HORSE RACING : Ultimately, It Will Be OTB or Nothing

The small fields that characterize so many races across the country -- and that will be much more prevalent in the coming years -- aren’t really due to a horse shortage. They are caused by an owner shortage. The economics of buying and racing thoroughbreds are bad enough to discourage even people who love the game. Because owners aren’t buying horses, breeders are producing fewer of them.

Even people in the industry who try to recruit new owners acknowledge they can’t offer realistic hopes of making profits. King Leatherbury, the third-winningest trainer of all time, said, “I try to sell this as a hobby, a form of recreation. People in this game should have money they can afford to lose.” In tough economic times, this is an increasingly tough sell.

Obviously, the remedy for the sport’s fundamental problem is higher purses, but if a typical track prospered enough to boost its purses by 10 percent, by 20 percent, would it really make a difference? Santa Anita has the best purse structure in the nation, with $30,000 pots for bottom-level allowance races, but even it was plagued by small fields last winter.

Racing needs purses that are drastically higher -- and this will require some drastic changes in the basic structure of the industry.

The economics of horse racing have several interrelated variables: the size of the total horse population, the number of races run, the amount wagered on those races and purse money. These interrelationships can get complicated. As the horse population drops, the average horse should earn more money. But when the horse population drops, the size of fields grows smaller and less attractive as betting propositions; bettors wager less on them and purses drop.

Nevertheless, the forces of economics will dictate a scenario that is fairly predictable. The horse population will continue to drop -- perhaps to a level that is two-thirds of what it is today. Weaker tracks will be caught in a downward spiral. With smaller fields, their betting will decrease; with less betting, purses will drop; with smaller purses, more owners and horses will defect. Many of these tracks will not be able to conduct the kind of racing schedules they do now. The remedy for such marginal tracks is well known by now: simulcasting and intertrack betting.

Canterbury Downs in Minneapolis is ailing, but during the winter months it pipes in simulcasts from Santa Anita. Erie, Pa., couldn’t support its local racetrack, which went bankrupt, so now the city’s residents bet on simulcasts from Philadelphia Park and Penn National.

Garden State and Philadelphia Park raced in direct competition with each other for several months this year, a battle that has driven Philadelphia Park to the brink of bankruptcy. Both managements recognize they will have to divide the live racing dates and simulcast to each other.

Horsemen used to dread and fight such contractions of the racing industry. But trainers are now being put under such uncomfortable pressure to fill races at tracks that are short of horses that their opposition is relenting. When Pimlico trimmed its schedule from six to five days a week, vice president Tim Capps said, “We got virtually no flak. There was almost a sense of relief among horsemen.”

It’s going to be sad and painful in many cases, but marginal operations such as Ak-Sar-Ben in Nebraska, Prairie Meadows in Iowa, Mountaineer Park in West Virginia and Canterbury Downs may wind up principally as simulcast outlets. They have enough trouble supporting live racing now, and they will be the victims when a shortage of horses trims their six-horse fields to four-horse races that nobody wants to watch or bet. Some of the money bet at such outlets will flow to strong tracks that offer live racing, creating larger handles and larger purses.

But intertrack betting alone isn’t going to transform the economy of the racing industry. People in the sport initially thought intertrack betting was a panacea -- witness the way Maryland racing boomed when Pimlico-to-Laurel simulcasting was introduced -- but it is not. The reason is that intertrack betting tends to bring the sport to existing fans -- not new ones -- and eventually knocks some of them out of action because of overexposure.

After the initial growth that was spurred by simulcasting, business in Maryland eventually leveled off and then declined. New Jersey had the country’s first big intertrack betting network and its business has taken a nosedive, because the same customers keep coming back day after day and getting their bankrolls ground up through the parimutuel process.

Everybody in the sport ought to know by now that off-track betting is the way to generate significantly high levels of wagering. It could take many possible forms: neighborhood OTB shops, betting outlets in barrooms, telephone wagering coupled with race coverage on cable TV.

Yet the industry continues to move in slow motion toward this inevitable end, partly because New York’s initial experiences with OTB left a bad taste in everybody’s mouth; partly because of political resistance; and partly because of conservatism and nostalgia for the old days when 50,000 people would crowd a track to cheer for live horses.

“We’re still debating things about which there should be no debate any more,” said racetrack consultant Tom Aronson. “There is no alternative now but for this sport to aggressively embrace every form of OTB possible.”

There is an existing model for the U.S racing industry to envy and emulate: Australia. Its business was suffering and its purses were low in the early 1960s, but industry leaders were nevertheless reluctant to embrace off-track betting because they knew it would hurt live attendance.

But when OTB saturated the country, betting totals skyrocketed and pushed purses so high that buying a racehorse became a rational investment. People at every level of society became horse owners. Large fields and high-quality racing spurred more interest in the sport and more wagering, and purse money went even higher.

The racing industry in the United States has two choices for its future. Its leaders can plot its changes rationally, reduce racing dates, foster interstate cooperation and interstate simulcasting and expand off-track betting broadly.

Or the industry can let the forces of economics do the job for them in a ruthless fashion, driving more owners and breeders out of the game and bankrupting racetracks until only the strong survive. Based on the evidence to date, the industry has chosen the latter course.