The Good, the Bad and the Possibilities* NCLGS Committee on Pari-Mutuels January 6, 2017 F. Douglas Reed Principal: Racing, Gaming & Entertainment LLC dougreed27@gmail.com & Director Emeritus: University of Arizona Race Track Industry Program *Apologies to Sergio Leone, director of “The Good, the Bad and the Ugly”

Overview The Good - What is working The Bad - Challenges The Possibilities

The Good -What is working International expansion/Account Wagering Niche meets (Keeneland 2016 Fall attendance up 15%, on-track handle up 12.5%, total daily handle up 11%) Big Events – (Breeders’ Cup, Triple Crown) Horse clubs/fractional ownership (WA, IL, KY, MN…) Lower takeout experiments show promise – (KY Downs, Canterbury Park) Intl simulcasting – Yonkers common pool in France w/ PMU, internet enables video and wagering, growing market Niche meets: Del Mar, Keeneland, Saratoga Big events – they are showing increases – experiences sell (this can’t be repeated 365 days/year) Horse clubs and/or fractional ownership – Emerald, Hawthorne, Canterbury, now others following Churchill, Arlington – quasi or real ownership, gives them real owner experience, educates, some become more involved, or at least more engaged fans

The Good -What is working Exchange wagering, P-2-P – (NJ, CA?) Historical racing machines (AR, KY, WY) Fixed Odds wagering (Australia, NZ…) Shared/Team group bets – fractional ownership of large multi-leg bets with social aspects and prizes (Finland, Sweden & Norway) Historical racing machines – legal in some jurisdictions not in others In the Scandinavian countries they have had success with group or team betting – in essence fractional ownership of a pick 6 or other type of large bet. Some offer competition among teams with prizes etc.

The Bad- Challenges Horse/owner supply to races run ratio – shortage Field size – starts per year per horse Popularity vs. competition Fragmented Difficult to make change Animal issues The racino marital relationship can improve

The Possibilities - Ideas North American thoroughbreds run 6.18 times a year – what if it was 7.18? Experimental Rule There are lots of ideas but hard to experiment with regulatory barriers 45 Ideas in 45 Minutes ( www.ua-rtip.org ) Innovators’ Circle 2015 Millennials eSports events Crossover Pari-Mutuel wagering? Panel Sunday on eSports

Closing Thoughts There is not a “silver bullet” cure-all for racing 2017 Updated Economic Impact Study - AHC Racing like other businesses must innovate/change It takes a lot of hard work, a lot of efforts, some will fail, some will succeed – there are good ideas out there. Help the industry innovate and experiment! I offer some closing thoughts for horse racing in general: There is not one “silver bullet” cure-all for racing Racing like other businesses must innovate/change It takes a lot of hard work, a lot of efforts, some ideas will fail, some will succeed There is a silver lining: look at what is working and what is not and know there are many people out there with passion and ideas

Thank You! & Director Emeritus of the University of Arizona Race Track Industry Program