When Eric Jackson, who was general manager of Arkansas’ Oaklawn Park racetrack, installed the first of what would be known as historical horse racing (HHR) or “instant racing” machines, it was the first attempt by a parimutuel operator to tap into the benefits of racetrack slots in a state where slots were not legal.
The idea was to use data on past horse races—winners, odds, etc.—in a program that would let bettors wager on randomly chosen anonymous races, all on a slot-like cabinet. The first games included handicapping information on the historical races taken from the Daily Racing Form, and let players use that information to pick a horse.
Before long, the winning results would be displayed as traditional slot-machine reel results.
Various forms of HHR have appeared over the years, their operation often the subject of legal challenges. In markets like Kentucky, where year after year, attempts to legalize slots at the racetracks were turned back in the legislature, the HHR machines allowed tracks to raise purses and attract the quality of races that already were benefiting tracks in neighboring states where they were permitted to add Class III slots.
HHR, eventually legalized by Kentucky lawmakers, has provided a lifeline to the state’s storied horse racing industry, and recently has become a hot new genre in the larger slot sector. More and more states are looking to legalize the machines, and top slot manufacturers are now porting their most popular titles to be placed as HHR machines.
Most of those top manufacturers are able to do that thanks to groundbreaking efforts by a single manufacturer, Las Vegas-based Ainsworth Game Technology. Ainsworth has been at the center of HHR expansion in Kentucky, where more than 2,000 Ainsworth games—on Ainsworth cabinets—are operating across seven venues.
However, in the larger sense, Ainsworth is arguably responsible for the recent growth of the genre, thanks to its HHR platform. Its technology to present historical racing data as slot machine results in popular themes was painstakingly developed alongside its original partner, Churchill Downs, Inc., and those efforts resulted in a presentation that so effectively re-created themes and game play that Ainsworth’s competitors at the top of the slot market decided to fast-track their own entries into the burgeoning HHR market by partnering with Ainsworth to port their games to HHR on Ainsworth’s platform.
Today, companies including IGT, Aristocrat, Light & Wonder and Konami are introducing HHR versions of their most popular slot titles via the Ainsworth technology.
David Waters, the vice president of global technologies at Ainsworth who was in the middle of that collaboration with Churchill Downs, says CDI looked to several vendors, and decided Ainsworth fit the bill for what they were trying to accomplish. “For some vendors, it wasn’t enough business to get their attention,” Waters says. “It was enough for others, but they didn’t have the library and cabinet selection. Ainsworth was kind of the ‘Goldilocks’ size for their project.”
When CDI first contacted Ainsworth in 2016, there were various HHR products in the market, but none they felt would generate the kind of revenue already fueling purses at rival tracks across the Ohio River that offered Class III slots.
“They weren’t happy with the HHR products that they saw in the marketplace,” Waters says, “and being Churchill, they wanted to make sure they brought the finest product possible to the market, and wanted to be able to compete with the the full Class III casinos across the river.”
“Traditionally, there had been a couple other manufacturers that had been there, but the challenge was in developing a game that would be competitive with those in neighboring states, particularly in southern Indiana,” adds Deron Hunsberger, chief commercial officer for Ainsworth. “They wanted to make sure that it was something that would be able to attract those players residing in Kentucky who had traditionally gone across the river into Indiana with their gambling dollars.”
One problem with earlier HHR systems was the relative simplicity of the games using HHR as the underlying math model. “They didn’t have the same polish and finish that the typical casino games would have,” Waters says, “and the way they played was more like you would expect the play on a three-reel, one-line game. Although they did have multi-line games, there were a lot of three-reel games, and they had (low) hit frequencies more in line with your high-denomination games.
“What I wanted to build for Churchill was something that solved what I considered to be the fundamental problem with the products that were in the market. We wanted to be able to have low-denomination, high-line games. You win on some lines, you lose on some lines, with a partial pay.”
It was a tough nut to crack, since parimutuel rules prohibit wins that are less than the wager, and wagers under 10 cents are not permitted, Waters says. “If I couldn’t solve that issue, I wasn’t sure that we could bring the Class III gaming experience Churchill was looking for to compete with the casinos across the river. But that’s what we ultimately were able to to solve, and we filed for patent protection for those those features.”
The solution was developed on the bones of the central determinant system Ainsworth inherited with its 2016 acquisition of Class II supplier Nova Technologies.
