Horse Racing Industry Transition
Toward a Sustainable Future - a Plan for Horse Racing in Ontario
Draft for Consultation
Horse Racing Industry Transition Panel
June 21, 2013
The Honourable Kathleen Wynne
Minister of Agriculture and Food
Government of Ontario
It is our pleasure to submit this draft of our plan for a sustainable
horse racing industry in Ontario. It reflects our consensus on the
next steps the government and the industry should now take to optimize
and grow horse racing in the province.
We look forward to a lively and constructive conversation with
stakeholders and the public to chart a path for the industry to
take responsibility for its future.
Table of Contents
- Executive Summary
- From a Model to a Plan
- Key Objectives: Optimize and Grow
- New Ontario Horse Racing Plan - the Details
- Conclusion: Driving Continuous Improvement
1. Executive Summary
- In May 2013, the Minister of Agriculture and Food, the Honourable
Kathleen Wynne, requested the Horse Racing Industry Transition
panel provide a concrete plan for a long-term sustainable horse
racing industry in Ontario, effective April 1, 2014. The panel
consists of three former Ontario Cabinet ministers. This document
is a draft plan, for consultation. After considering responses
from stakeholders and the public, the panel will produce a final
- The panel was retained in June 2012 to make recommendations
on how the Ontario government could help the horse racing industry
adjust to the end of the Slots at Racetracks Program (SARP). In
its two reports, the panel found that dependence on slots revenue
- a funding source unrelated to wagering by horseplayers - had
divorced the industry from its customers and spurred artificial
and unsustainable growth. As a result, much of the industry today
is built on racing that is not attractive to the consumer. This
has to change. At the same time, the panel found that a sustainable
horse racing industry requires a measure of public funding, though
much less than SARP.
- The panel concludes that the path to success lies in aligning
economic interests. The panel recognizes that gaming in Canada
is a highly regulated industry. We therefore acknowledge that
the final plan for horse racing in Ontario must comply with all
existing laws, regulations and authorities.
- To firmly link the industry with the horseplayer and fan, the
panel now concludes that future public funding for horse racing
should be based on a dollar-for-dollar match with the industry
commission on pari-mutuel wagering. In this way, public investment
will reinforce rather than undermine the dictates of the market.
- The panel observes that nearly two thirds of pari-mutuel wagering
in Ontario is on foreign races. On the other hand, Ontario tracks
export their live-racing signals to other markets, netting about
$20 million a year from wagering outside the province.
- The panel finds no public interest in using government funds
to encourage wagering on foreign product. A major aim of the plan
is to strengthen and promote live racing in Ontario - that is,
races actually run in the province. Live racing generates more
economic benefits in terms of jobs on the track, on the farm and
in spinoff industries than do simulcasts of races in other jurisdictions.
In distributing matching funds to the industry, the panel therefore
proposes to use a formula aligned with the commissions earned
from wagering on live Ontario races and also reflecting exports.
The government will invest in success as defined by the marketplace.
It will not subsidize failure as SARP did by supporting racing
that does not attract customers.
- To govern a reformed industry, the panel recommends the creation
of a new market-driven central body - Ontario Live Racing (OLR).
OLR would consolidate all industry revenues and share them among
industry partners on the basis of consumer demand for live Ontario
- The panel has been asked to facilitate a more integrated relationship
between horse racing and the Ontario Lottery and Gaming Corporation
(OLG). The purpose of integration is to align the interests of
the horse racing industry and the OLG to enhance gaming revenue
to the province and provide a stable base of funding for live
racing in Ontario.
- In the panel's view, non-track betting (including wagering
at off-track betting sites, telewagering and online wagering)
is essentially a gaming activity. The panel therefore proposes
that all non-track wagering should be administered by the OLR
and willing racetracks with input and, where appropriate, direction
from OLG, through mutually beneficial relationships. This structure
would provide for the use of OLG expertise in optimizing the non-track
wager and facilitate the introduction of race-themed gaming products
(historic racing, race-based lotteries, etc.). Integration should
give the OLG an incentive to expand non-track wagering and introduce
new racing-themed products, generating more revenues for the government
and the industry.
- As a further step to boost investment in Ontario live racing,
the panel also proposes to direct industry commissions from on-track
and off-track wagering to OLR. In addition, OLR would take charge
of the savings from Ontario's pari-mutuel tax reduction.
- OLR would distribute the consolidated industry revenues - including
all public funds and pari-mutuel commissions - to the three breeds
based on their share of wagering on live Ontario racing.
- As the linchpin of a new industry governance structure, OLR
would take on the current non-regulatory roles of the Ontario
Racing Commission - including coordination of the racing calendar
and direction of horse improvement programs. OLR would also organize
the common marketing and branding of Ontario horse racing.
- The new governance structure would include three breed-based
divisions: Standardbred Live, Thoroughbred Live and Quarter Horse
Live. These organizations would develop the racing calendar, conduct
live racing, encourage fan participation and operate horse improvement
programs within their respective breeds. As well, they would work
with the respective horsepersons group and tracks to arrange a
split of purses and track operating costs.
- Structural changes are necessary to optimize the industry's
operations. This especially so in the standardbred sector, which
was the most reliant on SARP and most affected by its termination.
The panel urges creation of a world-class racing circuit to embrace
all premium and signature standardbred racing in Ontario. Designed
to appeal to horseplayers and fans, the circuit would be hosted
at five tracks located within a commercially practical shipping
- The horse is the heart of the racing industry. The panel believes
that the existing Horse Improvement Program has overemphasized
purse support for races that are restricted to Ontario horses.
Recognizing successful results in unrestricted competition might
provide more of an incentive to improve Ontario breeds. The program
should be redesigned with a focus on developing quality and rewarding
- The panel recognizes that several racetracks have entered into
multi-year agreements with the government. We therefore acknowledge
that the final plan for horse racing must comply with these agreements,
except as mutually agreed.
- The panel looks forward to constructive consultation with stakeholders
and the public on how Ontario horse racing can take responsibility
for its own future.
2. From a Model to a Plan
The Horse Racing Industry Transition panel was originally created
in June 2012 to make recommendations on how the Ontario government
could help the horse racing industry adjust to the end of the Slots
at Racetracks Program (SARP). The panel consists of three former
Ontario Cabinet ministers.
