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Wag the dog 

Will slot machines eclipse the animals at Arkansas tracks?

DEAL EM: Video blackjack at Southland.
  • DEAL EM: Video blackjack at Southland.

 

Down at Oaklawn, it’s the kind of late February day that makes you suspect God is a fan of horseracing: 73 degrees, the sky a blue dome marked only by a ghostly thumbprint of daytime moon. As the horses come out of the barns and onto the track, even they seem to know that winter has mostly played itself out. If animals can express joy, surely these do. They almost hover with each step, their hides catching the sun — roan, dun, bay, chestnut, black — purpose-bred engines of muscle and sinew, tapering down to legs that look as delicate as spun glass.

Believe it or not, even with this spectacle of evolution and breeding and pure, equine grace on display, there are people at Oaklawn this day who just don’t give a damn about horseracing.

The room under the grandstand where Oaklawn keeps its 350-odd Instant Racing machines and 125 electronic games of skill — Lock-n-Roll, video poker and a few other games that I couldn’t quite puzzle out — is maybe a football field in size once you count all its nooks and crannies. It’s mostly not Oaklawn’s fault that their electronic gambling parlor is a windowless tomb of a place, devoid of sunlight and clocks. Expansion of electronic gambling at the track is currently on hold, awaiting the outcome of a lawsuit filed by the Family Action Council Committee. The lawsuit, now pending before the state Supreme Court, questions whether Garland County residents outside Hot Springs city limits should have been allowed to vote on whether to include gambling on electronic games at the track.

As relatively humble as it is, even what Oaklawn has is surely a sign of things to come. As at most casinos, the parlor at Oaklawn is all flash, lit mostly by neon. Even when the machines pay — though they make the hollow, metallic, chunka-chunka-chunka noise of coins dropping into the tray — all you really get is a redeemable piece of paper. The air is filtered and chilled. Silent attendants move among the 300 or so players on hand, swabbing down empty stools with cleanser. Among them circulate the drink girls, with their trays and hoochie-mama dresses. Among them sit the players, staring into spinning rolls or hands of virtual cards like they’re looking for The Answer.

While the gamblers here might not find the true path to riches, Arkansas’s two animal racing tracks — thoroughbred race track Oaklawn in Hot Springs and greyhound race track Southland in West Memphis — just might. Since voters in those communities approved the installation of what the tracks call “electronic games of skill” at the tracks in 2006, machine gambling has taken off.

For example, figures from the Arkansas Racing Commission show gross electronic gambling wagers for January 2007 at Oaklawn of more than $11 million, which produced a cash flow of about $25,000 per day for the track. At Southland, wagering was more than $8 million, but a lower payoff percentage increased its cash flow to about $45,000 per day. In time, the tracks predict more than $1 billion a year in wagers on the electronic machines, which could produce $100 million for the track before taxes and other overhead. Though electronic gambling hasn’t hit that rate overall yet, if it does it would more than double the money bet in 2006 at the tracks on live, simulcast and Instant Racing pari-mutuel wagering — a total of about $92 million at Southland and $337 million at Oaklawn. Already, though, Southland is pulling in on average each month on the machines as much as it made on other wagering last year.

The new gambling has made a difference at both tracks. According to horseracing industry magazine the Blood-Horse, daily average purses at Oaklawn during the 2007 meet have been at an all-time high; $290,000 per day, up from $275,000 per day in 2006. The track reports $1 million has been added to racing purses due to electronic gambling this season — money that has already attracted some of the best trainers and horses in racing. At Southland, the staff has almost doubled, remodeling efforts have moved to the racing side, and officials there say gambling receipts have managed to halt the steady descent Southland’s bottom line has been tracking for over a decade.

No one is quite ready to use the S-word yet (that would be: “Savior”), but the conventional wisdom in the racing industry is that “racinos” are the wave of the future. Less clear, however, is how electronic gambling might change the sport.

