Archives for August 2018

WHY THE “REAL” NUMBER OF THOROUGHBREDS IN THE USA MATTERS

The American Horse Council Economic Impact Study was conducted in 2017 and published in early 2018.  Statistics from the survey research were cited at the August 12, 2018 Jockey Club Roundtable Conference.  Laura Barillaro, Jockey Club Executive Vice President, said:

“On February 28th, the American Horse Council announced the results of its 2017 Economic Impact Study, an update from the 2005 study….according to the study, the horse industry in the United States generates approximately $122 billion in total economic impact, compared with $102 billion from the 2005 study.  It also provides employment for 1.7 million people.  The current number of horses in the United States is more than 7.2 million, with Thoroughbreds accounting for approximately 1.1 million, or 16% of the total.”

The number of Thoroughbreds in the United States is manifestly vastly overestimated.  The Jockey Club website shows that in the 28-year period 1990 through 2017, the aggregate number of registered Thoroughbreds in the United States was 855,735.  (Not all Thoroughbreds born are registered.)  Life expectancy for a horse is about 25 years.

If every Thoroughbred registered in the United States between 1990 and 2017 were alive in 2017, it would take another 244,265 unregistered Thoroughbreds to total 1.1 million.  This calculation does not take into account that The Jockey Club reports that exports of Thoroughbreds from the United States typically exceed imports by a factor of three to one, so there is a net outflow.  For example, in 2017, 2,324 Thoroughbreds were exported versus 734 that were imported.  Unregistered Thoroughbreds make up some of the differential.  But, even so, it is evident from actuarial mathematics and common sense that all Thoroughbreds registered between 1990 and 2017 are not living.

There are two reasons that the American Horse Council’s inflated figures are important.

First, the 1.1 million estimate is so obviously exaggerated that it calls into question the validity of the putative $122 billion economic impact of the horse industry in the United States.

Second, animal welfare.  The Humane Society of the United States reports that over 100,000 horses are exported from the United States to foreign slaughterhouses annually.  If racehorses comprise 16% of the total U. S. horse population (using American Horse Council statistics) about 16,000 Thoroughbreds are slaughtered every year.  This figure is far too high because there cannot be anywhere close to 1.1 million Thoroughbreds alive in the United States.

Copyright © 2018 Horse Racing Business

SARATOGA MUSINGS

 

Several miscellaneous observations about horse racing at the Saratoga Race Course.

License plates from all over the United States and parts of Canada can be seen around Saratoga during the racing season, demonstrating how much horse racing fans are attracted to an event that has been held annually since 1863.  One example is a gentlemen I met in the Saratoga clubhouse, who looked to be in his early 70s.  He said he and his wife drove about 22 hours to Saratoga with several other relatives, arriving for opening day.  They rented a 3-bedroom carriage house for the meet at a cost of $15,000.  Most days the men in the group attend the races and their wives join them some days.  Occasionally, they take short trips to places to sightsee and dine.  This year, they spent three days in New York City to visit sites and attend a stage play.  Every year, I meet racing fans like these, from all walks of life, who share an affinity for the storied racetrack founded by John Morrissey only weeks after the epic battle of Gettysburg in the American Civil War.

While it is difficult to quibble with how NYRA conducts the Saratoga meet, one need for improvement was evident from the race card this past Sunday, August 12.  NYRA prudently moved the turf races, which constituted five of the ten races on the card, to the dirt over safety concerns owing to rain.  As a result, so many horses were scratched that the fields in the five scheduled turf races were very short of entries and bettors were left with not much to wager on.  Knowing that it rains in upstate New York in July and August, why does NYRA not take precautions by carding, say, no more than two turf races per day?

Late on Sunday afternoon (August 12), the Jim Dandy Bar had all of the television sets tuned to the Saratoga races except for one that was showing the final round of the PGA Championship to a small contingent of obvious golf fans.  Tiger Woods, trying to win his first major championship in a decade, was in contention and the folks in the Jim Dandy group were watching intently and cheering him on.  They weren’t alone as the television ratings soared by 69% over last year.  This is the same phenomenon that racing experiences when even casual fans tune in to watch a Zenyatta or a Justify.  The problem for racing is that most of its television stars retire as 3-year-olds.

Young trainers like Chad Brown and Joe Sharp deserve lots of credit for their accomplishments.  Yet so does D. Wayne Lukas, who is still winning some races at Saratoga.  At nearly age 83, the “Coach” is understandably not as formidable as he was in his prime.  However, it would not be surprising to see him win another big race like a Breeders’ Cup or Triple Crown.  Hope he does strike a blow for all of us old-timers.

Copyright © 2018 Horse Racing Business

HORSE RACING AS AN ECONOMIC FORCE IN NORTH AMERICA

How big is the North American horse racing enterprise?  That is a highly subjective question because each individual has his or her own perception of what constitutes “big.”  For example, a micro-business employing two or three people might think of another business with 500 employees as big.  Yet the conventional definition used by the U. S. Small Business Administration would classify a company with 500 or fewer employees as small.

In 2017, North American pari-mutuel handle was $11.6 billion.  On the bloodstock side of the industry, auction sales in 2017 were nearly $1 billion.  Thus the North American racing industry produced revenues of $12.6 billion annually not counting hard-to-estimate but consequential revenues from private transactions, such as stud fees, non-auction horse sales, trainer and jockey fees, and from suppliers like pari-mutuel machine manufacturers, racetrack concessionaires, horse-feed companies, and bloodstock agents.

To put the size of the North American horse racing into perspective, benchmarks are necessary in order to make meaningful comparisons.  Take several recent examples:

Casinos generated $76.6 billion of revenue in 2017 in the United States.

American movie theatre ticket sales were $11.1 billion in 2017.

In 2018, Cintas ranked 500th on the Fortune 500 list of largest U. S. companies (using the metric annual revenues to do the ranking) with revenue of $5.5 billion.

The Dallas Cowboys, the National Football League’s most valuable team, led the NFL in 2016 with revenue of over $840 million.  Next came the New England Patriots at approximately $575 million.

The American Gaming Association estimates that in 2017 $150 billion was bet—legally and illegally—on sports in the United States.  More objective experts put the number at somewhere around $67 billion per year.

While horse racing does not approach the magnitude of casinos and sports betting, it is certainly far from a cottage industry.  Racing is a significant employer, and way of life, at both the retail racetrack level and in agribusiness.  By the numbers, North American racetracks, account wagering providers, bloodstock-related businesses, suppliers, and tertiary firms account for billions of dollars in commercial transactions.

Copyright © 2018 Horse Racing Business