UBER DISRUPTION

Traditional taxi firms are being upended by Uber.  This audacious upstart provides on-demand transportation to people using the Uber App to contact independent-contractor drivers affiliated with the company.  Taxi interests, however, have sent out SOS pleas to sympathetic friends in high places, like the mayors of Paris, France and New York City.

New York mayor Bill de Blasio has so far failed in his attempt to limit Uber’s growth in the Big Apple to one percent annually and prominent members of his own Democratic party have opposed his efforts.  Uber mounted a public relations campaign that included a coalition of tech-savvy New Yorkers and many members of de Blasio’s key minority constituents.  (A large percentage of Uber drivers come from minority groups.)

A bitter de Blasio lashed out after his chastening by comparing Uber to big oil companies and greedy real estate developers…and vowed to fight on to regulate Uber and curb its growth.

Presidential aspirant Hillary Clinton weighed in on the subject of free-lance work by stating:

“Many Americans are making extra money renting out a spare room, designing a website … even driving their own car.  This on demand or so called ‘gig’ economy is creating exciting opportunities and unleashing innovation, but it’s also raising hard questions about workplace protections and what a good job will look like in the future,”

Whenever disruptive technologies like Uber imperil old ways of doing things, such reactions are typical and expected.  Entrenched interests in quasi-monopolies are always against consumer choice and so are the politicians they help put in office.

Like the taxi business vis-à-vis Uber, pari-mutuel wagering continues to be disrupted by alternative forms of gambling like sports betting, slot machines, poker, and other casino games and, consequently, wagering handle continues its long-term decline.  To stimulate a turnaround, pari-mutuel wagering in North America must be disrupted–in terms of takeout percentages–to make it a far more attractive betting proposition.

Yet the retailers of horse-race betting in the United States have stubbornly refused to try significant across-the-board decreases in pari-mutuel takeout percentages (for a protracted period of time to see if they work).  By significant takeout reductions, I mean enough to make pari-mutuel betting competitive.

The chief executive of Time Inc. made a candid and ominous observation to the Wall Street Journal (July 28, 2015) about his efforts “to save the company” that could very well have been made about the pari-mutuel industry in the United States:  “If we don’t find new revenue streams…it’s a slow and steady death.”

Copyright © 2015 Horse Racing Business

MULTIPLIER EFFECTS OF FASHIONABLE RACE MEETS

The 2015 meet at Saratoga Race Course opens on July 24.  This much-anticipated relatively brief annual gathering in upstate New York is an economic boon to Saratoga Springs and surrounding areas.  Restaurants are full of diners, shoppers are plentiful in downtown, and lodging facilities at least double their rack rates and often have no vacancies.  Even run-down motels are able to double and triple their normal prices, plus there is an 11 percent charge for state and local taxes.

Several racetracks across the United States hold summer meets that are huge boosts to local economies.  The prominent ones are the aforementioned Saratoga Race Course, Del Mar in Southern California, and Monmouth Park on the New Jersey shore–and none of these are racinos.  (American Pharoah’s entry in the William Hill Haskell Invitational at Monmouth Park on August 2 will be a colossal benefit to Oceanport.)

C-Span 3 featured the city of Lexington, Kentucky over the past weekend.  Part of the telecast focused on Keeneland racetrack.  The statistics cited during the segment demonstrate how much non-profit Keeneland contributes to Lexington and Fayette County.

According to a recent research study, Keeneland’s economic impact on the Lexington and Fayette County area is approximately $600 million annually.  The money earned by Keeneland is distributed three ways:  back into the facilities, to the Kentucky racing industry, and to community charitable and non-profit organizations.  The $600 million should easily be surpassed in 2015 with the Breeders’ Cup added to the mix of offerings.

Keeneland conducts high-class boutique racing meets in the spring and fall (and does not have alternative gaming).  It is the world’s leading auction company for Thoroughbred bloodstock.  Keeneland holds racing 32 days per year and hosts three auctions over 35 days annually.  The auction company sells between 8,000 and 8,500 horses each year and attracts buyers from 52 countries.  In addition, Keeneland is a year-round training venue.

Carefully look around during a visit this summer to Saratoga, Del Mar, or Monmouth for the Haskell (or at Keeneland for the sales).  You will see and sense a splendid example of what economists refer to as the multiplier effect, whereby spending by people drawn to the racetracks has wide-ranging salutary effects on local businesses and the indigenous economy.

Copyright © 2015 Horse Racing Business

THE RICHEST AMERICAN FAMILIES IN HORSE RACING

Forbes magazine’s July 20, 2015 issue has an article titled “Billion-Dollar Bloodlines” that lists America’s 200 richest families.  This list differs from the annual Forbes 400, which is based on individual wealth rather than family wealth.  At the top of the list of wealthy families are familiar names like six members of the Walton family (#1 at $149 billion), four members of the Koch family (#2 at $86 billion), and three members of the Mars family (#3 at $80 billion).

At least eleven of the families on the Forbes list are involved in some aspect of Thoroughbred horse racing and at least five families on the list have deceased members who were prominent in the sport.

Forbes families with a presence in horse racing today:

Bass (#29, 4 family members, $8.2 billion) Ramona Bass

Brown (#20, 25 members, $12.8 billion) Laura Lee Brown (Hermitage Farm)

Dorrance (#17, 11 members, 13.6 billion) George W. Strawbridge Jr. and Charlotte Weber (Live Oak Stud)

Du Pont (#14, 3,500 members, $14.5 billion) Sarah Farish and son William Stamps Farish IV (Lane’s End Farm)

Hughes (#31, 3 members, $7.9 billion) B. Wayne Hughes (Spendthrift Farm)

Jackson (#116, 7 members, $2.4 billion) Barbara Banke (Stonestreet Farms)

Johnson (#46, 60 members, $6.3 billion) Diana Firestone (Newstead Farm)

Phipps (#44, 300 members, $6.6 billion) Ogden Mills Phipps and Stuart Janney

Rockefeller (#22, 200 members, $11 billion) Roy Jackson (Lael Stables)

Rooney (#193, 15 members, $1.2 billion) Shamrock Farm and Yonkers Raceway

Steinbrenner (#75, 5 members, $3.8 billion) Kinsman Stud Farm

Forbes families with deceased members who were a presence in horse racing:

Annenberg (#126, 15 family members, $2.1 billion) Walter Annenberg, once owner of the Daily Racing Form

Hunt (#15, 33 members, $14.2 billion) Nelson Bunker Hunt

Kluge (#49, 5 members, $6 billion) John Kluge (Morven Stud)

Lindner (#129, 7 members, $2 billion) Carl Lindner Jr.

Mellon (#21, 200 members, $11.5 billion) Paul Mellon (Rokeby Stables)

Copyright © 2015 Horse Racing Business