In case you were wondering, there is only a limited amount of skill necessary in playing Arkansas’s games of skill — in most cases, it’s not much more than could probably be mastered in an afternoon by a trained chicken.

According to the state law passed in 2005, a game of skill is defined as: “Games played through any electronic device or machine that affords an opportunity for the exercise of skill or judgment where the outcome is not completely controlled by chance alone.” The law goes on to specifically exclude “Instant Racing” machines from the definition. Introduced at Oaklawn in 2000, Instant Racing machines are essentially video libraries of tens of thousands of previously run horse races that a player can bet on, and winning wagers are paid from a pari-mutuel pool, just as live racing wagers are paid. That is, winners split up the money after the track takes out its take and the tax man’s share. The electronic gambling machines generally pay off at a predetermined rate over a period of time, just as Vegas slot machines do, with a statutory minimum of 83 percent required. According to early data (see sidebar), bettors have a better chance of winning at Oaklawn than at Southland.

With the card-based games — video poker at Oaklawn, the digital Texas Hold ’em tables and electronic blackjack at Southland — the prerequisites are fairly clear. Know when to hold ’em. Know when to fold ’em. Know a flush from a straight. Know your face cards and whole cards and how luck can stick them together. Repeat.

It’s when you start playing the so-called Lock-n-Roll games, however, that the definition of “skill” gets a little looser. Designed to appeal to slot machine fans while staying within the state’s requirement that players demonstrate some hint of skill during play, the Lock-n-Roll game is basically a bastardization of the classic one-armed bandit. The difference is: with each bet, players are allowed two spins. If you like some result from your first spin — say, two 7s — you can “lock in” those symbols and spin again, shooting for the final 7 and a jackpot.

Denise Von Herrmann is an associate dean at the University of Southern Mississippi, and the author of the 2002 book “The Big Gamble: The Politics of Lottery and Casino Expansion.” For Von Herrmann, calling the simple act of pressing a button to hold a symbol a “skill” might be stretching it a bit.

“In general these games of skill do not involve the same high level of skill that one would normally associate with, for example, blackjack,” she said.

Like modern slot machines, Von Herrmann said, games of skill have sophisticated programming inside which can make the machines responsive to player action. While not set to pay off on a schedule, they aren’t quite as random as a hand of blackjack with a flesh-and-blood dealer, either. “I’m not sure they are as truly interactive,” Von Herrmann said, “and thus, as truly skill-based, as playing actual poker.”

Von Herrmann said that with all forms of electronic gambling, there is a concern about the lack of human interaction. With traditional casino games like blackjack and poker — and with horse and dog racing — a player is required to make at least some contact with other human beings in order to play. The electronic gambler, however, can bury herself in hours of play without ever speaking to another person. Such immersion can lead to problem gambling.

“The further removed from the social aspects of a casino, the more most observers begin to wonder about the possible downsides, such as compulsive behaviors — and isolation, which can often feed such problems,” Von Herrmann said.

“The slots at the racetracks are known in the psychological, psychiatric, and business communities as the ‘crack cocaine’ for hooking new addicted gamblers,” said John Kindt, professor of business and legal policy at the University of Illinois. Kindt, whose criticism of the gambling industry led to his 2006 Congressional testimony on the dangers of Internet gambling, said that concerns about the impact of electronic gambling at racetracks are not new. He cites Congress’ 1999 National Gambling Impact Study. In their final report, commissioners said that no matter what the benefit, casino-style gambling shouldn’t be expanded at pari-mutuel facilities like dog and horse racing tracks.

Section 3-12 of their recommendations read: “States should refuse to allow the introduction of casino-style gambling into pari-mutuel facilities for the purpose of saving a pari-mutuel facility that the market has determined no longer serves the community for the purpose of competing with other forms of gambling.”

In Arkansas, the introduction of “skill” games was the only way around a constitutional prohibition on games of sheer chance. Legislation to allow it at Oaklawn and Southland, both claiming economic necessity, passed narrowly in 2005. Their casino gambling competitiors are not in Arkansas, however, but in Mississippi, Oklahoma and Louisiana.

