U.S. purses rise, but wagering declines in November

by | 12.04.2011 | 12:09pm
Economic Indicators graph

(The following information was provided by Equibase)

THOROUGHBRED RACING ECONOMIC INDICATORS
FOR NOVEMBER 2011

November 2011 vs. November 2010

Indicator Nov-11 Nov-10 % Change
Wagering on U.S. Races* $874,386,107 $905,848,904 -3.47%
U.S. Purses $101,876,670 $95,522,074 6.65%
U.S. Race Days 392 375 4.53%

YTD 2011 vs. YTD 2010

Indicator YTD 2011 YTD 2010 % Change
Wagering on U.S. Races* $9,970,704,337 $10,736,200,808 -7.13%
U.S. Purses $987,513,084 $971,187,788 1.68%
U.S. Race Days 4,953 5,159 -3.99%

*Includes worldwide commingled wagering on U.S. races

  • ITP

    Purses up and handle down……great effing strategy!

    I guess when purses start dropping at some point, racing thinks they will just be able to turn the handle pump back on.

    Pretty sad that next year, if we continue on the same pace, handle will possibly dip to single digit billions for the first time since, I’m guessing the 80’s, as the Jockey Club handle chart only goes back to 1990 and it was over $10 billion then.

  • frankie

    Every track will look like Pennsylvania racing soon.Good purses very little handle,and then the slot money will be taking away…..and then it’s over.

  • Carrie

    Handle down is not always purses down. If the handle is coming from sources that direct more of the takeout to purses instead of third party ADW providers, purses can be higher with less handle.

    Look at the NY model where the OTB’s were pocketing the majority of the takeout with little returned to racing. Now that that a lot of that handle has been diverted to NYRA more per dollar wagered is returned to the purse account even though total handle is down purses were up. (before slots).

    I’ll take that.

  • ITP

    Carrie,

    Correct!

    Hopefully racing’s business strategy you speak of can get handle to drop to $5 billion a year and purses go up 20%.

    The people who want handle to go up 100% and purses go up 20% are insane.

  • Carrie

    One thing at a time ITP. Fixing the system where the poachers do not siphon the majority of takeout for themselves is just one step to correcting the issues that the horse industry faces.
    Once the industry has gained control of its content and customers again they will be able to afford to grow that customer base. Right now most of the money is siphoned out by for profit and illegal bookmakers making it hard for the industry to reduce the price of its product to the betting customer.
    Direct your handle to an on track bet taker so that you are supporting the sport that you use for your enjoyment or your living.

  • Charli125

    Carrie,

    “Once the industry has gained control of its content and customers again they will be able to afford to grow that customer base.”

    Twinspires is the biggest ADW out there, and it is officially track owned. What have they done to grow the customer base? They bought Youbet which was very player friendly and instantly removed all rebating except for their player rewards plan which was something like a .01% rebate. Now they’ve further reduced that. They’ve repeatedly made very deliberate customer unfriendly decisions.

  • sharon

    the people that shill for the tracks don’t bet…ever…you can book THAT

  • David

    So the idea is to have all the meets run by horsemen and the bettors? That way horsemen will get their fair share, bettors won’t have to pay those high prices and, best of all, the nasty ole tracks will be gone forever. Then, we’ll just have to rake a bit to pay for a few people run things, conduct some real marketing, possibly a little financing go keep things nice and make a few improvements and . . . wait a minute, we’re back where we started! Oh my!

  • CG

    If those numbers are accurate, purse money is 11.5% of handle. Yes, a lot of that comes from alternative gambling sources, but when racing was thriving, didn’t purse money only make up around 3-5% of handle?
    Something is broken big time.

  • Ray Paulick

    CG,

    This is from a Fall 2010 article in Horsemen’s Journal:

    “Purses derived from pari-mutuel wagering were 6.33 percent of the total U.S. handle in 2009. That percentage has varied since 1993 from a high of 7.26 percent in 1995 to a low of 5.97 percent in 2003, but has remained around 6.3 percent during the past three years. Variations in simulcast takeouts and fees are responsible for the fluctuation in return from year to year.”

