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Homestretch looms for DeFrancis Racing future tied to bold tech gamble

THE BALTIMORE SUN

When he emerged the surprise successor to his father at the head of the state's major thoroughbred tracks, Joseph A. De Francis, then a 34-year-old corporate lawyer, was viewed as bright, energetic, if a little green.

Less than four years later, Maryland racing has faltered badly, and critics increasingly are blaming him. The tracks are losing money, and fans are staying home.

True, there's been a recession in America and a depression in racing since he became chairman and chief executive officer of Laurel and Pimlico race courses in late 1989. But the tracks have fallen behind national growth rates in both betting and attendance.

Now De Francis is making what might amount to a bet-the-farm wager on advanced technology, a bold initiative that not only will change forever the face of racing in Maryland, but also likely will establish 1993 as a turning point for a major local industry and Joe De Francis.

While other tracks dabble in telecasting races or opening betting-only parlors in nearby towns, he is jumping in with both feet. When he is done, Maryland's tracks will be on the leading edge of a transformation that is replacing live, mud-splattered racing with television monitors.

Local fans already are seeing changes in the game, and more are coming. Players who once satisfied themselves with nine races a day at two tracks soon will have almost 10 times that many and a network of wagering parlors around the state.

In addition to live races, there is an almost non-stop, daylong series of televised simulcasts of harness and thoroughbred races from around the country with a sophisticated computer network blending the wagers into a single pari-mutuel pool. Telephone betting might follow, possibly in coordination with a cable television program.

If his gamble pays off, De Francis will have silenced his critics and come to be viewed as a savior like his late father, Frank De Francis, the back-slapping deal-maker whose razzmatazz brought riches and national acclaim to Maryland racing during the 1980s. If he fails, the younger De Francis may come to be remembered as the man who led the state's 300-year-old thoroughbred industry to an ignoble end.

"This is a watershed year, no doubt about that," De Francis said. "This industry right now can go either way. If this works, then we are headed for a new age of prosperity. If this doesn't work, then we are clearly headed for the shoal."

Many people think the local industry is already on such a course. In De Francis' first full year as owner, 1990, the tracks set all-time highs in attendance and wagering. Since then, however, attendance has dropped by 11 percent and wagering by 14 percent. That compares with a national decline of 8 percent in attendance and an increase of 2 percent in bets. The two tracks, burdened by heavy debt payments, have not earned a combined profit since 1988, losing $750,000 last year.

Purses -- the winnings distributed to horse owners -- fell 16 percent at Pimlico and Laurel from 1990 to 1992, due in part to a cut in the number of races. That compares with a decline of slightly over 1 percent nationwide in the same period.

Time is running out for De Francis to reverse those statistics: The fight with track co-owners Bob and Tom Manfuso is heading for a showdown in court and $33.4 million in loan payments to First National Bank of Maryland come due in 1996 and 1997.

Signs of promise

The technology still is being phased in, but there are some promising signs: In the first few weeks of expanded simulcasts, betting at the tracks or telecast locations rose by more than a third compared with the same period a year ago. It's too soon to estimate, however, the impact on track profits that will depend on the mix of live and telecast races fans are putting their money on, but De Francis is encouraged so far.

If Maryland's program works, it will produce a chain reaction of growth every bit as dramatic as the downward spiral the industry finds itself in, said De Francis. Extra races and players will mean more betting and higher purses, which will lure more and better horses, which will attract more fans, whose extra betting will mean still higher purses, which will attract even better horses . . .

Along the way, the tracks and horsemen, who split evenly about 17 cents of every dollar bet, will return to prosperity.

The changes do two things. By making it possible to bet at other facilities, Pimlico and Laurel will make it easier and cheaper for fans to play the game -- essentially taking the track to them. And adding telecast races will reduce the interludes between races, jazzing up the day.

But, at the same time, revenue will be lost when fans who would have gone to the track go instead to a simulcast outlet, where the track gets no admission and concession revenue and has to split betting proceeds with the facility operator. The horsemen and the tracks split evenly the diversion of wagers, about 4 percent, to the off-track operator (the state gets its one-half percent no matter what).

And although more races might provide more opportunities for people to bet, it doesn't necessarily mean they will spend more. If they bet a televised race instead of a live one, the track and horsemen lose.

"I don't think it's going to work in the long run," said Bill Dixon, co-owner of Maryland's Mea Culpa Stables. He said he doesn't like to bet on televised races and doesn't think many other fans will either.

Bob Lawrence, an economist at the University of Louisville and formerly the racing specialist at the University of Maryland, predicts the innovations "will help, but I don't know how much."

"The drawback is it doesn't draw many new people to the track," Lawrence said. "It's hard to get people who've never been to the track to come out and bet on races on TV."

