NORTH AMERICAN HORSE RACING, CIRCA 2025 (PART III)

The themes of Parts I and II of these posts are that (a) North American pari-mutuel handle will continue to stagnate without a strong catalyst; (b) states will gradually curtail purse subsidies from gaming, causing the economic situation to darken even more; and (c) the consequences of downsizing will be disastrous for the entire horse racing enterprise, from racetracks to farms.

Making matters worse, executives who run the racetracks have shown, for whatever reasons, that they are not up to the task of doing anything to reverse the downward trajectory.  In fact, it looks as if they won’t try.  Even the slight gain in North American handle in 2015 is essentially wiped out on an inflation-adjusted basis.

If I were an individual whose livelihood depends on the bloodstock industry, I’d be very concerned because my business ultimately derives from the actions of racetrack executives who aren’t willing or able to act in the best interests of horse racing.  Put in an unvarnished way, my future over the next decade looks bleak and I would likely get out of horse racing now.

In my view, absent actions by racetracks to reduce pari-mutuel takeout rates to competitive levels, there are very few options for horse owners, trainers, breeders, sales companies, and other people with a vested interest.  They are essentially captive to the indifference of top racetrack and casino executives.

Here are two possible options.

The racetrack owner and operator who is also deeply involved on the bloodstock side is Frank Stronach.  He obviously cares a great deal about horse racing.  He, as a sole owner of a private racetrack company, could direct his managers to aggressively experiment with much lower takeout rates without having to account to shareholders if profits drop until the reduced takeout rates eventually boost handle.  Mr. Stronach could leave an enduring legacy as the individual who saved horse racing in North America.

Another option is a longer shot, but still potentially feasible.  Leaders of the bloodstock side of the horse racing business could form a co-op and buy an advance deposit wagering company.  The main mission of the ADW would be to demonstrate the salutary effects of lower takeout rates on handle.  Once this was illustrated, the racetracks might be convinced to follow suit.

Both of these routes entail risk, but the risk is often in not taking risks, especially with the trajectory of pari-mutuel handle.

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