Remote wagering slow but steady in California

Don Thompson

Monday, Aug. 26, 2002 | 9:42 a.m.

SACRAMENTO -- More than $90 million has been bet on horse races over the telephone and on the Internet by more than 30,000 gamblers since remote wagering was legalized in California this year.

But it hasn't been the salvation some backers had predicted -- at least not yet.

"For people who thought account wagering was going to turn everything upside down, that hasn't happened," said Mike Marten, spokesman for the California Horse Racing Board. "It's new money, but it's not a gold mine yet."

Horse racing for years has been trying to reverse a downward spiral fed by aging fans and increased competition primarily from the lottery and Indian casinos. Previous attempts to attract a wider audience through off-track betting and other tie-ins haven't dramatically broadened the sport's appeal.

Account wagering's slow start may reflect the slumping economy and pace of the horse racing season as much as it does the state of the ancient sport, said Marten and other observers.

About $5 million, or 7 percent, of the $70 million bet last week was through so-called "advance deposit wagering" systems, where gamblers put money into an account, then place wagers over the telephone or Internet.

That's up from about $1 million a week immediately after the board approved the first such systems Jan. 25 under a law that took effect Jan. 1, and from about $2.25 million a week in April.

"The numbers are increasing, if not by staggering amounts, then steadily," Marten said.

When account wagering began, the president of one of three authorized account wagering companies, Mark Wilson of TVG, said it "could be the start of a new era in California racing. ... Maybe this will bring the game back to the status it had years ago."

But it could take five to seven years to see if account wagering revives horse racing, said Ed Hannah, vice president and general counsel of XpressBet, another online company.

So far, race track attendance and total betting have held generally steady, with minor predictable fluctuations, said John Reagan, the horse racing board's senior pari-mutuel manager. He said the board is considering an academic study of the impact, but expects no trends to develop for more than a year.

XpressBet's new accounts leveled off after growing "quite significantly, quite quickly" in the first month or so, Hannah said. But that's because the firm's three affiliated California racetracks run winter seasons that end in mid-April. XpressBet, a subsidiary of Canada's Magna Entertainment Corp., plans a marketing drive this winter as the season nears.

About 85 percent of XpressBet's 11,400 accounts were opened by California residents, who placed about 90 percent of the bets, Hannah said.

"We're actually ahead of what we had hoped for," he said.

Horse racing's future may hinge on whether account betting attracts new gamblers, or "cannibalizes" existing fans of a largely dormant industry who were limited to wagering at the tracks, Indian casinos, and state and county fair betting pavilions.

"It's basically wagering any time, anywhere," Hannah said. "So we believe it will succeed in attracting new customers."

What's more, track owners are counting on account wagering to bring those new customers to the see the races in person.

"It's exciting to place a wager and win," Hannah said. "It's even more exciting to place a wager and watch your horse win."

David Marshall, CEO of Woodland Hills-based Youbet, said his company promotes special events at participating racetracks and offers free promotional items to online bettors who attend races.

"It works both ways," Marshall said: online bettors may be drawn to racetracks, and racetrack fans may try remote wagering.

His national firm has signed up 5,000 California customers to date, which he called "an excellent response. ... Like any industry, you don't just turn it on overnight."

About 16,000 California bettors have accounts with Broomfield, Colo.-based TVG, which runs the Television Games Network, the only national cable and satellite television network devoted to horse racing.

The network reaches 8 million homes, said John Hindman, the company's vice president and general counsel, including nearly a million in California and an additional 4 million or so during limited programming on Fox Sports Net West 2.

Hindman sees account wagering and televised racing combining to introduce live racing to new audiences. Horse racing was the third or fourth top spectator sport into the 1960s, he said, but was supplanted when other sports moved aggressively to television.

The California law passed the Legislature nearly unanimously last year and was signed by Gov. Gray Davis a year after he vetoed a similar measure. Gambling opponents objected that lawmakers are trying to prop up a dying industry that hasn't found a way to appeal to a younger generation.

If it's successful, however, the California law could cut employee productivity as workers place their bets on the job, warned Websense Inc., whose software manages employees' use of the Internet, and Brobeck, Phleger & Harrison LLP, a labor issues law firm.

But the legal California Web sites are a tiny fraction of the offshore gambling sites already available on line, said Nathan Barankin, a spokesman for state Attorney General Bill Lockyer. Lockyer's emphasis was making sure the state law banned gambling by those under age 18, he said.

The horse racing industry estimates California tracks have lost up to $30 million to offshore firms' online and phone betting. Those firms offer discounts to heavy bettors that the California-licensed sites can't match.