Archives for December 2013


Pari-mutuel handle on horse racing in the United States peaked in 2003 and subsequently (not accounting for inflation) decayed 28.3% by 2013. A principal cause of the demand destruction is a plethora of competition from gambling choices that offer much better financial inducements.

The pari-mutuel wagering product may or may not be profitable at takeout rates more in line with alternatives like sports betting, but continuation with the status quo is a confirmed path to further downsizing. Without a significant catalyst for bettors, there is no reason to expect handle on pari-mutuel wagering to grow.

Einstein’s observation comes to mind that “We can’t solve problems by using the same kind of thinking we used when we created them.”

Lengthy and scientifically controlled experimentation at multiple racetracks is imperative in order to determine empirically how handle responds to changes in takeout rates on various types of bets. Realistically, racetracks cannot decrease takeout percentages by small amounts and expect results, much less instant results.

Bettors are not automatons that immediately respond to middling changes in financial incentives. It took years for handle to atrophy and it might require years to reverse the trend and attract new and lapsed bettors.

Decreases in takeout percentages must be meaningful and it might take a year or more to be able to determine optimal rates on straight bets and exotics. In the initial phases of a takeout-reduction trial, racetracks would be apt to see profitability drop, and most of them are unwilling to take the chance.

The publicly-traded racetracks are unlikely candidates for investigating the effects of takeout on handle, over a protracted period of time, because of their short-term emphasis on keeping shareholders satisfied by boosting current earnings and stock prices. The ideal place for research is in the privately-held Stronach Group, with its six racetracks and major ADW outlet and the freedom to focus on long-term strategies.

Copyright © 2013 The Blood-Horse. Used with permission.


A start-up called Fantex has established an online platform at which adult residents of the United States can trade shares in professional athletes. Fantex received approval from the Securities and Exchange Commission to offer common stock in Arian Foster, who has a five-year $20.7 million contract to play for the Houston Texans of the National Football League and endorsement deals with Under Armour and Fuse Science.

Foster is receiving $10 million from Fantex for a 20% stake in his lifetime income from football activities, including player contracts, endorsements, and appearance fees. Were Foster to derive football-related income after his playing days are over–as a coach, a product endorser, or as a broadcaster–his wages would continue to be split with investors.

Fantex, Inc. is currently doing an initial public offering, and the funds raised will be used to sign up more athletes. Fantex will act as the umbrella company in all transactions, and set up a separate “tracking stock” for each athlete that is linked to his or her “economic performance and value.” Fantex, Inc. will take a 5% cut of the earnings due the tracking stock and also allocate to the stock a portion of corporate expenses.

The Fantex public/corporate form of ownership differs legally from the prevalent private partnership structure in horse racing. Nonetheless, both propositions are fraught with risk, particularly because of career-ending injuries and off-the-field misbehavior in the case of human athletes.

Whether the Fantex business model is viable or not remains to be seen. If the innovative and speculative concept proves to be successful, the modus operandi might work to create a more robust marketplace for trading racehorses and expanding the ownership base. Individuals without the wherewithal or desire to join a partnership would be able to participate in a highly unpredictable equine sporting venture without having to commit to a regular cash outlay.

Copyright © 2013 The Blood-Horse. Used with permission.


Several people are especially notable for their accomplishments in 2013. Two that should be on anyone’s list are Gary Stevens and D. Wayne Lukas. Mr. Stevens came out of retirement at the age of 50 to have a stellar year, riding the Preakness and Breeders’ Cup Classic winners among many others. Mr. Lukas trained the winners of the Preakness, the Travers, and came within an eyelash of winning the Breeders’ Cup Classic. Both these gentlemen are worthy of Person of the Year in American Horse Racing, and are superb representatives of horse racing to the general public.

Nonetheless, the view here is that Person of the Year is Kathy Ritvo. The diminutive 43-year-old Massachusetts native has been training racehorses since 1987. Ms. Ritvo was diagnosed in 2001 with an hereditary heart condition called cardiomyopathy that had previously ended the lives of her father and brother. She was treated with medication with limited results until 2008, when she underwent a life-saving heart transplant operation after waiting for seven months for an organ.

Ms. Ritvo took over her husband’s (Tim Ritvo) training stable in 2010 when he made a career change into racetrack management. In 2011, her most notable achievement was sending out Mucho Macho Man to a third-place finish in the Kentucky Derby. Then, in 2012, Mucho Macho Man culminated a successful 4-year-old season by finishing a very close second in the Breeders’ Cup Classic. Not one to quit, Ms. Ritvo guided Mucho Macho Man through his 5-year-old campaign and had the horse at his best toward the end of 2013 when he won the Grade I Awesome Again Stakes and the Grade I Breeders’ Cup Classic, both at Santa Anita, to garner lifetime earnings of nearly $5.4 million.

The life story of Kathy Ritvo is one of perseverance and battling back against adversity that came close to terminating her life. That same determination enabled her to patiently train Mucho Macho Man through some low points to achieve the apex in American Thoroughbred racing. She deserves to be racing’s Person of the Year and is an inspiration in dealing with the inevitable ups and downs of life.

Copyright © 2013 Horse Racing Business