1. Gaming Comes to Town,
and Racing Takes It
On the Chin
Presentation to the Kansas Racing and Gaming Commission
by Will Cummings / Cummings Associates
August 18, 2008
1

2. Will E. Cummings
Cummings Associates
2

3. Questions, Please!
( at any time )
3

4. Overview
Cummings background
What ails racing?
Responses . . .
. . . Slots at Tracks
Gravity model methodology
Projections for KS tracks
4

5. Will E. Cummings
Cummings Associates
5

6. Will Cummings
Graduate of MIT’s Sloan School of
Management
Has directed studies of leisure and
entertainment businesses in more than forty
states, provinces and foreign countries, with
particular focus on gaming and wagering
Have dealt with (for, against, or as
independent expert) more new race tracks
than anyone else alive
6

7. Race Track / Casino Analyses
Iowa
New York
New England
Pennsylvania
Indiana
Alberta
South Dakota
New Mexico
The Caribbean
. . . and many more
7

8. Gov’t Agencies / Regulatory Bodies
Iowa Racing and Gaming Commission
South Dakota Commission on Gaming
Horse Racing Alberta
New Jersey Casino Control Commission
Connecticut Division of Special Revenue
many State Racing Commissions
Massachusetts State Lottery
Virginia State Lottery
Connecticut Lottery Corporation
Atlantic Lottery Corporation
8

9. What Ails Racing?
9

10. Off-Shore Simulcasting:
Protecting Horsemen’s Rights
(and Adding to Their Revenues)
Presentation to the
National HBPA Winter Convention
Will E. Cummings
Cummings Associates
January 24, 2006
10

11. Racing Must Adapt to
the New Realities of the
Marketplace
Materials for the Fourth Racing Congress
HTA / TRA / USTA
Will E. Cummings
Cummings Associates
February 9, 2006
11

12. 12

13. “Gross Annual Wager” (Win)
Slots + VLTs $48.9 bn
[Traditional] Lotteries $21.0 bn
Table Games $12.0 bn
Pari-Mutuel Racing $3.6 bn
Cummings estimates based on Eugene Martin Christiansen’s Gross Annual Wager statistics for
2006 presented in International Gaming & Wagering Business, November 2007.
13

14. 14

15. 15

16. Annual Spending / Adult
Slots + VLTs $600 - $700
Table Games $70 - $200
[Traditional] Lotteries $50 - $170
Pari-Mutuel Racing $10 - $40
Cummings estimates for adults who live within ten miles of a mainstream outlet.
16

17. 17

18. 18

19. 19

20. 20

21. Racing’s Responses:
Lower Taxes
Expand Distribution
Simulcasting
Off-Track Betting
Account Wagering . . . Internet
Slots at Tracks
21

22. 22

23. 23

24. 24

25. The Simulcasting Revolution
Much more competitive
Good for the customer
Better to give than to receive
Most tracks net importers
Most horsemen run at such tracks
Squeeze on “outsiders” . . .
25

26. In North America, We Are:
Fragmented
Small in relation to competitors
Still struggling with simulcasting
. . . and competition . . .
Market Power??
26

27. 27

28. Gaming & Racing Operators’ Revenues.
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
Harrahs
M
G
M
M
irage
O
ntario
G
am
ing
Boyd
Q
uebec
G
am
ing
Colony
C
apital
M
ohegan
Sun
Trum
p
Foxwoods
Penn
National
Isle
ofC
apriArgosy
W
ynn
(estannual)Station
Alberta
G
am
ing
Am
eristarVenetian
M
agna
Ent.
Aztar
M
ystic
Lake
Herbst
BC
G
am
ing
CarlIcahn
Pinnacle
Ent.Churchill
Soaring
Eagle
Seneca
Nation
Turning
Stone
M
ilwaukee
Bingo
NYRA
28

