The Changing U.S. Betting Landscape Can Deliver Both Higher Handle & Purses

[Wandering Eyes]

Lessons Learned from Australia Racing Prove when a Gambling Pie Grows, It Can Benefit Everyone

Back in 2008, Australia began opening up their betting markets. In particular, corporate bookmakers and exchanges were allowed to flourish, offering racing and sports betting customers myriad choice.

As we’ve often noticed in horse racing when presented with something new, in 2010, the sport down under was in full protection mode. They fought the changes in court, predicting “the total destruction of the racing industry as we know it,” and “all 50,000 participants in the sport will lose.”

A decade later, the results are in, and that has not happened.

Since 2010, according to the “Australia Racing Fact Book,” purses increased from $430M to $651M (all figures Australian dollars). The lower end of the business–many times the first to feel the pinch, like it has here in North America–has not suffered. Horses earning between $10,000 and $100,000 numbered 9,001 in 2010; 11,877 in 2018.

Meanwhile, in betting dollars, where purses are derived, we’ve seen some eye-opening numbers, because when supply changes, demand shifts.

TAB Retail–the old tote system–has seen the predicted drops, with total wagering cut in half, from about $6B in 2010 to $3B last year. However, with new competition the tote had to modernize and offer fixed-odds wagering. This new medium via the tote grew from $581M to $4.4B between 2010 and 2018. Total tote wagering was about even between the two time periods.

The tangible top-line growth happened via the bookmakers and exchanges that were licensed to operate. These entities saw wagering grow from $4.2B in 2010 to a record $9.6B in 2018. The exchange and bookmaker influence on the growth of sports betting was similarly impressive. Sports wagering almost quadrupled from just short of $3B to $11.2B between the two time periods.

While all this was going on, total wagering on Thoroughbred racing was up from $14.5B to $19.6B, an increase of 35%. Overall gambling turnover hit $35B in 2018, an increase of 57% over 2010.

Yes, despite dire warnings, allowing new skill-game gambling games and new modern mediums grew the entire pie for everyone, and created a bigger, more vibrant gambling ecosystem.

Here across the pond we’ve had a similar shock with the legalization of sports betting, and even in its infancy it has shown explosive growth. In New Jersey alone, monthly handle numbers are now outpacing Nevada, something few ever predicted.

The major difference between Australia and the U.S., however, is sports betting and racing offerings are not linked.

New Jersey’s betting exchange has seen modest volumes, and takeout at 12% is nowhere near what a younger, price-sensitive punter betting on Australian horse racing would receive.

Earlier this year, a DraftKings sportsbook posted Kentucky Derby futures odds, only to quickly take them down, reportedly at the behest of Churchill Downs. Surely, if this report was accurate, the ask was not untoward–it is Churchill’s product, after all. But in Australia a Cox Plate is offered out like an IHOP offers syrup; the difference is seismic.

I think everyone can agree: we want sportsbooks and online-wagering giants like DraftKings and FanDuel with billions of dollars on customer account to be offering some form of fixed-odds wagering on our sport. We want tech-savvy customers to exploit exchanges in Jersey and elsewhere, playing the great sport of horse racing just like they have down under. We’re a long way off from that ideal outcome.

What, in my view, should horse racing do? I believe the sport needs to stop worrying about that cannibalization of wagering and look more toward top-line growth, as we’ve seen in the Australia experience. Make a plan, embrace its principles and test out these new mediums. It just might grow the entire sport.

Dean Towers is a bettor, horse owner and marketer. He’s presented at various gambling conferences across North America since 2008.

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