Forecasting the future predicated on what occurred in the past is often not very accurate because there can be many unseen catalysts that cause change to take place in a nonlinear manner. However, it can be useful, from a decision-making standpoint, to project or extrapolate the status quo into the future to determine how satisfactory it would be for an industry or company if the current state of affairs prevails.
Accordingly, by applying simple regression analysis to key statistics (the known knowns) pertaining to Thoroughbred horse racing, I found that without some catalysts for change for the better, the North American horse-racing industry might look as follows in the year 2025:
North American pari-mutuel handle in 2025 U. S. dollars, assuming an annual 2% inflation rate, would equal $7 billion. This represents a decline of 47% in nominal dollars (i.e., unadjusted for inflation) since the start of the 21st century and a decrease of 86% in real dollars (i.e., inflation-adjusted) over the 25-year period 2000-2025.
If present conditions and trends continue unabated, the foal crop in 2025 would be about 9,900 and racetracks would hold 3,582 races.
Extrapolating purses into the future is meaningless because one cannot assume ceteris paribus, or that other conditions will remain the same. The current arrangement in most states in which casino revenues subsidize purses is unlikely to survive the next decade. If this proves to be the case, then the forgoing foal crop estimates are probably too high. Subsidies are already under attack in such states as Florida, Pennsylvania, and West Virginia.
In the next couple of posts on Horse Racing Business, I continue to construct plausible scenarios for what the North American horse racing industry might look like in 2025, assuming that upper-echelon racetrack executives continue to refuse to address the problem of deteriorating pari-mutuel handle through substantial takeout reductions on bets.
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