I was recently asked why so many people in the American Racing industry are so critical of the industry they participate in. I was also asked why we critics don’t spend our time offering suggestions for fixing racing. The folks who asked me these questions are members of a large community in racing that think public criticism can only do further damage to the American Racing industry. Both issues, criticisms and solutions, are inextricably linked.
Many strong American Racing critics have spent years suggesting and recommending changes to racing executives, association representatives and regulators. Many of us have joined executive boards and advisory committees. We have also made calls, presented issues, offered solutions, created PowerPoints, written letters and sent emails to those in a position to address issues. What we have often found is that the same people who have authored the massive industry decline, and can regulate change, are only interested in “simple inexpensive, non-conflict oriented quick fixes”. Yep, they are politicians not problem solvers, so multi-faceted integrated solutions which are required to solve complex systemic problems are simply not what politicians seek.
When critics make complex suggestions, they are typically ignored by people who favor inexpensive simplicity and the status quo. The critics naturally assume that those in power must not understand they are in a crisis. Consequently, they attempt to create “crisis understanding”, which can drive organizational innovation and change. Unfortunately, the same people who ignore complex or expensive multi-faceted solutions are also inclined to deny clear evidence of a crisis, particularly when their past action/inaction caused the crisis in the first place.
This is where the American Racing industry has been for many years. Major multi-faceted immediate change and innovation is required to address the mess that is racing, but only slowly evolving simple changes are acceptable to those in charge. So, American Racing industry racing executives, regulators and industry associations ridiculously focus on patronizing consumers with baby step changes, as those same consumers continue to direct their dollars toward more trustworthy and interesting consumer options.
The American Racing crisis is real and has been in evidence for decades. Since 2000 pari-mutuel revenue has dropped 21%, and when inflation is considered, the real dollar decline is 49%! Yep, inflation has averaged over 2% per year since 2000 and that means American Racing is today collecting only half of the real dollar pari-mutuel revenue the industry collected at the turn of the century. On top of this shocking two-decade decline, the number of American foals born has dropped 42%, clearly indicating a dramatic decline in the American consumer need for the American racing product!
Of course, these horrible economic indicators are not significant to folks who conveniently and politically only think from one data point to another. Afterall, revenue only drops 1% each year, while foal volume only goes down about 2% per year, right? Yep, that’s exactly how many people think. They go from data point to data point, never recognizing trends or crisis situations. In fact, there are some people in the industry who think things are getting better, or are sure that a magical change will improve the “bad cycle” fortunes of American Racing. In truth, things are getting worse. Baby steps taken in the industry are claimed to be beneficial, but they are really the equivalent of shuffling the deck chairs to improve the situation on a sinking Titanic.
Last year, based upon a recent industry press release, American Racing saw pari-mutuels decrease by 2.0% while purses went up 4.5. These factors are considerably worse than the prior two-decade averages. The net effect of increasing purse expenses 4.5% and seeing revenue decline 2%, when inflation was over 2% last year, negatively impacts profit/loss ratios by near 10%. In other words, losses are accelerating and 2019 was an awful year for the industry in general.
A quick look at the last 5 years in breeding also shows a near 2% decline per year, but a very disturbing state by state trend. Only Pennsylvania saw an increase in breeding over the last half decade, while Kentucky has only seen a 2% decline. Both the Pennsylvania and Kentucky numbers may seem encouraging on the surface however, those state results mask massively accelerating declines in many states. Many states show severe breeding declines, led by states like Minnesota, Washington and Colorado with declines of 78%, 66% and 64%, in just the last 5 years!
What I find more interesting is breeding versus available purses. By looking at the mares being bred in a state and reflecting that against the annual available purses in a state, a metric of breeding per million dollars of purses emerges. This metric reflects the effect purses should have on breeding activity. For example, if purses (racing expenses) in a state go up, so should breeding activity. If purses are cut, breeding activity should naturally go down.
Over the last half decade, of the 24 meaningful racing and breeding states studied, the breeding per million state average went from 31.7 mares bred million down to 21.5, down 33% (2015 through 2019). In fact, 17 of the 24 states (3 out of every 4) saw an over 30% five-year decline in this critical breeding metric, or 6% on average each year! For example, Washington bred 43 mares/million in their state in 2015, but only 18 in 2019. Minnesota went from breeding 10 mares per million in their state in 2015 to only 2 in 2019.