In May 2013, the Minister of Agriculture and Food, the Honourable
Kathleen Wynne, requested the panel provide a concrete plan for
a long-term sustainable horse racing industry in Ontario, effective
April 1, 2014. This document is a draft plan, for consultation.
It reflects the panel's consensus to date. After considering responses
from stakeholders and the public, the panel will produce a final
Panel's Earlier Findings
In its consensus Interim Report in August 2012, the panel concluded
that it would be a mistake to reinstate SARP. The program provided
far more funds than necessary to stabilize the industry - its original
purpose. Moreover, with more than 60 per cent of purse revenue -
that is, the prize money awarded in races - coming from SARP, the
industry came to rely on a funding stream that was unrelated to
wagering by horseplayers. As a result, the industry became disconnected
from its customers and had little incentive to face the challenges
of a changing entertainment marketplace by investing in a better
At the same time, the panel found that a thriving, world-class
horse racing industry required a measure of public funding, though
much less than the $345 million provided by SARP in 2011-12. Scanning
international jurisdictions, the panel could not find a single example
of a viable horse racing industry without some form of public support.
The panel emphasized that any further public investment in the
Ontario industry should be based on clear public interest principles,
- renewed focus on the consumer and
- positive return to taxpayers.
A Year of Transition
In its consensus Final Report in October 2012, the panel proposed
a new Sustainable Horse Racing Model for the conduct of the industry,
based on the above principles. To strengthen the link between the
industry and its customers, the model called for all racing purse
revenue to come from the industry's commission on pari-mutuel wagering.1
(The industry commission is about 20 per cent of the total amount
wagered by horseplayers, less deductions for taxes.) Under this
approach the total purse money available declined by about half.
The model also reduced the number of race days by about half to
maintain sizable average purses that can compete with other jurisdictions.
In the past, the industry commission was split 50-50 between racetracks,
which used the money to cover their operating costs, and purses.
With the industry share of wagering devoted entirely to purses,
racetracks required public funding to continue to operate. Moreover,
Ontario's highly regarded Horse Improvement Program (HIP) was funded
mainly through SARP and the industry commission. Under the model,
this program also needed public support. The panel recommended an
investment of $180 million in new public funds over three years
to offset racetrack operating expenses and guarantee up to $30 million
a year for HIP.
The government approved these allocations. Transitional funding
agreements have been signed with 12 racetracks - eight for two years
and four for one year. (Three tracks are racing in 2013 without
transition funding assistance.) In all, 867 race dates are planned
for 2013-14 at 15 tracks.
New Instructions to Panel
On May 1, 2013, the Minister of Agriculture and Food, the Honourable
Kathleen Wynne, requested the panel to move beyond the model outlined
in its Final Report to produce a concrete plan to assist the industry
in assuming responsibility for its future. The Minister explicitly
stated that the plan should quantify the amount of government investment
required into the future of horse racing. She also directed the
panel to take a lead role in facilitating a new integrated relationship
between the horse racing industry and the Ontario Lottery and Gaming
The Minister asked the panel to prepare a draft plan to be made
public prior to consultations with the industry and government ministries,
and to submit a final plan to allow for implementation on April
This is the draft Ontario Horse Racing Plan. The panel will consult
widely to refine its analysis and recommendations and deliver a
final plan by October.
3. Key Objectives: Optimize and Grow
As the panel has commented in earlier reports, Ontario's horse
racing industry is worth saving. It has a strong economic impact,
generating jobs, spinoffs and tax revenues. It is a valuable social
and cultural asset, woven into the fabric of Ontario life for generations
and appealing to many communities in today's diverse society. Moreover,
it has the potential to become a key component of Ontario's gaming
strategy, since it offers a modern infrastructure of facilities
and systems with an established customer base. Optimizing the existing
racetrack infrastructure can and should be an important element
in Ontario's plans to modernize gaming.
The goal of this plan is to construct a solid foundation for a
renewed and revitalized horse racing industry in Ontario. The panel
believes firmly that the industry can build a bright future. But
to do so, it must optimize and grow.
"Optimize" means getting the most value from the industry's
assets, such as skilled personnel, quality horses, innovative technology
and first-class racing and gaming facilities. In particular, the
industry must make the most productive use of Ontario's racetrack
infrastructure. This can be achieved by offering an attractive series
of races year round. It is also necessary to focus investment on
track facilities that demonstrate customer support while reducing
investment in facilities with limited customer appeal.
"Growth" means smart, sustainable growth - not artificial
expansion fuelled by revenue unrelated to the industry's core business,
which is to provide a racing experience that is attractive to consumers.
Sustainable growth involves expanding the fan base, increasing wagering,
maximizing the export of Ontario races through simulcasts and other
systems, and building the demand for Ontario horses.
Optimizing and growth are also the fundamentals at play in integrating
horse racing into the Ontario gaming strategy under the OLG. Historically,
as laws against gambling were relaxed, horse racing was Ontario's
original legal gaming product. While it now has much competition,
horse racing can help to grow the overall provincial return from
gaming. The key will be to optimize the use of existing infrastructure
by adding new gaming products at racetracks. The industry can also
contribute to gaming revenues through gaming products linked to
From Bigger to Better
Ontario horse racing has a proud record of excellence, from the
Queen's Plate - North America's oldest continuous running thoroughbred
race - to stellar horses like Northern Dancer and Thinking Out Loud.
Recently, however, the industry has lost its way. The focus has
shifted to producing more, not better, races and racehorses.
The reason is SARP. From 1998 until March 31, 2013, SARP provided
a substantial flow of revenue to the industry based on activity
at slot machines. The way SARP was designed created an incentive
to produce a quantity of racing to match the purse money available
from slots revenue. There was, however, little or no incentive to
offer racing of the quality expected by horseplayers.
In the short term, this arrangement appeared to be successful.
Large purse pools at tracks with enviable slots revenue sparked
enormous growth in the industry. But the industry drifted away from
its core constituents - the horseplayers and fans.
