Trojan Horse
03-28-2010 --
BEWARE OF THE TROJAN HORSE DISQUISED AS VLTs
By Barry Irwin
David Greathouse once said to me "We made a big mistake telling people they could make money racing horses."
The "we" referred to by the bloodstock agent and partner in family owned Glencrest Farm of Central Kentucky were those folks that sold a bill of goods to newcomers by telling them that racing was a financially viable pursuit.
Greathouse made a very insightful comment, one that I have reflected upon for the last 3 decades.
As he pointed out, one only has to look at other equine sports to see how they have presented themselves. Trainers of sport horses, dressage horses and show horses rarely if ever promote their sport to participants based on how much money can be made. The ones that do are not around very long.
Yet, by and large, the cost of keeping a three-day event, dressage, jumper or show horse in training is not insignificant. Any parent of a son or daughter with a horse in training at a local riding academy or stable knows precisely what I mean.
Those involved in these disciplines, however, willingly pay the costs because they receive value from the enterprise. That value, in most instances, is not derived from the earning of prize money or the resale of their animals.
Not that these horses lack value. A top dressage horse or jumper or event performer or even a very good child’s pony can be quite valuable in terms of dollars. The best of these animals sell for prices in the hundreds of thousands to the millions of dollars, especially if they are World Equestrian Games or Olympic quality.
But somewhere along the line, marketers of Thoroughbreds shook the genie out of the bottle and promoted their horses as a means by which one could expect to make a buck.
And it wasn’t just the hardboots of Kentucky, the sharp-tongued bloodstock agents in Florida or the fast-talking middle men in California that focused on the dollars.
The scholarly Joe Estes, a staid, analytical and proper gentleman whose bent for statistical analysis made The Blood-Horse the must-read trade magazine of the Thoroughbred industry, in 1948 developed the Average Earnings Index as the measurement by which sires were rated and ranked. It was all based on how much money the offspring of those stallions earned on the racetrack in a given year.
Clever marketers grabbed the ball and ran with it. Racing, a prospective owner could read and see and hear, was a good way to get rich.
For sure, there is money to be made in the Thoroughbred industry. Owners of farms, especially the majors like Coolmore/Ashford, Darley, WinStar and Lane’s End, need to operate on a sound financial basis and they prosper.
Support staff for horses such as trainers, veterinarians, hospitals, rehab facilities, training centers, transportation and insurance companies all make money. Just as they do in all other equine disciplines.
But the people Greathouse was referring to are the consumers of the horses, and the notion that has been floated for the past century in the United States that owners of racehorses are involved in a money-making venture. We would be better off today, he said, if we had never introduced the notion that one should expect a return on investment in a racehorse.
Can and do some owners of racehorses make money?
Of course.
But the percentage is so small that anybody getting into the game must be realistic and understand that these successful owners are the exception, rather than the rule.
If the marketers of racehorses promoted the enterprise based on racing’s intangibles, rather than the tangibles, it would be better for all concerned. Expectations could be better managed and the inevitable turnover rate of owners would decrease. Also, a lot of pressure would be taken off of the marketers themselves.
So if one cannot count on making money by racing horses, where is the value? Where’s the beef!
NO. 1 REASON TO BUY HORSES? THE THRILL OF RACING
I have been forming racing partnerships since 1987, so I have learned a lot about why people want to race horses. Invariably, the prime motivating factor is the prospect of racing a good horse and experiencing all of the magic and excitement that goes along with it.
The thrill of racing is the number one reason why people buy a racehorse. Yes, there is a lot of posturing about wanting to make money and getting the best deal, but mostly, in my experience, those people making this type of chatter feel they must treat it seriously, because they fully realize (consciously or even subconsciously) that they are totally indulging themselves and find a need to justify their purchase of a racehorse.
I know that many reading this will scoff at what they have just read, but I know it to be true in virtually every instance. And here is another reason I know that money is not the primary reason that people buy horses: even if these folks that are so concerned with dollars are offered a reasonable profit, they invariably do not take it. They will come up with any number of sound reasons for not accepting the profit, such as the tax man’s bite or capital gains holding periods. But in reality, they do not sell because they bought the product to consume it, not primarily to profit from it.
For these people, who form the vast majority of racehorse owners throughout the world, the value is not in the vaunted and much ballyhooed ROI, but in the intangibles, such as pride of ownership and race day thrills.
Have I taken the time to write the preceding 1,000 words just to make a point that people buy racehorses just for the excitement of it all?
C’mon … gimme a break! This is just laying the groundwork. Now, here comes the good part.
Racing is at a critical crossroads in its history, much like it was a third of the way through the last century, when horseracing’s very existence was threatened by those seeking to outlaw it.
The pari-mutuel system of betting, despised by those who wanted to bet with bookmakers, changed the entire face of racing and offered a financial boon to troubled states at a time when the nation faced a worse financial crisis than it does now.
