Status Quo, 'Welfare' Mentality Big Threats

Officials: Horse racing is stymied by resistance to change and reliance on subsidies.

If the horseracing industry fails to make voluntary changes it has resisted for decades, the only things that may save it from doom are involuntary changes brought on by forces in the gambling and entertainment marketplace, officials said Oct. 13.

For those with Pollyanna views of the racing industry or devotion to the status quo, Saratoga Springs, N.Y., wasn’t the place to be for the second day of the International Simulcast Conference. A midday panel discussion on the need for change indicated strong beliefs the industry doesn’t have the will to change.

“The prospects for voluntary change in the racing industry are slim to none,” said Eugene Christiansen, chairman of Christiansen Capital Advisors. “The racing industry is more resistant to change than any industry we’ve dealt with.

“I think hard times make people conservative and less open to change. Paradoxically, hard times force change. It’s extremely unpleasant.”

History is the best indicator of racing’s unwillingness to change. Many of the issues discussed Oct. 13 have been on the table for decades with no resolution.

“It’s very unlikely this industry will voluntarily undergo change,” said Jeff Gural, chairman and owner of Tioga Downs and Vernon Downs, two New York harness tracks with video gaming machines. “(The racing industry) is dominated by breeders for some reason, and I don’t get it. Unless the breeding business collapses, we probably won’t see any change.

“Breeders have had it their way for so long. They have no incentive to change anything.”

Gural earlier floated an idea to mandate Standardbreds race as 4-year-olds rather than retire to the breeding shed. He noted the sport’s top 3-year-old trotter and pacer, Muscle Hill and Well Said, respectively, won’t race next year at 4 because they are standing at stud.

Meanwhile, on Oct. 13, it was announced 3-year-old Sea the Stars, perhaps the best Thoroughbred in the world this year, had been retired to begin a stallion career in 2010. He will not compete in the Breeders’ Cup World Championships.

“I couldn’t get anyone to return my phone calls,” Gural said of his proposal. “It’s like Tiger Woods playing golf, or the New York Yankees. That’s what people want to see. Breeders want to retire horses the customer wants to see.

“Take Rachel Alexandra and Zenyatta for example. The owners will do everything they can not to race against each other. That way, they can both say, ‘We’re the greatest.’ ”

Christiansen acknowledged archaic pari-mutuel laws are an impediment to change. He cited, however, progress in the form of Betfair, the exchange betting company based in Great Britain, and the Hong Kong Jockey Club, which embraced sports betting.

Christiansen said Betfair proved a new audience can be created for racing through proposition bets with lower takeout rates. The HKJC, which wields clout not typical of racing associations in the United States, was approved to offer wagering on soccer games to recapture an audience it may have lost.

“That is the mindset there will have to be in this industry in order to save it,” Christiansen said. “With all due respect, I haven’t seen that willingness.”

Not surprisingly, horse racing’s increasing reliance on revenue from gaming machines figured into the conversation. Christiansen said slots have boosted purses and kept racetracks from closing but have done nothing to create new fans; Gural agreed but said the racing industry may be squandering the chance to use that revenue wisely.

Gural said slots contribute roughly 90% of purse money at many tracks. He said he would like to greatly reduce pari-mutuel takeout to encourage wagering on horse races, but pools at his tracks are so small, there may not be incentive to wager.

Gural said the takeout reduction could work if it was “integrated” throughout the industry. That, however, appears a 99-1 shot given previous resistance to such change.

Gural also said the racing and breeding industry must change its mindset when it comes to slots or risk losing the revenue.

“The horse industry doesn’t do anything to help itself,” he said. “It’s very content to be a welfare recipient. (Horsemen and breeders) believe it’s an entitlement. You’ve never seen any strikes over lousy food, lack of promotions, or dirty bathrooms at racetracks. All you hear them say is, ‘We should get more money for purses.’ They don’t do anything to help themselves.”

Gural said he has had success getting people into the building, but struggles with getting them to wager on horse races. He said he’s frustrated but would continue trying.

Christiansen, aside from his belief the current model is doomed, said recruitment of new patrons is the key. To accomplish that, he said, racing must adopt “wholesale structural changes” that could cause “pain for a lot of people.”

If that doesn’t happen, Christiansen said, “marketplace forces will create involuntary change, and there will be fewer tracks and fewer horses.” That in turn could “end any prospect of rejuvenation of the fan base” on a broad scale, he said.