Numbers Show Need for Contraction, Innovation

Economic indicators for 2009 showed that wagering on

A report showing that for the second consecutive year wagering on Thoroughbred racing in the U.S. sustained a major hit in 2009 is a sign that the industry is not only impacted by the U.S. recession but also needs to find ways to attract more betting dollars.

According to data released Jan. 6 by Equibase Company, all-source betting on U.S. racing in 2009 totaled $12,319,129,673, down 9.9% from the $13,669,477,234 the previous year. When compared with the total $14,723,993,055 wagered in 2007, U.S. wagering has fallen 16.3%.

In conjunction with the decline in betting, purse distribution at U.S. racetracks declined 5.6% last year to $1,093,875,799, compared with $1,158,616,930 in 2008. The number of race dates contested in 2009 also fell as more racetracks faced horse shortages and/or limited funds for purses, decling 2.6% to 5,934, compared with 6,093 the previous year.
Alex Waldrop, president and CEO of the National Thoroughbred Racing Association, said the numbers do not paint a pretty picture, but that the rate of decline is not out of line with other industries as the overall economic recession continues.
“A decline of this magnitude for the year is nothing to celebrate, but it does compare favorably to that of many other industries in 2009, especially when combined with an overall decline in the number of race dates,” Waldrop said in a statement, adding that a decrease in the rate of decline during the last half of the year could be a positive sign. “I believe that horse racing will reverse these trends in the years ahead, especially as we develop new ways to capitalize on our unique right to conduct legal online wagering.”
While the recession obviously played a role in the betting downturn on horse racing in 2009, recovery will not be accomplished only by a rebound in the U.S. economy, according to Chris Scherf, executive vice president of the Thoroughbred Associations, a trade group for racetracks.
Scherf said the racing industry needs to find ways to improve the gambling product if it wants to see future growth and two ways to accomplish that is by being innovative and by cutting back on the number of races that are being run each year.
“I think we would be short-sighted to say if it wasn’t for the recession, everything would be fine,” Scherf said. “From a racing standpoint, you could not ask for anything better than the year we just had. Between Mine That Bird and the rivalry between the two fillies (Rachel Alexandra and Zenyatta), what more could you ask for in 2009 from racing? On the racetrack end of it, in terms of generating some great sport, we did that. But it did not translate to the part that pays the bills. The fact of the matter is there is a huge dichotomy in the quality of the racing in terms of pure sport.”
While many tracks cut back on the number of races they ran in 2009 as a result of declining numbers of horses to fill races and reductions in purses, Scherf said much more contraction is needed in order to make the races more attractive wagering propositions.
“Field sizes are a key element. We know we are going to have fewer horses in the immediate future. So, you are going to have extremely short fields or you are going to have to have fewer race dates?” Scherf asked. “We still resist the reduction in racing dates. The market will force you to do some contraction. But it will force you to have only as much contraction as you need to hang on.”
The other potential for increased interest in betting on horse racing would be some new and innovative wagering opportunities, Scherf said.
“The wagering opportunities need to be looked a,” he suggested. “I am not talking about making a Pick 6 into a Pick 7. I am not talking about tweaking the current wagers or things like that, but having some fundamental changes to our wagering product. Some tweaks are going to come anyway. Some sort of fixed odds would be the kind of significant innovation that would generate excitement and increase participation among our current players and new ones.”
Scherf said examples of the types of changes he believes would boost handle are implementing current plans for decimal odds and offering fixed odds on U.S. races.
“We are going to move to decimal odds, which I think will be a boon but it is not going to suddenly drive a huge new portion of handle. Some sort of fixed odds would be the kind of significant innovation that would generate excitement and increase participation among our current players and new ones. I think it will increase the opportunities for current players to bet on races in multiple ways, which also increase handle.”
Scherf said the recent announcement that BetFair, the British betting entity that now owns TVG, wanted to begin offering exchange wagering is a move toward fixed odds wagering.
Whether forced or voluntary, the racing industry must change in order to generate new revenues, according to Scherf.
“The question is, do we want to have a business that is just hanging on or do we actually want to manage the situation and make sound business decisions?”