In Kentucky, where 56% of all Thoroughbred breeding in America breeding occurs, the breeding per million number only dropped 14% over the 5-year period. This means that in aggregate, though American breeders are breeding much less than they did 5 years ago, those mares that they do get bred are being shipped to Kentucky for breeding. While that is really no surprise, the degree to which the breeding economy is drying up in most states is shocking!
The data tells the crisis story. Profit positions are deteriorating, big owners are going bankrupt or leaving American racing altogether, consumers are abandoning the sport, new consumers have no interest in the sport, and individual state breeding economies have been decimated. What should we do? Well here are my short form American Racing answers to that question …. again.
First, we must address very public consumer concerns about safety. All American racetracks need to remove dirt surfaces and replace them with state-of-the-art synthetic surfaces such as Tapeta. The data internationally, and even in American racing itself, indicates synthetics are 50 to 120% "more dangerous" than dirt surfaces. Then we need to implement a “one model safety protocol” for all American racetracks. It’s not just about drugs but it is about no race day medication, prescribed pre-race and workout veterinary inspection protocols, out-of-competition testing, consistent medication limits, high quality testing laboratories, defined and strong violation penalties, appropriate whip limits, and backside monitoring through high definition cameras and microphones to not only inspect for cheating but to prevent it.
Second, address the wagering attraction. Advance the risk analysis mechanisms to create fixed odds wagering. Create wagering plus/minus lines (lengths or finishing positions). Create more horse to horse wagering options. Partner with fantasy experts to create weekend fantasy wagering options. Make all basic data wagering information publicly available and free. Models for all of these wagering options, including the advanced use of mobile or table top kiosk technology, exists in the sports betting industry and elsewhere.
Third, address the live entertainment and sporting attraction. Concentrate on the fan experience by running races on a timely basis every 20 to 25 minutes, and fill the gaps with entertainment, fan tours, behind the scenes perspectives, other “prize worthy or charitable” competitions (MMA, boxing, races, track and field, “safe” pet or farm animal events/racing, etc.) The overall fan experience extends to consumer expectations which racing fails at miserably in most cases, at most racetracks. These include contemporary intuitive website designs, call center answering standard operating procedures, decent on-line reservation services, fine dining quality menu options, cleanliness, improved event view seating, and many elements of onsite consumer interaction. Consumers are treated better when purchasing a $6 movie seat online than they are when trying to wager $500 at a racetrack.
Lastly, the consumer experience extends to marketing. When the fan experience is also considered as part of marketing, both are far from contemporary. The inability of racing to secure effective media contracts or relationships, both nationally and locally, prevent effective fan engagement. Social media, when it is utilized, is utilized incorrectly by almost all American Racing institutions. There has to be an entire revamp of American Racing marketing plans and priorities to create greater focus on consumer emotional connections, and “consistent, not occasional” consumer affiliation with equine and human superstars. This disconnect is both severe and unique to American Horse Racing. It requires a funded “consumer focused” marketing innovation program nationally and locally.
In closing, a multi-faceted approach to innovation is required in the American Racing industry. This typically means a centralized approach, like a National Board or Racing Commissioner’s Office. A centralized approach is probably the only way to control innovation and drive change in a generally dysfunctional industry which has spent decades failing to agree on just about anything consumers care about. “Standard Operating Procedures” exist in profitable quality organizations and industries, but American Racing is decades behind in even creating them, much less implementing them!
Well, I hope this answers the questions for those who have asked. And yes, unlike most presidential candidates today, I know change will cost a lot of money. However, after spending years analyzing and fixing some pretty large businesses and studying quality, I know the unknown and unknowable cost of poor consumer quality is immense, and far outweighs the innovation cost required to fix them. If for example, things were simply the same today as they were in the American Racing industry 20 years ago, pari-mutuel revenue would be up over 11 Billion Dollars, and we would have 15,000 more foals born, in 2020! Do you think those results would have paid for Tapeta surfaces, high definition cameras, decent websites and functionality, additional veterinary inspections and the other hard work suggested?
Oh well, such is life in the American Racing Industry. Those in power will continue to patronize critics and consumers, asking for change suggestions. I’m afraid however that they will also continue to only be interested in inexpensive short-term quick fixes, which by the way will never exist, rather than systemic innovations required to address an industry in crisis.
Dave Astar is a race horse owner, stallion owner, breeder, 40 year business executive, and 50 year handicapper.