Dave Briggs does it again........With wagering down sharply, purses dropping and reliance on slot revenue at dangerous levels, Great Canadian Gaming wants to demolish barns and cut race dates 40 per cent.
But will tearing apart Flamboro Downs save racing or precipitate its demise?
STORY BY DAVE BRIGGS • PHOTOS BY CLAUS ANDERSEN
Tear down the barns. Cut race dates by 40 per cent in two years. All in the backyard of Ontario Harness Horse Association (OHHA) president Jim Whelan.
This could get ugly.
Chuck Keeling knows it, he just doesn’t have time to care much about the battles which surely lie ahead. The way the vice-president of racing operations for Great Canadian Gaming Corp. (GCGC) sees it, the bottom line at Flamboro Downs passed ugly on the way to hideous some time ago.
“We know this won’t be received favourably by some, but if it’s not what we’re proposing, and if it’s a slightly different version of what we’re proposing, or something entirely different, let’s get it out there in terms of specifics, what we’re going to do, commit to it and get on with it,” Keeling said, “because when you lose 20 per cent of your business in the last two years, boy oh boy, if we don’t do anything we’re being irresponsible to this business long-term. I’ll take and Great Canadian will take whatever criticism people in the business want to levy at us, but I won’t accept criticism that we stood by and did nothing.”
On May 1, GCGC announced it intended to close the backstretch at Flamboro as of July 31 and would subsequently demolish the barns — a plan that was quickly put on hold by the Ontario Racing Commission (ORC). More on that later. Two days after announcing its intention to close the backstretch, the Richmond, BC-based casino company released a 24-page discussion paper entitled “Stop the bleeding. Build the business” in which it documented statistically the decline in the bottom line at Flamboro and, to a lesser extent at its other Ontario track, Georgian Downs near Barrie. GCGC’s main plan for stopping the bleeding was to slash race dates by 40 per cent at Flamboro by 2008 (from 260 to 156 annually) and by nearly 14 per cent at Georgian Downs (120 to 104).
Before releasing the proposal, Great Canadian officials held separate meetings with representatives of both OHHA and the ORC.Great Canadian has announced it wants to close and demolish Flamboro’s barns because the cost to bring them up to acceptable standards is too high given the decline in betting.
John Walzak, the chief operating officer (COO) for OHHA said he, and the OHHA executive in general, was, “very disappointed” with the news. “We were not expecting this. It’s not what we thought we were getting into when we got into the slots at racetracks program. It’s not what we thought we were getting into when Great Canadian came into the province (in 2005) to operate the two tracks. Frankly, we expected more and we expected better.
“The big thing that concerns us is this doesn’t appear to be about enhancing live racing. Closing the barns is downloading those costs directly onto horsepeople, costs that were previously borne by the track. I guess that now goes straight to their bottom line. Reducing racing, unless I’m missing something, is not an enhancement of live racing either.”
A key mandate of the slots-at-racetracks program was to enhance live racing.
This year, Flamboro — as it has for many years — is scheduled to race five days a week, year-round, for a total of 260 days, the most of any racetrack in North America. Keeling said purses have fallen 20 per cent from 2003 through 2005 — from an average of $68,047 daily to $54,300. By cutting dates, the daily purse structure will rise as the purse pool is spread over fewer days. Should GCGC be allowed to go to a four-day-a-week schedule in 2007 and a three-day-a-week schedule in 2008, the company projects daily purses will be in the $90,000 range.
“They made arguments I think that suggested that higher purses would lead to more betting,” Walzak said. “I don’t know. There’s lots of examples where higher purses — and we can just look within the province — Woodstock and Dresden and Sarnia didn’t lead to more betting.”
“I think that’s a fair argument,” Keeling said, “and I think that’s going to be the criticism coming back to us. But anyone who says that is simply viewing what we’re proposing in a vacuum.”
Keeling said the first priority is to improve the racing product. Higher purses and fewer dates will likely mean more competition for those racing opportunities, weeding out the least-talented horses. The ultimate goal, said Keeling, is for Flamboro and Georgian to become the second best circuit in Ontario after the two Woodbine Entertain-ment Group (WEG) tracks.
“When you look at the market, when you look at the horse-playing public as it relates to handle, you’ve got Mohawk and Woodbine at a plus-million dollars a day and then there is no number two. I am absolutely convinced there is not a number two,” Keeling said. “There’s a whole bunch of number threes — Western Fair, Grand River, Georgian, Flamboro, Rideau, Windsor and then a bunch of number fours like the Clintons, the Dresdens, etcetera — as it relates to our horse players, the market, which is, I think, something that we constantly overlook in this business. We’re always talking about what’s best for the horsemen, what’s best for management, what’s best for the regulator, we hardly ever talk about what’s best for our customer. So, looking at it from that perspective, we have an opportunity to serve as that number two circuit and be recognized as such by horsemen, by our playing public, by our simulcast audience.
