Archives for August 2013


United States pari-mutuel handle in 2012 was 13.4% greater than it was in 1993, when compared in nominal dollars. However, in real dollars (inflation-adjusted with 1993 as the base year), pari-mutuel handle declined by 27.6% in the 20-year period between 1993 and 2012.

Nominal pari-mutuel handle reached its apex in 2003 and fell 28.3% by the close of 2012. What’s of more concern, in real dollars, handle was at its zenith in 2002 and plumeted 42.9% by the end of 2012.

Pari-mutuel figures (in billions of dollars) for 1993-2012 are shown below. What these nominal dollars were actually worth when recast in 1993 dollars are depicted in the parentheses.

2012 10,882 (6,953)

2011 10,770 (7,026)

2010 11,419 (7,666)

2009 12,315 (8,400)

2008 13,662 (9,281)

2007 14,725 (10,383)

2006 14,785 (10,718)

2005 14,561 (10,819)

2004 15,099 (11,600)

2003 15,180 (12,047)

2002 15,062 (12,181)

2001 14,599 (12,090)

2000 14,321 (12,049)

1999 13,724 (11,940)

1998 13,115 (11,718)

1997 12,542 (12,293)

1996 11,627 (10,734)

1995 10,429 (9,917)

1994 9,897 (9,646)

1993 9,600 (9,600)

This trend is ominous when viewed in nominal dollars and starkly worse when the nominal dollars are adjusted to 1993 dollars. (The negative direction in the size of the U. S. foal crop is beginning to reflect the downsizing of the entire domestic industry.) In the months ahead, Horse Racing Business will occasionally be addressing the main cause, which is a noncompetitive takeout rate that destroys demand among large-scale bettors. The key question is whether the traditional pari-mutuel business model can yield a profit at takeout rates in line with sports betting in particular.

Copyright © 2013 Horse Racing Business


21st century trends in North American (USA, Canada, and Puerto Rico) pari-mutuel handle, purses, and auction prices for yearlings have not been closely linked, as shown by their lukewarm or negative correlation coefficients for the years 2000-2012 (a correlation coefficient is a measure of the strength and direction of the linear relationship between two variables that ranges from plus one to minus one):

Pari-Mutuel Handle and Gross Purses, .306

Pari-Mutuel Handle and Yearling Average Auction Prices, .403

Pari-Mutuel Handle and Yearling Median Auction Prices, -.333

Gross Purses and Yearling Average Auction Price s, .364

Gross Purses and Yearling Median Auction Prices, .365

The relatively low co-variance between handle and purses is not surprising. Although wagering on horse racing has been declining, subsidies from video lottery terminals have supported purses. Were VLT allocations to be reduced or withdrawn by governors and legislatures, purses would more precisely track the flagging fortunes of pari-mutuel wagering; this is the main vulnerability of American racing.

The average auction price for yearlings is moderately correlated with pari-mutuel handle; but the linkage would be much stronger if horse racing were a purely economically-motivated pursuit, rather than a sport/business. Similarly, average and median yearling auction prices generally move in the same direction as gross purses, but the degree of congruence is modest.

Auction buyers are acutely aware of adverse business-related factors in the racing industry, yet they are also inspired by the sporting challenge of winning races. Knowledgeable buyers do not enter into retail racing partnerships, for example, with the primary objective of making a profit. This may explain the negative correlation between handle and median yearling auction prices, depicting that median prices have held steady in spite of the persistent decrease in wagering on horse racing.

The scale of the American bloodstock enterprise ultimately hinges largely on whether the negative trend in pari-mutuel wagering can be reversed. But noneconomic elements having to do with sport are also important to attracting and retaining owners.

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


1. Ken Ramsey must be the most astute owner in American racing. On Saturday afternoon he won three Grade 1 turf races: the Sword Dancer Invitational at Saratoga with Big Blue Kitten; the Arlington Million in Chicago with Real Solution (on a disqualification of The Apache); and the Secretariat Stakes, also at Arlington Park, with Admiral Kitten. All three winners are homebreds by Mr. Ramsey’s stallion Kitten’s Joy.

According to my calculations, Mr. Ramsey’s cut of the purses was $1.26 million (before paying his trainers and jockeys).

Ken Ramsey is a self-made man from a small town in Eastern Kentucky’s Appalachia region whose entrepreneurial skills have been demonstrated in several industries, including horse racing and breeding.

2. The Grade 1 Sword Dancer was the most competitive stake of the day at Saratoga with 12 starters on the turf at 1 ½ miles. The Grade 1 Alabama was disappointing because only five fillies turned out for a $600,000 race. A handful of fillies in a premier race at America’s oldest racetrack is not an impressive showcase for national television.

3. In Saturday’s first race at Saratoga for fillies and mares 3-years-old and up, a $20,000 claiming race on the turf, the fifth-place finisher Heading to Toga, ridden by Jose Espinoza, broke down immediately after the wire. The injury (to a front leg) was horrific and jockey Espinoza was carried off on a stretcher. Some spectators went quiet whereas others were visibly shaken up and cried out or moaned. I was near the rail across from the finish line, when several college-age women asked me to explain what would happen to Heading to Toga. About that time, the equine ambulance arrived, along with the dreaded screen behind which the filly was euthanized. I struggled with my explanation, as it is never easy to say that some fatal breakdowns are inevitable.

It is reprehensible that many in the racing industry resist changes in track surfaces (synthetic is safest and the evidence is irrefutable) and medication policies that would reduce the number of breakdowns. Anyone who is not troubled by the high incidence of breakdowns does not have a heart.

4. The new Whitney viewing stand at the Oklahoma training track provides a clear look at workouts and is open to the public. This is a very nice addition.

5. The Reading Room is a private turf club adjacent to the Saratoga Race Course. While walking by the clubhouse I noticed a sign prohibiting cell phone use. This is refreshing in an age when cell phones ring intrusively in restaurants, at concerts, and almost everywhere.

6. Banners proudly proclaiming 150 years of Saratoga racing are displayed all over town. The pugilist and politician John Morrissey surely could not have dreamed what he wrought when he founded the racetrack in 1863.

Copyright © 2013 Horse Racing Business