29. (Simulcasting) Issues
Distribution
Pricing
Content
29

30. Places to Bet in N. America:
Horses: 1,027
30

31. Places to Bet in N. America:
Casinos etc: 1,378
Horses: 1,027
31

32. Places to Bet in N. America:
VLTs / Slots: 19,695
Casinos etc: 1,378
Horses: 1,027
32

33. Places to Bet in N. America:
Lottery Tickets: 214,284
VLTs / Slots: 19,695
Casinos etc: 1,378
Horses: 1,027
33

34. “Price” of a bet (house edge):
Blackjack/Craps: ~ 1%
34

35. “Price” of a bet (house edge):
Blackjack/Craps: ~ 1%
Slots/VLTs: ~ 7%
35

36. “Price” of a bet (house edge):
Blackjack/Craps: ~ 1%
Slots/VLTs: ~ 7%
Instant Ticket (MA): 24%
36

37. “Price” of a bet (house edge):
Blackjack/Craps: ~ 1%
Slots/VLTs: ~ 7%
Instant Ticket (MA): 24%
Exacta at Suffolk Downs: 26%
37

38. “Content” Issues
Is our TV “gripping”??
(Poker: not just the railcam)
Diversity of Products
Casinos: cards, dice, wheels, slots
Lotteries: instants, megabuck lottos,
fast-action keno, even racing games
More “Bettable” races
38

39. Slots at Tracks
39

40. 40

41. 41

42. 42

43. 43

44. 44

45. 45

46. 46

47. Win / Slot / Day – ?
47

48. 48

49. 49

50. Win / Slot / Day in 2006
# Slots Pop’n W/S/D
Illinois 9,892 12.9mn $478
Indiana 18,936 6.3mn $336
Iowa 15,967 3.0mn $206
Mississippi 34,712 2.9mn $194
Nevada 206,648 2.5mn $110
50

51. What’s In It For Kansas?
51

52. All Four(?) Zones:
Downside: $536mn
Baseline: $669mn
Upside: $797mn
(all excluding facilities whose viability is in doubt)
52

53. Issues with Slots at Kansas Tracks
Low revenues
High “tax” rate
Low-tax competition
53

54. Why “Gravity Model?”
54

55. 55

56. 56

57. 57

58. 58

59. 59

60. 60

61. 61

62. 62

63. “Gravity Models” – Overview
Location
Location
Size
Everything Else
63

64. Location I:
The Closer, the Better
64

65. Las Vegas Visitation/Distance
0.0
5.0
10.0
15.0
20.0
25.0
0 500 1,000 1,500 2,000 2,500
Distance (miles)
LasVegasVisitors/000adults
65

66. Mississippi Visitors/Day/000
0.0
4.0
8.0
12.0
16.0
20.0
0 100 200 300 400 500 600 700
Distance (miles)
MississippiVisitors/Day/000adults
66

67. Casino X / players’ club data
$0
$200
$400
$600
$800
$1,000
0 50 100 150 200 250 300 350 400
Distance from Casino X (miles)
AverageAnnualSpending/Adul
67

68. Casino Y: players’ club data
$0
$100
$200
$300
$400
$500
0 20 40 60 80 100 120
Distance from Casino Y (miles)
AverageAnnualSpending/Adul
68

69. Las Vegas Visitation/Distance
0.0
5.0
10.0
15.0
20.0
25.0
0 500 1,000 1,500 2,000 2,500
Distance (miles)
LasVegasVisitors/000adults
69

70. 0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5
ln(distance)
ln(LasVegasvisitors/0000)
70
Las Vegas Visitation / log-log

71. Las Vegas: slope of the curve
y = -1.0082x + 10.75
R2
= 0.9631
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5
ln(distance)
ln(LasVegasvisitors/0000)
71

72. Mississippi: steeper slope
y = -1.4088x + 11.25
R2
= 0.9353
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
3.5 4.0 4.5 5.0 5.5 6.0 6.5 7.0
ln(distance)
ln(Mississippivisitors/day/0000)
72

73. Laughlin: much steeper slope
y = -1.9121x + 16.299
R2
= 0.9552
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
5.0 5.5 6.0 6.5 7.0 7.5 8.0 8.5
ln(distance)
ln(Laughlinvisitors/0000)
73

