Newz Forum: OTHER: Horse Racing Malaise

This is generally a good portion of the annual sporting calendar for me. Football has begun; the long major league baseball season has been producing - and will continue to produce - meaningful games for the next month or so; and this is the time of year when the best horses in training are gearing up for a run at the Breeders' Cup races. Oh, I'm still ready to play the Breeders' cup races and I'm still psyched about them, but the state of horseracing as a sport is pretty miserable.


I wrote earlier on that Hollywood Park was about to be sold by Churchill Downs to the Bay Meadows Land Company; that sale has since closed and the new owners have started a three-year clock ticking on Hollywood Park and the Bay Meadows racetrack in San Mateo California. Sometime in the next three years, the company says that either California tracks have to be allowed to have slot machines or there has to be some kind of subsidy forthcoming from either the state coffers and/or the Indian tribal gaming establishments in California. Absent new revenue streams, both tracks will be closed and the land used for development purposes. I don't know the value of the land under Bay Meadows, but I've been to Hollywood Park and that land is valuable indeed.

That may not sound ominous enough all by itself to give me pangs of despair, but it is part of a disturbing spiral of events. Churchill Downs sold off an asset that was "underperforming expectations" and that's not so unusual. However, now one of Churchill Downs' other assets will also be underperforming. That asset would be the Fair Grounds racetrack in the New Orleans area; it will be "underperforming" because it is "under water". I’'m sure that the track was insured to some degree, but Churchill Downs has yet to say whether or not they will rebuild the Fair Grounds. To keep options open, they have arranged to run a shortened race meeting at Louisiana Downs in Bossier City, Louisiana. So, it is possible that another big city in the US will lose a significant racing facility; the Fair Grounds may have seen its last photo finish.

Churchill Downs is generally one of the more stable and steady portions of the racing industry. So when these kinds of things happen to them, I force myself to look around and wonder how things are going in other parts of the racing world. The answer is, "Not very well, thank you." Magna Entertainment is another major player in the racing business; I've already ranted on their dismal properties in Maryland saying that the Preakness needs to be moved elsewhere; I won't bore you with a repeat of that here. I will tell you that the latest idea from Magna Entertainment is to cut the racing dates at Pimlico and Laurel from 196 days to 112 days. They say that will allow them to attract larger fields of horses per race and to offer much higher purses for the races they do run. And presumably, that will increase the handle. Naturally, the horsemen and the owners want no part of this reduction in dates. I'll have more to say about this saga later.

Maryland has not been a feather in the cap for Magna Entertainment as custodians of racing there. Lest you think their performance there is an anomaly, things are not going all that well in some other Magna Entertainment venues. Gary West covers racing for the Fort Worth Star-Telegram. Several months ago, he noted that Lone Star Park - a Magna Entertainment property that hosted the Breeders' Cup events last year - had a dismal spring/summer meeting with attendance down almost 20% and the handle down more than 12%. His explanation is that Lone Star just could not compete with the comfort and convenience of Internet betting sites or the variety offered by casinos. Lone Star Park had been a successful venture through 2002 and that's why Magna Entertainment bought it in the first place. Now it is in the throes of a death spiral and the company is looking at its quarterly earnings reports and allowing this asset to devalue even further.

The financial misfortunes of Churchill Downs and Magna Entertainment are important for another reason. There has been a major set of scandals in New York related to the New York Racing Association. There was a Federal indictment against this group that was recently dismissed when the NYRA agreed to pay multiple millions of dollars in fines. It seems that mutual clerks had some kind of scam going on there to obviate the need to pay Federal taxes and had been working that scam for about 10 years; I don't know all the details here, but it is never a good thing to get yourself crosswise with the IRS. Additionally, the NYRA had to fire two of their top officials when those officials were named in a large indictment related to those officials and others taking cash bribes to allow jockeys to ride even though the jockeys were way overweight. Frankly, this "riding overweight" scandal doesn't make a lot of sense to me and it could well be politically motivated by a state attorney general who has gubernatorial aspirations. But at the moment, it is a black eye for an industry that needs an extreme makeover a lot more than it needs another black eye.

