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Online betting and wagering off to a slow start in California

Over $90 million has been wagered on horse races over the telephone and on the Internet by more than 30,000 gamblers since remote wagering was legalized in California this year. But that doesn’t represent the windfall that some analysts predicted at the outset – at least not yet.

'For people who thought account wagering was going to turn everything upside down, that hasn't happened,' said Mike Marten, spokesman for the California Horse Racing Board. 'It's new money, but it's not a gold mine yet.'

Horse racing has been in a slump for years, due to an ageing pool of punters, and competition from the expansion in other gambling outlets, notably Indian casinos. Previous attempts to expand the customer base through off-track betting and other tie-ins haven’t had much success.

Account wagering's slow start may reflect the slumping economy and pace of the horse racing season as much as it does the state the racing industry, said Marten. About $5 million, or 7%, of the $70 million bet last week was through 'advance deposit wagering' systems, where gamblers put money into an account, then place bets over the telephone or Internet.

That's still a big increase from the $1 million handle per week immediately after the board approved the first such systems Jan. 25 under a law that took effect Jan. 1, and from about $2.25 million a week in April. 'The numbers are increasing, if not by staggering amounts, then steadily,' Marten said.

When account wagering began, the president of one of three authorized account wagering companies, Mark Wilson of TVG, said it 'could be the start of a new era in California racing. ... Maybe this will bring the game back to the status it had years ago.' But others think that the good times will be a long time coming. Ed Hannah, vice president and general counsel of XpressBet, another online betting company said it could take five to seven years to see if account wagering revives horse racing.

XpressBet's new accounts leveled off after growing 'quite significantly, quite quickly' in the first month or so, Hannah said. But that's because the firm's three affiliated California racetracks run winter seasons that end in mid-April. XpressBet, a subsidiary of Canada's Magna Entertainment Corp., plans a marketing campaign this winter as the season nears.

About 85 percent of XpressBet's 11,400 accounts were opened by California residents, who placed about 90 percent of the bets, Hannah said. 'We're actually ahead of what we had hoped for,' he said.

Horse racing's future could depend on the extent to which new outlets for betting draw new customers, or on whether the new outlets merely cannibalize the existing customer base, and also on the continuing threat of offshore bookmakers. The horse racing industry estimates California tracks have lost up to $30 million to offshore firms' online and phone betting. Those firms offer discounts to heavy bettors that the California-licensed sites can't match.