THE BREEDERS' CUP FORUM: CALIFORNIA'S BETTING SATELLITES ON THE FAST TRACK

by Paulick Report
July 26, 2012-It’s hard to find anyone in the horse racing industry more engaging and upbeat than Rick Baedeker, who I first met some 30 years ago when we were both working the night Quarter horse meeting at Los Alamitos.

Over the ensuing years, Baedeker, has worn many hats: marketing director for Hollywood Park during the R.D. Hubbard era; initial marketing director for the National Thoroughbred Racing Association when the “Go Baby Go” Lori Petty ads were produced; marketing and public relations for TVG at the time of its launch; and back to Hollywood Park again, this time as president, when it was owned by Churchill Downs Inc.

After a brief hiatus from horse racing, Baedeker returned in April 2011 as manager of mini-satellite development for Southern California Off-Track Wagering Inc., better known as SCOTWinc. Baedeker is charged with expanding the network of small, sports bar-like OTBs authorized by 2007 legislation.

A few days before speaking with Baedeker, I stopped by the OC Tavern, one of the new mini-satellites, and found a vibrant, crowded place with a mixture of horseplayers, sports fans, and diners, young and old, male and female. It was an atmosphere far superior to previous experiences I’ve had in county fair wagering sites: more inviting, comfortable, and customer friendly.

What exactly is SCOTWinc?
It was established by statute in 1980s when racing expanded into satellites (there is a similar organization, NCOTWinc, representing Northern California). It’s a partnership of racetracks and horsemen, and manages the off-track facilities. The way the law was written, satellite wagering could only be conducted at fairs and existing racetracks. How many mini-satellite

OTBs are there now?
There are four. The first one was the Commerce Club in the city of Commerce at a hugely popular card club. The OC Tavern in San Clemente was next, and that process took an entire year to get through the city. Then one in Santa Maria opened at the Original Roadhouse Grill. The fourth is at Santa Clarita Lanes (in a bowling alley), which opened July 6. That one is by Magic Mountain (about 40 miles northwest of Los Angeles).

What are the benefits of mini-satellite to horse owners and racetracks?
The benefits are commissions and purses, in terms of payoff. That’s all fine, but to me it is secondary. The primary thing is the repackaging of our product. The irony is the new experience is very similar to the old experience at the racetrack, the good old days when the place was packed. These mini-satellites have an energy to them that’s fun and a great environment to bring in new people.

How is the revenue divided?
It’s very simple. The restaurant owner gets 2% of the wagering. The way I explain it to prospective owners is we are coming into your sports bar and renting space from you, and we’ll pay you 2% of all wagers. When you add in the food and beverage the customers bring in, it’s a pretty good deal. The OC Tavern was just marginally profitable. Now they have no worries. One of the unexpected benefits of adding horse racing to the OC Tavern is it raised awareness in general of its existence. They’re doing more non-horse related business than before.

What sites is SCOTWINC trying to open next?
There are three that have contacted cities and started the process. One is in downtown Los Angeles (at Casey’s Irish Pub, a sports bar co-owned by Santa Anita CEO Mark Verge), another is in downtown San Diego, and the other is in Lake Forest (in Orange County). Brad McKinzie, from Los Alamitos, has put together a group of investors for the Lake Forest location.

What are the restrictions?
Any existing racetrack or existing satellite wagering facility has a 20-mile protective circle, which is really unfortunate. In order to get the law passed they had to put that in. That’s a 40-mile circle. You dot these all over Southern California, and surprisingly it doesn’t leave you a lot of opportunities.

Why has it taken so long to expand the number of these mini-satellites?
The law didn’t go into effect until Jan. 1, 2008. It took the better part of a year for the California Horse Racing Board to write the rules and regulations. Then they started marketing it. Terry McWilliams at Sportech (formerly tote company Scientific Games) worked very hard on this, from a planning and engineering standpoint. The Commerce Club happened in a heartbeat, but the OC Tavern took over a year to get approved because the city was concerned about all the old stereotypes about gambling. That’s something we still face. The last two (Santa Maria and Santa Clarita) have gotten over the counter approvals, without public hearings. Each city is different.

What are some things you’ve learned about the people who go to these mini-satellites?
We have new people and younger people who are now exposed to racing, dipping their toe in the water. There’s no question about that. I don’t have any doubt either about the survey we did that showed 95% of the horseplayers are playing more than before. I was shocked that less than 30% in our survey had ADW accounts. I would have thought the majority did. I found that to be surprisingly good news because it says we are not just cannibalizing existing customers.

The food is good, the prices are fair, and there is no admission charges. It’s a widely social atmosphere and translates to fun. That’s what I remember about the good old days at the racetrack. It was enjoying the sport and much less about the gamble. Sometimes we are so focused on getting new people we forget about existing folks. Many of our existing fans are having fun again.