Last Sunday, Canada’s most prestigious Thoroughbred race, the Queen’s Plate, was run at Woodbine. Maybe for the last time, according to the track’s president and CEO, thanks to the decision to put an end to the province’s slots-at-tracks program. The provincial government passed its 2012 budget last week, making it official. The slot operations at three of the 17 racetracks participating in the program were already shut down on April 30.

It’s not surprising that the government, and the corporation that runs gaming in the province (OLG, the Ontario Lottery and Gaming Corp.), have examined recent trends in the industry and decided to take action. But the type of action (shutdown) and the speed at which it was implemented was the shocker. OLG calls it “modernization” of the industry, but to those whose livelihoods have depended on the partnership of horse racing and gaming, it sends them back to the stone age.

Other jurisdictions throughout North America have been plagued with declining gaming revenues, especially those in newly competitive markets. But in no case has a government decided to shut operations down. They have tried to address competition by adding new forms of gaming at existing facilities or they have considered expanded gaming beyond (not instead of ) existing facilities in an effort to stimulate revenues. The latter solution usually isn’t very practical in the changing economy, but who ever said governments were practical?

In all fairness, the racetracks were just partners in the casinos; they always were OLG operations. As such, OLG could decide if market conditions no longer warranted continuing the business. However, there seemed to be little opportunity for the tracks themselves to offer a solution; after all, they had made their own investments and had a huge stake in the future. For example, upon learning of the closure, Fort Erie investigated operating the slots itself, but in OLG’s new “gaming zone” plan, it was left out.

The racetracks have invested considerable sums in their facilities to accommodate gaming – Woodbine noted it just completed a $32 million expansion in 2010. Under OLG’s new modernization plan, Woodbine would appear to be a prime location for future gaming. After all, that one racetrack currently brings in more gaming revenue than any casino in the province – $588.4 million in fiscal 2011. Other racetracks may also fit in under the new scheme. But the terms of the game will change dramatically and that remains to be seen.

In the past ten years (fiscal 2002 through 2011), Ontario's racetrack slots have generated $15.7 billion in gaming revenue. Of that, $3.1 billion was shared between the racetracks and the horsemen (each receiving 10 percent of revenue in most years); another $563 million went to local municipalities (an average of 3.6 percent). Casino workers are on OLG’s payroll, so that takes up another piece of revenue (just under 11 percent in fiscal 2011). That leaves about 65 percent to cover OLG’s other expenses (including the slot machines themselves) and in profit to the province. Those are quite favorable terms for the government compared to other North American jurisdictions.

I have prepared a summary of gaming revenue at each of Ontario’s tracks, and also provided similar data for the province’s other casinos. Three track operations closed April 30 – Fort Erie, Hiawatha and Windsor. As border facilities, they clearly were impacted by both competition and U.S./Canadian border issues. In percentage terms, Windsor Raceway seemed to have held up better than Casino Windsor, but the latter brings in much more total revenue (and doesn’t have to share it with tracks and horsemen) and remains open.

Aside from the three border casinos, the other racetrack casinos have actually performed quite well, given the economy, especially when compared to the other casinos (the resort Casino Rama and all of the smaller charitable casinos combined).

See the gaming revenue data.