74. Casino X: isolated market
y = -0.8982x + 7.8944
R
2
= 0.6804
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0 6.5
ln(distance from Casino X)
ln(adjustedannualspending/adult)
74

75. Casino Y: competition afar
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5
ln(distance from Casino Y)
ln(annualspending/adult)
75

76. Casino Y: less competition close
y = -0.886x + 8.0919
R2
= 0.8505
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5
ln(distance from Casino Y)
ln(annualspending/adult)
76

77. Car Counts at Simulcasting:
y = 64.382x-1.3125
R2
= 0.9255
0.0
2.0
4.0
6.0
8.0
10.0
12.0
0 20 40 60 80 100
Distance from Xxxxxx Xxxx (miles)
Cars/1000AdultPopulation
77

78. Car Counts at Live Racing:
y = 175.04x-1.127
R2
= 0.909
0.0
6.0
12.0
18.0
24.0
30.0
36.0
0 20 40 60 80 100
Distance from Xxxxxx Xxxx (miles)
Cars/1000AdultPopulation
78

79. Car Counts at Simulcasting (2)
y = -1.3125x + 11.073
R2
= 0.9255
2.0
4.0
6.0
8.0
10.0
12.0
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
ln(Distance from Xxxxxx Xxxx)
ln(Cars/1000Adults)
79

80. Car Counts at Live Racing (2)
y = -1.127x + 12.073
R2
= 0.909
2.0
4.0
6.0
8.0
10.0
12.0
1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0
ln(Distance from Xxxxxx Xxxx)
ln(Cars/1000Adults)
80

81. Location I:
The Closer, the Better
=“Friction”
81

82. Location II:
Reilly’s Law
82

83. Reilly’s Law:
ms ~ S/d2
Where
ms : market share
S : “size” of each trade center
d : distance
83

84. Newton’s Law:
F = m/d2
Where
F : gravitational force
m : mass (of each body)
d : distance
84

85. Reilly’s Law:
ms ~ S/d2
Where
ms : market share
S : casino size (capacity)
d : distance
85

86. Newton’s Law:
F = m/d2
Where
F : gravitational force
m : mass (of each body)
d : distance
86

87. Reilly’s Law:
ms ~ S/d2
Where
ms : market share
S : casino size (capacity)
d : distance / travel time
87

88. Size Matters
88

89. Reilly’s Law:
ms ~ S/d2
Where
ms : market share
S : “size” of each trade center
d : distance
89

90. More Slots, More Spending
y = 43.304x + 207.05
R2
= 0.8607
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
0 5 10 15 20 25 30
"Density" of Slots in Iowa Markets ( = Number of Slots / 000 Adults)
SlotSpending/Adult/Year
90

91. Calculations
91

92. 92

93. 93

94. Other Things Matter, Too
94

95. “Other Things” that REALLY Matter
Micro-Access
Spaciousness
Slot Mix
Fit & Finish
Management
Marketing / Player Rewards
95

