The Kentucky Horse Racing Commission recently unanimously voted to allow Las Vegas-based Scientific Games to offer historical horseracing gaming machines at two Churchill Downs properties in Kentucky: Derby City Gaming in Louisville, and Oak Grove Racing and Gaming in Oak Grove. The games will operate on Ainsworth Game Technology’s proprietary historical horseracing system, using racing data through an exclusive license with Churchill Downs.

This Scientific Games’ first venture into historical horseracing game development; the company also offers slot machines, casino table games, sports betting platforms and lottery games.

500 Video style slot machines are located inside Newport Racing and Gaming The gaming center includes horserace simulcasting where players can bet on Turfway Park and other tracks across the country. The new Simulcast Center includes a tribute to Turfway Park in Florence.

Derby City Gaming received its machines in February. Located near Louisville International Airport and historic Churchill Downs Racetrack, the 85,000-square-foot facility currently offers 1,000 historical racing machines with 90 different themes. Oak Grove Racing and Gaming will receive its first delivery of Scientific Games machines when its gaming venue opens later this year. It will offer 1,200 historical horseracing games.

The two Kentucky properties will receive several of Scientific Games’ most popular titles, including 88 Fortunes, Tree of Wealth, Quick Hit, Lock It Link and Ultimate Fire Link.

Kentucky racetracks offer more historical horseracing games than tracks in any other state. Churchill Downs recently announced plans to add a historical horseracing venue at its namesake racetrack. It’s set to open by next year, and would operate in conjunction with Derby City Gaming. Churchill Downs also plans to install the machines at Turfway Park and a nearby satellite facility in northern Kentucky.

In addition, Kentucky Downs, located near the Tennessee state line, is investing $25 million to increase its historical horseracing machines from 753 to 1,200 by this summer. Ellis Park in Henderson has already added more than 100 machines, for a total of 300; the owners are planning to invest $100 million in the racetrack to add machines and make the venue a year-round destination.

• Turfway Park said it will be installing up to 250 of the legally-designed slot machines over the coming months. In a proposal to state regulators, the company said it’s planning to construct a 10,000 square foot addition to house the historic racing slots, and will employ an extra 35 staff members to work the new gaming floor.Once the historic racing slots open, Turfway Park will become the fourth race track in Kentucky to install the slots-like machines.
• Still waiting for Turfway Park to offer slot gambling While other race tracks in KY move ahead with slot wagering, Turfway Park continues go without Churchill Downs is developing a $60M instant racing betting facility, other KY tracks are moving ahead with the concept, too.

Earlier this week, on June 15, the governor of Ohio, John Kasich, announced a revised agreement with the licensees of the four casinos about to be built in Ohio that provides more revenue to the state. Part of the pact granted permission to Ohio’s seven racetracks to install video lottery terminals. The three Thoroughbred racetracks—in Cincinnati, Cleveland, and Columbus—are all owned by casino companies.

Once casino and racino operations are up and running in Cincinnati, the implications for apparently struggling Turfway Park in Northern Kentucky are dicey.

The Horseshoe Casino Cincinnati will be owned by Rock Ventures and managed by Caesars Entertainment Corporation, which is the world’s largest casino company. Rock Ventures is controlled by Daniel Gilbert, founder of Quicken Loans and owner of the Cleveland Cavaliers of the National Basketball Association. Rock Ventures also will own the Horseshoe Casino Cleveland and is likely to be a partner with Caesars Entertainment in Thistledown racetrack. The Horseshoe Casino Cincinnati will be located less than 12 miles from Turfway Park.

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River Downs racetrack is owned by Pinnacle Entertainment, with casino operations in Indiana, Louisiana, Missouri, and Nevada. Pinnacle Entertainment started out in horse racing as the Hollywood Park Turf Club founded by Jack L. Warner, Bing Crosby, Walt Disney, and other Hollywood legends in 1938. River Downs is situated on the Northern side of the Ohio River and is 15 miles from Turfway Park.

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Turfway Park is jointly owned by Caesars Entertainment and Keeneland and offers Thoroughbred racing, but is not permitted to have video lottery terminals or any other form of gaming per Kentucky law. Thus Turfway Park will be confronted by the Horseshoe Casino Cincinnati providing almost all kinds of gaming except sports betting and by the River Downs racino providing Thoroughbred racing and slots.

The interesting twist in all of this is that Caesars Entertainment would, on the one hand, lose in the closure of Turfway Park since it owns 50 percent of the facility. On the other hand, the Horseshoe Casino Cincinnati that it manages would have less competition for the gambling dollar and Caesars Entertainment might recover much of its investment in Turfway Park by selling the property for commercial development.

Turfway Park has four realistic courses of action. First, it can attempt to survive solely as a racetrack with pari-mutuel wagering. Second, it can try to hang on in an increasingly adverse competitive milieu and keep up the effort to get video lottery terminals legalized for Kentucky racetracks. Third, it can close almost immediately on the reasoning that it simply cannot compete effectively in the face of the ramped-up gaming situation in nearby Ohio, while conceding that the legalization of racetrack slots in Kentucky is an idle fancy. A final possibility is for the owners of Turfway Park to shutter the plant temporarily until the slots issue is resolved by the Kentucky governor and legislature.

Without access to the financials for Turfway Park, it is not possible to adequately evaluate the stay open or close decision. Yet it is possible to say with a high degree of certainty that Turfway Park’s financials will deteriorate dramatically as soon as the Horseshoe Casino Cincinnati and the River Downs racino are up and running.

Turfway Park’s decision hinges largely on estimating the likelihood of the Commonwealth of Kentucky legalizing slots soon enough to have them in place by the time the Horseshoe Casino Cincinnati and the River Downs racino are operational, or at least shortly thereafter. With the governor’s election in full swing in Kentucky, the slots issue won’t be meaningfully addressed by the legislature at least until after the election in November 2011, if then.

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Turfway Park’s options come down to choosing the least-worst decision. Readers can draw their own conclusions regarding the likely outcome. (Turfway Park has some “out-of-the-box” possibilities, but discussing them is beyond the scope of this analysis.)

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Why a state governor and/or a legislator would stand by while the state’s flagship industry slips away and jobs and tax revenues atrophy is a question that is easy to answer: The individual is playing to his or her base rather than placing the economic well-being of the state first.

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