In the SARP era it simply did not matter if races drew the interest
of horseplayers or if the stands at tracks were empty. Breeders
could produce horses of limited value outside Ontario, content in
the knowledge that the slots revenue had created a large domestic
market for average horses. In short, SARP encouraged mediocrity.
That is not to say that Ontario breeders, owners and trainers have
not continued to produce and race some excellent horses with international
appeal. In every sector of the industry a component of excellence
can still be found.
But much of the industry is built on racing that is not attractive
to the consumer. This has to change.
It is important to understand that, with modern technology, Ontario
racing now operates in an international market. Cross-border simulcasts
and wagering put the Ontario industry in competition with the racing
product of other jurisdictions for the horseplayer's dollar.
One of the main directions in the panel's Final Report was to re-size
and re-focus the industry. Producing the quality and quantity of
horses and racing that can draw an international audience is essential
for the industry's survival in modern times. To further this end,
the panel recommended tying the revenue for purses to the commission
available from wagering by horseplayers. This has been done for
the 2013 racing season.
The panel continues to believe it is crucial to base the size of
the industry on the demand for Ontario racing. In fact, to optimize
the industry's operation, the panel has concluded that it is necessary
to go beyond its initial proposals linking purse revenue with wagering
commissions. The panel now recommends a new funding model that will
tie public investment in the industry to the level of commissions
from wagering. The panel's plan will link government funding with
the consumer response.
Nurturing Sustainable Growth
While the panel believes the industry has much potential to grow
domestically and internationally, significant change and assistance
are required to realize this opportunity. The panel's new funding
model, which will be explained in the next section, is part of the
answer. Other fundamental reforms are also imperative.
Uniting a Fractious Industry
The industry has long been characterized by competition among stakeholders
for a share of revenues. These different constituencies centre around
the three types of racehorse - thoroughbred, standardbred and quarter
horse - with tracks, breeders, owners, trainers and jockeys or drivers
for each type.
The substantial funds provided by SARP allowed for some flow of
revenue to all of these groups. The industry's existing governance
reflects this arrangement and is premised on stakeholder representation
and consent. As the panel observed in the Interim Report, the industry
is fractious and has proven capable of only limited collaboration
for the common good.
Moreover, horseplayers and fans are missing from this mix. While
this was not a serious concern in the SARP era, it is a fatal flaw
for an industry that must focus on consumer demand.
Centralized management is critical to optimizing and then growing
Ontario racing. The industry's current governance is not able to
direct activity and investment to the areas of the industry with
the highest potential for growth and return. Strong leadership is
needed to target investment to, and direct the production of, racing
in the most attractive and marketable form. Creating a basis for
growth will also require withdrawal from aspects of the industry
that are not commercially viable.
In short, the horse racing industry requires determined leadership
with the power to make and execute the decisions necessary to refocus
the industry on the consumer. In the panel's opinion, the industry,
as currently organized, is not capable of generating this leadership.
A new governance structure is proposed later in this plan.
The industry's future depends on attracting and retaining a robust
horseplayer base. Collaborative marketing and branding of the Ontario
racing product in the global wagering market should be a priority.
Presenting Ontario racing as a single brand will strengthen its
market presence and particularly support the export of Ontario racing
as a package. Common branding requires an investment in brand building,
a focus on target consumers and an aggressive promotional effort.
All this also calls for strong leadership and will be addressed
by the new governance model.
Changes in Industry Practices
Two other changes in current practices are advisable to help horse
racing function as a more united industry: purse pooling and the
consolidation of Home Market Areas.
In the SARP era purses largely depended on the slots revenue generated
at individual tracks. Some of the pari-mutuel commissions also went
into purses at each track, accounting for about half of thoroughbred
purses, but only about a fifth of standardbred purses. The panel's
plan calls for the pooling of revenues available for purses and
a distribution of purses based on the conditions of a particular
race. The effect of this form of purse pooling is to offer the same
purse for races of comparable quality, helping to meet the needs
of the industry and the demands of the market.
Purse pooling allows for even and predictable purses for similar
races. For example, a signature level standardbred race would offer
the same level of purse regardless of the track venue or season.
Pooling purses within quarter horse, standardbred and thoroughbred
racing, respectively, eliminates the competition between tracks
and focuses the industry on developing and maintaining customer
Apart from Ajax Downs, each Ontario racetrack has a Home Market
Area (HMA) assigned under its racing licence from the Ontario Racing
Commission, and receives a commission on all types of wagering in
its area (both on and off the track). Hence the revenue from wagering
is divided, in part, based on the HMA boundaries of the tracks.
The panel proposes that the individual HMAs be consolidated into
one, with the entire province considered a single market area and
revenues distributed to support attractive, marketable racing events
rather than confined within arbitrary borders.
Working with the OLG
The panel believes that considerable revenue is lost to the industry
and the provincial government through the current disconnect between
the horse racing industry and gaming under the OLG. This present
"silo approach" does not encourage and in some instances
prevents the optimal use of expertise and assets for the good of
As has been demonstrated by SARP, racetracks provide a community-friendly
venue for gaming. In addition to the physical track infrastructure,
racing also provides a virtual and physical off- track network.
It makes sense to maximize the revenue from gaming at these facilities,
for example, by enhancing the existing gaming activities or linking
the Greater Toronto and Hamilton area racetracks into a network
of gaming centres.
Optimizing gaming within the existing racetrack infrastructure
fits with the goals and objectives of the OLG modernization strategy.
Doing this would reduce the need for extensive new infrastructure
and hence could deliver a much faster return.
The OLG has a wide network of retail outlets, a sophisticated marketing
department and deep understanding of the business of gaming. This
expertise should be brought to the forefront in repositioning horse
racing, enticing new horseplayers and enhancing the gaming experience
on- and off-track.
In other jurisdictions, various racing-themed gaming products -
such as race-based lotteries and historical horse races (where players
bet on the outcome of unidentified past races through an electronic
terminal) - help support live racing and contribute to public revenues.
Ontario should introduce these kinds of racing-themed gaming products
under the auspices of the OLG within the framework of relevant legislation.
