TRA Report Reflects Purse Revenue Trends

Revenue from alternative forms of gaming now accounts for almost one-third of total Thoroughbred purses in United States, but despite a decrease in total pari-mutuel handle, the percentage of handle that goes to purses has remained steady, according to new report.

A study released May 27 by the Thoroughbred Racing Associations is the first of its kind made public by an industry organization. The handle and purse information on which it’s based were provided by Equibase and the California Horse Racing Information Management Systems.

In 2009, alternative revenue—from slot machines, video lottery terminals, video poker machines, table games, card rooms, and direct subsidies from casinos or state governments—represented 29.01% of U.S. purses, which totaled $1.098 billion. In 1993, the first year of the TRA study, the figure was 0.08%.

It wasn’t until the late 1990s and early 2000s that racetrack gaming began to rapidly expand in the U.S. The amount of non-pari-mutuel revenue to purses has increased every year since 1994, according to the TRA report; the figure stood at $318,580,638 last year.

In 1993, 7.2% of handle went to purses. The figure peaked at 7.26% in 1995, and remained static or steadily declined year by year until it hit a low of 5.97% in 2003, around the time advance deposit wagering began to take hold.

Total handle reached a high of $15.18 billion that year; in 2009, it was $12.32 billion, the lowest since 1996. The share of purses from handle, however, went from 6.62% in 1996 to 6.33% in 2009, the TRA reported.

Based on a blended takeout rate of 20%, about 13.6% last year went to racetracks and other bet takers as well as for state taxes, some of which support racing industry programs and regulation.

“Returns to the industry are higher for each dollar wagered at a racetrack, so understandably the rate of return was higher before simulcasting, particularly with the expansion of account wagering, became the principal source of revenue to the industry,” TRA executive vice president Chris Scherf said in a statement accompanying the report. “Despite the growth of third-party account wagering companies and their retention of some of the takeout, the racetrack industry has recovered some revenue through higher simulcast fees to those outlets.”

The high-water mark for purses derived from handle came in 2001, when the figure was $946,371,778 (6.53%), according to the TRA report. Total U.S. Thoroughbred handle that year was $14.6 billion.

TRA president Roy Arnold, president of Arlington Park, said it is “disturbing” purses have declined even with an increase of $63 million in non-pari-mutuel revenue the past two years.

“Tracks without other gaming revenue are finding it necessary to consolidate their live racing dates, which impacts not only their handle but also reduces the amount of wagering produced by their fans on imported simulcasts,” Arnold said. “If we settle for gaming subsidies ‘replacing’ pari-mutuel wagering revenue, rather than ‘enhancing’ it, pari-mutuel wagering simply will continue to decline.”

Through April of this year, wagering on U.S. races totaled $3.78 billion, down 8.4% from the same period in 2009, according to the Thoroughbred Racing Economic Indicators published by Equibase. U.S, purses for the period were down 7.33%.