96. Useful Assets
Hotel
Structured Parking
Variety of Dining Choices
Retail
Entertainment
Players’ Club
96

97. Comparisons /
“Power Ratings”
97

98. 98
Exhibit 11: Slot "Power Ratings" for Major Regional Gaming Facilities
(Spending per Distance-Adjusted Adult Compared to "Midwest Standard" of $700)
Northeastern US Kansas and Other Markets
Markets Its Neighbors Midwest & West
Deadwood, SD 129.9
S Dakota Indian avg. (8) 124.7 e
Colorado (2) 120.1 Upstate Michigan avg. 120.0 e
Kansas Natives avg. 117.3 e
Terribles Lakeside. IA 113.6
Mississippi / Louisiana 115.5
Horseshoe / Bluffs Run, IA 113.1
Diamond Jo Worth, IA 113.1
Iowa Indian average 111.7 e
Ameristar Council Bluffs, IA 111.4
Upstate Wisconsin avg. 110.0 e
Mt. Pleasant, MI 108.1 e
IOC Marquette, IA 107.0 Metropolis, IL/KY 107.6
Harrahs Council Bluffs, IA 106.7 Albuquerque, NM avg. 107.4
Dubuque Greyh Park, IA 106.7
Emmetsburg, IA 106.6 Harrahs Joliet, IL 106.4
Other New Mexico avg. 105.7
Atlantic City, NJ 104.3 Riverside, IA 104.3
IOC Boonville, MO 103.4
Harrahs NKCMO 102.7 Wisconsin Dells 101.6 e
Mohegan Sun, CT 100.0 Prairie Meadows, IA 99.9
IOC Waterloo, IA 99.6
Ameristar KCMO 98.0 Michigan City, IN 97.9
Dubuque Riverboat, IA 97.3
Harrahs W St Louis 97.0
Argosy Riverside, MO 96.6 Aurora (Chicago), IL 96.4
Foxwoods, CT 95.6 Argosy Sioux City, IA 96.1 Elgin (Chicago) IL 96.0
Joliet Empress, IL 95.3
IOC Bettendorf, IA 94.0
Southern Delaware 93.7 Catfish Bend Burlington, IA 93.7 East St Louis, IL 93.7
Niagara (NY) casino 94.6

99. How Do They Do?
99

100. 100
Exhibit 12: Recent Projections Compared to Actual Results
(Annual Slot Win / $million)
Projection / Source Actual / Source
Facility / Market:
Zia Park / New Mexico $53.7 (1) $68.9 (2)
Emmetsburg / Iowa $23.4 (3) $26.4 (4)
Worth County / Iowa $34.2 (3) $67.5 (4)
Riverside / Iowa $82.0 (3) $85.8 (4)
IOC Waterloo / Iowa $96.8 (3) $76.9 (4)
$30.2
$49.9
Tioga Downs NY (5) (6)$42.2

101. What’s In It For Kansas?
101

102. Northeast Zone
102

103. 103

104. 104
Exhibit A-1: Analysis in Brief ($mn / 2007$)
"As Was" 2007 -- Before Any New Facilities
# Slots Power Slot Win win/slot/day Total Win
Gaming Facility / Location: Rating ($mn) ($mn)
Woodlands
KCK Speedway
KCK Stateline
KCK Middle
Camptown
Cherokee Corner
Cherokee Galena
Sumner Mulvane
Sumner Wellington
Dodge City
---------- ---------- ----------
Subtotal Kansas Taxable 0 $0.0 $0.0
KCK 7th Street
4 Northeast KS Natives 2,693 117 $180.8 $184 $205.4
---------- ---------- ----------
Total Kansas 2,693 $180.8 $184 $205.4
memo: Northeast Zone
memo: Southeast Zone
memo: South Central Zone
Argosy Riverside 1,969 96.6 $164.2 $228 $182.0
IOC KC 1,523 78.1 $77.3 $139 $83.8
Harrahs NKC 1,783 102.8 $175.4 $270 $202.3
Ameristar KC 3,012 98.0 $222.5 $202 $252.6
Sugar Creek
---------- ---------- ----------
Subtotal KCMO 8,287 $639.4 $211 $720.7
Greater KC Total 8,287 $639.4 $211 $720.7
Greater Joplin Total 3,641 $121.1 $91 $136.1
Greater Wichita Total 3,632 $91.1 $69 $102.4

