RACING STILL NEEDS PARI-MUTUEL REVENUE

Churchill Downs, Inc. recently announced that it had acquired the poker magazine Bluff, including its database and websites. The move was precipitated by the U. S. Department of Justice’s flip-flop in late 2011 stating that the Wire Act does not prohibit Internet gambling, except for sports betting.

Churchill Downs’ purchase of Bluff is the latest step in diversifying its product offerings. Churchill Downs and numerous other racetrack companies have already moved away from their historic reliance on pari-mutuel wagering by adding video lottery terminals and table games.

Both the racetrack/ADW and bloodstock components of the racing industry have a compelling vested interest in making the pari-mutuel product as popular and profitable as possible. By contrast, these two major industry sectors do not share the same degree of self-interest regarding racetrack expansion into casino gaming and online poker.

Upper-level racetrack executives, particularly in the publicly-traded companies, are evaluated by their shareholders and boards of directors on customary financial benchmarks such as earnings per share and stock-price performance. As long as these metrics are headed in an acceptably positive direction, it matters little to most institutional and individual shareholders whether enhanced revenues and profits come from pari-mutuel wagering, casino gaming, or new ventures like online poker.

Conversely, it matters a great deal to people operating bloodstock businesses, whose collective future literally depends on a healthy pari-mutuel product, especially since the diversion of a portion of gaming revenues to purses cannot be counted upon indefinitely.

Racetracks–racing’s frontline retailers–are evolving into gaming enterprises that include horse racing as an item in a growing product mix. Consequently, the fate of racing and pari-mutuel wagering rests more and more in the hands of the bloodstock—or production–side of the industry.

The major initiatives currently underway at racing-centric organizations–the Jockey Club, the Breeders’ Cup, and NTRA–are timely and critical to the long-term outlook for pari-mutuel wagering on horse racing in the United States—and by extension to the overall bloodstock business. The Jockey Club is aggressively pursuing a nine-step program to advance horse racing. Similarly, the Breeders’ Cup signed a multi-year agreement with NBC-TV and the 2012 Classic will be televised in Saturday prime time in an effort to reach out to more viewers.

The groups behind these vital initiatives have a laser-like mission to strengthen Thoroughbred horse racing and breeding.

While the racetracks desire a buoyant pari-mutuel business, their success as business enterprises is increasingly less dependent on it.

Copyright © 2012 Horse Racing Business

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

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