Positive Change

Today’s Harness Racing Product Needs Positive Change

Leadership

Change is not easy, but without it keeping harness racing viable will be difficult at best and perhaps impossible. But where to start? What changes can improve the product to make it more interesting/exciting from the perspective of the bettor, novice and media? Which changes have the best chance of improving the sport’s economic viability? Which ones can be tried? What resources are required, available and how could they be employed? Priorities must be established and initiatives formulated that can be implemented (and measured) as soon as possible. Horsemen’s organizations, through stakes, breed awareness/development and people, have the best opportunity to initiate change, to lead the industry.

Let’s start with the premise that horse racing is a consumer business, and that viable products and services must be something that consumers want, need and are willing to pay for. Viable products and services need to be supplied in quantities and at venues that match demand. The key component of the standardbred industry is its racing and pari-mutuel wagering product. That’s where the focus should be and where horsemen’s organizations can initiate and implement change. Improvement requires focus, starting with product and establishment of key priorities.

Awareness, Goal Setting, Leadership

Horsemen’s association have the unique opportunity, through their respected personnel and stakes sponsorship/administration, to focus on major issues affecting harness racing in America, obtain consensus, set focused goals and initiate change. Stakes events remain the cornerstone of US harness racing and are respected, covered in the media to some degree and offered through simulcasting in North America and to many countries. These stakes showcase US racing and US horses that have positively affected standardbred development and desirability of yearlings and breeding stock here, in Europe and the Pacific Rim. What better basis to:

• Drive increased pari-mutuel handle, product interest and exposure to a broad demographic
• Produce greater competitiveness, higher odds, larger payoffs
• Generate equine icons, the stars of the sport

Horsemen’s associations are suited to embrace consistent principles, create change and promote results to all parties of interest in the industry.

Recognition that Pari-Mutuel Wagering is the Foundation of Industry Health

Recent studies conducted by Purdue University on the impact of the Indiana Horse Racing and Breeding Industry and by Rutgers University regarding New Jersey illustrate the positive economic affect of a healthy equine industry:

• In 2009 the total economic impact of the Indiana racing and breeding industry was over $1 billion, up from $294 million in 2005; in 2007 the New Jersey economic impact was $1.1 billion
• In 2009 the Indiana industry paid $69 million in state and local taxes, up from $5 million in 2005; in 2007 the New Jersey equine industry generated $160 million in federal, state and local tax revenues
• The industry generates direct and related employment of 9,865 jobs in Indiana and nearly 13,000 jobs were provided in 2007 in New Jersey (9,150 equine industry and 3,820 racetracks)
• Significant shares of racetrack revenues are derived from off-track pari-mutuel sources and much of the investment in equine breeding is from out-of-state interests, indicating that the industry is a major export industry generating in-state revenues from out-of-state sources
• Amount and nature of “real” investment spending have long-lasting economic impact; the New Jersey study suggests that the industry has over $4 billion in assets employed

The Purdue survey concludes that “from a nation-wide perspective, a racetrack is either expanding or declining…When a racetrack is successful, it can afford to offer larger purses and attract better horses and athletes, drawing in larger incomes from pari-mutuel and off-track wagering, which then affords an opportunity to offer even more attractive purses. When a racetrack is less successful, purses decline and the cycle reverses.”

The same dynamic is reflected in EPMA-Europe’s recent study on the economic and social contribution of horseracing

• European horse betting and the horse industry is large and vivid – 40,000 breeders, 300,000 jobs, 500 racecourses, 4% of land used to produce horse feed, 80,000 races annually, 170,000 race horses, 20 million betters, 35 billion euro of bets, over 1.8 billion euro paid in government taxes
• Horse racing fosters social cohesion, events of national importance, draws diversified spectators and attracts varied profiles of betters (in France 29% of betters are age 18-34 and 33% are age 35-49; 34% of betters are women; 67% began to bet through their friends or relatives who also bet; in 2009 there were 6.5 million clients/punters)
• Betting is the main component of horseracing funding; and horseracing employment is closely correlated to horse betting handle
• Horse breeding is driven by purses financed by betting (.82 correlation to number of breeders; .94 correlation to number of foals, mares and stallions)
• Countries with uniform regulation and legal frameworks prosper; those with non-uniform regulation decline; fall in pari-mutuel handle leads to decline in betting contribution to the industry, fewer industry jobs, lower purses, fewer top quality horses, decline in racing quality, and fewer betters

The Rutgers study summarized it well, for New Jersey and perhaps for the entire US equine industry:

Wagering Product in the US

A review of wagering statistics in the US suggests a product that is too predictable, too uniform and perhaps uninteresting to all but professional horseplayers who utilize technology to search for wagers that it deems attractive from a return on investment standpoint. Uniformity of product and uniformity of past performance data creates a relatively easy basis for computer modeling.