105. 105
Exhibit B-1: Projection in Brief ($mn / 2007$)
Baseline / Likely Future -- New Facilities Elsewhere
(inc. Powhattan)
# Slots Power Slot Win win/slot/day Total Win
Gaming Facility / Location: Rating ($mn) ($mn)
Woodlands
KCK Speedway
KCK Stateline
KCK Middle
Camptown
Cherokee Corner
Cherokee Galena
Wichita Gh Park
Sumner Mulvane
Sumner Wellington
Dodge City
---------- ---------- ----------
Subtotal Kansas Taxable 0 $0.0 $0.0
KCK 7th Street
4 Northeast KS Natives 3,443 117 $191.4 $152 $217.6
---------- ---------- ----------
Total Kansas 3,443 $191.4 $152 $217.6
memo: Northeast Zone
memo: Southeast Zone
memo: South Central Zone
Argosy Riverside 1,969 96.6 $161.6 $225 $179.2
IOC KC 1,330 80.1 $74.9 $154 $81.2
Harrahs NKC 1,783 102.8 $172.2 $265 $198.5
Ameristar KC 3,012 98.0 $218.6 $199 $248.1
Sugar Creek
---------- ---------- ----------
Subtotal KCMO 8,094 $627.2 $212 $707.0
Greater KC Total 8,094 $627.2 $212 $707.0
Greater Joplin Total 7,063 $145.8 $57 $163.9
Greater Wichita Total 4,632 $93.4 $55 $104.9

106. 106
Exhibit B-2: Projection in Brief ($mn / 2007$)
Baseline -- KCK 7th Street Casino Added (Solo)
# Slots Power Slot Win win/slot/day Total Win
Gaming Facility / Location: Rating ($mn) ($mn)
Woodlands
KCK Speedway
KCK Stateline
KCK Middle
Camptown
Cherokee Corner
Cherokee Galena
Wichita Gh Park
Sumner Mulvane
Sumner Wellington
Dodge City
---------- ---------- ----------
Subtotal Kansas Taxable 0 $0.0 $0.0
KCK 7th Street 450 78 $19.4 $118 $19.4
4 Northeast KS Natives 3,443 117 $189.9 $151 $215.8
---------- ---------- ----------
Total Kansas 3,893 $209.3 $147 $235.2
memo: Northeast Zone
memo: Southeast Zone
memo: South Central Zone
Argosy Riverside 1,969 96.6 $155.1 $216 $171.9
IOC KC 1,330 80.1 $71.7 $148 $77.8
Harrahs NKC 1,783 102.8 $166.4 $256 $191.9
Ameristar KC 3,012 98.0 $212.3 $193 $241.0
Sugar Creek
---------- ---------- ----------
Subtotal KCMO 8,094 $605.6 $205 $682.7
Greater KC Total 8,544 $625.0 $200 $702.1
Greater Joplin Total 7,063 $145.6 $56 $163.7
Greater Wichita Total 4,632 $93.3 $55 $104.8

107. 107
Exhibit B-3: Projection in Brief ($mn / 2007$)
Baseline -- Woodlands Added (Solo, with 800 slots)
# Slots Power Slot Win win/slot/day Total Win
Gaming Facility / Location: Rating ($mn) ($mn)
Woodlands 800 95 $46.2 $158 $46.2
KCK Speedway
KCK Stateline
KCK Middle
Camptown
Cherokee Corner
Cherokee Galena
Wichita Gh Park
Sumner Mulvane
Sumner Wellington
Dodge City
---------- ---------- ----------
Subtotal Kansas Taxable 800 $46.2 $158 $46.2
KCK 7th Street 450 78 $18.7 $114 $18.7
4 Northeast KS Natives 3,443 117 $188.8 $150 $214.6
---------- ---------- ----------
Total Kansas 4,693 $253.7 $148 $279.4
memo: Northeast Zone 800 $46.2 $158 $46.2
memo: Southeast Zone
memo: South Central Zone
Argosy Riverside 1,969 96.6 $150.3 $209 $166.6
IOC KC 1,330 80.1 $69.8 $144 $75.7
Harrahs NKC 1,783 102.8 $162.5 $250 $187.4
Ameristar KC 3,012 98.0 $207.7 $189 $235.7
Sugar Creek
---------- ---------- ----------
Subtotal KCMO 8,094 $590.3 $200 $665.5
Greater KC Total 9,344 $655.2 $192 $730.4
Greater Joplin Total 7,063 $145.3 $56 $163.3
Greater Wichita Total 4,632 $93.2 $55 $104.7

