Tuesday, November 18, 2008

The Future Looked Bright

In this article dated October 21, 2000 the numbers were good. Racing was moving forward.

Only seven years ago [in 1993], Thoroughbred racing was a very different sport from today's game. As illustrated by purse statistics for individual tracks across the continent-a new annual feature of Thoroughbred Times-two events have altered the economic fabric of the sport in that relatively short period of time.

One development is full-card simulcasting, whose effects have spread throughout the sport and provided the financial engine for creation of the National Thoroughbred Racing Association. Also playing a big role in individual track's growth were slot machines, which have in some cases brought tracks back from the dead.

Individual tracks and purses were discussed. Things were really looking good as the article focused on purse increases galore.

At Delaware:

In 1994, Delaware authorized slot machines at the state's racetracks to save the racing industry and to generate income for a state that has no sales tax. The effect was dramatic and continues today. Through October 1, Delaware Park's purses averaged $27,826. Even allowing for inflation-a $5,230 purse in 1993 has the same buying power as a $5,554 purse today, based on changes in the consumer price index-Delaware Park has more than quintupled its purses.

At Woodbine:

This year's spectacular success story is Woodbine racetrack, where slot machines arrived in the spring with dramatic results. To be sure, Ontario Jockey Club officials primed the pump by raising purses before its new slots casino put money in the bank, but slots piled up the reserves very quickly.

Through October 1, the Toronto-area track was paying out $50,479 per race in Canadian funds, which was up 48% from a year earlier. By contrast, the Ontario track had an average purse of $23,266 in 1993.

In Kentucky:

Growth continues in states such as Kentucky, which has ridden the full-card revolution to year-round prominence. One of the chief beneficiaries has been Churchill Downs, which with Frank Stronach-controlled Magna Entertainment Corp. has gone on an acquisition binge over the past two years. Churchill's flagship spring meeting had an average purse of $44,078 this year, up 63.9% from 1993.

Ellis Park, now owned by Churchill, had a similar increase, growing 58% to an $18,477 average this year.

In 2000 we bet around $14.2 billion dollars.

In 2008 we will probably bet less than 14.2 billion dollars.

When inflation is taken into account in 2008, wagering will have dropped about 28%.

So how did this happen? Currently we are in a fight about exactly this: Purse increases. The very sharp and capable Steve Zorn argues below in a comment about the trouble owners are having.

I guess my question is, in 2000 we raised purses by an absolutely obscene amount (as a horse owner you won’t hear me complain about that), yet eight years later we are nowhere. The handle ship is sinking. If purse increases were the answer should we have not grown handles, or at least held them flat?

HANA members think they have the answer on why wagering has fallen despite record purses. They tell us that through all this time the customer has not been appreciated - both the live track and ADW customer. The industry has invested in bricks and mortar, given away huge amounts of slots and handle money to purses, but have not invested in them.

We have a chance to make this right and we sincerely hope that racing takes steps to help the customer. Without them and their handles, and this is becoming very apparent this year, we are in serious trouble. We have a wagering crisis in racing.

As a commenter on a blog recently stated: “If handle is so unimportant, then why are the sides always fighting over it?” That is a good comment, and I think true. Handle is important because handle fuels purses. With the numbers we are seeing lately, the business is starting to take notice that the loss of handles is becoming the most important metric in racing, just like it was 50 years ago. Now that our business has finally realized we have a problem, maybe we can discuss ways to fix it.

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