Winnipeg Free Press - PRINT EDITION

VLTs now outperforming racehorses at the Downs

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OFFICIALLY, it's still a thoroughbred racetrack. But dig a little deeper into the operation at Assiniboia Downs and what becomes clear is that horse racing now actually comes in second at the Portage Avenue facility.

Such is the state of horse racing in Manitoba -- and North America generally -- that today the single-largest source of wagering at the province's only thoroughbred racing facility isn't horse racing, it's video lottery terminals (VLTs).

And the gambling machines are running away with the race in recent years.

Consider:

As recently as 2003, patrons at the Downs wagered roughly $2 on horse racing for every $1 spent on VLTs.

But just two years later, those same Downs patrons were betting more on VLTs than they were on horse racing -- the first time in Downs history VLT wagering outstripped the racing operation -- and it looks like the same will happen again this year.

Put another way, as a racetrack, Assiniboia Downs -- a horse racing fixture in this community since 1958 -- has quietly become a modestly successful casino.

So successful, in fact, that the track expects to post a profit of about $350,000 at the end of this year, despite declines on the racing side of the operation. That's about the same profit they posted last year and the year before that.

Indeed, while there's a popular perception in Winnipeg that the Downs is drowning in debt, the reality is the track is actually fairly financially stable at the moment. In addition to modest profits posted over the last few years, the Manitoba Jockey Club also has just three years left before the mortgage on the Portage Avenue facility is paid in full.

Boffo numbers

Finally, there are the boffo numbers being churned out by the track's VLTs. The Downs was the first facility in Manitoba to receive the new generation of VLTs introduced by Manitoba Lotteries in 2004 and the track's stable of 140 machines has been doing record business ever since.

Under an arrangement with the province, the Downs takes about $5 million annually as its cut of the profits from VLTs installed on track premises.

The money is roughly equal to the $5 million the Downs hands out in purses to horsemen every year, a crucial synergy that allows the track to continue to stay in the racing business.

But there are also major challenges looming for the Downs. For starters, the core business of horse racing continues to be in a free fall. When the 2006 live racing season wraps up on Sunday afternoon, the Downs will record about a six per cent decline in wagering on live racing this year as compared to last.

That's despite an aggressive marketing campaign launched last spring aimed at attracting new and younger patrons to the track.

Then there's the increasingly tough competition for race horses from competing tracks, particularly in Canada.

After going bankrupt twice, the Downs was the first race track in Canada to sign a deal with a provincial government giving it VLTs to help prop up the racing operation.

Now, virtually every racing jurisdiction in Canada and many in the United States have similar arrangements with their racetracks. Those deals -- in Alberta, Ontario and most recently British Columbia -- are vastly more lucrative, giving tracks in those provinces more VLT money for purses to attract horses.

"We're surrounded on both sides -- Ontario, Alberta, B.C. -- by racetracks with excellent gaming arrangements with their respective governments," says Manitoba Jockey Club president Harvey Warner. "And so the present situation just doesn't cut it anymore.

"Where we're different than other sports venues is this way: whether it's the Moose, Goldeyes or Bombers, they all compete with some kind of salary caps. Whereas in our business, purses are everything. And whichever jurisdiction has the best gaming opportunities gets the horses and horsemen."

Then there's the elephant in the room called the Calgary Race Track and Entertainment Centre, a new $80-million facility with harness and thoroughbred tracks going up just outside Calgary.

The facility will include -- and be partly funded -- by a massive "racino" that will include 500 VLTs, more than triple what the Downs can offer and draw purse money from.

The Downs has long lobbied the province for a similar casino attached to the track and came very close to getting an agreement two years ago to begin construction. But Downs officials say the deal fell through at the 11th hour and the province has shown little willingness to reopen discussions on a dedicated casino for the Downs.

Instead, the discussions recently have centred on what percentage of the take the Downs should receive on its existing stable of VLTs. The current arrangement between the Downs and province is supposed to run through 2008, but the Downs has argued the new-era machines have been so wildly successful that they want to reopen the deal.

An announcement could come as early as the end of this week that would sweeten the deal for the Downs through 2008.

But what happens after 2008 is the larger question. That's the same year the new Calgary track opens and Warner says the Downs needs something more than another short-term VLT arrangement if thoroughbred racing is going to survive in Manitoba for the long term.

"If there isn't a new plan that covers a long term for racing -- an expanded gaming facility beyond 2008 -- I think it would be very questionable how long racing as we know it today would continue at Assiniboia Downs," Warner says.

Machines win by a nose

Where the money's being wagered at Assiniboia Downs

Year Horse racing VLTs

2005 $32.4M $36.5M

2004 $33.2M $27.3M

2003 $35.3M $16.3M

2002 $36.2M $18.1M

2001 $34.8M $18.4M

-- Wiecek

Republished from the Winnipeg Free Press print edition September 21, 2006 $sourceSection$sourcePage

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