Putting Its Money Where Gamblers Aren’t

On the brown dirt fields of this small farm town, a Canadian company plans the next wave of the global gambling boom, a horse racing track built almost solely for television and online gamblers.

The $250 million Dixon Downs race track and entertainment complex planned 20 miles west of Sacramento is part of Magna Entertainment’s vision to rule the emerging world of television, telephone and Internet gambling. Analysts say home betting will earn fortunes for firms that produce horse races and handle wagers.

“This is going to be the first race track ever developed as a TV studio,” says Jeff Rabin, equity analyst at Dundee Securities in Toronto.

Magna Entertainment Corp., guided by Frank Stronach, one of the nation’s leading horse owners and breeders, has more immediate ambitions, too, in a nation that reportedly gambled $84 billion in 2000. It is lobbying for “racino” slot machines at its tracks.

All this centers on a sport widely associated with decline and older men, a sport whose bettors represented 4.2 percent of the nation’s gambling in 1990, but only 1.8 percent by decade’s end, according to Kentucky-based Blood Horse Magazine.

Stronach’s plan to build one of the nation’s most advanced race tracks is just the newest twist in a corporate drama that has wowed the horse world since 1998.

That’s when Stronach’s Magna Entertainment, a corporate spinoff of his Ontario auto parts firm, began bidding for horse and dog racing tracks, eventually buying 14 in nine states and one Canadian province. The company now dominates North American horse racing with tracks such as California’s Santa Anita, Florida’s Gulfstream and Maryland’s historic Pimlico Race Course, home of the Preakness Stakes.

Magna CEO Jim McAlpine says the plan is to “become a major owner of racing content, live racing, which you get by owning race tracks” and reach “as many customers at home, in sports bars and hotels as we can.”

Magna’s track buying spree also set the stage for the company’s Xpressbet, a telephone and online network begun last year to handle home betting, and HorseRacing TV, a 24-hour cable network launched in January.

In Dixon, a town of 17,000, city officials are processing plans for 1,600 horse stalls, a 260-room dormitory for grooms, a one-mile track with 1,800 grandstand seats and a three-story 5,000-seat “simulcast center” for bettors to watch North American races on TV. The complex on Interstate 80 would open in 2006.

Magna also plans 1.2 million square feet of off-track entertainment, copying another emerging trend on the horse track circuit: the mini Las Vegas style resort to attract women and families.

The company plans no slot machines at Dixon Downs. They’re banned outside California’s Indian reservations and tribal owners oppose expansions beyond their 51 casinos. But Magna officials say California’s Indians have an unfair monopoly and would like to change that.

Called “racinos,” the combination of slot machines and horse racing is growing nationally, especially as states look for ways to collect taxes and fight massive budget deficits. Already, Delaware, West Virginia, Rhode Island, Iowa, New Mexico and Louisiana have legalized slot machines at racetracks, making them formidable challengers to the nation’s other gambling outlets. Though Magna owns no race tracks in those states, it has slot machines at Flamboro Downs, a track it bought last year in Hamilton, Ontario.

The company, which bought two tracks last year in Maryland, Laurel Park and Pimlico, is leading the push for slot machines there. Maryland Gov. Robert Ehrlich wants to put 10,500 slot machines at Maryland horse tracks in exchange for $350 million in expected taxes to close the state budget deficit.

Magna is also lobbying Pennsylvania officials to legalize slot machines. Slot machine revenue would burnish Magna’s image with investors and fatten its stock price, says Louisiana-based leisure and entertainment analyst Daniel Davila. The company reported a $14 million loss last year.

If Magna can get slot machines at just one track, Davila says, the impact can be “extreme,” because of “the dramatic effect slots can bring to the bottom line.”

Dixon officials, while remaining noncommittal, believe Dixon Downs could significantly boost the town’s $11 million budget with property, hotel and sales taxes. It could be, economic development director Marshall Drack says, a “fantastic opportunity. We’re getting the 21st Century version of a sport that’s 400 years old.”