Earl Bellamy has seen both the good and the bad of what electronic gambling can bring to racetracks. As president of the Arkansas Horsemen’s Benevolent and Protective Association, Bellamy runs the local arm of a group with chapters in 30 states. Made up of owners and trainers licensed by the Arkansas Racing Commission, the AHBPA is keeping a closer eye than most on the room full of sorta-slots and video poker games under the grandstands at Oaklawn.

Bellamy said that 25 years ago — before riverboat gambling, before Tunica, before the Native American casinos in Oklahoma — there was a kind of golden age at Oaklawn. “At that time, it was the only recreational game in town. People could go out and put two dollars down on a horse and enjoy the afternoon. But there’s just so much competition for those same dollars now that I don’t think we can ever hope to see that again.”

Bellamy said that even as purses dwindled due to waning interest, costs went up.

“The amount of money that owners spend on purchasing horses and keeping them trained and keeping them at the racetrack is only about half of what purses will pay them back,” he said. “That’s sort of the current thought. The numbers I have are from 2005 but there was something like $2 billion spent on the upkeep and purchase of thoroughbred horses, and there was only about $1 billion of that returned in purses.”

Given what he calls that “bad business model to begin with,” Bellamy’s attitude toward the shift to “racinos” — a coinage widely used in the industry but shunned at Oaklawn for its association with casinos — might best be described as “cautiously favorable.” While he admits that anything that creates bigger purses is inevitably going to be better for horsemen, he adds that at other tracks, the pattern has been clear: as money spent on electronic gambling goes up, the money spent on live racing goes down.

“I think one of our neighboring tracks, Louisiana Downs, is a good example,” he said. “You go over there on any Wednesday, Thursday, Friday, and you’ll see more people in the gambling room than you’ll see out there watching the races.”

Terry Wallace, track announcer and director of media relations for Oaklawn, agrees. He said that when Instant Racing machines came to the track in 2000, tucking them off in the south end of the grandstand was a conscious decision, designed to keep the focus on horse racing and a “racing culture.”

While expansion is on hold for now, if or when the litigation pending before the state Supreme Court goes Oaklawn’s way, Wallace said the plan is to continue that separation by building an electronic gambling facility to the south of the main building — a new structure that isn’t physically connected to the grandstand itself.

“The focus is on the horse and will always be on the horse here,” Wallace said. “That comes right from the top, from the Cella family. They have always been horse people.”

While Wallace said that electronic gambling probably would have never come to the track in the first place if it wasn’t for the pressure to compete with other gambling facilities in the region, it has been good for them. Since the advent of instant racing, more than $6 million in electronic gambling profits have been folded into purses at the track.

Because patrons aren’t charged to go into the gambling parlor, Wallace admits that it’s still something of a mystery if there’s any cross-over wagering going on. With electronic gambling receipts on their way up, however, he said it’s easy to assume that some cross wagering is going on. Whether they play the games or not, Wallace said the electronic games have been good for fans of horseracing.

“Just last week, we announced another purse increase,” Wallace said. “So just this racing season alone, we’ve increased the purses a million dollars. Largely, that’s off the business that has developed through instant racing and gambling.”

Increases like that have already managed to attract big-name talent to Oaklawn. This season, those names include superstar trainer D. Wayne Lukas and his entire stable of thoroughbreds. Lukas, who has trained four Kentucky Derby winners, was the first trainer whose horses’ career purse winnings exceeded $200 million.

“That’s the kind of thing we could never do before,” Wallace said. “But when the purses are good enough and you make it worth somebody’s while to make the trip here, that’s when that kind of stuff happens.”

Tom LaMarra is the editor of the Blood-Horse, a Lexington, Ky., magazine. LaMarra said that a recent visit to Oaklawn reminded him that it’s one of the few smaller tracks in the country that can still draw large crowds on tradition and quality alone.

