Dec 07 2011

Accountants and the deep doo-doo of racing

Today’s Blood-Horse (here) asks, in a headline, if horse ownership is “more about love than money.”

Well, as the kids say, duh.

Anyone who’s owned horses for any period of time can tell you that, from an economic perspective, the numbers in racing simply don’t work.  Sure, some horses make money; sure, some owners will make money in this or that year.  But the fundamental issue — the reason it’s hard to bring new owners into the game and to keep them involved once they do get in — is summed up in the old joke about how to make a small fortune in racing: first, you start with a large fortune. Horses, on average, don’t even make enough to pay their annual training and vet bills, let alone making back their purchase price.

These days, in some locations, this reality has been obscured — happily, for owners — by slot machine revenues, which have dramatically boosted purses at places like Parx, Delaware Park, Charles Town, and, soon, the NYRA tracks.  Because of these purse increases — because the slots bring in revenue that racing does not — owning horses in some places may be, at least for a time, what the gamblers call a positive expectation play.

But for how long?

All businesses are in the same line of work — making money — and the successful (read, rational) ones will be ruthless about culling those elements of their product line which drag down their bottom lines.  No one can reasonably expect that slots and gambling hall operators, whether or not they are racetrack companies, will continue to subsidize the racing side of their business indefinitely.  Indeed, the good folks who run Penn National Gaming have been all too clear that, in their eyes, racing is a dying business that they tolerate for now, but probably only for now.  Later is a different question.

Which gets to racing’s other long-term problem: The sport is failing in really a rather spectacular way.  Total handle, which is down more than seven percent this year, declined in six of the seven years from 2004 to 2010.  The total drop in that period was more than 24 percent, and, if current numbers hold, the drop from 2004 to 2011 will exceed 30 percent.  The 2010 handle of $11 billion and change was the lowest since 1995.

It’s not exactly a news flash that this industry is in what the elder George Bush called deep doo-doo.  In fact, the current trends, coupled with dysfunctional leadership with an absolute, unwavering commitment to doing everything the same way it’s always been done regardless of the changing landscape, make it hard to see a bright future for our game.

Still, people do continue to buy horses, to the dismay of their accountants.  And that points to at least one factor in racing’s favor: that it inspires a strong, in fact an irrational, passion in some people.  The question is whether, in the long run, that will be enough.

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