Evans: Optimism, But Not Without Changes
Churchill Downs Inc. president and chief executive officer Bob Evans said Dec. 7 there are reasons to be optimistic about the future of horse racing—but not without major changes in the way the industry does business.
Evans, the keynote speaker at the University of Arizona Symposium on Racing and Gaming in Tucson, Ariz., cited alternative gaming, improved balance sheets, technology, a market for quality racing, and innovation geared toward customers as positives. The key, he said, is dealing with changes in supply and demand.
“It’s going to be different, but there is room for a lot of optimism,” Evans said.
Evans offered a look at what Thoroughbred racing could be in 2020. He called it a “math problem” and made clear he wasn’t making forecasts or predictions because of the many variables at work in the racing industry.
What could occur? Pari-mutuel handle would grow to about $15.5 billion a year in 10 years; purses would increase to about $1.7 billion a year; the number of races would drop from 56,000 in 2010 to 31,000; race days would go from 6,600 a year now to 3,100; the number of racetracks would drop from 55 to 26; average handle per race would rise from $230,000 to $495,000; the average purse per race would increase to $55,000 from $22,000; the number of starters would drop from 74,000 to 56,000; and field size would grow from 8.2 horses per race to 12.
Evans said his model “is wrong, because the assumptions are wrong.” He questioned whether track operators “would respond in an economically rational way” that could create a “smaller, healthier, economically sustainable business.”
The economic model is based upon racetracks being profitable—gaming revenue not factored in—at 5% pre-tax return on invested capital. Gaming, however, would account for 70% of the growth in purses from 2010 to 2020, Evans said.
“We need this money desperately so we have the time to make the changes necessary (to improve racing’s economics),” Evans said. “There is a viable business model at the foundation of racing’s future.
Evans touched on a number of issues including the video presentation of horse racing. He said CDI spends more than $1 million a year per track for high-definition presentation and $750,000 a year sending its signals to 42 outlets that can accommodate it. That means there are almost 1,600 wagering outlets that don’t have high-definition television.
“We’ve got to bring our video up to 21st century standards,” Evans said. “Within a few years we’re going to look like black-and-white television in color television world.”
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