Richard Thalheimer, an industry consultant based in Lexington, Ky., has studied states that have adopted inter-track and off-track betting. The result is usually a dramatic increase in betting, sometimes on the order of 50 percent, he says.

"Theoretically, the total will go up, but the question is what will be the impact on Maryland live racing," Thalheimer said. "You're bringing in competition for live racing."

Tracks that have been successful have blended technology with old-fashioned customer service to keep fans coming back. Kentucky's Churchill Downs, for example, markets aggressively to novices with group outings, beginners' betting windows and handicapping contests and seminars. Gulfstream, in Florida, has installed a pony-petting zoo and playground to lure families. Arlington Park, near Chicago, gave a rose to every woman coming to the track on Mother's Day.

Bucking the odds

Maryland's tracks are hurt by the congested nature of gaming in the North Atlantic seaboard, where nearly every state has several tracks competing not only with each other, but also with a growing variety of state-run lottery games and Atlantic City's casinos.

Ed Bowen, author of several books on racing and former editor of The Blood Horse magazine, said: "Racing all over the country is in a malaise. I think Joe's done a yeoman's job. Clearly, there isn't the unity that there was under Frank."

De Francis, who stopped taking his $719,400 salary on April 1 until the economic picture improves, gets high marks for the hiring this year of veteran horseman Lenny Hale as vice president of racing. But De Francis' critics say other aspects of track management, such as promotions and maintenance, have languished under his leadership.

"I think he doesn't know how to run anything -- he has no experience. He is a young lawyer who jumped into shoes that were too large for his feet," said S. Bonsal White, a retired Alex. Brown executive and longtime horse owner.

Richard Wilcke, executive vice president of the Maryland Horse Breeders Association, said: "Anyone who has a long-term investment in this industry has got to be extremely nervous about the continued instances of bad news that suggests the decline of the industry is not just caused by external factors."

Grover "Bud" Delp, trainer of Spectacular Bid, winner of the 1979 Derby and Preakness, moved his operations out of Maryland after that year, saying the state's racing industry was "the pits." When he returned in 1989, it was viewed as a strong vote of confidence in Maryland racing.

Now, he said he enjoys the quality of life here in his native state, but is not so sure it was the best business move. "After what Frank did, it looked like a good move. Then it petered out," he said.

In the three years the elder De Francis ran both tracks, attendance rose 15 percent and betting grew by 21 percent. That was twice the growth rate of 6 percent in attendance and 12 percent in betting posted by tracks nationwide.

Although he's reluctant to criticize the younger De Francis, Delp said other tracks where he races -- in Illinois, Florida, California and Louisiana -- are doing more, especially in attracting fans.

"You go to Gulfstream Park, Fla., and it's such a pleasure you want to go back. Everything is nice and clean and beautiful. I don't see anything beautiful at Laurel and Pimlico," he said.

Answering his critics

De Francis has heard the criticism before, and makes no apologies for not being his father. But, he said, "I'm not unfamiliar with organizing people and delegating. I didn't spend the first 35 years of my life pumping gas."

At the time Frank De Francis made his death-bed request to his son to carry on the family business, Joe De Francis was working in Washington for a prestigious law firm, Latham & Watkins, specializing in corporate mergers and antitrust litigation. His sister, Karin M. Van Dyke, left a job as prosecutor in California to become corporate secretary and a director of the tracks after their father's death.

De Francis, a bachelor, holds degrees in business, political science and law from Stanford University and UCLA. But his only prior racing experience, other than as a fan, was helping to run the Freestate Raceway harness track for a year when his father owned it.

He said the critics don't understand the realities of a business in contraction. He's had to cut races because a decline in horse breeding has left a shortage. And if horsemen are going to demand free, year-round stables at Pimlico, Laurel and the Bowie training center -- a perk most tracks don't offer -- they can't expect "to have them all look like the Taj Mahal," he said.

"Being customer-driven is an absolute necessity, but, all by itself, it is not enough," De Francis said. "I have to make my priorities."

Some of those priorities could prove very shrewd in the long run. De Francis' initiative to establish regional cooperation with the fledgling thoroughbred industry in Virginia could be vital to Maryland's tracks, both by reaching new customers and by heading off a potential competitive threat just over the border. However, he will have to beat an expected bid from Churchill Downs, among others.

"There are days when I wake up or pick up the newspaper and shake my head and wonder if there isn't another way to make a living," says De Francis. He's still "of counsel" to his old law firm, drawing a small stipend, and presumably could return full-time.

But he adds: "One thing I am not is a quitter. If I ever felt I didn't have the capacity to lead the industry, if this [the technological innovations] is a flop and a complete disaster, maybe. . . . But I would never just take my ball and go home."

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