BETTING ON BYTES

Racetrack executives are sometimes criticized for putting so much emphasis on advance deposit wagering. The evidence mounts in industry after industry that racetracks have no choice if they want to remain in business and expand revenues and profits.

The Economist magazine (July 9, 2011) posed the question: “Who killed the newspaper?” It went on to say that the person most often blamed in the United States is “Craig Newmark, the founder of Craigslist, a network of classified-advertising websites…” It is truly amazing that one person can have such a negative effect on such a huge industry that has been around for so long. He had plenty of help, of course, from other Internet sites and cable television.

Fortune magazine recently examined (“Bytes Beat Bricks,” July 4, 2011) the performance of four formidable bricks-and-mortar companies since 1999 compared to four digital rivals. Like The Economist article about newspapers, the results demonstrate just how disruptive the Internet has been to any business whose core product can be delivered digitally.

In the years 1999 through 2010, the United States Postal Service saw its mail volume decline by 19%, as email and text messaging have soared in popularity. Cellphone messages in 2010 were about 1.9 trillion, for an increase of 1,200,243% over 2000. The USPS estimates that it will lose $6 billion in 2011. Remember when working at the USPS was thought of as having a high degree of job security?

From Netflix’s founding in 1997 until the end of 2010, sales went from zero to $2.2 billion. Meanwhile, the former kingpin of movie rentals, Blockbuster, filed for bankruptcy in September 2010 after its 1999 sales plummeted by 29%.

Borders books, the number two bookseller in the United States behind Barnes & Noble, is liquidating. Borders’ sales are 44% less than they were in 1999, whereas Amazon’s sales are up by 808% from 1999 to $14.9 billion.

Songs sold on CDs are off by 60% from their 1999 level as chains like Tower Records and Musicland have folded in the face of the digital onslaught by iTunes. The latter’s annual sales are up by 1,169,900% from 2003 and stand at approximately $11.7 billion.

Horse racing broadly provides entertainment and some people enjoy attending live races and have the time to do so. Nonetheless, the only business segment in racing that has been growing is gambling via advance deposit wagering. As with retailers whose products can be conveyed over the Internet, racetracks are part of the same digital trend that has undercut newspapers, the USPS, Blockbuster, Borders, and CD sellers.

Racetracks can attract people to big events like the Triple Crown and the Breeders’ Cup, but for routine day-in and day-out racing, advance deposit wagering is the best–and perhaps only–modus operandi for revitalizing the sport of horse racing.

Copyright © 2011 Horse Racing Business

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

Comments

  1. nice job? my Q is when will we start seeing adds for ADWs on non-horse parts of the sports sites such as ESPN. Seems a huge untapped market. Used to think, maybe racing declines adds to avoid competing with State Lotteries. In the internet age, that excuse disappears. We have sport made for the internet. Why avoid advertising it?

  2. Difficulty with changing business models is the tendency to add the new, leaving you with an addendum on the old rather than a truly new model with the concomitant reallocation of resources.

  3. Good Comparisons !!!

    Key is that ADW will always require “Bricks & Mortar” to host the actual race.

    So I agree that Track owners need ADW, but they also need to come up with creative ways to get new people to the excitement of the track to then get them into the ADW environment.

    Good example of Churchill Downs Friday evening racing.

    Another example is Charles Town WV getting new people into the sport of horse racing by attaching a casino to the track.

  4. I bet race horses every day but actually going to the track is and “event” for me. I visited Philadelphia right after the new casino was build and was literally the only one outside watching the races. I could clearly hear the jockeys “chirping” and urging their mounts as they passed by.

    Nothing like being at the track!!

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