Why We Are Where We Are, Part III: Blessed Are The Survivors

[Wandering Eyes]

The following represents the conclusion of this look at how long-term  trends in Thoroughbred racing have evolved to the point where a turnaround may be near in the sport's economic fortunes. To read part I, click here. For part II, click here.

 

Defining Development #6–Blessed are the Survivors

As a matter of basic free-market economics, it is possible to view the past 30-plus years of contraction in U.S. races, racing dates, and racetracks as an unfortunate, but necessary adjustment to a changing competitive environment. The Thoroughbred sport, presented to its best advantage, still retains its centuries-old ability to attract, engross, and thrill fans of all ages. The thrill lessens when racing overwhelms even its hardiest followers with too much inferior product.

There are some signs that the pattern of downsizing may be within a furlong or two of a sustainable destination. As one favorable trend, take the relationship of the cost of training to the average annual earnings of American Thoroughbreds.

In 1988, when racing's contraction was just underway, the average annual cost for keeping one horse in training was generally in the range of $25,000 to $30,000 on major racing circuits, and less so at other tracks. That same year, average racetrack earnings for Thoroughbreds was slightly above $8,000. By 2023, the average annual cost of training had doubled to $50,000 to $60,000 on major circuits, while the average earnings quadrupled to nearly $32,000.

In other words, in 1988 racehorse owners could expect to recover on average about one-quarter of the annual costs of training a Thoroughbred. In the current day, owners can expect to recover a bit more than half, while waiting and hoping for the major winner that will cover past losses and take them to the promised land.

This favorable trend has happened because available wagering has been concentrated on fewer horses competing in fewer races, enabling purses, supplemented by other forms of gambling, to rise faster than training costs. This pattern of focusing more revenue on fewer races stands to benefit the full range of participants in the industry.

The downside is that sound economics in racing now support fewer stakeholders. The upside is that survivors have better chances to stay afloat, and perhaps prosper.

Other favorable developments, now ingrained into racing's culture across the country, include ways to increase the sport's appeal to casual fans, and to offer something special to hard-core bettors.

Kelso with Eddie Arcaro aboard wins the Brooklyn Handicap | Coglianese

For casual fans, grouping a track's best races into special Saturday packages, maybe four or five weeks apart, sends an authentic signal that here is something that shouldn't be missed. Such efforts were never on the radar, nor were they necessary, in the long-ago days of Kelso. Today they have produced some success in increasing overall attendance and pari-mutuel handle.

For the hard core, handicapping contests, leading to a national championship for top individual gamblers, provide a way for serious students of the game to test their skills against the best other players. Anyone who has witnessed the final rounds of these contests cannot doubt the intense interest at play. Why not tweak and expand this concept, albeit with lower stakes, to daily events at individual tracks, or combination of tracks?

In another promising smaller-scale development, racing has benefitted from numerous partnerships that serve as points of entry to Thoroughbred ownership for casual fans. These owner-fans, particularly in micro-share partnerships, have at times turned out in substantial numbers and wagered enthusiastically enough to boost pari-mutuel pools and lower the odds on 'their' horses. Some also plunge heartily into the parties, hats, and let-the-good-times-roll side of major events. This stuff is irresistible to TV cameras and presents racing in its best light. Now that is good marketing.

Elsewhere, there has never been a time in my decades of watching Thoroughbred racing when so many comments, criticisms, and ideas for change have bubbled into the national debate. Long gone are the see-no-evil, hear-no-evil, speak-no-evil years of the past.

Necessity has produced an array of conferences, forums, panel discussions, letters to editors, and summits, all seeking a better way forward. This kind of ferment can lead to a consensus behind workable ideas and opens doors to acceptance of long-needed change.

So which racetracks are most likely to endure and prosper in coming years? Here is a checklist of factors that affect the chances of survival.

1) Sports Competition. How many other top-level professional sports are vying for fans in a track's local market?
2) Gambling Competition. How many casinos and other gambling outlets with no connection to racing exist in the same market?
3) Modern Facilities. How long has it been since a racetrack's physical facilities were updated?
4) Length of Season. Does a track's racing season have a beginning and an end, or is it forced to grind away for too many months through all manner of conditions, good and bad?
5) Real Estate Values. Has a track's real estate value risen to the point where only not-for-profit ownership can resist the chance to cash out?
6) Political Clout. Does horse racing have a productive relationship with its state government?

Fixed odds wagering at Monmouth Park | Bill Denver/EQUI-PHOTO.

