Updated: Tuesday, November 28, 2000 8:49 AM
Posted: Tuesday, November 28, 2000 8:49 AM
Editor in Chief
The Japan Racing Association, whose business and marketing acumen has been a role model for the rest of the racing world, is sputtering after more than a decade and a half of sensational growth. The future for the government agency that controls every aspect of Japan's major racing circuit does not appear to be particularly bright.
On-track attendance began heading south in 1997 as various kinds of off-track wagering expanded. The addition of telephone and in-home computer wagering was expected to adversely affect on-track business, but JRA officials anticipated that any lost revenue would be more than made up by an increase in total handle. That hasn't happened. In fact, at year's end, total wagering on JRA races will have declined for the third consecutive year.
Before we start shedding any tears, let's remember that even with an anticipated 5% decline in wagering this year, the JRA will average somewhere in the neighborhood of $111 million in handle for each of the 288 programs it put on. By comparison, North American handle for this year's Breeders' Cup was $108.6 million. But year-end totals will be 15% lower than they were in 1997, when the JRA handled a record amount of over four trillion yen, or about $36.8 billion at today's conversion rate. That's three times the amount handled each year in the United States.
JRA officials blame the weak Japanese economy for most of the recent decline, but that's only part of the problem. JRA watchers suggest the organization's marketing efforts have weakened considerably in recent years, while others have criticized the organization's failure to respond to fans who want more wagering options. Currently, the JRA offers win, show, and three types of quinella wagering only. With a 25% takeout on all bets, including a 10% government tax, the Japanese horseplayer is hard-pressed to show a profit.
Most troubling for the JRA may be what lies just around the corner. Another government agency has only recently begun taking on professional soccer, an extremely popular sport in Japan. Participants are asked to pick the winners of every soccer league game each week, and the payoffs for a sweep can be enormous. When the bet is available throughout Japan (it currently is offered in a test market), there is a strong likelihood the impact on racing's pari-mutuel handle will be severe. Strangely enough, though, many JRA officials only shrug at the mention of this new competition, not believing that it will damage their sport in any way.
The JRA has been slow to change, whether it's in the restrictive nature of its racing programs or its limited menu of betting opportunities for fans. The JRA probably will offer new forms of wagers as early as 2002--including exactas or trifectas--but by then racing may have lost a number of fans to soccer betting, and its handle may have dropped another 10% or more. Japanese horse owners and breeders eventually will feel any continuing decline in handle when prize money is reduced.
Expanding the wagering menu is only one change the JRA must make if it is going to successfully take on new competition. It also must convince the federal government that the 10% tax on betting is excessive, and that the declining revenue to the government can be reversed only with a lower tax that will generate additional handle.
The JRA became a world giant in racing largely because it has complete control of the industry and has held a virtual monopoly on gambling. Complementing its powerful position was a management team that created an exceptional marketing strategy. The success of those past efforts has led to a bloated, some would say arrogant, organization that at present might not be agile enough to face the coming challenge.
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