As noted in the panel's October report, the Senate of Canada is
considering a bill that would permit single-event sports wagering
under a provincially regulated system. The panel believes that this
potential new offering in the Ontario gaming product mix would be
a natural fit with some components of the racing infrastructure,
such as the off-track betting network.
4. New Ontario Horse Racing Plan - the Details
In the Interim Report, the panel sketched a vision for a sustainable
horse racing industry. The vision has three dimensions:
- a racing product that appeals to horse players - which means
state-of-the-art tracks, ample race dates, full cards, competitive
fields and an attractive pari-mutuel wagering pool
- an Ontario-based breeding industry - for thoroughbreds, standardbreds
and quarter horses - including world-class horse improvement programs
needed to preserve a high-value horse racing industry
- an Ontario-based racehorse training network - serving resident
Ontario horses, not just horses shipped in for a short season
and then shipped out.
To realize this vision, the panel believes it is critical to reach
the following goals:
- optimize the industry's size and activity by aligning investment
with market demand
- grow the industry through collaborative marketing and branding,
and development of a racing product that attracts and retains
- strengthen and promote Ontario live racing
- encourage the breeding of superior Ontario horses
- build the industry's capacity for self-management
- maximize provincial gaming revenue by making the most of racetrack
facilities and the OLG retail network and tapping the expertise
The panel believes that the measures outlined below meet the test
of good public policy and will foster best-in-class racing, engage
racing fans and horseplayers, produce an internationally competitive
product, nurture jobs in horse breeding and training, and promote
a sustainable industry. To achieve these results, the plan calls
for a strategic redesign of the way the industry is funded, governed
A New Funding Model
In the October report, the panel determined that the right size
for the racing industry could best be reached by deriving all purse
money from the industry commission on wagering. To make this benchmark
work in 2013, the panel advised the government to provide tracks
with transition funding to make up for the loss of operating revenue
that previously came from the industry share of wagering.
While this model preserved live racing this year, it is not a long-term
or even medium-term fix. Without sharing directly in pari-mutuel
commissions, tracks have no incentive to increase the volume of
wagering by making their product more attractive. To firmly connect
all parties in the racing industry with the horseplayer and fan,
the panel has concluded that, going forward, all public funding
should be based on the commission from wagering.
The new funding model addresses two key questions:
- how to determine the amount of government funding that will
be required to sustain the industry in the future, and
- how to share this public investment among the partners in the
Amount of Public Investment Needed
In 2013-14, the public contribution to racing from transition payments
and the pari-mutuel tax reduction2 is
approximately $110 million. This is the amount the panel calculated
was needed to maintain a viable industry by keeping a competitive
racing product in the marketplace. During the year, industry commissions
from pari-mutuel wagering are also expected to total about $110
million. Since these amounts are in balance, the panel believes
it would be reasonable and practical to benchmark the future public
contribution to horse racing on a matching-dollar basis with commissions
Under this formula, if the pari-mutuel commission remains the same
in future years, the public investment will too. On the other hand,
if the commission declines, so will the public investment. Conversely,
government funding would increase with an increase in the pari-mutuel
commission. In short, the industry as a whole will be able to maximize
government funding by maximizing pari-mutuel wagering. The government
investment will reinforce rather than undermine the choices of the
Since the proceeds from the pari-mutuel tax reduction would be
included in the matching funds, this model requires renegotiation
of the existing memorandum of understanding (MOU) with the industry.
The tax reduction savings would be redirected to a new provincial
racing governance body to be known as Ontario Live Racing (OLR).
One of the principles the panel has adopted to guide public investment
in the industry is a positive return to the taxpayer. This means
that any public funding should generate at least an equivalent amount
of provincial tax revenue through the industry's direct and indirect
economic activity. The metrics for precisely measuring the industry's
tax contribution have not been established. Still, the panel is
confident that the funding recommended in the October report - $180
million over three years and a continuation of the pari-mutuel tax
reduction - reflects a reasonable estimate of tax revenues from
the industry. Since a growing industry will yield more tax revenue,
the net cost to government should remain stable or even decrease
even if the public investment increases in line with growth in pari-mutuel
Distributing Public Funds to the Industry
As noted, the panel proposes to match overall public funding to
horse racing with the industry commission on pari-mutuel wagering.
In determining how to allot this public investment within the industry,
the panel considered some current realities about Ontario wagering.
First, wagering in the province is based largely on imported product:
races in other jurisdictions account for almost two thirds of wagering
in Ontario. Wagering is also weighted heavily in favour of thoroughbred
racing, while in standardbred racing, the highest of the three divisions
(premier) attracts the most betting, while the lowest (grassroots)
attracts much less. As well, Ontario tracks export their live-racing
signals to other markets, netting about $20 million a year from
wagering outside the province.
A major aim of this plan is to promote and strengthen live racing
in Ontario - races actually run in this province and not transmitted
from elsewhere. Live races generate more economic benefits in terms
of jobs on the track, on the farm and in spinoff industries than
do simulcasts of races in other jurisdictions. In particular, they
build a market for superior Ontario-bred horses.
It is in the public interest for the government to invest in Ontario
racing products, not foreign ones. In distributing matching funds
to the industry, the panel therefore proposes to use a formula closely
aligned with live-racing commissions and exports and the level of
Matching fund grants would be allocated within each breed sector
based on commissions from wagering on Ontario live racing3
and on net export earnings. Under this model, the funds provided
would be a multiple of the actual commissions, creating a strong
incentive for the industry to grow the fan base, attract horseplayers
and expand wagering on live racing in Ontario. Within standardbred
racing, a special formula would be needed for grassroots racing,
as this generates relatively little wagering but is an important
component of the industry.
For each track, the level of public funding will be tied to consumer
demand for the Ontario racing product. The government will invest
in success as defined by the marketplace. It will not subsidize
failure as SARP did by supporting racing that does not attract customers.
Industry Revenues to Be Consolidated
Public funds for the racing industry in 2013 are flowing through
two streams: the pari-mutuel tax reduction (approximately $50 million)
under the MOU with the industry, and transition funds (approximately
$60 million) through transfer payment agreements.4
These funds have come either as foregone government revenue (tax
reduction) or a direct payment from the Ontario treasury (transfer
A more permanent and more transparent payment structure is desirable.
