Ray Paulick<br>Editor-in-Chief

Ray Paulick

Worldwide Woes

In many ways, the Japan Racing Association is the envy of the racing world. As a branch of the national government's ministry of agriculture, forestry, and fisheries, the JRA controls all facets of the industry, including racecourse management, scheduling, marketing, licensing, drug testing, and pari-mutuel operations.

Compare that to the patchwork quilt that exists in the American racing industry: competing racetrack ownership, racing schedule conflicts, minimal national marketing, state-by-state licensing, regulations, and drug-testing laboratories, and an archaic, poorly funded, private-industry pari-mutuel system.

Yet for all its obvious advantages, the JRA is struggling with many of the same issues faced in the United States.

On-track attendance has dropped 40% over a seven-year period, from 14.1 million in 1996 to 8.5 million in 2003. It's dropped by another 6% this year. In 1997, average on-track attendance was just shy of 50,000. It fell below 30,000 per day in 2003.

The primary reason for the on-track decline is an increase in off-track betting at OTB sites or via telephone, Internet, or personal-access terminals. On-track bets now account for just 7% of all JRA wagers, down from 15% a decade ago. OTBs handle 53% of the total; Internet and personal access terminals 35%; and telephone 5%.

But the additional wagering off-site has not made up for the on-track deficits. From its all-time high of ¥4 trillion in 1997, total wagering on JRA races dropped 25% by the end of 2003. It's down nearly 3% in 2004.

The declines come in the face of an expanded betting menu for Japanese racing fans. When wagering peaked in 1997, the only wagers offered were win, place, quinellas, and bracket quinellas (which combined two horses into one wagering number). Since then, the JRA has added exactas, trifectas, and trios (a trifecta box). The newest wagers are the most popular, not surprising since they offer the highest potential payoffs. On the downside, because there is a smaller number of winning tickets, there may be more losers than there were in the JRA's more conservative betting days.

Despite the declines, handle remains a substantial amount of money. At season's end, total handle will approach ¥3 trillion. At today's exchange rate, that's $30 billion, or a little more than $100 million per day for each of the JRA's 288 racing days. For the recent Japan Cup and Japan Cup Dirt program, when 119,362 fans showed up at Tokyo Race Course (which is in the third year of a five-year rebuilding program), total handle was ¥38.2 billion, approximately $382 million.

By comparison, American racing's two biggest events, Kentucky Derby day and Breeders' Cup World Thoroughbred Championship day, handled $143 million and $121 million, respectively, in 2004.

The JRA gets a 10% cut of handle to pay for operations and purses, so there has been a decline from $40 billion to $30 billion (based on the current exchange rate of approximately ¥100/$1) in the organization's operating budget. One consequence will be a decline in the world's highest purse structure, beginning in 2005. JRA officials were not specific on how much will be cut from a purse program that averages over $290,000 per race, but the first thing to be trimmed will be incentive programs for owners and breeders.

Another area to be cut will be marketing, where the JRA is also a world leader. In 2004, the JRA will have spent approximately $270 million for marketing and public relations. More than half ($143 million) is spent on television, radio, print, and subway billboard advertising.

American visitors are amazed at how popular racing is in Japan. But the numbers don't lie: that popularity is slipping.