Panel says horse racing industry needs public funds to survive

A few years ago, a couple of my hobbies led me to read over hundreds of sports sections from the Toronto Star and the Globe and Mail from the 1930s, 40s and 50s. Although I was scanning for particular information, a couple of general trends jumped out.

First, that day-to-day coverage of local women's sports was much stronger in the 1930s than it is today, and second, the huge role of horse racing in mainstream Toronto sporting life. It was everywhere. I wasn't researching horse racing, but it was impossible to avoid reading about it, and it was impressive.

I'd never been to the races, but after immersing myself in these old sports sections and the Toronto sports world of that era, it felt like something I should do. I got as far as taking a look at the website for Mohawk Racetrack—not very far from Waterloo—but I never did go. Nostalgia only goes so far, and whatever horse racing once was as a cultural force, it sure wasn't any more and hadn't been for decades. In recent years, if Ontarians were at a race track, they were probably there for the slot machines and not for anything related to horses.

Horse racing was already in decline when government-run lotteries began appearing in the mid 1970s. Lotteries greatly expanded in the 1980s and the introduction of casinos in the 1990s looked like it might be the end of the line for racing ... except that the provincial government agreed in 1998 to place slot machines at racetracks and give the horse racing industry 20% of the revenue.

Last week, the three-person Horse Racing Industry Transition Panel put together by the Ontario government in June—and comprised of former cabinet ministers from NDP, PC and Liberal governments—delivered its interim report. It paints a picture of an industry that not only managed to stay alive off its cut of slot machine revenue—hundreds of millions of dollars a year—but got fat off it, with more tracks, more races and higher purses than almost anywhere else in North America.

But it also describes an industry lacking in vision and leadership, ready to coast complacently in the slot machine slipstream with no urgency around finding a sustainable business model. And now the gravy train is coming to an end, as the government has decided it has better uses for those hundreds of millions of dollars than to put them into an otherwise unsustainable industry with a dying market.

It's a huge blow to the tens of thousands of people who work in the horse racing industry. The panel puts the number at up to 30,000 FTEs, but with many of the jobs part-time or seasonal, the number of people who earn a significant part of their income in the industry would be much higher.

And the government isn't wasting any time. It only gave one year's notice that it was taking slot machines away from the racetracks, and then took machines out of some tracks almost immediately (while continuing funding for another year).

In its findings, the panel supports the decision to end the Slots at Racetracks Program (SARP), calling its continuation "poor public policy" that would "not be a wise use of public funds" and would allow the industry to "keep evading the competitive challenges of today’s entertainment marketplace."

But while that may sound like the panel is championing a market-driven, sink-or-swim-on-your-own approach, that's not the case, as it encourages "reducing but not terminating public support" as "no Ontario racetrack has a viable business plan to continue racing operations after March 31, 2013" (the end of SARP) and "a viable, vibrant horse racing industry is simply not feasible today without public investment."

It wants the government to continue to keep horse racing alive, but with less funding and more strings attached to the dollars—with objectives, benchmarks, and regular reporting required from the industry. And it says the government will have to oversee reform in the horse racing business as "the industry currently lacks the cohesion to save itself."

Between this inability to save itself, the absence of viable business plans, and the panel's claim that the industry "has done little to modernize or repackage its product or even, until recently, think very hard about its future," you have to wonder why this is an industry worth saving.

From a business perspective, it isn't. Instead, the panel points to horse racing as "a cultural asset" and discusses the dire consequences for the people who work in the industry, many of whom  do not have transferrable skills and would have a hard time replacing the lost income (the report also discusses the impact on the horses—thousands of which would be euthanized, which in turn would also be devastating to many in the industry).

Consistency is not a strength of the report, which says that SARP is bad policy and then suggests that maybe the government could consider paying "enhanced rent to tracks for their slots facilities"—just a different way to spin what SARP does. But it's clear that there are no simple answers (at least none that wouldn't have sombre consequences), and some inconsistency may be the least of the challenges ahead.

Even if all the necessary reforms are made, the panel isn't under any illusions that the horse racing industry as we know it can survive. "Without a doubt, the horse racing industry of tomorrow will have a smaller footprint than it does today."

You have to sympathize with the trainers, grooms, walkers, jockeys and others who weren't in a position to lead the industry out of its complacency and whose lives will be turned upside down by the end of SARP. A year's notice that $350 million in annual funding is being pulled is never going to go painlessly, and the panel reports that the (up to) $50 million in transition funding that the government has pledged isn't going to be enough to keep the industry alive in any significant form.

But there really is no horse racing industry, if we define "industry" as a business sector. There's no sustainable business here—no market that can support the industry as it currently exists—and according to the panel, that's not going to change.