“We used a lot of the core communications infrastructure and central determination-type functionalities of Nova Technologies,” Waters explains. “After we got their Class II product integrated into our cabinets, we started working on the Washington state pull tab/VLT system, and that work had us creating the ticket stacks that would be used in the the electronic scratch ticket system of Washington state. We then expanded on that and used that type of ticket stack concept to make race ticket stacks.”
Ainsworth used this technique to create games with game play and features virtually indistinguishable from their Class III cousins, but within the framework of the parimutuel rules. “To be fundamentally parimutuel, you must have a wager and you must have an outcome tied to that wager, and the probabilities or prizes have to change based off of wagers. So in HHR, as wagers come in and you get more and more wagers, the prizes need to go up. There are no fixed prizes in the HHR system.”
By summer of 2018, Ainsworth got the first test lab approvals of the HHR platform, and the new paradigm for HHR was set.
Winning Formula
Whatever the underlying technology, the authenticity of the slot play experience in the Ainsworth system led to rapid success. In September 2018, Churchill Downs opened its Derby City satellite facility in Louisville with 900 Ainsworth machines.
The games, 16 unique titles with seven different cabinet styles, were a hit immediately, and the new HHR phenomenon would soon spread to tracks across Kentucky and beyond. One reason for the sustained success is that within months of Derby City opening, Ainsworth was negotiating partnerships to bring the games of other top manufacturers onto its HHR platform.
“We felt it was best for the health of the industry to have as many vendors’ products represented in the facilities as possible,” Waters says. “We liked having a facility with 900 Ainsworth machines in it, but we knew in the long term people want to have variety on the floor, so we wanted to have other other competing products.”
“I think that’s the other piece that was vital in our development with Churchill,” says Hunsberger. “Churchill wanted to be able to compete with neighboring states, so they wanted to make sure they had the variety of product and content that would be competitive. So, part of our development with them was assuring that we could build a game development kit that would allow other manufacturers to come on our system.”
Multiple manufacturers on the system also created the variety of hardware to which players in nearby states were already accustomed. “It wasn’t just making content available,” Hunsberger says. “It was making sure you had a variety of cabinets that would create an appealing slot floor, like you would have in any other casino. When you go into a Churchill Downs HHR facility in Kentucky, you’ll see the same variety of cabinets that you see in any traditional Class III casino.”
That variety has grown even more as additional manufacturers enter the genre. AGS, for instance, just introduced its premium Rakin’ Bacon! Deluxe slot to the HHR market on a recurring-revenue basis.
“We’ve sold HHR games in the market recently, but having Rakin’ Bacon! Deluxe as a lease game within the market we see as a great growth opportunity for us,” says Mark DeDeaux, AGS general manager and vice president, slots. “It’s something that we’re really working hard at in our partnership with Exacta, and with the customers within those markets to make sure that we have the right products and the right solutions for them.”
Exacta Systems, another central-determinant solutions provider, is one of few companies besides Ainsworth offering an HHR platform that slot-makers can use to enter the market. DeDeaux says AGS chose the Exacta system because of synergies with the company’s own technology and experience in the Class II market.
“Our technology has allowed us to scale into that that market segment pretty quickly,” he says. “And with our experience in Class II, we just found a lot of synergies with Exacta in terms of our technology and how they worked with us to be able to integrate and scale into the HHR market segment.”
He adds that the fact games on the Exacta platform can coexist in the same space as those on the Ainsworth technology means even more variety for operators in the HHR space.
The presence of multiple slot brands has supercharged the growth of the HHR genre. Historical racing has spread from Kentucky to Louisiana, Virginia, Wyoming, and most recently, New Hampshire, where two of the 17 charity casinos have already installed HHR machines on Ainsworth’s system—which, with the multiple manufacturers, now counts a total footprint of around 3,500 machines.
That includes many of the most famous titles in the industry. IGT, for instance, recently launched an HHR version of the venerable Wheel of Fortune.
“IGT’s business outlook in the HHR segment is very positive,” says Luigi Cacciapuoti, IGT’s vice president of specialty product and ETG. “We are currently live with HHR products in five states, and we have room for further growth, in terms of market penetration in those jurisdictions, as well as expansion into new markets, when available.”
AGS has installed its titles in all four current HHR states, and DeDeaux says the company is working on potential entry into the New Hampshire market.
