The law of diminishing returns

The citizens of Miami-Dade County, Florida, overwhelmingly approved slot machines for racetracks – in Miami, that also mean dog -- this week, a referendum that accompanied the presidential primaries in South Florida and followed the downsizing of the failing casino at Gulfstream Park, which is located in Broward Country.

As a result, a new casino is destined to be developed at Calder Race Course not far from the underachieving casino at Gulfstream Park and the more robust, full-scale, themed gambling-resort operation owned by the Seminoles, a favorite of the late Anna Nicole Smith. Another 2000 slot machines are intended for a jai-alai fronton in Miami.

While the politicians in Albany haggle over, among other things germane to the continuation of racing in New York, about 9,000 video lottery terminals are proposed for Aqueduct and Belmont Park, which would increase the number of such machines in the metropolitan area to about 15,000 counting those already in operation at the harness track formerly known at Yonkers Raceway. Meanwhile, the governor proposes expansion of the lottery, particularly the Quick-Draw game widely known as video crack and expansion of the upstate casino industry. Politicians obviously believe that the best way to narrow budget shortfalls is to fleece the citizens.

It appears almost certain the Maryland will soon join Florida, Delaware, Pennsylvania and West Virginia as Eastern states that are home to what has come to be called the “racino.” Kentucky is not far behind. Louisiana and Iowa are in the fold.

There will come, sooner than later in the current climate, a point of diminishing returns. All estimates of revenue potential, from Gulfstream to Yonkers, have failed to evolve into economic reality. The harness track at Saratoga may be an exception but it is uniquely positioned alone in a market that includes Albany and several smaller cities. The pool of gamblers attracted to such games, particularly the one-trick slot machine or video lottery operations, is finite and at some point – now perhaps or at least soon – the supply overwhelms demand particularly when the games involved are, long-term and financially crippling for the players.

By beating the financial brains out of its gambling citizens – the inevitable toll exacted from every slot machine player and video crack addict – the state lottery in it various predatory forms is involved in a continual, night and day erosion of the demand.

According to reports published on Thursday, the New York State budget division predicts Aqueduct will generate $150 million in lottery machine proceeds for the state in 2009-10, followed by $300 million in 2010-11.

If approved, the Belmont machines would go into operation in September 2010 and the forecast is for a contribution of $150 million to Albany in 2010-11 and $300 million in 2011-12.

As the crow flies, Aqueduct and Belmont are six miles apart, 15 minutes in routine traffic. If the budget gurus believe that a second casino in that span of distance-- especially one that, like Belmont, is difficult to reach by public transport and offers the identical product-- will double the betting handle, they are at best very wrong, hopefully just foolish and at worst disingenuous. In practice, one will cannibalize the other – another reason for a VLT-free Belmont. The parallel experience is Florida, where there is a casino in the dog track in Hollywood just to the north of Gulfstream – walking distance if people actually walked in Florida -- further north but not far, a jai-ali fronton in Dania and, a few miles further north, another casino at a harness track in Pompano Beach.

Not all will prosper in such an environment. Increased supply in the face of stagnant and dwindling demand is not a sound business model. It is, however, the one that we have in New York.

Let the games begin

This is the first Saturday of the year with some buzz to it.

Daaher, who may have not been fully revealed last year but was very impressive nevertheless while winning the Jerome and Cigar Mile, faces Brass Hat and Einstein at nine furlongs in the Grade I Donn Handicap at Gulfstream Park, where the Swale Stakes may or may not produce a Derby contender.

Mike Luzzi will make the New York-Miami commute to ride Daaher for trainer the Kiaran McLaughlin, who won the Donn last year with Invasor, who won the ensuing Dubai World Cup, his last start. Daaher is likewise Dubai-bound for this year’s World Cup off the anticipated good effort in the Donn.

Baffert: Giants cover! Giants cover!

The white-haired guy with his hands in his pockets doing interviews up and down Radio Row at the Super Bowl in suburban Phoenix yesterday? Bob [what does he know about football, there’s racing on Sundays] Baffert, who did the series of promotional radio appearances on behalf of the NTRA. Per Super Bowl tradition, the question he fielded most often surrounded which team he liked in Sunday’s game. Baffert picks the New England Patriots to defeat the New York Giants 38-31.

Overheard at the Belmont track kitchen:

“Nah, I don’t want any breakfast. I’m trying to cut back on food; it makes my blood pressure rise. Okay, I’m going out for a cigarette.”

Aqueduct: Feb. 1

Race 4: Little Belle