Designing such a structure creates an opportunity to further a more
integrated relationship between horse racing and the OLG.
In the panel's view, non-track betting (including wagering at off-track
betting sites, tele-wagering and online wagering 5)
is essentially a gaming activity. The panel therefore recommends
that all non-track wagering should be administered by OLR and willing
racetracks with input and-, where appropriate, direction from OLG.
OLR would receive the net revenue (after operator profit) from non-track
In this arrangement the gaming expertise of the OLG would be combined
with the racing expertise of the industry, while respecting federal
and provincial gaming legislation. An enhanced collaboration would
be able to create the best non-track customer interface and increase
the export of Ontario racing. It would also provide the groundwork
for introducing new racing-themed gaming products, such as historical
horse races or race-based lotteries. The OLG's role would be to
assist in coordinating the non-track wagering offering - including
contractual arrangements with service providers and operation of
off-track betting sites - as well as the delivery of new products.
The panel believes public matching funds should be generated from
gaming activities. Under this approach, the panel expects the OLG
to come out ahead. If racing-related revenues exceed funds flowing
to the industry, the OLG would be in a position to increase returns
to the treasury. Moreover, the OLG would have an incentive to grow
non-track betting and develop new racing-themed products, thereby
increasing the horse racing fan base and generating more revenue
for both the industry and taxpayers.
The panel is confident that integration will contribute to provincial
revenues, creating a stable source of public funding for horse racing.
The ongoing government matching funds to the industry will come
from the fruits of an integrated relationship between horse racing
and the OLG.
In addition to the matching funds and the non-track wagering revenues,
the panel proposes to direct all industry commissions from on-track
wagering to OLR. Moreover, as mentioned above, OLR would take charge
of the savings from the pari-mutuel tax reduction.
OLR would consolidate all industry revenues - including all public
funds and all pari-mutuel commissions - and then distribute them
to the three breeds based on their share of wagering on live Ontario
races. This model would give the industry a laser-like focus on
the live-racing customer. In particular, commissions from wagering
on foreign product would be diverted to support for Ontario live
The panel recognizes the need for cash flow management for purse
accounts and track operations. Creating an efficient method for
distributing funds within the industry may include retention of
on-track and other revenues by a track up to an agreed threshold.
The panel further notes that transfer payment agreements with several
tracks have been signed for 2014. These agreements must be honoured
except as amended by mutual consent.
A New Governance Model
As suggested above, horse racing in Ontario is not a monolith.
The industry divides into three distinct groups based on breed:
quarter horse, standardbred and thoroughbred. Within these three
groups there are further divisions between tracks, breeders, horse
owners, trainers and jockeys or drivers - and between the various
levels of racing. What is deemed good for one group is not always,
or even often, good for all.
Beyond the competition for resources, the three breeds have different
histories, cultures and practices. For example, thoroughbred horses
are resident on track while standardbreds and quarter horses ship
in for racing. This difference implies a much higher level of track
costs for thoroughbreds.
Another example: artificial insemination can be used in standardbred
and quarter horse breeding, permitting the shipment of semen, while
the thoroughbred industry restricts breeding to live cover. This
difference in allowable technology profoundly influences the nature
of the breeding industry and the required supports.
Horseplayers also divide by breed. There is very little overlap
between thoroughbred, standardbred and quarter horse wagerers.
All in all, it is unrealistic to assume that treating the three
breeds in a similar fashion will result in good outcomes. Each breed
deserves and requires its own management structure. At the same
time, however, the industry as a whole has functional areas that
cut across all breeds and require industry-wide management.
The panel understands that the government is interested in permitting
the horse racing industry to govern itself, as a number of industries
now do. However, in the panel's opinion the industry lacks the capacity
and structure to self-manage effectively at this time. Therefore,
the panel proposes a governance model that will reflect the current
state of the industry and provide an opportunity for capacity-building
with the ultimate goal of self-governance.
The government is proceeding with an independent review of the
Ontario Racing Commission (ORC) to determine the appropriate regulatory
role for that organization. Its current regulatory functions include
approving the racing calendar, officiating at all horse races, licensing
of tracks and of individuals directly involved in racing, and adjudicating
appeals6. The ORC also performs industry
management and development roles, which the panel proposes to move
to a new industry governance structure, as discussed below.
It has often been observed that a conflict occurs where a regulator
participates in managing the regulated industry. The panel agrees
and is determined to avoid this. The new industry structure could
be created as an arm of the ORC, but it would have to be firewalled
from the ORC's regulatory function.
OLR should report annually to the public through a report submitted
to the government.
Reformed Racing Governance
The ORC's non-regulatory roles to be transferred to the new structure
include creation of a racing calendar - with race dates and conditions
- and administration of the Horse Improvement Program (HIP) and
the Quarter Horse Racing Industry Development Program (QHRIDP).
The linchpin of the new model would be a central industry-wide
umbrella organization, Ontario Live Racing (OLR). There would also
be three breed-based divisions:
- Standardbred Live
- Thoroughbred Live
- Quarter Horse Live.
Since OLR would have responsibility for substantial public funds,
it would be appropriate for the government to appoint its leadership.
A board of directors appointed by the government would lead OLR,
with advice and input from industry experts, particularly from the
The organization would coordinate and review the racing calendar
proposed by the divisions, ensure a fair process for developing
the calendar and submit the calendar for regulatory approval. OLR
would also determine the budget and priorities for HIP and QHRIDP
and undertake centralized marketing and branding of the Ontario
racing product. (This crucial marketing function is discussed more
fully later in this plan.)
In addition, as outlined above, OLR would play a pivotal financial
role. It would consolidate all public investment (including the
pari-mutuel tax reduction and the matching funds) plus all net commissions
from all types of wagering. It would then flow funds to the three
breed-based divisions based on their share of wagering on live Ontario
The three divisions would be led by representatives of tracks,
horse breeders and horsepersons. These organizations would be responsible
for conducting live racing and encouraging fan participation within
their respective spheres. They would develop the racing calendar
and work with the respective tracks and horsepersons to arrange
a split of purses and track operating costs, as well local marketing
initiatives. The results of this planning would be provided to OLR
so signal output and overall race scheduling could be coordinated.