Bright Future
New HHR markets are likely to continue to accumulate, and current markets will grow and expand. Ainsworth’s Hunsberger predicts the New Hampshire charity casinos, now very small venues, will eventually expand into larger facilities as demand increases. Kansas recently passed HHR legislation. “That’s going to allow the facility in Wichita to run up to 1,000 machines in that market,” Hunsberger says.
“There’s other legislation floating around—HHR is a viable product in markets in which there’s not a large number of traditional commercial casinos or tribal casinos nearby. For those markets that are looking to generate tax revenue associated with horse racing or parimutuel, HHR is a viable alternative to the traditional Class III environment.”
Hunsberger says Ainsworth and other HHR suppliers continue efforts to educate regulators in new states about HHR. “We aren’t dealing with traditional commercial casino regulatory bodies that have experience in approving games and setting regulations,” he says. “We’re now dealing with racing commissions, whose background has been in parimutuel and horse racing. And so there’s a learning curve as it’s related to that.”
That learning curve has been straightened not only by Ainsworth, but by testing organizations like Gaming Laboratories International and BMM Testlabs, which both have instituted HHR approval processes. Expansion of HHR to more new states is likely.
Meanwhile, expansion continues in existing HHR states, including Kentucky, where Kentucky Downs recently used the Ainsworth system to open a new venue in Bowling Green, a satellite facility to The Mint Gaming Hall at Kentucky Downs in Franklin.
“Bringing Ainsworth in has helped increase and elevate our business, which in turn puts more money into the horse industry,” Dan Roy, COO of Kentucky Downs, told GGB late last year. “The install, the expansion went fantastic. We’re excited to get them up in Bowling Green, with even more content available to us, and on the eastern side of Kentucky.”
Hunsberger says the variety available in today’s HHR system will not only lead to further expansion—it will promote bigger purses for horsemen. “You’re seeing the purses increase in the Kentucky marketplace, and you’ll continue to see it,” he says.
“There are more facilities that are going to be coming on board over the next six months. Kentucky Downs has a couple of new locations that they’re going to be opening in southeastern Kentucky, and Churchill Downs is working on expanding their facility at Turfway Park near Cincinnati. They also announced that they’re going to be opening another facility in downtown Louisville.”
In the bigger picture, it seems HHR is here to stay.
“We do believe that HHR is going to have a permanent place in gaming,” says DeDeaux at AGS. “It will probably evolve over time, but having that beachhead for us and having a stable presence within that market is important to our overall strategy today.”
IGT’s Cacciapuoti says the supplier is developing dedicated HHR titles in addition to porting its popular existing titles to the technology.
“I believe HHR is a gaming segment that will continue to grow in the foreseeable future,” Cacciapuoti says. “I would expect interesting evolutions in HHR regulation as soon as next year’s legislative sessions. Currently, there are multiple U.S. states that are evaluating the introduction of HHR gaming in their jurisdictions.
“The success of HHR games in states such as Kentucky and Virginia has gained the attention of regulators across jurisdictions, and IGT is prepared and qualified to scale its HHR footprint with new market opportunities.
“IGT sees HHR as having a unique place in the gaming landscape and continuing to grow for years to come, given its proven capacity to bring significant benefits to the communities where introduced, create new business and employment opportunities, and support the horse racing industry.”
Todd Eilers, principal, Eilers & Krejcic Gaming, LLC, agrees on HHR’s long-term viability. “HHR can be a way for racetracks to generate additional revenue to help support the existing racing business, thereby creating or preserving jobs and generating additional tax revenue to the state,” Eilers says.
“We estimate there were approximately 10,000 HHRs in operation at the end of 2021, generating roughly $1 billion in gross gaming revenue driven primarily by growth in Kentucky and Virginia. Looking forward, New Hampshire, Louisiana and Kansas have all approved HHRs, which should provide another layer of growth, likely expanding the HHR market to roughly 20,000 games by the end of 2023.”
As for Ainsworth, Hunsberger says he expects more manufacturers as partners. “The market is still kind of in its infancy,” he says. “I’m not sure how big it’s going to be. But when you start looking at the cost to develop your own system versus participating with us, our partners have been great to work with.
“We compete with each other in all these other markets, but we understand, and I think they do as well, that this is an opportunity for us all to be successful together. And so far it’s worked out that way.”
