It's well-established the National Handicapping Championship has grown substantially in recent years, so much so that some horseplayers have begun taking a closer look at how it all works, and where the money goes.
My experience is limited to local contests at Keeneland, which does a very good job for a very reasonable fee. I don't keep track of the NHC Tour, and haven't been to Las Vegas to watch the now three-day finals.
A recent blog series by Lenny Moon of Equinometry.com triggered my interest. Whether you agree with some of the assumptions and figures isn't the point; the blogs are loaded with detail and offer by far the best explanation I've seen of how the NHC works. I had no clue how complicated this is; Moon deserves credit for investing his time in this endeavor.
I strongly suggest reading the three installments and coming to your own conclusions. What follows is a light overview; BloodHorse.com asked National Thoroughbred Racing Association executive Keith Chamblin, who throughout the year spends a lot of time on the NHC, some questions about the tournament dealing with structure, money, and ways to improve it.
Chamblin acknowledged Moon's blogs as well as comments the NTRA, which houses the NHC, receives from horseplayers.
"They're passionate about it," Chamblin said. "We're passionate about it. We want to be transparent. We can't structure the event properly without input and participation from horseplayers.
"We're doing a pretty good job at growing the event. I'd like it to be $5 million or $10 million someday. I think it can be."
Figures provided by the NTRA show that for 2013 (the finals were held in January 2014) total prize money and awards was $2,069,984. Total revenue was $2,400,273, which includes seat sales of $2,238,913 and NHC Tour memberships worth $161,360.
(Memberships cost $50 per person. They are mandatory to earn a spot in the finals but come with other benefits, such as NTRA Advantage and a voice in Washington, D.C.)
"People argue there shouldn't be any value on that, but if you're putting it down as revenue, you ought to put it down as expenses," Chamblin said.
If Tour memberships are factored out, the "takeout rate" for the NHC is 7.55%, according to NTRA figures. If they are factored in, the takeout rate is 13.76%.
Chamblin said total profit "on paper" is about $330,000. But about $140,000 goes toward expenses for the tournament; money also goes toward the salaries of those involved in the tournament based on how much time is devoted to it, he said.
"Revenue is generated for the NTRA, but profit comes down to how much in salaries is allocated to the operation," Chamblin said. "I'd say it's bringing a little money to the NTRA coffers. But my CEO may say it is killing us."
Various entities–racetracks, advance deposit wagering services, and Daily Racing Form-owned NHC Qualify–pay for seats in the National Handicapping Championship as part of the almost yearlong series of qualifying contests under the NHC Tour. Bricks-and-mortar facilities can get three seats for $10,000; non-NTRA members and online entities pay $6,500 a seat, but that has increased to $7,250 this year.
The seats, Chamblin said, are the prizes for winning qualifying tournaments. He said the NHC Tour was "added at the behest of players and host sites about five years ago as a way to connect the series of qualifiers through points and prize money."
The number of NHC seats won through online contests has grown from 40 in 2006 to 250–roughly half the total seats–in 2013. Chamblin said that in 2013 there 64 tournaments at bricks-and-mortar facilities and 81 online tournaments.
The shift isn't unexpected, but racetracks and off-track betting facilities that participate in the NHC find value in the contests because they attract patrons, some of whom travel a great distance. They put money through the betting machines and, if a racetrack has a casino and hotel, may spend a few days.
"It has become a circuit," Chamblin said, "and we want to do everything within reason, and sometimes more, to preserve, grow, and strengthen bricks-and-mortar tournaments."
During a recent exchange on Twitter, some contest players expressed upset over receiving numerous W2 forms for the value of seats, mainly from online operators. Chamblin said NTRA attorneys have advised the organization taxes shouldn't be paid on contest seats.
"(Players) should not have to pay taxes on seats. When a horseplayer says he or she was sent a tax form, we try to reach out to the host site and explain the way most host sites handle it. There really is no value to that seat from a tax standpoint. You can't sell it. You can't put it on e-bay."
Chamblin wouldn't divulge how much sponsors such as DRF, the Racetrack Television Network, and host site Treasure Island contribute, but he did say it's not enough to defray expenses. The sponsorships help fund the event and the NTRA, he said.
There could be several changes when the next NHC rolls around in early 2014. The "final table" of 10 players will remain, but after receiving complaints about announcing their selections before races were run, the picks won't be released until the horses break from the gate.
The prize structure most likely will be altered. Though the top payout of $750,000 is expected to remain for the champion from the final 50 players, amounts for the consolation tournament and daily bonuses may change.
For instance, the winner of the consolation tournament got $20,000 and a $10,000 spot in the Breeders' Cup Betting Challenge, but the sixth-place finisher in the top and final 50 earned $17,000 and a 12-month subscription to the Racetrack Television Network; the two daily bonus winners each got $6,000 and a $10,000 BCBC spot, while 25th in the final was worth $7,200 and the RTN subscription.
"We've got to do a couple of things differently. The prize pool for instance–we don't have it right yet. By no means is it perfect. We continue to tweak it every year."
The NHC and related NHC Tour clearly have grown in popularity. Using some of the "revenue" to pay expenses and partial salaries is more than reasonable, and remember, the NTRA, along with the American Horse Council, are on the front line on Capitol Hill, protecting things such as pari-mutuel wagering. There could be issues, however, when the NTRA or its partners–they could have financial agendas–try to make the NHC a profit center.
The event and related yearlong contests will be fine, and probably grow, as long as the horseplayers are the true benefactors of the profit.