Betting ON THE FUTURE

In the outback of Australia, there is an entrepreneur with a futuristic idea of building three racetracks--one each for thoroughbreds, standardbreds and greyhounds--that would have no turns and no room for spectators.

These one-mile straightaways, designed to enable television cameras to zoom in on every step of the race, would operate year-round, one of them open almost every night, and all of the betting would be done on the Internet. Profits for this Fellini-esqueproposal have been estimated at $180 million a year.

Some of the locals are suggesting, as politely as they can, that John Hodgman, the brain behind the brainstorm, should quit smoking his socks.

But hey, five years ago, horse racing in the United States was in the doldrums, and few in the industry envisioned what is happening in the doddering old game today.

No one has gone to the deep end, a la Hodgman, but in Colorado, a 24-hour all-racing TV cable network is up and slightly running.

On the East Coast, you can spend $370 for a 30-inch satellite dish, plus about $15 a month in subscriber fees, to gorge on 2,500 races a week.

For $5.95 a month, assuming you own a personal computer, you can do business with a Los Angeles company that provides online betting and race-watching opportunities.

Doug Jeffe, a Los Angeles consultant, refers to all of this as “the Cyber Derby,” and the biggest bets of all are being placed by some of the investors with the deepest pockets.

The Television Games Network, or TVG, is being bankrolled by TV Guide Inc. and Rupert Murdoch’s News Corp. Their outlay has been projected at $200 million-$300 million.

One of the partners in the Racing Network (TRN) is the Ladbroke Racing Corp., whose parent company is internationally involved in racetrack, bookmaking and gaming ventures.

Youbet.com, the interactive betting service, started with a $4-million kitty three years ago and earlier this year got $73 million in additional funding from U.S. Bancorp Libra and a new stock offering.

The racing industry, which has undergone a dramatic shifting of revenue sources because of the explosion of off-track betting, is game for any of the above in varying degrees, although TVG has left the gate with widespread support because of its alliance with the National Thoroughbred Racing Assn., a coalition of many tracks and other industry groups.

“Horse racing is a diamond in the rough,” said Peter C. Boylan III, president of TV Guide Inc., at an industry conference in Saratoga Springs, N.Y., in August. “Historically underexposed on television, horse racing can prosper like other sports leagues by increasing consumer demand through TVG.”

Because of the size of the potential market, there ultimately could be room for TVG, TRN and other alphabet-soup outfits that may come along.

Rick Baedeker, a former Hollywood Park marketing executive and now vice president of communications for TVG, says there are 6 million horseplayers in the U.S. and 25 million “lapsed players” that his network is trying to woo back to the game.

Bill Hogwood, president of the Racing Network, says that his satellite service and TVG’s cable network are apples and oranges.

“TVG is trying to appeal to new players,” Hogwood said. “They’re coming off like the MTV of racing. I wish them well, and I really don’t think we’re competitive. Our service is associated with the experienced players, and we don’t include wagering, like TVG will be doing. The two of us ought to be able to supplement the industry.”

Although the Racing Network, with its six channels, does not accept bets per se, its partner, Ladbroke, offers account wagering through its “Call-A-Bet” phone system.

TVG’s irreverent, loose-and-easy broadcasters, many of them no-names even in racing circles, are the antithesis of Sgt. Joe Friday’s just-the-facts-ma’am style. Among the network’s original hires were thoroughbred trainers Gary Mandella and Frank Lyons, and recently it announced that jockeys Kent Desormeaux and Corey Black have joined as analysts.

TVG, which recently completed its yet-to-be-used betting hub in Oregon, can be seen on cable systems in Louisville, Ky., and Maryland, with market expansion projected for the months ahead. Carrying only selected race coverage rather than full cards, TVG will frustrate the viewer who can’t get enough betting action, but Baedeker is adamantly unapologetic when he says, “We will not be a simulcast show. This is a 24-hour network to attract new fans. If we had become a simulcast show, we would have suckered our [financial] partners.”

TVG has played hardball with the competition, insisting that its partner tracks sign exclusive agreements. Many of the NTRA tracks, among them Hollywood Park and Del Mar, have come aboard, but there’s a dichotomy at Santa Anita. There, the Oak Tree Racing Assn., which opens a meet Wednesday under its lease arrangement with Santa Anita, is a TVG partner, but Santa Anita itself is not.

