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Why are tracks lukewarm about 'Instant Racing'?

With one uncomplicated vote this week, Kentucky has finally given race tracks the ability to put in some form of electronic gambling. But most tracks and horsemen, while appreciative of the move by regulators, seem lukewarm about the prospect.

Why?

Because they don't think it will make a lot of money or be very popular with Kentucky gamblers. And there are still legal hurdles and expenses to be considered, the tracks say.

"There are a lot of unanswered questions," Kevin Flanery, president of Churchill Downs racetrack in Louisville, said Tuesday after the Kentucky Horse Racing Commission approved betting on historical races.

Churchill, like other Kentucky tracks, would vastly prefer electronic slots or video lottery terminals to betting on historical races, as in "Instant Racing."

"The economics of this are very different than slots," Flanery said. "These are not slots."

Instant Racing has made millions for Oaklawn Park and Arkansas horse-racing purses, but Flanery and others say it is far from certain the games would be as lucrative in Kentucky, which faces competition from casinos in Indiana, and soon in Ohio.

Flanery pointed out that even Oaklawn has added electronic card games to its banks of games.

And casinos don't play Instant Racing.

"You don't find these types of machines in the Horseshoe casino across the river or anyplace like that," Flanery said, referring to Horseshoe Southern Indiana. "We need to examine their reasoning."

Tracks are worried that Instant Racing won't be able to draw players away from the slots or the tables.

"We'll be evaluating all that, and where we sit, and trying to make sense of that," he said, after Franklin Circuit Court rules on the constitutionality of the regulatory changes to allow betting on previously run races.

The tracks say they will wait until the legal dust settles before they make any investment in infrastructure or apply to the commission to install the games.

That was underscored in the petition asking the court to expedite a ruling.

"The immediacy of these issues is underscored by the financial challenges currently facing several of the (tracks). The new revenue from wagering on historical horse races is important to the financial viability of these (tracks) and, consequently, to the future of the horse racing industry in Kentucky," according to the petition. "The (tracks) have an immediate and pressing need for a determination whether the regulations and proposed form of taxation are valid."

A court ruling might take at least six months, and the General Assembly could block the changes during the 2011 session, although that's considered a long shot.

In the meantime, the tracks will be studying the numbers.

Keeneland president Nick Nicholson said Tuesday that the Arkansas model gives some hope for revenue for purses.

"They seem to have something what's working pretty well," he said. But even Keeneland is talking about a modest start.

And, at this point, the tracks will hardly look a gift revenue stream in the mouth.

"It has saved Oaklawn and made them a very competitive track," said Ron Geary, owner of Ellis Park in Henderson. "Our worry is that it's located in the middle of the state and they don't have much other gaming competition. Here in Kentucky, Ellis and Churchill and Turfway are going to be facing other competition."

Turfway Park, in Northern Kentucky, has one of the largest riverboat casinos in the country 15 minutes away in Indiana, said Bob Elliston, Turfway president. And nearby Ohio is poised to add slots to its racetracks as other states have.

"Full-blown 'racinos' have demonstrated they produce lots and lots of revenue for purses in jurisdictions like Indiana, like Pennsylvania, like West Virginia," Elliston said.

Adding Instant Racing to Turfway would be very different, he said after the vote.

Southern Kentucky, near Tennessee, might prove to be the best market for something like Instant Racing because it is a relatively untapped gambling market.

Corey Johnsen, president of Kentucky Downs in Franklin, said he thinks it will be enough to save the state's year-round racing circuit, in jeopardy now because purses have increased so much in other states.

"The question mark is: How much can Instant Racing machines generate?, because there is not a lot of effective comparable situations, so we really don't know how much it can generate until we have a few years of practice," he said.

In Arkansas in 2009, when Oaklawn had 355 Instant Racing terminals, patrons bet about $248 million. The takeout — the amount not returned in winnings — was $22 million; each machine generated about $170 a day for the track and racing.

Horsemen got about $3.5 million for purses, an average of $60,000 in extra purse money per day of Oaklawn's 55-day meet.

Louis Cella, vice president of Oaklawn Park, said Wednesday that he sees no reason Kentucky couldn't replicate Arkansas' success, as long as the tracks are willing to give patrons the kind of amenities and atmosphere they would expect at nearby casinos.

"The reality is you can't expect to have Instant Racing, turn on the switch and say, 'Here we are, come on over,'" Cella said.

Tracks will have to give users a nice experience, he said. The patrons whom tracks are trying to recapture expect that.

But, he said, Oaklawn has shown it can be done. Attendance at live racing has increased since the machines were installed.

"It's more than just purses. Kentucky already has high purses," Cella said. "With Instant Racing you're getting them back to the racetrack."

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