Horse racing in other countries where pari-mutuel wagering remains effective, offer a far less uniform product and therefore less data regarding horse past performance. It would appear that these products offer an attractive proposition to a greater cross section of the population/demographic and can compete with lottery and other wagering forms. Some countries offer more variation in wagering options including forms of super-bets which are limited in availability to a single daily race or a single set of races on specific days that provide large pools. Certain “Super-Bets” offer automated, computer generated selections for those that want to play but not handicap (e.g., SWE’s “Harry Boy”). It would appear that a longer period from engagement to race day permits more handicapping time for these races (e.g., seven day engagement period in FR).Tracks in other countries do not have slot machines onsite although casino competition exists. The successful pari-mutuel countries do, however, have numerous off-track outlets and coordinated internet wagering vehicles.

Throughout 2011 we have sampled various harness betting statistics in the US, Canada (Woodbine) and in Europe with the findings shown below:

US tracks sampled do not include half-mile tracks. European tracks include major tracks in France, Belgium, Holland, Germany and Spain. Field size would seem to be a driver of higher favorite odds and lower favorite winning percentage. Other determinants may be varying distances, starting and handicap methods, track surfaces, sulky and under-saddle racing, conditions based on age, sex and lifetime earnings and even clockwise and counterclockwise direction. The European product design appears to create a fair and ethical “game of chance” that appeals to a wide audience, not just to professional handicappers. Performance enhancing medications are not permitted.

Creation of a Super Product, a “Daily Super Bet” to complement lottery and slots

A vehicle that can create pari-mutuel handle growth and exposure to the masses is the “Daily Super-Bet”. Concepts vary (Quinte+, V75, and V64) but the principles are similar:

• Limited availability (exclusive to one race/day or several races on a single day from a single racetrack)
• Available through authorized simulcast and account wagering outlets
• Generate large common pools
• Provide the probability of large payoffs, typically driven by large fields, widely dispersed odds without prohibitive favorites
• Promoted widely by betting organizers/operators and their affiliates

Largely populated states such as New York, Pennsylvania and others theoretically have the opportunity to create such bets given cooperation of racetrack operators, lottery commissions and the like. Horsemen’s associations may have the opportunity to influence the creation of these bets starting with its sponsored stakes and given changes in race conditions.

“Jackpot” bets with huge payoffs create a “game of chance”. We presently do not have an opportunity to attract anyone to bet except for the serious handicapper. “Quinte+” races in France typically generate handle in the 400,000 euro to 2 million euro range, on a single race, seemingly connecting with casual bettors. In 2009 there were 189 Quinte+ (France) payoffs of 100,000 euros or more. Another feature of these “attractive” races is that they create a lottery-like bet where takeout appears not to be a material issue. The most recent European Pari-Mutuel Association (EPMA) statistics from 2009 show that the V75 and V64 in Sweden generated 45% of its total handle. In Norway the same bets contribute 38% and in France the daily Quinte alone is 21.9% of its 9.3 billion euro revenue. Further, PMU France revenues have grown every year from 1999-2009 and at a compounded annual growth rate of 5.5%, increasing by over 71% from the 1999 level.

Use “Daily Super-Bet” funds to seed and distribute funding to broader initiatives such as product change, organization/administration and promotion

Conceptually the distribution of “Super-Bet” takeout could generate funding for promotion of the event itself to patrons, media outlets, sponsors and even equine industry entities excluding the horseracing segment. The “Super-Bet” could, if successful, be the driver of expanded change to the racing and wagering product, organizational uniformity and continuous expanded promotion.

Horsemen’s Associations as Role Model, as Change Agent

Conditions change could enhance the stake race relevance and exposure. Changes could become the basis for expanded stakes change in the areas of eliminations, field size, post position draw, distance, purse distribution, purse enhancement based on fan attendance. There may be opportunity to merge or expand race conditions based on age and sex, thereby encouraging leading horses to remain active longer, and perhaps be used for both racing and breeding. Examples could include open events for three year-olds and up (horses and mares).

Through stakes, horsemen’s organizations can influence investment, owner/fan development, types of bets on its events, scheduling to maximize simulcasting and broadcast coverage, and attracting greater attendance/social interaction. By exerting control over stakes events these organizations can and should become the chief advocates of US harness racing.