  • CG

    Ray, I’m not denying that. However, there seems to be a good chunk of coin derived from elsewhere. I know I read articles from the 50’s and early 60’s that stated that purse money was around 3-5% of the the handle (back then, collective takeout was lower and state taxes were much higher).
    My point is that horsemen are looking for a bigger piece of the pie….well their piece has never been higher and horse racing is dwindling.
    The percentage of purse money that goes to purses is much much lower everywhere else in the world as well, and there is actual growth in some of those jurisdictions.

  • Ray Paulick

    CG…
    I don’t want to get into a back and forth with someone who is never wrong, but the 6.33% is lower than the 7.26% in 1995. I don’t quite understand how you can say it’s never been higher.

  • CG

    I’m including alternative gambling money. If you have a calculator handy, what is $101,876,670 (purse money) divided by $874,386,107 (total handle)?

    My calculator comes up with a number higher than 6.33 or 7.26%. And I just bought it a couple of months ago.

  • David

    Bottom line is available commissions from gross handle less taxes and mutually agreed deducts (breed funds, etc.) are split by the track and the horsemen (purses) 50-50%. Yes, there are slight variances and some states operate by defined spits but, essentially, the deal is 50-50. The main variables over the years have been the decline in taxes and the shift from straight wagers to exotics, both of which have increased both shares. As to supplements from alternative gaming proceeds they’re typically prescribed by statue and generally favor the purse account. Its just math.

  • Ray Paulick

    CG

    Or course the percentage is much higher when you include slot subsidies to purses, but I’m not sure I understand the relevance.

    Percentage of handle going to purses is lower today than it was 15 years ago. In 1990, at the beginning of the full card simulcast era, purse/handle ratio was 7.6%.

    Have a nice night.

  • CG

    Maybe I’ll explain the relevance in my next blog piece:)

  • PTP

    Purses have been one of the few bright spots for racing the last dozen or so years.

    From 1998 to 2008 we had a nice 28% bump in purses in NA from $904M to $1.17B. Because there were fewer races, the average purse per race was up a whopping 31%.

    If handle kept pace we’d have handles approaching $20B. It looks like this year we’ll do about half that.

    To have your purses up 28% and have your core business be cut in half is pretty good, I think. There are probably a gazillion companies in this world who’d love to lose half their business and somehow grow 28%.

    PTP

  • Ray Paulick

    PTP,

    Not sure your math is correct. I have the average purse per race going up even a higher percentage than you calculated over that 1998-2008 time frame.

    I’m sure you’re right that a gazillion businesses would love to lose half their revenue and grow 28%.

    However, how many businesses would enter an industry knowing that $2 billion must be invested in expenses in order to fight over less than $1 billion in revenue?

    Those are worse odds than most lotteries give someone.

  • PTP

    None Ray, that’s why we’re all nuts.

    In 1912 it was written (in the magazine of the day which name escapes me at the moment) that horse racing is not a business, it’s a hobby, because only 1 out of every 500 horse owners make money. I think that’s probably accurate!

    PTP

  • Ray Paulick

    PTP

    On the plus side, racehorse owners do better financially than steeplechase owners. But there’s not enough of them around to support 50,000 races a year.

  • David

    Gross proceeds from NA racing – 16b in ’00, about 10b this year. Regardless of the math, if growth for any stakeholder is a function of splits from another product, good luck on that legacy thing.

  • frankie

    The great Mr.Carstanjen,The President and COO of Churchill Downs said…

    “You have the horse-racing business, producing horse races at our four racetracks, and that’s a very tough business. That business has declined beyond just the headwind that the economy has given us. ”

  • CG

    Ray, historically, owning a race horse is a losing business no different than collectively betting on horses (mathematically it is impossible for net gains by the masses in either).
    Both are collective negative expectation games.
    The key for both horse owners and Horseplayers to stay in the game is the possibility that some can be long term winners, if one is smart enough, and lucky enough.
    That possibility is much more realistic for only horse owners today.
    What gets me is why support the horse ownership side blatantly when much of what is needed to increase their odds (and only temporarily) comes at the expense of the future of the game and the customer (the bettor).
    Horse owners are really customers too, but somehow they are more special than Horseplayers? It doesn’t make sense to me.

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