“The Saturday I was at Oaklawn, it was what I’d call a crappy day. Cloudy, upper 30s, a Saturday,” he said. “But there were like, 16,000 people there. Sure there were people in the Instant Racing room, but a lot of the people were outside watching the races. You don’t necessarily see that at these other racinos, except like when they have a major racing day.”

Like many we talked to, LaMarra said that the racino phenomenon has provided a lot of money for purses — which, in turn, improves the quality of racing at tracks with electronic gambling. With higher purses, however, comes a new set of problems.

“With Oaklawn, it’s a short meet, it’s always at the same time of the year, and most of the trainers, they plan to go to Oaklawn and they stay there three months,” he said. “Other places, like in the mid-Atlantic, you can ship a horse wherever you want. There’s maybe eight to ten tracks within a two-hour drive of each other, so you can pick your spot. The purse money at most places is very good, so that kind of drains on the horse supply as more and more of these places have machines.”

LaMarra said that while electronic gambling does get more people through the turnstiles at horse racing tracks, most of the gambling overlap — slots players betting on horses, horse players betting on slots — just isn’t there. While those wagering on horses might drop a few coins in a machine on their way to the buffet on the electronic gambling side, LaMarra said his experience is that slots players don’t like the slower pace of wagering on horses. “Is it cannibalizing the wagering on horse racing?” he asked. “I think that’s probably extreme, but having 3,000 slots players on the property — I doubt that much of that money is making its way into the racing pools.”

LaMarra said that — even with their long-standing use of Instant Racing machines — Oaklawn has so far stuck by traditional horse racing as its primary focus. LaMarra said that at tracks like Charlestown Races and Slots and Mountaineer Gambling and Racing, both in West Virginia, “you can find the race track. But clearly, when you’re talking about 4,000 slot machines, it kind of takes over the joint. They have to have racing because they’re licensed to have racing and slots or whatever you want to call them in each state.”

Given the uncertainty involved, LaMarra isn’t ready to call the racino phenomenon the magic bullet that will save pari-mutuel gambling on horse and dog races. While electronic gambling might get warm bodies on the premises and more dollars into horsemen’s pockets, the jury is still out on whether that translates to more fans in the grandstand.

“Has it kept them open? Probably,” LaMarra said. “Has it helped the racing product? You’d have to say yes, because instead of racing for $20,000 a night, these places might be racing for $150,000 or $200,000 a night. So, obviously the horsemen are making more money. But I guess the main question is — long term — is it drawing more fans to the track for racing? That question has just not been answered.”

At Southland Racing and Gambling in West Memphis, they’re taking down the track’s scabby blue tote board. Shipwrecked at the edge of the infield, it’s a relic from a bygone era — long bygone.

After walking through Southland’s spanking-new 110,000-square-foot casino to get to the track — a $40 million Lock-n-Roll, video poker, and digital blackjack emporium featuring a 280-seat buffet — the race grounds behind the main building just look threadbare and sad.

Even so, Barry Baldwin, president of Southland, can’t stop smiling. Since the gambling side opened late last year, profits are up, and the staff and purses at the track have nearly doubled.

Part of what’s behind Baldwin’s unbreakable smile is that he can remember the bad old days at the track. He still clings to the idea that — with over 50 years of greyhound racing behind it — Southland would have somehow kept on keeping on if electronic gambling had never come. Possibly, he said, that could have involved cutting employees and staying open at “a minimal type of level.” However, as anybody who visited the track in recent years can tell you: In the dark days after the coming of gambling to Tunica in 1992, Southland was locked in a death spiral.

Slowly, Baldwin said, as gate traffic and wagering fell off, so did the purses paid to winners. While Baldwin said that Southland’s long heritage helped ensure that the quality of races never took the “deep dive” it did at other greyhound tracks, the caliber of animals they could attract did begin to wane.

“People would ask: ‘Are you going to close next year?’ No,” Baldwin said. “And I would tell them, ‘If you’re asking are we going to close in five or six years? Well, I can’t answer that.’ ”

All this is to say: what a difference an infusion of electronic gambling dough makes.