The divisions would also support the breeding of superior Ontario
horses through operation of the horse improvement programs for their
Under the new model, both purses and track operating costs would
be covered by the allocation from OLR. This contrasts with the current
transitional arrangements in which all industry pari-mutuel commissions
are devoted to purses, and track costs are offset by government
Standardbred Live would include the standardbred track alliance
mentioned in the panel's October report. While the track alliance
model assumed working groups of breeders and horsepersons, the panel
suggests formalizing this relationship.
Currently, standardbred horsepersons in Ontario are represented
by four organizations. The panel urges consolidation into one group
for all Ontario. This should be accomplished by a vote of all licensed
horsepersons who are currently a member of one or more of the associations.
Standardbred breeders now participate in a working group with the
ORC. This group should move over to Standardbred Live. The panel
suggests making the existing breed governing body, Standardbred
Canada, the formal breeders' partner in Standardbred Live.
The thoroughbred sector has fewer tracks and racing divisions than
the more complex standardbred industry. With two operational tracks,
one horsepersons group and one breed registry, a decision-making
nucleus already exists. The new governance body, Thoroughbred Live,
should be relatively easy to design.
Similarly, in the quarter horse division of OLR, a track alliance
would be unnecessary, and horseperson and breeder representation
could be achieved through existing organizations.
The government has guaranteed up to $30 million in funding for
HIP for 2013-14 and also for 2014-15. One of the first orders of
business for OLR should be to decide how to deploy these funds.
The panel recognizes that many jurisdictions support purses for
races that are restricted to local horses. In Ontario HIP has done
this through the Ontario Sires Stakes and a similar program for
thoroughbreds. However, the panel observes that, while restricted
races have a role, they do not truly promote excellence. It might
be worthwhile to consider new breeder incentives that would focus
on successful results in unrestricted competition. For example,
incentive awards could be presented to breeders of Ontario horses
that perform well in major international races.
In any event, the panel believes that HIP should be redesigned
with an emphasis on developing quality and rewarding excellence.
HIP affects breeders, owners and other horsepersons and should be
remodeled in consultation with all of these stakeholders.
QHRIDP requires a similar redesign, again in consultation with
Integrated Gaming Strategy
The OLG is responsible for most gaming in the province - specifically
lotteries, bingo, slots and casinos. The Minister has asked the
panel to work with the OLG on integrating horse racing into the
province's gaming strategy.
In its October, 2012 report the panel stated the OLG should not
subsidize the horse racing industry but neither should the horse
racing industry subsidize the OLG. Building on this theme, the panel
now believes that by aligning economic interests, the OLG and the
horse racing industry can work collaboratively to reduce costs and
increase revenues. A more integrated relationship will increase
revenue to the province.
As a step toward optimizing the gaming sector, the panel proposes
to enhance all non-track wagering through mutually beneficial agreements
between the OLR, willing tracks and the OLG-,. This arrangement
should create a more competitive environment for non-track wagering,
hasten the introduction of new wagering products by the OLG and
encourage tracks to focus on marketing live racing to fans and horseplayers.
In fact, the OLG retail networks could potentially be used to expand
wagering on horse races, if the changes to the Home Market Area
provisions proposed earlier in this plan are made. The panel has
also identified opportunities for the OLG to offer a race-based
lottery product or present historical horse races, in collaboration
with the industry, as noted previously.
The panel reiterates what is one of the most important aspects
of integration: the use of racetracks as gaming centres. Ontario
communities support enhanced gaming opportunities at tracks, and
new gaming products can be added to existing facilities quickly
and at relatively low capital cost. The panel believes that tapping
the potential of racetracks as gaming centres should be a top priority
in the integration of horse racing into the provincial gaming strategy.
Restructuring the Horse Racing Industry
The racing industry must be restructured for success. This need
is most acute in the standardbred sector.
Standardbred racing consumes the majority of the racing calendar
in Ontario. It was the largest beneficiary of SARP and consequently
suffered most from the termination of the program.
Standardbred racing is comprised of three divisions:
- Premium - The best horses running for relatively large purses.
This level of racing attracts the most interest from horseplayers.
- Signature - Second tier horses that may occasionally run in
premium races. This level of racing has an inconsistent following
- Grassroots - Racing for very young and unproven horses or horses
that are not competitive in premium or signature races. This level
of racing attracts relatively little wagering.
Under SARP all three levels of standardbred racing prospered regardless
of wagering levels. In an industry more focused on the consumer,
this cannot continue.
Growth in wagering will come from a condensed product offering
(fewer race days more strategically located) featuring competitive
races. To grow the standardbred industry in Ontario, a focus must
be placed on the products most attractive to horseplayers: premium
and signature racing.
Racing of this kind currently takes place at Woodbine and Mohawk
(the Woodbine Entertainment Group tracks), Flamboro and Georgian
(the Great Canadian Gaming tracks), Western Fair, Grand River and
This plan proposes to incorporate all Ontario premium and signature
standardbred racing into a world-class circuit. The panel has been
advised that such a circuit must conduct races within a practical
shipping limit to be commercially viable for the bulk of the industry.
With this in mind, the panel proposes hosting the Ontario standardbred
racing circuit at five tracks: Mohawk, Flamboro, Georgian, Western
Fair and Grand River. These tracks lie within a practical shipping
region and present a variety of track conditions suitable for a
range of horses.
To support such a racing circuit, it will be essential to pool
purses and align racing schedules into a coherent, coordinated program
that consistently offers competitive racing and captures the consumer's
imagination. This would be a task for Standardbred Live.
Left off this list is a fine track within the area, Woodbine. Woodbine
is the preeminent racetrack in Canada and hosts standardbred racing
in the winter season. However, the panel has sympathy for those
in the standardbred industry who prefer Mohawk as the anchor for
the circuit. Many feel Mohawk creates a more exciting venue for
standardbred live-racing fans. Unlike the Woodbine standardbred
track, which lies inside two other tracks, the Mohawk track is directly
in front of the grandstand and ideal for trackside viewing. Horsepersons
also report that Mohawk's location improves the logistics for most
of the industry. The panel anticipates much debate on the merits
of this proposal during the consultation period.