The franchise to run horseracing in New York goes up for a new bid in 2007 and it appears as if slot machines are going to be tried at Aqueduct in the near future. So there might be a way to infuse some money into the industry but there needs to be a financially sound company out there ready to make a serious bid. The NYRA has not exactly been a force for collegiality in the industry over the years so if they win the franchise again, it is not likely that the situation will improve a whole lot. Sadly, Churchill Downs and Magna Entertainment don't look all that financially sound at the moment and may not be able to make a serious bid here.

Even if they can and do, any success they may have in getting into NY racing could exacerbate another major problem with racing: Churchill Downs and Magna Entertainment control far too much of the top shelf racing in the country because they own far too many racing venues. They don’t come anywhere near the size level that would run them afoul of the anti-trust laws, but as a pair, they control far too much of it. Add to their part of the business the fact that Harrah's owns tracks to - through some subsidiary, as I understand it - and the situation exists where racing is being managed on a quarter-to-quarter basis when it really needs some kind of long-term vision. At the moment, there is only one thing that passes for vision in the racing industry and basically, it is nothing more than a mantra repeated over and over again by the zombies who run racing:

Must ... have ... slot ... machines ... Must ... have ...

Even at Saratoga, the handle was down - albeit ever so slightly - this year. The racing industry is in serious trouble and everyone is too busy with "other things" to step back and look at the problems and figure out a way to correct them. State legislators need to start figuring out ways to keep racetracks profitable. If that means slot machines, so be it; if there are other ideas out there, then someone needs to champion them and get some of them passed. Legislators need to remember that the state gets a small percentage of the handle at the track and that revenue will disappear if the track disappears. And in states with a significant racing presence, there is also a horse breeding industry that exists in that state which creates and maintains jobs in that state. Kill off the tracks and the racing industry and those jobs will similarly die.

The legislators also charter and define the authorities of the various state racing commissions. These are bureaucratic entities which behave according to the First Law of Bureaucracy:

At all costs, a bureaucracy must protect its turf and try to annex the authorities of other bureaucracies without simultaneously annexing any of their responsibilities.

State racing commissions achieve this behavior by creating and maintaining great disparities in what is "legal" in one state as opposed to a neighboring state. All that does is create a situation where standardization can only come from a Federal authority and there is exactly no enthusiasm for that now. Congress is too worried about steroids in baseball and finding a way to oversee boxing - two blips on the radar screen of 21st Century man to be sure - to think about horse racing any time in the next decade. And would it really be better for the Feds to run racing? About the only positive thing I can see there is that when Michel Browne goes looking for a Federal job next time, they can stick him in the "Racing Oversight Authority" and leave the job of FEMA director to someone who might actually know something about emergency management.

Quite frankly, the horsemen and owners share in the responsibility for the state of racing today and show no propensity to make it better. Let's be clear here. It is very much to the benefit of owners and trainers to have lots of races - even if they aren't high quality races and even if the public really does not want to see them or bet on them. The reason is that the winner of the race takes home a large share of the purse. So with lots of races, owners and trainers can "spot" their horses and look for weak fields they can beat. If a local "monster" or two enters the race, they just scratch their "average horse" and go looking for another advantageous spot to put him. If races - or race dates - get slashed, they will have to run the horse against tougher fields and that means fewer wins to stroke their egos and fill their wallets.

Horseracing is a sport that is in trouble. If there is a visionary leader out there who has the ideas and the charisma to pull the sport out of the morass it finds itself in, that person is staying incognito. The Breeders' Cup races will be here in a month; people will celebrate those races and there will be a patina of class and good feeling spread over the sport on that day. There will be more Pollyanna statements made on TV that day than you will be able to count. But to paraphrase what it says in the Book of Genesis:

And the evening and the morning were the next day...

Curmudgeon