Inside its Wal-Mart-sized casino area, Southland now features what Baldwin calls 915 gambling “positions” — 803 electronic games, 12 six-seat digital blackjack tables, and four 10-seat electronic Texas Hold ’em tables. Though the blackjack and poker tables had a ready-made audience, Baldwin said that finding the right mix on the slot-style games was a challenge. As an example, he said that they started out with fewer than 20 machines that accepted wagers of a nickel or a penny. Though the math just didn’t seem to work on those in terms of profit, they were the most popular item on the floor.

“Well, people were just lined up to play the penny machines,” he said. “What we found out is that most people don’t play a penny. They play 25 cents or they play 50 cents. They won’t play a quarter or 50-cent machine, but they will play 50 cents on a penny machine.” Since then, Baldwin said, they changed over another 100 games to penny, nickel and dime wagering.

Equally popular — though mostly at night, Baldwin said — are Southland’s blackjack and poker tables. While Baldwin said the games are as random as tables using six decks of real cards, both poker and blackjack at Southland are fully computerized, with players looking at virtual cards on embedded screens. While the poker table has a virtual dealer, the blackjack table is manned by an attendant who regulates play. With blackjack, as the cards are “dealt,” each player’s screen suggests an action the player might take: stand, hit or double-down. Baldwin said that the prompting system has led to play by those who might be intimidated by traditional, flesh-and-blood blackjack. “We’re seeing a lot more women play,” Baldwin said. “They’re not so worried about making a quote-unquote ‘mistake.’ ”

Poker and blackjack aside — and though he has something of a vested interest in the subject — Baldwin defends the level of skill it takes to play games like Lock-n-Roll. The skill, he said, is in recognizing patterns. “Once you have a pattern — let’s just say it’s a double bar, double bar and a seven. Well, you look at the pay table, and three double bars pay five or ten, while three 7s pays 100,” he said. “Automatically, you should know that in the long run, you should keep the two double bars. However, you still have that element that wants to try for a bigger score.”

While the new influx of money is just starting to trickle through to amenities and improvements on the racing side, Baldwin said that dog owners and trainers have long since started seeing the extra money in the form of purses. Southland pays the first, second, third and fourth place finishers in every race, with the amount determined by a point system.

“In the ninth week last year, the winner was paid $69 a point,” Baldwin said. “Today, with $48,675 from games that week — adding that boosts the purse to $106 per point.” While a winner in a top-tier race would have made around $500 a year ago, today, the same greyhound would make $850 for a win. Meanwhile, the staff at Southland has increased from 320 employees in 2006 to close to 610 today.

“We have literally doubled our employee base,” Baldwin said. “It’s a dramatic increase. In less than four months, the additional money from [electronic gambling] has already been a half-million dollars.”

Still, Baldwin admits that electronic gambling at Southland is not for everyone — especially those more familiar with slots parlors in Tunica.

“I think it has to grow,” Baldwin said. “A lot of people come here looking for exactly what Tunica has. We have to tell them, this is not a slot machine. We get a lot of people who come in the door, try it one time, and don’t come back. We have others who come in, try it, and become regulars.”

Even with the major renovations ongoing and electronic gambling handle rising daily, Baldwin said that the numbers show something even more amazing could be happening at Southland: evidence that the interest in electronic games is beginning to pump up wagering on the track side.

“We’re way too young and way too new at the business — but Southland is showing increased numbers,” Baldwin said. “Last Saturday, [racing] did better than the previous Saturday, and we did better than the Saturday a year ago. Not often can we say we beat the previous year.”

While Baldwin said those preliminary numbers don’t mean that Southland will manage to pull off what almost no other racino in America has done, they’re seeing “some minute trends.” Whatever the case, it’s sure not going to do anything to get that smile off his face.

“We’re having a slight bump,” Baldwin said. “Will that maintain? I don’t know. What I do know is that it’s stopped that decrease that we always see. That’s good.”

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