Rideau Carleton in Ottawa currently offers a combination of signature
and grassroots racing with support from horseplayers through a network
of off-track wagering facilities. In many ways this represents an
enviable local market. However, the track's location makes participation
in an Ontario racing circuit commercially unfeasible. The track
does not currently receive transition payments from the government
for its operations.
The panel proposes to exempt Rideau Carleton from participation
in the consolidation of commissions and permit it to continue to
use its on-track wagering proceeds. In addition, the panel would
allow Rideau Carleton to retain profits from operating non-track
wagering. Export of races from Rideau Carleton as part of an Ontario-based
racing package would be subject to agreement with Standardbred Live
Grassroots and fair racing is an important, rural-based component
of the standardbred racing industry. This segment does not contribute
materially to the export of Ontario racing. On-track wagering, while
low compared to other levels of racing, can be locally significant.
The panel proposes limited participation in funding for grassroots
tracks based on wagering on live races and urges flexibility in
scheduling these races to meet local needs.
Thoroughbred racing currently takes place at two tracks, Woodbine
and Fort Erie. This sector was less reliant on SARP funding than
other players in the racing industry. Therefore thoroughbred racing
faces a less daunting task in engaging racing fans and restructuring
This does not, however, mean that thoroughbred racing is without
challenges. In particular, the second tier track, Fort Erie, requires
considerable public support to conduct races and has struggled to
maintain an adequate supply of competitive horses.
Under the new governance model the business case for track funding
will be determined by Thoroughbred Live and OLR. There will be a
competitive process designed to put the right racing product at
the right, best-value venue.
Support for signature level thoroughbred racing has been difficult
for many years. While the product has good market acceptance, the
production cost is high. As the industry is currently configured,
two operational thoroughbred tracks require a duplication of on-site
stabling. Mitigating these costs and retaining customers will be
primary tasks for Thoroughbred Live. Cost-reduction strategies could
include cost recovery of stabling and ship-in racing options.
Quarter Horse Challenges
Though the quarter horse industry has existed in Ontario for decades,
it is often considered a cottage industry within the racing community
because of its limited scale. The size of the industry and the distance
from other North American tracks make a racing circuit impractical.
Due to these factors it is also a challenge to arrange large competitive
fields and frequent race dates. However, the races are enthusiastically
supported by owners and horsepersons.
Quarter horse racing at Ajax Downs and Fort Erie has proven fan
appeal and strong community ties and attracts a younger demographic
than other racing products. The level of wagering on these races
is an issue. To provide a robust future for the quarter horse industry,
the live-racing wager must continue to grow. To this end, the industry
is exploring innovative ways to appeal to horseplayers and fans.
Quarter Horse Live will face the toughest wager improvement challenge
of the three breeds. It will benefit from an existing, cooperative
relationship between the track, breeder and horseperson elements
of the industry.
A Focus on Marketing and Promotion
As currently organized, the industry is unable to present the Ontario
racing product to fans and horseplayers under a common brand. While
some excellent local efforts have made inroads in fan appreciation,
these activities lack coordination and funding.
Several tracks host successful community outreach days, which represent
valuable opportunities to expose more people to the excitement of
live racing. However, new fans do not immediately contribute much
to the wagering pool, and the financial benefit of attracting new
fans is a long-term proposition. This situation will be partially
addressed by the panel's proposed revenue distribution model that
puts a premium on wagering on live racing. Common fan education
tools and other marketing materials on a range of platforms would
assist horsepersons and tracks to enhance the new fan experience.
OLR would be charged with creating a common brand for Ontario racing,
executing a marketing plan for Ontario racing and assisting the
breed divisions with the design and execution of local marketing
and fan education initiatives. Included in the marketing plan would
be a robust earned media plan, including targeted local media, a
common social media approach and support for a variety of platforms.
The industry currently underutilizes the promotional value of its
higher-profile events. The panel has examined endorsement and promotional
campaigns in other jurisdictions and believes opportunities exist
for revenue generation and product exposure. OLR would also be charged
with developing promotional agreements with targeted industries.
Overall, the industry would benefit from a deeper understanding
of its primary customer, the horseplayer. While some work has been
done in this area, the expertise of the OLG in understanding the
behaviour of the gaming consumer will be invaluable. The panel sees
an opportunity for the racing industry and the OLG to partner in
a marketing effort to target and reach consumers who may be attracted
to the experience of live racing and enhanced gaming products.
An element of any marketing plan is internal communications. The
best ambassadors for the sport of racing are the horsepersons and
breeders who know and understand it. Therefore it is vital to keep
everyone in the industry informed of the marketing strategies, fan
outreach opportunities and future plans for live racing in Ontario.
To this end, the panel recommends directing a fixed amount of funding
from the 2013-14 transfer payment budget to support a communications
plan within the industry. This fund should be established immediately
to provide a framework for communications during the consultation
period for this plan and the development of the 2014 racing program.
Promoting Equine Welfare
In its two previous reports, the panel underlined the important
issue of equine welfare. The well-being of the equine athlete -
the horse - continues to be a principal concern.
Ensuring fair and honest competition is fundamental to the credibility
and integrity of horse racing. This oversight is the purview of
However, fairness is just the beginning of the equine industry's
responsibility to respect community ethical norms. The racehorse
industry must treat equine athletes with the care and kindness the
public reasonably expects. These standards include not exposing
the equine athlete to undue risk of disabling injury, and ensuring
that the equine athlete is free of pain. Given that even successful
racehorses often finish their racing careers by age five, the public
also has a reasonable expectation of a second career for retired
By their nature, all competitive sports push the limits of performance.
Racing should be a test of athletic ability, conditioning and heart.
The public will not support an industry that is unwilling or unable
to prevent substandard animal care, limit injury and provide a full
The panel believes everyone connected to the racehorse industry
has a responsibility to ensure that public expectations for the
care of horses are met on and off the track. Standards of care must
go beyond regulatory requirements and be enforced through OLR and
the breed divisions.
As the panel has noted previously, the horseplayer is absent from
the decision-making bodies of the industry as currently construed.
