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Churchill's higher takeout reflects struggles to compete with tracks backed by casino money

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LOUISVILLE, Ky. - Before the Kentucky Derby contenders sprint from the starting gates, the crowd at Churchill Downs will hand over millions of dollars at betting windows. Gamblers lucky enough to pick the right colts, thanks to homework or hunches, will be getting a little less back on those winning tickets.

The famed track recently announced that it will take a bigger cut of the money bettors place on its races. The decision came after Kentucky lawmakers rejected the racing industry's latest effort to add slot machines to generate more cash to boost prize money for horse owners.

Churchill spokesman John Asher said without the bigger cut, the track would have had to reduce the prize money for winners of spring races and some races would likely have been cut altogether. Instead, the track was able to increase its stakes purses by 2.7 per cent to $7.68 million for the spring races. The track hopes for a domino effect — that higher purses will lure more horses for races, which in turn will bring out more bettors long after the Derby is run.

"If Churchill Downs is to present a competitive racing product, purses must be strong enough to keep current stables in the state and attract new stables and horses to the Kentucky racing circuit," Asher said.

Kentucky touts itself as the world's horse capital with its picturesque horse farms and historic tracks. But some race courses are struggling to compete with tracks in states such as New York and Pennsylvania that have parlayed casino gambling into higher purses that lure more horsemen.

The decision by Churchill Downs — the most storied of all tracks — to withhold more money signals the sport's struggles in states that haven't expanded racetrack gambling.

"It is fair to say that Churchill's decision to raise takeout is a bellwether of how difficult things have gotten for tracks without (casino) gaming," said Alex Waldrop, president and CEO of the National Thoroughbred Racing Association and a past president of the Churchill Downs track.

Nationwide, the tradition-steeped sport is still trying to regain its footing after the Great Recession. The industry suffered declines in wagering, foal crops, number of races and auction prices for horses during the downturn.

But some of Churchill's regular customers see the track's bigger takeout as a money grab at their expense.

"When you take away from the players that come here every day and enjoy the sport, it kind of leaves a bad mark on racing for me," Steve Pollard said recently as he left the track's simulcast parlour where he bet on horse races run elsewhere.

The new takeout formula means a win-place-show wager will now have 17.5 cents of every dollar taken off the top, compared with the prior 16 cents. People betting multi-horse or multi-race exotic wagers like exactas and trifectas will have 22 per cent take out, up from the previous 19 per cent.

The higher takeout follows another round of improvements to the track, geared toward the money-making bonanza that is the Derby.

The track installed a gigantic video board, a $12 million project to give fans — even those packed into the infield — a giant-size view of the horses.

Churchill is adding 2,400 seats as part of a $14.5 million upgrade that includes VIP sections, new food and beverage locations and new restrooms.

Total U.S. pari-mutuel handle in 2013 — a measure of overall horse betting — was essentially unchanged from the previous year at $10.88 billion, according to The Jockey Club. That's compared with $15.18 billion in 2003.

The big races remain hugely popular, but weekday racing at many tracks can be "pretty desolate," said Brian McGill, who follows the horse racing and gaming industries as an analyst for Janney Montgomery Scott.

"Is it possible that horse racing can see somewhat of a comeback? Maybe," McGill said. "But with so many other entertainment options out there, it's going to be tough."

Online wagering is growing in popularity, but the downside is that online betting depresses on-track wagering and attendance, Waldrop said.

Meanwhile, the total number of U.S. races last year sank to 43,139, down from 53,503 in 2003 and 74,071 in 1989.

Last year's gross purses in the U.S., however, were slightly above the 2003 level, due to the infusion of casino money at a number of "racinos" featuring horse racing and casino gambling. In New York, casino-enhanced purses have surged at Belmont Park — home of the third leg of the Triple Crown — and at Saratoga Race Course and Aqueduct Racetrack.

Big races including the Triple Crown series and the Breeders' Cup remain huge draws. Keeneland logged its second-largest crowd ever for this year's Blue Grass Stakes, a key Derby prep. Gulfstream Park broke its record for wagering at its Florida Derby weekend this year.

Still, it can be a challenge to fill the stands for lower-level events.

Turfway Park in northern Kentucky has long struggled to compete with casinos. First it was the gambling boats that opened nearby. Now it's the "racinos" with bigger purses in other states that are taking horses away from Turfway.

The track has lured fans for Friday night racing by offering $1 beer, hot dogs and bets, plus live bands.

"Our facility on a Friday night is like the old days — the grandstand is packed, people are screaming at the horses and it's a lot of fun," said Turfway general manager Chip Bach.

The challenge is to draw similar crowds for the other days of racing. Bach sees a larger problem in growing the sport's popularity.

"We have to figure out a way to make racing cool for the younger demographic," he said.

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