Illegal Internet gambling is threatening Ontario's $2.1-billion horse-race industry and the province's rural economy, say horse owners and industry officials.
"The biggest threat to the horse-racing community in Ontario comes from illegal offshore gaming," says Jane Holmes, vice-president, corporate affairs, Woodbine Entertainment Group of Toronto, the owner of Canada's largest horse-racing operation.
Holmes says illegal offshore Internet gaming costs the non-profit company more than $100 million a year in lost revenue from on-track and off-track wagers, and slot machines at racetracks.
"The illegal operations are essentially stealing purse money from Ontario horsepeople," Holmes says.
|Photo courtesy of Dave Landry|
More than 100 online Internet sites conduct illegal betting on Ontario horse races.
In 2005, on-track wagering fell to $286 million from $308 million in 2004, and race purses fell to $160 million from $165 million, according to the company's annual report. Woodbine Entertainment expects purses in 2006 to further decline.
The horse-racing and breeding industry in Ontario generates more than $2.1 billion in annual expenditure, about 80 per cent in rural Ontario, including more than 60,000 direct and indirect jobs, says the Ontario Horse Racing Industry Association (OHRIA).
The operators of the illegal Internet sites do not pay operating costs, do not pay purses to horse owners, jockeys or staff and can therefore offer rebates of five per cent to 12 per cent to attract Woodbine's largest gaming customers, Holmes explains.
Wagering on horse races in Canada in 2005 totalled $1.73 billion, $1.12 billion of that was in Ontario, according to the Canadian Pari-Mutuel Agency.
British Columbia is Canada's second-largest horse-wagering province at $213 million. Alberta is third at $159 million.
This is a decline from 2004 when wagering on horse races in Canada totalled $1.79 billion with $1.17 billion in Ontario, $214 million in B.C. and $156 million in Alberta.
The OHRIA echoes Holmes' warning. "The growth of illegal Internet gaming sites at home and abroad has become a serious threat to the future viability and integrity of both the horse-racing industry and government-operated gaming," it says on its website.
The fall in racetrack wagering is compounded by a drop in revenue from slot machines at racetracks and by increased regulatory costs that are "undermining the industry as a whole," says Holmes.
Race purses, which drive farm employment and agricultural spending, jumped from $161 million in 1999 to $300 million in 2004, following the installation of slot machines at racetracks in 1998, says the Ontario Racing Commission.
The Ontario Lottery and Gaming Corp. says that, since 1998, more than $1.74 billion in slot revenue has flowed to horse owners and racetrack owners.
In 2005-2006, of the $1.9 billion generated at more than 9,330 slot machines at Ontario racetracks, the industry received $299 million, a drop from previous years.
Slot revenue in 2003-2004 was $306 million and in 2004-2005 it was $300 million.
Slot revenue has boosted the rural Ontario economy.
The number of horses born in the province jumped by 21.4 per cent between 1999 and 2005, from 28,233 horses to 34,266 horses, according to a 2005 study by Econometric Research Ltd.
The number of licences by the Ontario Racing Commission issued to horse owners and others in the horse industry increased more than 39.5 per cent from 22,024 in 1999 to 30,722 in 2005.
But, Holmes says, declining slot earnings will have an effect on the province's horse-racing industry.
She also blames municipal anti-smoking bylaws and increased competition from other forms of gambling as contributing to falling revenue for Woodbine.
Tim Orlando, president of Toronto's Horsepower Racing Management, says illegal gaming is putting Ontario's rural economy at risk. "Illegal Internet is the most critical negative on horse racing today, bar none," says Orlando. "It affects not just racing in Ontario and Canada, but all legal racetrack operations around the world."
Yet, the size of the problem puts it beyond the capacity of a single racetrack operator such as Woodbine or a jurisdiction such as Ontario to control. It will require a worldwide effort, he says.
This spring, Ontario MPP Jeff Leal (Peterborough) introduced a private member's bill to curb advertising by unregulated Internet gaming operators in Ontario.
Recently, a bill passed in the U.S. House of Representatives that would make it illegal to bet online inside the U.S.
Meanwhile, the horse-racing industry is fighting back against falling revenue.
Woodbine's racetracks at Toronto and Campbellville (the Mohawk track) account for about 47 per cent of all Canadian racetrack wagering and 73 per cent of Ontario racetrack wagering, according to the non-profit company.
Thoroughbred races operate at two Ontario racetracks and standardbreds (harness horses) race at 16 Ontario racetracks.
To help offset the continuing decline in track betting, Woodbine opened three off-track betting facilities in 2003 and 2004 and a digital television channel.
"We are drawing in new customers through the off-track bars. These are customers who wouldn't have gone to the track before," Holmes says. The off-site locations added $31.5 million in betting revenue in 2005.
Loss of wagering on Woodbine's teletheatre network is about 50 per cent of the loss of at-track betting. "We're still losing revenue, but at a slower rate," Holmes says. Since opening the offsite betting sites in 2003, Woodbine has added 18,000 customers who actively gamble on horse races.
Earlier this year, Woodbine announced plans to develop a 25-acre, $350-million entertainment and retail complex adjacent to the racetrack. The complex will include a cinema, bars, restaurants and a hotel, says Holmes.
Ted Clarke, general manager of Grand River Raceway in Elora, says It is not an "entirely bleak picture.”
Grand River Raceway, which opened in 2003, is a year-round harness racing track about 110 km west of Toronto's Woodbine.
While wagering at live racing has declined, the total amount wagered on horses is at the same level as it was 10 years ago, Clarke says. He points out that the total wagering in Ontario between January 2006 and May 2006 was higher than a year ago.
Thanks in part to revenue from slot machines, Grand River has been able to build a racetrack complex that tripled the number of employees to 300 and generates $30 million annually in horse-race wagering, Clarke says.
Nick Coukos, executive director of the Horsemen's Benevolent and Protective Association of Ontario, expresses similar views.
"There has also been a decline in racehorse track gaming because there are alternative forms of gaming. We're having to be more competitive and provide entertainment we didn't before. We need to get more people to the racetrack that would not normally," he says.
However, Clarke says, "We are not as robust as we would like to be ... We're holding our own on the level of wagering. Where we're challenged is on the cost of creating it. Our profit margins are less than they were. But, this is not unlike any industry going through a retooling."
(Charles Wyatt can be reached at firstname.lastname@example.org)