Also absent from the governance structure is representation of the
public concern for the ethical treatment of the equine athlete.
The panel therefore proposes that a sport ethicist be included in
the advisory capacity for OLR.
Life cycle planning for race horses is the responsibility of owners
and breeders. The panel's October report recommended government
funding for foundational work on the development of life cycle plans
through Equine Guelph. The panel understands that this effort is
only the first step to proper care for retired racehorses. The three
divisions of OLR would be responsible for developing a robust post-racing
path for all horses in their breeds.
Public Interest Principles
As the panel has observed in previous reports, any government investment
in horse racing should be based on clear public interest principles:
- renewed focus on the consumer
- positive return to taxpayers.
This plan so far has centred mainly on a renewed consumer focus.
The other three principles remain critical, and it will be up to
OLR to deliver on them.
SARP funds were paid without any reference to performance - or
any requirement to disclose results. This mistake must not be repeated.
OLR would be responsible for developing clear objectives and benchmarks
to show that the government funding to the industry is in the public
interest. In particular, OLR will design performance metrics to
demonstrate that the government investment is being recouped through
tax revenue. OLR would also report results on a regular basis, so
that the public knows who is receiving public money and what is
being done with it. Accountability and transparency will be the
hallmarks of the new partnership between government and Ontario's
horse racing industry.
5. Conclusion: Driving Continuous Improvement
To recap the highlights of this plan, the panel recommends the
following actions to optimize and grow Ontario horse racing:
- Match overall public funding to horse racing on a dollar-for-dollar
basis with the industry commission on pari-mutuel wagering of
all types (about 20 per cent of gross wagering, less deductions).
- Distribute public funding among tracks based on their share
of commissions on wagering on Ontario live racing.
- Refocus the Horse Improvement Program (HIP) on developing quality
and rewarding excellence.
- Create an industry-wide governance organization, to be known
as Ontario Live Racing (OLR), to:
- Take on the current non-regulatory roles of the ORC, such
as coordination of a racing calendar and direction of horse
- Coordinate common marketing and branding of Ontario horse
- Consolidate all industry revenues and flow funds to three
breed divisions, based on their share of wagering on live
- Develop metrics to measure the industry's performance in
meeting public interest objectives, including a positive return
to taxpayers on the government investment in the industry.
- Firewall the regulatory functions of the Ontario Racing Commission
- Establish a separate management structure or division for each
of the three breeds - Thoroughbred Live, Standardbred Live and
Quarter Horse Live - with responsibility for:
- Conducting live racing
- Expanding wagering and promoting fan participation
- Supporting the breeding of superior Ontario horses through
the operation of horse improvement programs
- Developing the racing calendar
- Working with the respective tracks and horsepersons to
arrange a split of purses and track operating costs.
- Integrate horse racing with Ontario's gaming strategy under
the OLG by:
- Creating mutually beneficial agreements between OLG, OLR
and racetracks to manage non-track wagering (including off-track
betting sites, telewagering and online wagering)
- Charging the OLG to explore new horse racing-themed gaming
products to earn new revenue for the industry and the government
- Maximizing government revenue from gaming by making the
most of racetracks' network of facilities and systems - for
example, by transforming tracks into gaming centres.
- Restructure the standardbred sector into a world-class Ontario
racing circuit operating at five tracks within a practical shipping
- Promote equine welfare by enforcing standards of care and developing
life cycle plans for all racehorses.
Like any other industry, the horse racing industry exists to create
satisfied customers. This plan makes sure that the flow of money
in the industry reflects rather than distorts this reality. By matching
public investment in the industry with pari-mutuel commissions -
the key gauge of customer satisfaction - this plan will drive the
industry to continuously improve the racing experience for fans
Under this plan, a track's return on live racing will increase
substantially with all funding - from both government investment
and pari-mutuel commission revenues - calculated as a multiple of
commissions on live Ontario races. The industry will have a strong
incentive to develop live racing, rather than rely heavily on imported
simulcasts. Growth of live racing will maximize the industry's economic
impact by creating more jobs and more business in the equine sector
and related industries. A focus on live racing will also encourage
the industry to produce high-quality horses that win fans and generate
The purpose of this plan is to build a solid foundation for a renewed
and revitalized Ontario horse racing industry. To do this, it aligns
the economic interests of all industry partners toward the common
goal of maximizing the fan base and wagering - now the key to the
The panel looks forward to a constructive dialogue with stakeholders
and the public on how Ontario horse racing can take responsibility
for its own future.
1 Wagering on horse races is conducted
through a pari-mutuel system, under which all amounts bet are combined
in a single pool. After deductions for purses, track operating expenses
and taxes, the balance of the pool - nearly 80 per cent - is shared
among the winning bettors. The payoff odds depend on the number
of winners sharing the pool.
2 In the mid-'90s, the Ontario government
sharply reduced the tax on pari-mutuel gambling in the province.
The reduction is equivalent to 6.9 per cent of gross Ontario wagering.
The tax reduction is subject to a memorandum of understanding between
the ORC, the government and the industry. The industry no longer
remits the funds to the government, but has agreed to spend the
savings on Horse Improvement Programs and various consumer benefits
and other initiatives.
3 Wagering on Ontario live racing includes:
betting on races run at the track where the bet is placed, inter-track
wagering at one track on races at other Ontario tracks, and non-track
betting - including off-track sites, tele-wagering and online wagering
- on Ontario races. The panel is examining ways to measure the various
aspects of Ontario live racing. It is often difficult, however,
to disentangle wagering data on Ontario product from that on foreign
product. To simplify the method for allocating funds, the panel
is considering the use of just one measure: wagering at the track
where the bet is placed. It appears this can be relatively easily
determined and could serve as an accurate indicator of overall wagering
on Ontario product. The panel will be analyzing data and considering
various data collection options to determine if this is the best
criterion to use.
4 Racetracks with slot facilities are
also receiving commercial rents from the OLG. The panel assumes
these funds cover slots facility costs and do not subsidize racing.
5 Also known as advance deposit wagering
6 Complementing the ORC's regulatory
role, the Canadian Pari-Mutuel Agency regulates and supervises pari-mutuel
betting on horse racing at tracks across Canada.