracts and make that segment of the business profitable his way. "It's doable in bankruptcy.....It's a tool that's available." Bankruptcy is a wonderful thing, isn't it?

NYRA, along with Yonkers, is willing to take a hit on money owed and statutory payments in exchange for the business, which not only would eliminate a key competitor and yield it a healthy customer base, but allow it to collect its full on-track share of the handle, some three times what it gets from OTB wagers now.

Of course, the final alternative is to liquidate and shutter the operation. And, unlike his predecessor, this guy is probably not kidding.

New York City OTB is under a hard deadline to get the plan worked out by Tuesday so that it can opt into a state early retirement incentive program. Unions, however, are objecting to key points, such as elimination of Sunday double-time pay, while demanding that a set number of jobs be kept regardless of handle and revenue.
Rayburn said he does not believe NYRA or the state’s five other off-track betting companies would be able to recoup all of the lost income, much of which could head out of state. [Thoroughbred Times]


El Angelo said...

If the only way OTB can even conceive of being profitable is to close down the only growing area of business--internet wagering--and to put all its eggs in the basket of upscale bars and clubs where it thinks people are going to want to bet, it is not long for this world.

Anonymous said...

On the other hand this could be a way of unwinding the entire business model one piece at a time. Once the bricks and mortar pieces stand on their own they can isolate on the profitability solely of that piece of the business and 1)consolidate to locations that make sense - geographically or as part of a bar/club and 2)Re-negotiate labor deals reflective of actual costs and profits.

I think having the problematic piece in isolation helps starkly outline those issues/opportunities.

Steve Zorn said...

From my rather parochial point of view (more money for purses is good, everything else is irrelevant), I have no idea whether the proposal would be a good deal for NYRA. Yes, we'd get the full 20% blended takeout on bets placed over the OTB phone and internet system, rather than the less than half of that which we'ree getting now, but (1) there would inevitably be some shrinkage in handle, at least in the short run; (2) we'd have to give up the claim to the $20-million-and-counting that OTB owes, half of which would have gone to purses; and (3) we'd have to hire some entity to run the network, at least until it's merged with NYRA Rewards.

I know the NYRA staffers who have been running the numbers, and they're pretty smart, so I presume that, in the long run, they think this could be a workable deal. One can only hope.

jk said...

"allow it to collect its full on-track share of the handle, some three times what it gets from OTB wagers now"

When I bet directly with NYRA, they get the full on track share but I do not get a rebate because I am not a "whale" who bets > $2k/month.

It is time for NYRA to pass on some of its savings to the minnows.

El Angelo said...

The shops are a dead-end, I'm sorry. No matter what they try to do, they'll never get past the public stigma of them being full of old degenerate men, smoking and cursing while gambling away their money. No new customers will come as a result of the parlors. As for the idea of building new upscale bars and restaurants that will attract new customers, I will believe it when I see it, but can't think of a bigger waste of money.

jk said...

El Angelo, I respectfully disagree. If it is done the right way, there is an opportunity for success.

First of all, there is no smoking allowed in any NYC OTB. Smoking indoors in NYC is a thing of the past.

Two hours up the road at Mohegan Sun is an example of how to run a successful race book i.e. OTB parlor.

It can be done with an adequate level of service and furnishings.

At Mohegan, you can bet from your seat via a SAM and have drinks served to you.

OTB and NYRA should clone this operation for the NYC customers.
It should not be very hard to do.

There is no excuse not to have a first-rate simulcasting facility along side the casino at the Big A. Also no excuse not to have one in mid town as well.

I do not think upscale bars are the way to go. A racebook is the way to go. Serve drinks and food but it has to be a racebook first and foremost.

If it gets done remains to be seen.

El Angelo said...

JP, you're missing my point. The reality is only part of the problem, it's the public perception of OTB. It has a Q rating in the general public below David Paterson. And it's unlikely that will ever get better.

Anonymous said...

For all the people who were quick to jump on my "west coast bias" when I said lucky was a monster, and the only real threat to zenyatta in the classic:

William Hill rates defending champ Zenyatta and Preakness and Haskell winner Lookin At Lucky as 4-1 co-favorites for the Breeders’ Cup Classic as the British bookmakers opened for Cup business on Tuesday. Hill offers Whitney winner Blame at 6-1, with Whitney runner-up Quality Road at 8-1, followed by Travers one-two Afleet Express and Fly Down both at 12-1 along with Rachel Alexandra.


Anonymous said...

Union's are the problem.

Anonymous said...

Greg Rayburn and NYC OTB the lazy boys who couldn't be bothered to request an Informal Opinion from the NY State Attorney General on whether NY PML Sec 105 applies to the OTBs and/or is constitutionally defensible eg violates the rights of bettors secured by NY Const. Art. 1, Sec. 3. You have to be open for business when people want to bet if you want to make money. How can you take these people seriously when NYC OTB once opened on Palm Sunday and Easter Sunday (one of them) but failed to go to court to assert its right to do so. Where are the fine high priced legal errand boys? Ah you can simply ask for an Informal Opinion from the NY State Attorney General. A FREE Opinion from the top legal guy for the state.

Figless said...

Did not realize NYRA was forfeiting its claims in exchange for Internet/Telephone wagering, INCLUDING purse money.

So they are essentially using horsemen's funds to acquire a new business?

Do the Horsemen have a say, seems a tad illegal if you ask me?

I agree with jk, race books work, "upscale" restaurants do not.

OTB should not be in the restaurant business, gambling should be the focus, with a modest, basic food and beverage menu.

It can be done profitably, but probably not by government with union labor.

But why bother in the first place, without the handle generated by telephone and internet wagering and standard OTB shops, as well as the surcharge, would the revenue really justify their existance?
Why bother?

Figless said...

I hope NYRA realizes they are not simply going to retain 100% of NYCOTB's account wagering clients.

Not happening.

Most of these folks hang out in the parlors and restaurants and use the account to avoid the surcharge.

They operate in cash, not electronic bank transfers.

Someone is going to step into the void to handle their wagers, and it won't be reflected in the handle.

I make the over/under on customer retention at 25%.

Anonymous said...

PPS - And if I am correct NYRA is going to lose money on this deal, total legal handle decrease is going to more than offset the benefits from the new customers.