Each of these six factors is important. The sixth may be the most important. Leaders of racing and breeding organizations deserve full credit in states where governments have come to view the sport as a public-private partnership aimed at saving a job-creating, greenspace-preserving industry. With that as a goal, states are more likely to channel proceeds from other forms of gambling into racing, and adopt tax policies that enable the sport to survive.

The struggle does not end there. The continuing challenge is to ensure that racing is more than a ward of the state. To thrive, Thoroughbred horse racing must find ways to consistently offer a fan-friendly, bettor-friendly product in a people-friendly environment. Is that too much to ask?

Thus ends the more serious portion of this commentary on racing's economic history and current state of affairs. Now, how about a long-shot suggestion for one way to approach the impending fate of Gulfstream Park.

It would be especially useful at this moment if a “Coalition of the Willing” came together to build an investment fund intended, not as a charitable pursuit, but as a profit-making enterprise seeking an acceptable future for Florida racing. A good starting point, amid current property values in South Florida, might be raising (a modest) $50 million a year for five years.

Any Coalition with a such a fund could approach Gulfstream's owners with a proposition like this: We'll invest our $50 million annually for five years for an equity position in the track, proportionate to its current real estate value. Then after five or 10 years, all parties will evaluate whether it makes financial sense to continue racing, or sell the property for whatever the market will bear.

Turf blur at Gulfstream | Ryan Thompson

Such a scheme would allow Gulfstream's owners to take some money off the table, while pondering what comes next. Any eventual sale of the property would also allow a Coalition to share in profits from further increases in property values. Maybe even enough to build a new, appropriately down-sized racetrack elsewhere in the state.

That's a plan, but where would a Coalition find the money? Answer: By beginning with contributions from some of the nation's most prominent owners who race horses in the Florida sunshine. This would continue a long tradition of the sport's leading patrons playing key roles in owning racetracks. Think of Joseph E. Widener and Edward R. Bradley at Hialeah and August Belmont Jr. and William Collins Whitney at Belmont Park, in early decades of the 20th century. Following those titans, modern-day exemplars of turf should be good for at least $25 million a year in seed money, wouldn't you think?

It is frequently said that the demise of Gulfstream would spread grief among numerous other sectors of the industry, including breeding farms and sales companies far beyond Florida. Why not ask those sectors to contribute their fair share to a rescue plan?

The most consistent profit centers in the industry throughout the 21st century have been stallions with extraordinarily large books of mares, and auction companies whose revenue streams continue to flow, despite racing's decline.

Now, for some back-of-the-envelope calculations. A plan that would ask stallion masters to contribute proceeds from one season for every 25 mares covered might generate $10-12 million a year. Asking sales companies to chip in one percent of their annual gross revenue could produce another $12-13 million.

So, there's the Coalition's $50 million a year. Make no mistake, loss of Gulfstream and the South Florida market, either now or in five or 10 years, would damage the Thoroughbred industry. But it need not mean sudden death for all concerned.

Florida has sizable tracts of rural real estate, not far north of mega-metropolitan Orlando and south of Ocala, say along I-75 not so many miles from The Villages' ever-growing retirement community. Has there ever been a more promising assemblage of existing and potential horse racing enthusiasts, with time on their hands?

Derby longshot Mine That Bird | Sarah Andrew

Any track in such a location could take advantage of the Ocala area's unmatched roster of training centers, thus reducing the need for on-track stables. Its leaders could also negotiate a division of racing dates with Tampa Bay Downs, providing for alternating meetings and avoiding endless drudgery at either track.

The odds on this flight of fancy could be longer than a Derby parlay on Mine That Bird (Birdstone) and Rich Strike (Keen Ice). Hapless California might be completely off any odds board. For Florida, there may be a kernel here that could grow if nourished by the right leaders.

The Thoroughbred industry has an outsized portion of dreamers, schemers, survivors, salespeople, risk-takers, and savvy investors. Now would be a good time for some of them to have a go at an investment plan like this. Or maybe they already have.

–David L. Heckerman, 80, is a native of Southwestern Indiana and 1966 graduate of DePauw University. He spent most of his working years as a writer, editor, and columnist in the newspaper world, and, from 1980-2000, covering Thoroughbred auctions and the economics of racing and breeding at trade magazines based in Lexington, KY. Heckerman now lives in retirement in Evansville, IN and may be reached at davidheckerman@twc.com.

The post Why We Are Where We Are, Part III: Blessed Are The Survivors appeared first on TDN | Thoroughbred Daily News | Horse Racing News, Results and Video | Thoroughbred Breeding and Auctions.

View the full article