Today, three forces threaten to shut racing down or at the very least, reduce it to a pitiful sideshow. The entities are, in no particular order, racetracks, state governments and gaming interests. In some instances, the racetracks and the casino interests work together. In the future, all three have financial reasons to join forces and work against horseracing.
Right now, there are plenty of people inside of horseracing that see the way to stemming the downward slide and growing the sport is to get in bed with the casinos. There already has been enough evidence on record to indicate that the casinos represent a Trojan horse. They want access inside a racetrack in order to gain a foothold, which they can use to entice both the racetrack and the state to eliminate the expense of horseracing.
Horseracing interests have spent entirely too much capital, time and energy trying or getting into bed with interests whose ultimate goal is to snuff out the game.
Given that the people attracted to horse ownership find more value in the sport than the money involved, I would like to suggest that racing consider making two adjustments that can lead it on a different path, one that hopefully can go some way in establishing a more viable future for the game.
PROMOTE THE SPORT, NOT THE FINANCIAL REWARDS
If I am correct in my contention that the sport trumps the dollar, let’s start by reframing the goals of horse ownership by concentrating on promoting the sport and not the financial rewards to newcomers.
Those marketing horses can take a lead from the top racing partnerships like Dogwood, West Point and Team Valor International. When communicating with newcomers, these outfits stress the intangible aspects of the sport and let neophytes know right up front that if they are getting into racing with the expectation of making a fortune, they are being unrealistic.
Believe me, we are selling our sport short if we think that we must rely on greed and the false promise of life-changing riches in order to attract newcomers and keep them. People, guess what? This sport really is this good!
Secondly, and more importantly, if the sport does indeed trump the dollar and purses are not the end all and be all of the game as we have been told, I suggest that it behooves racetracks to stop pursuing partnerships with casinos and return to their original purpose, which is to promote the sport of horse racing.
I think the non-profit racing associations would be more receptive to this concept, as the for-profit groups seem bent on providing the most return to their shareholders no matter how adversely their actions impact horseracing. Some tracks right now act like they would like to stop producing a live sport altogether.
In the final analysis, the only way our game is going to prosper at a high level again is for the sport to thrive, because it is the sport that provides the driving power, not alternative gaming. Casinos are great for racetracks. They are not good for racing. In the short run, horsemen will be compensated. But in the long run, the casinos will drive them out of business.
MAKE PEACE WITH HORSEPLAYERS
Racetracks that want to stay in business should promote racing. Otherwise, they should not apply for a license and go into the casino business and leave racing alone, so that it can find others to promote it that have their heart in it.
High purses are good, but they are not critical. Racing for years has prospered in many locales where prize money has been very low. It is not ideal to have low purses. But one of the reasons racing in America in particular could use a high purse structure is that expenses to have a horse in training are too high. A lower purse structure, however, could have the benefit of giving a break to gamblers that have supported our enterprise for years.
For racing to prosper again, here is what needs to happen:
1. MEDICATION: racetracks need to take charge of all veterinary supplies to gain control over the use and cost, so that the public is better protected from unscrupulous practitioners and owners can have their horses treated by drugs at as close to cost as possible. Vets can make their money diagnosing and treating horses, like human doctors have forever. They should not look for their compensation from middling strapped owners on the difference in the wholesale and retail price of drugs such as GastroGard and hyaluronic acid.
2. FEED: racetracks need to buy the feed and make it available to horsemen at as close to cost as possible to lower the expense to owners.
3. TAKEOUT: it should be reduced on all wagers to 12 percent, with the state getting 2 percent and the horsemen and the track getting 5 percent each. The states have been greedy for too long and they mostly have budgets inflated by expenses for racing commissions that are woefully inept. Horseplayers have carried the game on their backs for far too long and we need to cut them some slack. It is more important to cater to the bettor than to have higher purses.
So by adjusting to lower purses, horsemen can accomplish a lot. They can make peace with horseplayers. They can keep the casino wolf at bay and improve the chances for the longevity of the sport. And they can concentrate on promoting the game, which in the end is the only thing that can offer it salvation.
In conclusion, racing needs to do whatever it can to concentrate on the core activity, which is racing. The sport must be promoted first and foremost. Secondly, the game must realize that contraction is its friend. By reducing the number of horses bred, the number of tracks in operation and the sheer number of races run, the concentration in quality will only aid the game. Bad horses, bad racetracks and lousy races help nobody. There are too damn many tracks that are nothing but an excuse to have simulcasting.
If by having lower purses the result is that the game contracts, so be it. That way, at least we will find a viable level at which the sport can be sustained. The subsidies from gaming are temporary, no matter what the law says, because as we have all seen, when state budgets get low, the legislators simply amend the law and grab what they need.
Racing must change its focus to promote itself, seek its viable level and send out the best product we can to the bettors that support our game. We need a new model. The present one is broken. It is time to get real.
