Mixed Year, Outside Influences Add to Maryland Racing Industry's Concerns

By George Berkheimer, STAFF WRITER

Looking back, 2007 was a year of mixed signals for Maryland's horse racing industry. Attendance at the major Maryland Jockey Club (MJC) events was up, but overall handle was down. And Pennsylvania-based Penn National Gaming agreed to acquire Rosecroft Raceway in August - but then reneged three months later when the Fort Washington harness racing venue wasn't included among contenders for slots licenses.
And even though Maryland's legislators agreed on where to locate machines and how to divide revenue, they ultimately passed the buck and asked voters to make the final call on slots in a presidential ballot referendum this November.
With five fewer race days than the previous year at Laurel Park and Pimlico Race Course, the MJC announced its total handle declined 8% in 2007.
The all sources handle totaled $883.8 million, as compared to $960.2 million from the same period in 2006; and the daily average handle from all sources decreased 6.5% from $4.1 million to $3.8 million.
"We are facing many challenges in 2008, and are hopeful that several opportunities are realized for the industry as well," said Chris Dragone, MJC president and general manager. "We look forward to working with all interested parties in strengthening our industry in the coming year."

Record Crowds,
Reduced Purses
The 2007 Preakness Stakes drew a record 121,263 spectators to Pimlico, and the event's attendance figures have topped six figures in eight of the last nine years, including seven straight.
Preakness day wagering finished at more than $87.2 million last year, the fourth largest in the 132-year history of the event, with more than $57 million bet on the middle jewel of the Triple Crown.
The 22nd annual Maryland Million event drew its own record crowd of 26,788 last October. Handle figures on the live card neared $6 million, with a record $5,985,793 bet on the 12-race Laurel card, while a total of $3.9 million passed through the pari-mutuel windows on the 10-race Fall Festival of Racing card in November, which was headlined by the Grade I Frank J. De Francis Memorial Dash.
In an effort to stay competitive with surrounding states that supplement purses with slot machine revenue, the MJC and the Maryland Thoroughbred Horsemen's Association reduced purses and the stakes schedule for the second half of the 2007 racing campaign, as the industry faced a $3 million shortfall in the purse account.
Similar concerns have forced a 15-day reduction in the 2008 Laurel Park winter meeting. A winter storm cancelled an additional day of live racing on Feb. 22.
Additionally, the Maryland Racing Commission accepted an MJC proposal to alter its live racing calendar for the final seven weeks of the current Laurel winter meeting. Normally conducted on a Wednesday through Saturday basis, live racing shifted to a Thursday through Sunday schedule beginning the week of Feb. 25.
"We saw a decline in the on-track handle last year and it has continued during the first four weeks of the new year, so we decided to try something new," said Dragone. "I believe we can get more fans out to the track on a Sunday versus a workday."
Wagering figures for the 17-week Laurel Park fall meeting were 3.3% lower than a year ago. Numbers for the Laurel Park winter meet and the Pimlico spring meet were down 9% and 7%, respectively, from the previous year.
For what it's worth, the slump isn't limited to Maryland. "Handle is down throughout the entire industry," noted MJC Spokesman Mike Gathagan.

Stock Slip
Adding to these concerns in the first quarter of 2008, the NASDAQ Stock Market notified Magna Entertainment Corp. (MEC), owner of Laurel Park and Pimlico, that it has until Aug. 11, 2008, to regain compliance with requirements for continued listing on the NASDAQ Global Market. Magna received the notice on Feb. 12 after the bid price of its publicly held Class A Subordinate Voting Stock closed below the $1 per share minimum for 30 consecutive business days.
MEC will be deemed compliant should the bid price of its stock close at $1 per share or more for a minimum of 10 consecutive trading days within 180 calendar days of notification. However, MEC stock could be delisted if Magna cannot demonstrate compliance within this time period, or such later date as may be permitted by NASDAQ.
Magna has been looking to improve its financial situation and is actively pursuing a debt elimination plan announced in September last year, with a stated goal of being debt free by the end of 2008.
Blake Tohana, executive vice president and CFO of MEC, did not return a phone call seeking comment on the NASDAQ announcement.

Draining the Pool?
One positive this year is the fact that the MJC has not seen a repeat of last winter's equine herpes virus outbreaks, although the Maryland Department of Agriculture did place an investigational animal hold order on an isolated barn at the Bowie Training Center in January. The order was lifted when follow-up testing on the suspect horse proved negative for the neurological form of the disease.
"Because we know the virus is out there and we have learned that most of the outbreaks happen during the winter, we are better prepared than ever to identify the virus and respond quickly," said Maryland Racing Commission veterinarian Dr. David Zipf.
As MJC and MEC officials continue their efforts to remain competitive and improve operations this year, they may have to figure in the as yet unknown effects of a possible termination of the nation's largest off-track betting operation this summer.
On Feb. 19, the board of directors for the New York City Off-Track Betting Corp. (NYCOTB) unanimously voted to shut down the financially troubled organization in mid-June. The NYCOTB operates more than 60 branches throughout the city and generates more than $1 billion in bets every year. There is still a slim chance that the New York state legislature could intervene to save the gambling operation.
"They do receive our signals," Gathagan said, "but it's not clear how many of our races they [broadcast] or how significantly we would be affected" from an accompanying loss of simulcast revenue or from a smaller pool of out-of-state bettors wagering on Laurel Park or Pimlico races.