Frank Stronach, the Canadian industrialist, bought Santa Anita last year for $126 million, bought Gulfstream Park this year for $95 million and is expected to add more tracks to his empire. Stronach is reviewing his inherited two-track commitment--which costs an estimated $750,000 a year--to the NTRA, and industry scuttlebutt is that he could use his burgeoning leverage in a number of ways.

“We’re looking at TVG, but we’re not interested in going exclusive with them,” said Lonny Powell, president of Santa Anita and vice president of Stronach’s MI Ventures Inc. “It’s always possible that we might want to create our own arena with the tracks we have in our family. We’re not going to rush into anything. Home-account wagering is the next wave for racing, that seems to be certain, and we’re intrigued by the concept.”

Hollywood Park pulled its race signal from Youbet.com in early July, citing disappointment that the computer-wagering service was averaging only $21,000 a day in bets. A Youbet spokesman suggested that Churchill Downs, a staunch NTRA member and an avowed booster of TVG, made the decision, in advance of closing the deal to buy Hollywood Park.

Whoever made the decision, Ron Luniewski, chief operating officer of Youbet, was miffed.

“Just a few days before their meet was ending, it didn’t make any sense,” said Luniewski, who also questions why tracks would sign exclusive contracts with TVG.

“We don’t think there’s room for another network, and that’s why we’ve insisted on exclusivity,” Baedeker said. “Exclusivity is vital to our investment of hundreds of millions of dollars.”

Neil Campbell, writing in the Blood-Horse magazine in July, cast a vote for non-exclusivity.

“The sport is in the dawn of the technological revolution and it is absurd for tracks to grant exclusivity so early in the digital game,” Campbell said. “This is an experiment with racing’s future. And if America’s best tracks are selling exclusively to TVG, then they are selling out the horseplayer who will much prefer the Racing Network’s wall-to-wall action to TVG’s gosh-isn’t-this-fun approach.”

Luniewski said that Youbet has more than 10,000 customers and its goal is to reach 35,000 by the end of the year. Of the new funds Youbet has raised, Luniewski said that $10 million-$15 million will be spent on marketing.

Hall of Fame jockey Chris McCarron, a spokesman for Youbet, has been quoted as saying, “I think this is the best thing to hit horse racing since the creation of the Triple Crown. It’s like riding into the future.”

Racing’s past is a sad reminder of how the industry’s laissez faire attitude toward TV exposure resulted in a lost generation of customers. During a 13-year period ending in 1995, parimutuel betting grew by 34%, but state lottery revenues increased by 602% and casino gambling went up 329%. Horse racing is still playing catch-up.

With betting across state lines, via telephone and the Internet, comes Congressional scrutiny. Only eight states--California is not one of them--have legalized account wagering.

Proposed legislation known as the Internet Gambling Prohibition Act has been kicking around Washington. Known in racing as “the Kyl bill,” after its sponsor, Sen. Jon Kyl (R-Ariz.), the bill doesn’t prohibit current forms of wagering, but a U.S. Justice Department official said in June that his office opposes the exemptions.

Racing has taken the position that where a bet is accepted, rather than where it’s made, should determine its legality. Therefore, TVG’s betting hub is in Oregon and Ladbroke is established in Pennsylvania, states where account wagering has been approved.

Jay Hickey, president of the American Horse Council in Washington, said that the parimutuel industry as a whole supports the Kyl bill, but Stan Bergstein, executive vice president of the Harness Tracks of America, portrays Kyl as an enemy of racing.

“He’s coming at this issue not from high moral ground, but as a political opportunist,” Bergstein said. “What he’s doing is politically expedient and little else. Racing is a legal gambling industry with major economic benefits for the states. Racing needs to battle for regulation rather than prohibition. I don’t want to wake up some morning and see where this bill has been made into law after it’s been rewritten at our expense.”

Bergstein was an early critic of TVG, writing in a Daily Racing Form column that the opening broadcasts were amateurish and embarrassing.

“People have gotten me wrong,” he said. “I wrote out of disappointment, but I’m still a big believer in TVG. It’s the only way we’re going to broaden our customer base. But we lost out to the TV generation, and we can’t lose out on this one too. If we do, it means we’ve blown the whole deal.”