Youbet.com raises stakes in effort to get online gamblers back to the track.

In terms of online wagering, poker and fantasy football have exploded.

As for horse racing ... let's just say the fuse is lit.

No one is trying harder to set it off than Chuck Champion, chief executive of Woodland Hills-based Youbet.com Inc. The task before him is simple, but challenging: he wants to steer today's young hordes of online bettors toward their fathers' best bet, the ponies.

"Horse racing is relatively unknown to a younger audience," Champion said. "Our job is to educate those younger folks that it exists."

Just look at golf. "Older white males were what golf was 10 years ago, and it is what horse racing is today," Champion said.

Horse racing has yet to catch fire in pop culture--and online--the way other sports wagering has. Almost $1 billion was wagered online on horse racing last year, according to the sport's governing body, compared with $2 billion on online poker. Race tracks and off-track betting brought in $15 billion last year.

After years of declining popularity, the sport is making a comeback--interest rose 19 percent last year, according to an ESPN survey. But that pales in comparison to the five-year surge of poker and fantasy football, both of which have translated into online wagering bonanzas.

The demographics of poker and fantasy football are basically the same: males aged 18 to 40, and Youbet.com wants a piece of that action.

"They want horse racing to be the next Texas Hold 'em," said Ryan Worst, gaming analyst with Brean Murray Carret & Co. To do that, Youbet.com will have to put a number of pieces in motion, and not just online, he said.

"The whole industry needs to play a part in it," Worst said.

Nagging problems

Until the early 1970s, horse racing was one of the nation's most-watched spectator sports. But as other forms of entertainment gained in popularity, viewers left, purses shrank, tracks closed and the sport's image suffered. Aside from the mint-julep garden parties that accompany big races like the Kentucky Derby, the horse racing industry developed a stale image that's hard to shake. It became an old man's sport, played at run-down tracks with empty stands and in smoky OTB halls.

"We need to debunk that stereotype because it's just not true," said Chip Turtle, partner with Conover Tuttle Pace, a marketing consultancy to the horse racing industry. Individual tracks, the NTRA and companies like Youbet.com are trying to remake the sport's image.

"Sure, the crowd at Santa Anita on a Thursday afternoon will look like the traditional racetrack demographic," Tuttle said. "But the crowd on a Saturday looks a lot more like you'd find at a Dodgers game."

The NTRA has a new marketing campaign that features some of the "younger, hipper racing fans," that takes a page out of celebrity poker's book. Spots feature singer Kid Rock, actor Michael Imperioli of HBO's "The Sopranos," and Matthew Fox from the hit TV series "Lost," with the new slogan, "Who do you like today?"

An ESPN poll last year showed fan interest in racing has grown every year for the past five years, with 37 percent of adults 18 and older "a little bit interested" in horseracing, up from 31 percent in 1999. That put horseracing ninth in popularity, ahead of fishing and the PGA tour, but behind figure skating and NASCAR.

Last year, ESPN announced it was "reviving" its commitment to horse racing as it secured the rights to the Breeders Cup World Thoroughbred Championships. ESPN Senior Vice President Len DeLuca said the network would step up marketing for the Breeder's Cup and expand coverage.

There is horse racing channel TVG, a division of Gemstar-TV Guide, and HRTV. Satellite company Dish Network offers interactive betting through TVG, which allows viewers to place bets through their television sets.

Thoroughbred tech

Youbet.com is trying to pull the industry into the next century by the power-cords. It streams live races with television-like quality, thanks to technology advances in broadband connections.

Its fastest-growing customer group is 21-to 30-year olds (Youbet.com does not accept customers younger than 21), and the second-fastest growth is among 31- to 40-year olds. About half of its revenue comes from those two demographics. But Champion admits that the other half of its estimated $88 million in revenues last year came from just 6 percent of its customer base, the roughly 50-year-old demographic.

"We've built a site that goes to the upper quartiles of the industry. It's more geared towards the Nordstrom and BMW-type of user than to the JCPenney and Ford-type of user," Champion said. "We've pretty much captured that market, and now we're looking at broadening out and reaching a younger audience."

Youbet.com's business model is based on a pari-mutuel betting system, similar to online poker tournaments, in which players bet against each other, not against "the house." Bets are routed online to the company's hubs in Oregon and California, and Youbet.com takes a "rake"--a percentage off the top.

Santa Anita has its own "Account-Deposit Wagering" company, which is the type of wagering Youbet.com does--called XpressBet, so they are semi-competitors. Santa Anita's president, Ron Charles, said he believes the industry needs to stay competitive and current with technology and that online and trackside betting can co-exist.

"I don't think there's any doubt that some cannibalization is taking place, however ADW is the one segment of our industry that is enjoying increasing wagering," Charles said. "We should be working together."

Youbet is trying to integrate the betting terminals at racetracks with its online operation. In December, the company acquired United Tote Inc. for $49 million, which manufactures and maintains wagering terminals--called totes --at 20 racetracks around the world. The company processed more than $7 billion last year in wagers, with almost no overlap with Youbet's online customers.

The idea is to merge Youbet's software with the tote hardware to keep customers involved, even when they're wagering from somewhere else.

"Casinos have rewards programs," explained Nick Danna, gaming analyst with Sterne Agee & Leach. He said they foster customer loyalty and generate more business.

"But there's no frequent-flier program for racetracks," he said, adding that tracks are just starting to embrace technology that will allow them to "know their customers. Youbet, on the other hand, keeps track of every key stroke that every customer makes online."

Apprentice jockeys

The success of online poker, Champion said, can be attributed to three factors: TV poker shows exposed masses of viewers, to the game, the "hole card" camera let viewers in on the action to see the face-down cards, and hundreds of sites offer practice tutorials where players can learn and play for free.

"They put it in front of you, they promoted the heck out of it, and they gave you the inside look," he said. "You can sit there and play with other people as if it was real money ... and as soon as you're feeling comfortable, then you move on to doing it for real."

He aims to do the same for horseracing. With its purchase of United Tote, Youbet.com is planning to launch a fantasy-style horse-betting program in April that Champion hopes will combat the impression that betting on horse racing is more complicated than playing poker.

"That's always been a hurdle," Danna said. "You can learn poker in a minute."

Many in the industry are hoping that the launch of fantasy sites will improve horse racing's reality, but it could be tricky.

"We haven't figured out what our 'two-down' cards are to let these people in," Champion said.

The homestretch 

Putting slot machines at tracks could have a profound impact on the industry, and spur logarithmic growth. Casino-like slot facilities will bring thousands of new people to race tracks, and slot revenues will increase the purse. Bigger purses mean better horses, better horses mean better races.

The racing industry in California, where Native American tribes have exclusive rights to the use of slot machines, failed in the last legislative session to pass a provision for slots at the tracks. Charles says he continues to talk with the tribes to "try to find a way to work together." Florida, Pennsylvania and Delaware have recently passed legislation allowing slots at race tracks.

"Those jurisdictions where slots have become legal will be contributing huge subsidies to the purses," Charles said.

Despite the potential for growth and all the talk of positive demographic trends, Champion admits that horse racing hasn't done a very good job of promoting itself. Industry advocates have been reluctant to focus on the lure of wagering - while the public is most intrigued by the chance to put $10 down on the favorite.

"Frankly, we still have a lot of spade work to do over the next year before we're really going to see any changes," he said.