108. 108
Exhibit B-5: Projection in Brief ($mn / 2007$)
Baseline -- Kansas Speedway Added ($150/day)
# Slots Power Slot Win win/slot/day Total Win
Gaming Facility / Location: Rating ($mn) ($mn)
Woodlands 800 95 $25.1 $86 $25.1
KCK Speedway 3,960 100 $216.8 $150 $249.2
KCK Stateline
KCK Middle
Camptown
Cherokee Corner
Cherokee Galena
Wichita Gh Park
Sumner Mulvane
Sumner Wellington
Dodge City
---------- ---------- ----------
Subtotal Kansas Taxable 4,760 $241.9 $139 $274.3
KCK 7th Street 450 78 $13.2 $81 $13.2
4 Northeast KS Natives 3,443 117 $164.4 $131 $186.8
---------- ---------- ----------
Total Kansas 8,653 $419.5 $133 $474.3
memo: Northeast Zone 4,760 $241.9 $139 $274.3
memo: Southeast Zone
memo: South Central Zone
Argosy Riverside 1,969 96.6 $109.6 $152 $121.5
IOC KC 1,330 80.1 $54.4 $112 $59.0
Harrahs NKC 1,783 102.8 $127.7 $196 $147.2
Ameristar KC 3,012 98.0 $168.4 $153 $191.1
Sugar Creek
---------- ---------- ----------
Subtotal KCMO 8,094 $460.0 $156 $518.9
Greater KC Total 13,304 $715.2 $147 $806.4
Greater Joplin Total 7,063 $142.1 $55 $159.6
Greater Wichita Total 4,632 $91.5 $54 $102.8

109. 109

110. 110
Exhibit B-5: Projection in Brief ($mn / 2007$)
Baseline -- Kansas Speedway Added ($150/day)
# Slots Power Slot Win win/slot/day Total Win
Gaming Facility / Location: Rating ($mn) ($mn)
Woodlands 800 95 $25.1 $86 $25.1
KCK Speedway 3,960 100 $216.8 $150 $249.2
KCK Stateline
KCK Middle
Camptown
Cherokee Corner
Cherokee Galena
Wichita Gh Park
Sumner Mulvane
Sumner Wellington
Dodge City
---------- ---------- ----------
Subtotal Kansas Taxable 4,760 $241.9 $139 $274.3
KCK 7th Street 450 78 $13.2 $81 $13.2
4 Northeast KS Natives 3,443 117 $164.4 $131 $186.8
---------- ---------- ----------
Total Kansas 8,653 $419.5 $133 $474.3
memo: Northeast Zone 4,760 $241.9 $139 $274.3
memo: Southeast Zone
memo: South Central Zone
Argosy Riverside 1,969 96.6 $109.6 $152 $121.5
IOC KC 1,330 80.1 $54.4 $112 $59.0
Harrahs NKC 1,783 102.8 $127.7 $196 $147.2
Ameristar KC 3,012 98.0 $168.4 $153 $191.1
Sugar Creek
---------- ---------- ----------
Subtotal KCMO 8,094 $460.0 $156 $518.9
Greater KC Total 13,304 $715.2 $147 $806.4
Greater Joplin Total 7,063 $142.1 $55 $159.6
Greater Wichita Total 4,632 $91.5 $54 $102.8

111. Southeast Zone
111

112. 112

113. 113

114. Conclusions
114

115. Issues with Slots at Kansas Tracks
Low revenues: $25-$26mn
High “tax” rate: 60%
Low-tax competition . . .
Therefore marginal ROI
115

116. “You don’t get what you
deserve – you get what
you negotiate”
Chester Karrass
116

117. Gaming Comes to Town,
and Racing Takes It
On the Chin
Presentation to the Kansas Racing and Gaming Commission
by Will Cummings / Cummings Associates
August 18, 2008
117

118. Will E. Cummings
Cummings Associates
135 Jason Street
Arlington, MA 02476
(781) 641-1215
cummingsw@aol.com
118