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Tuesday, May 08, 2007

Effects of PA Slots Spreading Quickly

- As slots continue to come online in Pennsylvania, the effects are already spreading beyond the state's borders. And it's still early in the game - there's much more to come. The ground hasn't even started to be broken on the the two giant non-racetrack parlors in Philadelphia, where never-say-die opponents are mounting one last(?) stand, even after the state Supreme Court struck down an attempt to rush a referendum proposing a ban on the parlors being within 1,500 feet of homes, schools or houses of worship onto a May 15 ballot.

At Monticello Raceway in New York, slots business is down considerably.

At the 1,500 video gaming machines at Monticello Gaming & Raceway, the company's take declined 13 percent, or $2.2 million, in the first three months of the year as compared to the same period in 2006. The number of visitors — normally about 1 million per year — also fell by 9 percent over the same period, as did the daily win per machine, to $106 per unit from January to March, from $122 in the first quarter of 2006. Empire's net losses were $4.6 million. [Record Online]
Competition from the Mohegan Sun racino at Pocono Downs, just two hours away, is blamed for the decline. Worse yet, Mohegan Sun recently broke ground on a lavish new facility there; and a slots parlor is also planned for the Mt. Airy Lodge, also located within a couple hours of Monticello (and just 45 minutes from Pocono Downs). So it certainly doesn't sound as if things are going to get any better. I wonder if casino operators being courted by NYRA to replace MGM are having a look at these alarming figures and assessing all the present and future competition in the metropolitan area.

One big problem is that New York racinos are saddled with a high tax rate; operators keep only around 32%, as compared to 45% in Pennsylvania. Thus, they claim they are unable to keep up with PA when it comes to amenities and entertainment. Monticello VP Cliff Ehrlich points out that: "That is over a $400 million investment at Mount Airy, as opposed to a $30 million facility." A bill introduced in the state legislature would increase the percentage to 40%, and raise the marketing allotment that is returned to the operators from the present 8% (which mostly offsets an additional 8 1/2% cut applied to purses) to 10%.

Back to Pennsylvania, there's a depressing, but not at all surprising report in the Patriot News regarding declines in on-track wagering and attendance at state tracks that have slots. At Philadelphia Park, wagering on horses at the track is down 7 percent, to $120 million, from $129 million during the same period in 2006. Declines were also cited at Penn National (where racino construction is ongoing), as well as at the Meadows and Pocono Downs harness tracks.

In the case of Philly Park, the decline is perhaps at least partly due to the fact that the horseplayers are being crammed onto the 5th floor. I sure as hell wouldn't be going under those circumstances. That was supposed to change with the construction of a new slots facility, but racino owner Greenwood Racing, who previously denied that they were abandoning those plans, wrote in an application to the Pennsylvania Gaming Control Board that it was “no longer prudent or feasible" to proceed.
“From a financial perspective, once the current expansion is completed, Philadelphia Park will have invested $136 million in its casino site — more than three times the amount originally proposed in its application....Anyone who has visited Philadelphia Park Casino can have absolutely no doubt that the present facility… is a permanent one.” [Bucks County Courier Times]
Tommy Tomlinson, the area's state senator, defended the plan, saying:
“I should think that the horse racing industry would want the slot machines in the grandstands. That way people can play the slots and watch the races at the same time.”
But as we're quickly learning, and as the Senator should educate himself before speaking on the subject, people don't play slots and watch the races at the same time; and, in fact, the racinos generally specifically discourage anything to distract slots players from their slot playing.

Greenwood, by the way, are the same wonderful folks who were perhaps the last holdout amongst "major" racetracks to increase insurance coverage for jockeys - and they've done so only to $500,000.

- And in West Virginia, where the looming competition from Pennsylvania has spurred the legislature to authorize local referendums regarding permitting table games at racetracks, the opposition has, not surprisingly, filed a lawsuit to stop the votes, scheduled for June 9. As you know, I'm not generally at all sympathetic with the religious right, and have little use for any organization with phrases like 'Family Foundation' in their name. But here, their ethical objections aside, the West Virginia Family Foundation seems, in my view, to be standing on quite logical grounds with their constitutional challenge to the law permitting the votes. It seems quite the stretch I think to claim that a 1984 amendment to authorize a state lottery would also legalize full-blown casinos. Whatsmore, state law requires that the state "regulate, control, own and operate" any gambling enterprises in West Virginia. The state is seeking to get around that by claiming that they own the "intellectual property" to the games. That seems like a stretch of a stretch. An attorney for the group challenging the law explains:
“We’re arguing that you can’t have an intellectual property that is in the public domain."

“You have to have a patent. You can’t have a patent in that.”

[Michael Mann, an intellectual property lawyer] agreed, saying the state would have had to apply for a patent on the games in dispute.

