The Past Predicts the Future

Often times in the past eight or ten months we have read that racing might be willing to change. This change is hard to come by, however, and even today some people say our problems are only linked to the economy, and once that recovers everything will be good again.

I doubt that very much. Looking back at an article written in early 2008, it shows just how much our problems in racing are fundamental, and systemic. The losses in handle we going on long before bailouts, government spending, deficits and declining GDP.

From "We Need Change - And Fast" written early last year we can see how the fundmental problems in racing have hurt us, and continue to hurt us.

First, the author takes a look at an article from a Canadian newspaper, who is urging the government to stop supporting a sport (harness racing.... thoroughbred racing long died in that province) that can't seem to get out of its own way.

To see Quebec's harness-racing industry become a financial disaster brings both relief and exasperation.

Relief because the industry had hitched its fortunes to building racetracks in conjunction with video-lottery terminals, devices that have already wrecked countless lives. That the industry's VLT revenues are far below projections means the machines are sucking fewer people dry.

But even more irritating is that this was so predictable. Harness-racing here is as out of step with the times as is dancing the Charleston.

Update: Last month the government, despite efforts pulled the plug on any racing funding in that province. Racing is now dead in Quebec.

"Let us not forget that the horse racing industry started its decline several years ago. Since 1995, the government poured more than $450 million in subsidies to support this industry. In spite of this aid, the industry continued to regress. The evolution of wagering on horse racing proves this. In 1990, $315 million was wagered and fell to $136 million in 2008. More than 80% of the money wagered on horse racing is money wagered on horse racing that takes place outside of Quebec at Hippo Clubs."

Then we had this piece on the Bloodhorse - keep in mind this is long before any TARP funds, or declining stock markets. It asked questions of bettors upset with signal impasses and high takeouts. It was about this time that the Thoroughbred Horseman Group was asking for more and more money from signal fees, money that is usually passed on to bettors - a de facto raise in takeout.

“They have taken a great game and (expletive) on it,” said a bettor from New Jersey who also owns horses. “And they think the players will take whatever they give us. But if they don’t get it now, with the way things are going, they will find out later.”

A bettor from Canada, who estimates he wagered $3 million on horse racing last year, said about half of his money now goes through offshore outlets, which for now are spared the wrath of the signal war combatants, or bookmakers, which don’t process money through pari-mutuel pools.

“How many American businesses operate like this?” he asked. “It’s unbelievable: They don’t want my money. Getting a higher percentage of nothing is not a good return.”

He said he wants to support the racing industry, but may consider a return to sports book betting if he sees trends continuing to head south. “They’ve never had any respect for the bettors,” he said of racing. “Horse racing is so bad they don’t even know who their own customers are. Some places have lost my business.”

Players either want rebates, or have track takeout lowered closer to levels of casino betting, where the “rake” is often 10% or less.

“When online poker becomes legal, people are going to split,” the New Jersey bettor said. “The amount that the track takes out is already ridiculous. And the horsemen want more?”

The Massachusetts bettor, who feels only a powerful national commissioner’s office can rectify racing’s problems, squarely places fault at the feet of the warring horsemen and racetracks.

“I blame them both,” he said. “I blame the whole game. It’s gone too far and gotten too far out of hand. Handle will go down. And racetracks will go down.”

Today handle for 2009 should come in around $12.5B. If we just would have held inflation - plugged the holes in the ship and bailed as much water as was coming in - we would be about $19B in wagering. Those horseplayers quoted in the article were not "disgruntled gamblers", they were Nostradamus.

The writing was on the wall for years. This is not new, it is not the economy. It is racings unwillingness to change and make tough decisions on the systemic problems that it faces. The especially sad thing is that often we are not only unwilling to change, we tend to make the same mistakes over and over again. For evidence of that all we have to do is look at the current signal dispute between Tracknet and the Mid-Atlantic tracks. Doing virtually the same thing to bettors they did in the Bloodhorse article long ago and not expecting to lose customers is not considered insanity in racing, it seems to be policy.

Oh and lastly, speaking of Quebec, with horse racing out of the way and culled from the gambling landscape, they are looking now to legalize online poker. "If all goes according to plan, Quebecers will be able to play poker online at a secure, government-regulated site by next summer."

If we are looking at the past to predict the future, maybe we should be buying a Phil Hellmuth book, rather than an Andy Beyer one. After all, as the New Jersey bettor said “When online poker becomes legal, people are going to split." They seem to be right on quite a few things.