Parimutuel wagering and video gaming: a racetrack portfolio

Abstract

Parimutuel wagering has been declining for several decades due, in part, to increased competition from state lotteries and casino gaming. In recent years, an attempt has been made to integrate video lottery terminal (VLT) gaming into a parimutuel racetrack's product portfolio. Daily data are used to develop product demand equations for parimutuel horse-race wagering and video lottery gaming at a throughbred racetrack. It is found that introduction of VLTs into the product mix results in decreased parimutuel wagering and revenues. However, the additional revenue generated from the VLTs is found to more than offset the decline in parimutuel revenue and the increased expense associated with the VLTs, given that a sufficient number of terminals are made available. When revenue from the combined parimutuel and VLT gaming product increases, if the respective shares of the VLT revenue distributed to the racetrack, to the horsemen who race horses at the racetrack and to the government are the same as their distributive shares from parimutuel wagering, all will enjoy an increase in revenue. To the extent that the respective shares of these participants differ from their share of parimutuel wagering, all participants may or may not enjoy an increase in revenue, depending upon the magnitude of the revenue increase. An additional finding of importance is that patrons who attend and wager on horse racing also wager on the VLT games while patrons who attend for the VLT gaming are less likely to wager on horse racing.

Market Cannibalization Within and Between Gambling Industries: A Systematic Review

“…As was the case with studies on the substitutionary impacts of casinos on pari-mutuel and race betting, lotteries have also been argued to be partially responsible for the decline of racing industries (Thalheimer, 1998). The available evidence seems to support this suggestion, as most studies have found that lotteries cannibalize pari-mutuel and racing wagers both by a patronage effect and by a spending effect (Gulley & Scott, 1989;Miers, 1996;Mobilla, 1992;Simmons & Sharp, 1987;Thalheimer & Ali, 1995a, 1995bVasche, 1990).…”

“…Pari-mutuel betting has been declining in many Western contexts for a long time. Some authors have attributed this decline to the cannibalizing effects of the expansion of casino gambling and state lotteries since the 1980s (e.g., Thalheimer, 1998), and the available evidence seems to support this view.…”

“…All three studies on this topic found cannibalization (Thalheimer, 1998(Thalheimer, , 2008(Thalheimer, , 2012. According to this evidence, EGMs at race tracks reduced pari-mutuel betting by over 20% (Thalheimer, 1998(Thalheimer, , 2012, while the combined effects of various relaxations on EGM regulations at race tracks reduced the pari-mutuel handle by 49% (Thalheimer, 2008).…”

“…According to this evidence, EGMs at race tracks reduced pari-mutuel betting by over 20% (Thalheimer, 1998(Thalheimer, , 2012, while the combined effects of various relaxations on EGM regulations at race tracks reduced the pari-mutuel handle by 49% (Thalheimer, 2008). However, despite these significant levels of substitution, the overall profits of race tracks increased, as the revenue from EGMs more than made up for any losses in race betting (Thalheimer, 1998(Thalheimer, , 2008. Impact of EGMs on EGMs.…”

“…Studies have been conclusive and evidence suggests that the presence of pari-mutuel racing, live or simulcast, increases EGM gambling (Thalheimer, 1998(Thalheimer, , 2008(Thalheimer, , 2012. One study (Thalheimer & Ali, 2003) found a negative impact on EGM revenue, but the relationship was statistically insignificant.…”