“Here, of course, with table games decades old, perhaps millennia old, there are no currently valid patent rights on known games of chance such as poker, blackjack, roulette and baccarat,” the attorney said in the suit.

“A check of issued patents and published patent applications reveals no patents on games of chance owned by the state of West Virginia.” [Register-Herald, Beckley, WV]
The state's contention seems as illogical as arguments that the West Virginia Family Foundation, and certain Republican presidential candidates, may make against evolution. But it seems there should be little debate about the contention that slots in the Northeast are evolving into a situation in which there will be far too much in one region for anyone to profit in the long run. And that the industry will soon need to find a way to stand on their own.


Anonymous said...

Maybe Greenwood should issue a press release to clarify their position. It could go something like this..
"The management of Philadelphia Park would like to thank all of our loyal race fans. Your years of patronage have sustained our business through good times and bad. Without your support, the dream of bringing slot machine wagering to Philadelphia Park would have never been realized.
As you know, for many years we had pursued legislation enabling the installation of these devices. As this legislation was deemed necessary to preserve and improve Pennsylvania's horse racing and breeding industries, many of you have supported our efforts throughout this process. For this, we are greatly appreciative. Now go f**k yourselves."

Horseplayers shouldn't be in a big hurry to bring slots to their local track. While the despicable actions of Philly Park might be an extreme example, we get shafted everywhere. At Delaware Park, 90% of the facility is dedicated to slots. The racing area is crammed into the far end of the building. And while improvements to the slots area are knocked out quickly, the improvements made to the racing area have moved at a glacial pace. It's been 10+ years since slots were introduced, yet the upgrades to the racing parts of the place are still ongoing. Hell, they didn't even start them until 6 or 7 years had passed. Charles Town's casino is constantly growing bigger and more extravagant. It's never the same place twice. Yet the racing area is still the same dump it was 10 years ago. I can't wait until Penn National's new building is complete. I want to see how spacious and elaborate the casino is and how cramped and generic the new racing portion is.
You would think these tracks might take care of the people who kept them in business long enough to attain their cash cow. But profit always trumps what's right.
Herbert Hoover stated it best when he said,"The only trouble with capitalism is capitalists-they are too damn greedy."

Alan Mann said...

Bob F -

Thanks so much for the great post...I have nothing more to add. One question though - I'm curious as to whether you can even see the racetrack from the slots floors at Philly Park? Thanks.

Anonymous said...

I can't imagine what Philly Park is like now. I was there once before slots (about 2 1/2 years ago) and hated the atmosphere then.

As far as DE park goes I've been a casual visitor for the last four or five years and would disagree with the racing part being "crammed" into the far end. What they've got more than meets the demand. This year's derby was only the first time I ever thought the place had more people than was comfortable and the food lines were too long. Even then, betting was no problem at all.

I hate slots as much as the next horseplayer - but from talking with 'old-timers' at the park who pre-date the slots, the machines occupy an area underneath the grandstand that used to be just a row of (usually empty) betting windows. As irritating as the cacophany of slot machine sounds can be, the silence of an empty grandstand can be just as depressing.

Anonymous said...

I haven't been to the Pha since they opened the casino (and I'll never go again after the stuff they've pulled), but if I remember correctly the 5th floor does have grandstand seating. If you would like to step outside or visit the paddock, you have to make a bit of a hike, though.
It's pretty obvious that they would abandon racing altogether if they could. When the "temporary" plans were announced, I thought they were obnoxious due to the disregard for the comfort or interests of race fans. That they would seek to make the current setup permanent is unconscionable.
Oh, they claim that if they're granted permanent status they'll eventually build a seperate slots facility. I'll believe that when I see it. Hopefully, the gaming control board won't allow them to pull a bait and switch, and force them to adhere to the plan they submitted in order to obtain their license. But I won't hold my breath. You know how government works. Money talks.

I would also have to disagree with Brian regarding Del Park. Over the years, I've spent many Saturdays there. A few Sundays, too. I wouldn't say I'm an old-timer, but I do remember Delaware pre-slots. Yes, much of the space now occupied by slots was once empty. I don't have a problem with unused space being dedicated to slots, but the split could certainly be more equitable. The inside racing area is actually beyond the finish line! Trying to find an indoor seat in that area on a Saturday afternoon is very difficult, and sometimes impossible. I won't go there if I plan to play any simulcasts. It is a nice place to watch the races...outside. I make it down there probably 8 to 12 times during the season. Maybe we've just been there at different times or something, but we're apparently seeing different things.
Btw, about a year ago or so they built a slots tournament area (what the Hell is a slots tournament?) on the second floor of the racing end. As if they didn't have enough slots space already. Now you can actually play the horses in the same room where slot-monkeys are doing their thing. Oh joy!