BRICK-AND-MORTAR CASUALTIES

The Kentucky Derby drew its usual immense crowd and a huge television audience.  This week, Churchill Downs will have ample seating, parking for all comers, and its races will receive relatively little media coverage.

With the exception of the Triple Crown races, the Breeders’ Cup, and several boutique race meets like Del Mar and Saratoga, racetracks will continue to play to relatively small crowds.  What has happened in horse racing is part of a cultural revolution aided and abetted by information and communication technologies that have decimated brick-and-mortar retailing.

This United States in the first quarter of 2017 had more retail store closings than in the record-setting 2008.  In 2008, the financial crisis was the precipitating factor, but currently the main cause is the increasing popularity among shoppers of doing business with Amazon and other online companies.

Credit Suisse reports that 8,600 brick-and-mortar stores may close in 2017, compared to 6,163 in 2008.  The main contributors are Sears, Penny’s, and Macy’s, and Sears management warned investors that the company is in jeopardy of going out of business.

What has occurred in American retailing long ago happened to horse racing, with many track closures …and more on the horizon.  The advent of simulcasting and then the Internet increasingly incentivized bettors to opt for the convenience of remote wagering.

The most astute and creative marketer cannot reverse a technological tsunami that disrupts and obsoletes an established business model, whether it is selling mainframe computers when PCs came along, buying books in stores vis-à-vis online, or making wagers on horse racing at racetracks as opposed to betting with an advance deposit wagering firm.

The challenge for horse racing interests is for enough racetracks to remain open so as to provide bettors with sufficient opportunities to play.  Even most of those that stay in business will struggle to fill races; Santa Anita, for example, recently cancelled a day of racing for lack of enough entries.

A strategy for dealing with this is too complex to discuss here, but the people who own most of the racetracks are casino-oriented and can’t be counted on to care, nor can the preponderance of governors and legislators in states with legal pari-mutuel wagering.  The people with the most on the line are those who depend on the breeding and sales of bloodstock…and they have limited influence on what the racetracks do.

Absent a strategy, look for a future with a small number of U. S. racetracks providing live racing, with ADWs increasingly supplementing betting opportunities with races from abroad.

Copyright © 2017 Horse Racing Business.

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