Bounce Back - By Dan Liebman

The general economy in the United States is starting to show signs of recovery, elements of which are necessary to improve individual industries, such as the business of breeding and racing Thoroughbreds.

On Aug. 6, the U.S. Senate approved a measure already passed by the House for $2 billion in additional funding for the program known as “Cash for Clunkers.” Though the program, which provides a hefty incentive to trade in old vehicles getting bad mileage for newer, more efficient models, is a short-term stimulus, it does seem to be working to help dealers sell cars and encourage consumers to spend money.

The following day an announced fall in the unemployment rate was unexpected, so even though the economy lost 247,000 jobs in July, the rate improved from 9.5% to 9.4%. During all seven recessions in this country since 1970, unemployment has continued to rise for months following the official end of the recession. While most economists believe the unemployment rate will hit 10%, the fact that it is slowing is certainly a positive sign.

At the close of business Aug. 7, the Dow Jones Industrial Average registered 9,370, a new high for the year. The index, often used to measure the health and direction of the stock market, sat at 8,776 at the end of 2008, dropped to near 7,000 in February, and then saw a big jump in July as confidence in the economy grew.

The racing and breeding industries have not been immune from the economic pains gripping not only this country, but most others around the globe. Handle began dropping early in 2008, and purses naturally followed suit. The trend continues.

In July the amount wagered on U.S. races dropped 13.4% from the corresponding month a year ago, and year-to-date, handle is down 10.9%, according to Equibase statistics. Purses paid to owners decreased 7.35% during the month and for the year are down 6.27%.

In 2008 U.S. handle declined 7.2% from 2007 to $13.67 billion, its lowest level since $13.115 billion was estimated to have been wagered in 1998. The 2008 figure represented a 9.9% drop from a record $15.178 billion wagered in 2003.

Purses did not start falling until the third quarter of last year. They were actually up 2.63% through August 2008 but at the end of the third quarter had fallen 2.37%. That is not surprising, however, considering September 2008 is seen as the tipping point when unemployment reached its highest point in five years, the housing crisis deepened, and several major banks failed, most significantly Washington Mutual.

Purses last year dropped 1.3% to $1.16 billion, the first time that figure had decreased in three years. This year’s decline in purses will certainly be more dramatic.

The downward trend in purses is not solely because less is being wagered on races, but because the public is also retreating from alternative gaming, which helps fund purses. Not only are racinos feeling the pinch, but so, too, are Nevada casinos. The latest revenue report from the Nevada Gaming Control Board, for May but released in July, showed casino winnings down 8.3%, the 17th consecutive month of decline. A larger drop was seen in the race books, off 12.3% for the month.

Racing industry officials are quick to place the blame for the declines in handle and purses on the economy. Certainly the recession is a major factor, but many other issues have also contributed, such as disputes between tracks and horsemen over advance deposit wagering; issues with large gamblers, such as use of illegal medications and a refusal by some to bet on synthetic surfaces; and a lack of funds to market racing in its competition with other sports and gambling options.

The U.S. economy will rebound; it always does.

Decisions made today will affect whether the Thoroughbred industry will rebound along with it.

4 Comments

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RobfromBMore

Dan, good points on the economy in general. Though I love the horses and betting, in a time of recession and a person's choice to gamble on horses, slots, or whatever or feed their family or pay the mortgage, I highly recommend that people feed their family and pay the mortgage first. Where horse racing can make inroads is re-introducing the sport to their local neighborhoods and work force. Going to the races should be: Entertainment, Watching a sport and Gambling. Tracks that make going to the races a real deal with clean facilities and activities for the whole family are: Keeneland, Delaware Park, Saratoga, Penn National and Del Mar. I have never been to Santa Anita which I heard is beautiful.

Dumps like Pimlico racecourse here in Baltimore are nowhere to take a women to the track. Also, racing unless it is at Saratoga, Keeneland or Del Mar is a losing proposition and even these three tracks will eventually have to have slots to survive. Without slot revenues, almost any track, Churchill, Keeneland, Saratoga will eventually not have as good as horses at these premier events. Yes the economy is getting better, Thank you President Obama and local tracks could keep on capitalizing on making the track a great experience to go to, allow a fan to learn about the sport and hard work to get a horse to run and maybe the fan could win a few dollars. Horse Racing is still one of the greatest wagers to make even with the takeout that one could make. The Pick Four is the greatest bet out there, much better than playing a stupid lottery. Horse racing handle will go up next year and the increased purses being paid out are being fulled by the slot machine betting.

12 Aug 2009 1:31 PM
Rachel

Gee, Sorry purses were only a billion.

13 Aug 2009 1:11 PM
FourCats

Hey Rachel,

Thanks for the sarcastic remark.

The average racehorse in this country earns back approximately half of what it costs to keep him/her in training.  And that includes the very few that make big bucks so the median is significantly lower.  Don't know what you do for a living but why don't you go to your boss and tell him/her that you make too much money because you are actually walking away with more than it costs you to have a job.

People decry that the good horses are rushed off to breeding.  Well, no one likes to lose money and that's what happens to most owners who actually race the horses they own.  Until the industry finds a way to make it profitable (if only marginally profitable) to race horses, this industry will continue to decline.  And if the purses are dropping, the problem is getting worse, not better.

14 Aug 2009 1:53 PM
Lena Turner

What has happen to Stardom Bound?????? I never see any info on her and I really liked her. What is going on with this filly??

16 Aug 2009 6:49 PM

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