THE racing business is about to wrap up 2008 with a daunting collection of negatives – falling attendances, betting declines, purse cuts, collapsing horse sale prices, a sharp drop in media interest.
The landscape looks bleak, with nothing on the horizon to suggest 2009 will be any better. Prophets of gloom are everywhere.
The reality, however, may not be nearly so dismal. In the tumultuous economic climate of the day, few businesses are holding up better than horse racing. It’s not robust, but it’s not yet going under like so many other boats.
All year, racetracks have been fighting an erosion of business. Using total betting volume as the gauge, here’s a partial picture: Gulfstream Park’s all-sources betting fell 5 percent, Belmont Park’s spring meeting down 2.2 percent, Delaware Park 20 percent, Del Mar 7, Saratoga 10, Santa Anita 7, Hollywood Park 1.8, Churchill Downs 11 and Keeneland 17 percent.
Final figures are not yet in, but total horse betting in the U.S. is running about 10 percent below last year. Nothing to celebrate there.
But compared with other gambling wheels and enterprises, racing almost looks buoyant.
For example: Atlantic City’s revenues in September plunged 15 percent, the steepest decline in its 30-year casino history. Plans for two new casinos, worth $7 billion, have been shelved for years. Hundreds of workers have been laid off, including 400 alone from the Borgata.
Las Vegas has not escaped the blight. Through September, its revenues were down 7 percent – and that was before the economic meltdown struck.
Its stocks have been battered. MGM-Mirage, a year ago, was trading at $93 a share. Last week you could buy it for $9. The Boyd Gaming Corp, a major player in Nevada and elsewhere, was selling for $39 a year ago. This week, it was $3.80.
It is hardly necessary to mention the catastrophe in the banking, housing, insurance and auto industries and Wall Street markets. Next to them, racing looks like a gold-plate investment.
Consider this: Warren Buffett, the so-called “Oracle of Omaha” who is the richest man in the world ($62 billion) has seen his Berkshire Hathaway stock plunge a whopping 41 percent. Next to that, the Meadowlands had its betting business shaved 4 percent this fall.
The irony is that Buffett is a fierce critic of gambling, labeling it “a tax on ignorance.” Right now, the Buff’s shareholders could do with a bit of Big M ignorance.
Horsemen and horseplayers habitually complain about racetrack managements for their perceived incompetence, but they look like business geniuses next to the bunglers and rogues running Fannie Mae, Freddie Mac and all the bust-outs flocking to D.C. for bailouts.
The hardest-hit segment of the racing wheel has been the breeding industry. The Keeneland September yearling sales fell 14 percent, which was bad enough, but the November breeding stock sale crashed 45 percent.
“Disaster,” said BloodHorse magazine editor, Dan Liebman. “Brutal. Bloodbath.”
Still, no one is about to pass the basket for the breeders. No segment has prospered so much for so long. They were overdue for a shakeout.
The other major racing disaster has been the near-collapse of Magna Entertainment Corp., Frank Stronach’s public racing arm, which bought a flock of tracks and set out to transform the game with bold new ideas, only to stumble into an ocean of red ink.
Stronach bought Gulfstream Park for $95 million, spent $130 million to renovate it – and essentially ruined it as a horse venue. Magna has lost $400 million in the past four years through similar erratic, scatter-shot planning and management. It is now fighting for survival.
The company is really a tragedy. Stronach’s heart was in the right place. He loves the game, he’s an outstanding breeder (five Eclipse Awards), he came in with the best intentions and a checkbook to match, but he went haywire in execution.
His shareholders have paid dearly. The stock was trading for $35 a year ago. Today it goes for $1.30.
Racing certainly has not escaped the hard times.
“It’s been a difficult year,” said Alex Waldrop, head of the National Thoroughbred Racing Association.
No one can be sure what the new year will bring. But everything is relative. Next to the paupers, shysters and con men roaming the Washington corridors with a begging bowl, horse racing exits the year still a fairly solid, viable business.
With prudent management, it has a good chance of staying that way.