“We can do it by spending money on our facilities, by improving the presentation, improving the distribution, but we’re going nowhere if we don’t have the product. And we will be so explicit to say, ‘We don’t have the product right now, especially at Flamboro.’ We don’t have the product to be number two. We’ve got to have the product and the only way to do that is by retrenching, building up the purses, the conditions, the purse structure.
“If somebody else can tell us how to do it, without concentrating purse money into fewer number of race days — this is exactly why we want to start this discussion — tell us how else we can do it.”
Walzak and OHHA are glad to offer some ideas. For one, Walzak points to OHHA’s current project to brand harness racing much like Horse Racing Alberta has done in the west.
“Our way of doing it is to try to start building the business; go out and find fans and build fans one by one,” Walzak said. “I’m not sure, but I guess (Great Canadian’s) proposal is basically short-term. I don’t see any long-term. I don’t see any medium-term here. We actually offered. Part of our building-the-business strategy, of course, is our youth camps. They’ve turned us down at Flamboro. ‘You don’t want to build the business?’ We’re getting mixed messages here. We don't understand it.”A foreshadowing of things to come? Keeling (left) and Walzak discuss business in August of 2005, shortly after Great Canadian Gaming announced it had purchased Flamboro Downs.
Keeling said the economic situation is so dire Great Canadian needs to concentrate all its efforts on plugging holes in the dam before it can consider building a new one. There is a stark sense of urgency in his voice. “Creating new customers is a long-term and a very worthy goal, but by the time that pays any dividends we’re going to be five years from now, and believe me, we will not be in the same position to build new customers as we are then,” Keeling said. “We’re not thinking five years from now, because nobody in this business, including OHHA, has the time to think about that. We need to restructure now.”
OHHA has already pledged to fight both the proposed barn closures and the race date cuts at every turn — with politicians, the ORC and the courts, if need be. OHHA has already scored a minor victory. Just two days after GCGC released its proposal, and only four days after it announced it was closing the barns at Flamboro, ORC executive director John Blakney issued a directive putting an immediate stop to Great Canadian’s plans to close the backstretch until a formal investigation could be made in the matter. The ORC also ordered that the cost of the investigation will be paid for by Great Canadian.
In a statement, the ORC said, “the executive director has determined that the closure may be prejudicial to the best interests of racing and has ordered an investigation into the matter.”
In an interview on May 8, Blakney said the order was made to put the brakes on the barn closure until the ORC could “take a fair and equitable look at the complete situation... and the issues and impacts on the licensees.
“This came upon us fairly quickly.”
Blakney said the Commission was looking into whether Great Canadian, when it sought regulatory approval to be the new owner of Flamboro Downs, made any formal commitment to invest money into the barns at Flamboro, or at the very least, keep them open.
As for the race dates issue, Blakney said, the “Commission will deal with a proper race date application in the fall.” At that time, as part of normal protocol, the public will be invited to comment.
Meanwhile, in the second week of May, OHHA held separate meetings with its horsepeople in the Flamboro and Georgian districts to inform members of GCGC’s plans and, almost certainly, devise a strategy to fight them.
Prior to those meetings, both Walzak and Keeling were, at least publicly, sounding a conciliatory tone — though clearly Keeling feels the need to drop dates at Flamboro from 260 to 156 and Walzak said OHHA did not want to budge an inch.
“Great Canadian said to us and we said to them, ‘We need to talk about this. We need to come to some better understanding about where we’re going as an industry,’” Walzak said. “I absolutely agree to stop the bleeding and build the business. We’ve got to do it. I just don’t see how cutting race days and closing the backstretch stops it. Maybe it stops their bleeding, it doesn’t stop the industry’s bleeding. It doesn’t build the business... We don’t even know what’s the bleeding all about? What causes the decrease in the bet? We have no idea. That’s sort of disturbing. How are we going to solve it, if we don’t know what it is?”
Keeling quotes statistics that show wagering at Flamboro fell more than 14 per cent between 2003 and 2005; betting in the first quarter of 2006 is down some 26 per cent compared to the same quarter one year ago; wagering is down 21 per cent at Flamboro over the last nine months and a dangerously high percentage of purses come from slot revenue (over 71 per cent at Flamboro and almost 85 per cent at Georgian in 2005), not pari-mutuel wagering.
Slot revenue has been necessary for racing’s survival, but both Keeling and Walzak said there are major warning signs ahead.
“I think the slots-at-racetracks program is going to be very, very vulnerable if we’re not able to demonstrate that all facets of the business have grown, not just the supply side, which the Ontario industry has done an admirable job with,” Keeling said.
