AMERICAN HORSE RACING IN 2031

Dateline 2031. The horse racing enterprise in the United States has evolved dramatically in the past twenty years. About half the American racetracks that were in business in 2011 are no longer holding live racing; some are now exclusively simulcasting facilities and others are defunct. The foal crop is about 60 percent of what it was in 2011.

Racing twenty years ago had excess capacity—too many racetracks supplying too many races with too few starters. Its dilemma was similar to the commercial airlines, which addressed overcapacity with mergers and a substantial curtailment of the number of flights. Racetracks struggled to earn a profit because they were capital-intensive businesses–with money tied up in plant and equipment–trying to compete against comparatively low-overhead operations like off-track betting parlors, offshore sports books, and advance deposit wagering firms.

Back in 2011, with so many commodity-like simulcasting signals proffered, racetracks could not raise prices except for premium events such as the Triple Crown races. At the same time, racetracks were buffeted by cost pressures arising from their significant investment in bricks and mortar. Further, racetracks’ slim profit margins precluded them from markedly lowering takeout on handle to make the pari-mutuel product more competitive with other forms of gambling.

Almost all of the racetracks that remain in business in 2031 fill valuable market niches in their respective local markets and offer the caliber of races that attract both on-track patrons and off-track bettors. Del Mar, Gulfstream, Keeneland, Saratoga, and others with appealing value propositions are faring well. However, most of the winter racing in cold-weather locations has ceased. As a result, some racetracks have disappeared altogether, while others are relying on simulcasting and advance deposit wagering during the winter and limited live racing meets in the months with warmer weather.

Because there are so fewer racetracks, the ones left have been able to expand their simulcasting handle sufficiently to make running a capital-intensive operation much more profitable than it used to be. The enlarged revenue stream and the attendant economies of scale enabled racetracks to meaningfully cut their takeout percentages. This reduction provided an incentive for bettors. Racetracks were then able to augment purses and the subsequent increase in the number of starters per race also boosted wagering.

Initially, industry insiders were alarmed about all the racetrack casualties, wondering where racing’s new fans would come from. Then, they were apprised of a startling statistic: 90 percent of National Football League fans had never been to an NFL game. The NFL became the most popular American sport mainly through television exposure rather than live attendance. Racing took a cue and began to promote the sport aggressively on TV. Television created more fans all over the United States and the increasingly technologically connected American society was a boon to advance deposit wagering.

Originally published in the Blood-Horse. Used with permission.

Comments

  1. interesting as always but distressingly promoting the NASCAR model of racing. I truly hope that there are enough out there to have a different view of the sport. There is an unlimited market out there if horse racing would ever decide to advertise. It will, and when that happens, hopefully horse racing will continue to expand instead of contract since we have a sport made for appropriate internet promotion and the one professional sport that is presently democratic. promoting and predicting that most of it will die off for “profit” I find quite distressing. It is the rip off horse racing for money point of view instead of “horse racing is a sport” point of view.

  2. The industry is definitely headed in the direction you describe. Fewer racehorses would be welcomed from the standpoint of aftercare.

  3. Bill Shanklin says

    One could write several plausible scenarios for the next two decades. Which one turns out to be true depends, of course, largely on the initiatives that American racing interests pursue now. The scenario I wrote for 2031 could be much worse in terms of the number of foals and racetracks if new fans are not recruited and developed. Racing so far is not doing well with the younger generations. Baseball and golf have the same problem.

  4. Riccardo Cantoni says

    As a very, very small Gr1 owner-breeder in love with our game I do think that the idea in the article is quite right.
    There is definitely too much low profile racing around and as far as I do think, with an higher profile racing and some more television coverage I do think that we, as an industry, will live for some more centuries… and wealthier.
    Horseracing is the best game around, isn’ t it?!

  5. John Chambers says

    What was said in the article may happen. However there are some smaler tracks that are doing well and may last for years to come. Smaler tracks usually have smaller overhead costs and a loyal local fan base. So if they combine a shorter live racing season with simulcasting and maybe other gaming income they may outlast other big name venues. Think how many times Big name tracks recently have had major problems and come close to closing. Magna owned tracks are the poster child for this. If not for the majority stockholder being able to fold the track propereties into another company he owned some may have closed and we know he did sell off some of the old tracks Magna owned.

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