“Here it is seven years after the first slot, I think, came in and we’re still talking about the industry declining,” Walzak said. “But what have we done? We’ve seen Flamboro get sold for an increasingly-accelerated amount of money. Meanwhile, they want to tear down the barns. Where’d all the money go if they can’t afford to keep the barns. So, what’s going on here? Is this a shell game, or what? As horsepeople, we’re very concerned.”
Keeling said OHHA’s threats to make this a political issue don’t make a lot of sense. “I understand the initial reaction. If this is going to be a political issue, that’s fine. Again, we’re just going to present our argument to say, ‘This is what’s happening to the business.’ The business has contracted 20 per cent since 2003. So, what is political or legal about this? The business is contracting and speeding up. It’s not slowing down. What are we going to do? If there is a political or legal resolution to this, great, but you know what? It’s going to come down to simple business fundamentals as far as we’re concerned,” Keeling said.
“We’d like to continue talking to OHHA about this between the two parties, versus in a political or legal arena, but, so be it. We’ll respond accordingly, if need be. I hope it doesn’t come to that, because we still view OHHA as a key partner. They’re the ones that have to deliver the product for us.”
Walzak bristles somewhat at the suggestion the racing at Flamboro needs to improve dramatically. “They say the quality of the racing is something that’s kaput. We’ve got the trainer of the year (Casie Coleman) and the driver of the year in Canada (Mark MacDonald) who race there regularly. The driver of the year last year wasn’t even the top driver at Flamboro (Jody Jamieson was the top driver at Flamboro). What’s their measure of quality?”
Great Canadian has pledged to make a $2 million total investment in Flamboro (some $1.3 million) and Georgian (nearly $700,000), but only if the quality of the racing product improves.
“We’re not going to dedicate those types of resources if we don’t have the product. It doesn’t make sense,” Keeling said. “No person in business would do that, including horsemen... It’s one package, we’re willing to go forward on it. We’re willing to give more details or specifics if that’s what’s required of us, but fundamentally, we’re going to have to have a better product.”
Should that happen, a key part of the planned investment calls for an improvement to the look of both tracks’ simulcast signals and the search for new teletheatre sites. Walzak agreed that both areas need investment, but pointed out horsepeople would be making sizable investments, as well. “They’re saying they’re going to make a $2 million investment into Georgian and Flamboro, but we’re probably going to make a $10 million investment in horses through those two tracks over the next years,” Walzak said. “That’s what we do. We go buy horses. Now we’re going to have to make an even bigger investment, because some of these guys are going to have to go buy trucks and trailers and go into training centres. They never had to do that when they were stabled there. They downloaded that whole cost onto us.”
Keeling said what is often forgotten is what the customers think. He said patrons are speaking loud and clear that changes need to be made. “I think they’re not only telling us anecdotally, but, more importantly, they’re telling us that with their dollars. For handle to decrease 21 per cent in the last nine months, talk about voting with dollars.”
Walzak said GCGC clearly is aiming its proposal at existing customers. “I’m not sure we can get much more out of our current customers,” Walzak said. “I didn’t see anything in their proposal, or hear anything from their descriptions that says they’re going to go after new customers.”
“This plan wasn’t meant to address that,” Keeling said. “This plan was to talk about how we want to restructure the business within the current operating environment.”
Keeling said he was concerned about much more than betting being down some 20 per cent, though that is the ultimate indicator.
“It’s not only overall handle, but it goes deeper than that, it’s purses generated. We lost $4 million in purses generated in the last two years at Flamboro. Irrespective of handle on live racing, on simulcast racing, the source of that handle, it’s down $4 million. If there’s ever an alarm bell for our partners it’s that. We’re not talking about Great Canadian, we’re not talking profit. We’re talking money to OHHA members that’s gone in two years. The purses paid out. We’ve gone from $68,000 paid out in purses at Flamboro down to $54,000 in ‘05. You want to talk about product quality, there it is,” Keeling said.
“We’re not suggesting the business is automatically going to rebound five, 10, 15 per cent by doing this immediately. All this is meant to do is stop that bleeding that’s happening, stop the hemorrhaging. But we’ve got to start building trend lines in a positive way, rather than watch these negative trend lines build and compound on themselves, because that’s what’s happening, in multiple areas, not just gross handle.”
Why put all the bad news out at once? “Because we’re convinced the problem and the issues we’re facing are that serious,” Keeling said. “We know it’s a long, long process on this issue. We also know that consensus is probably not likely, but all we can do is do our best to try to address the very serious problems we face and whatever happens from there, at least we’re trying. At least we’re trying to do something for the demand side of our business.”
Track management and the horsepeople agree on one thing: “Stop the building and build the business. I’m looking at their press release. I couldn’t agree more,” Walzak said. “We’ve got to do that. We’ve got to do something.”
Trouble is the two sides can’t agree on exactly what that “something” is.
FEATURE STORY: http://www.canadiansportsman.ca/