Horse racing fans often lament its undeniable decline in popularity. It is commonplace to hear or read that the sport is moribund and that its fans are old and dying out. Some people decry the sparse coverage in the newspapers and on television.
My many years consulting for and researching troubled companies have taught me that virtually every such business thinks that the situation facing it is unusual if not unique. This is normally not the case at all and horse racing is no exception. Many old-line businesses and industries are coping with change.
The fact is, the United States has become a compartmentalized society aligned around specific and sometimes very narrow interests and this presents opportunities and challenges. The television networks have had their audiences carved up by cable channels and the Internet. The major newspapers are fighting for their lives in the face of the Internet. Major retailers have been eviscerated by specialty shops and online vendors and huge shopping malls often look deserted, not unlike Aqueduct on a cold Winter day. Even baseball, the reputed American national pastime, has valid concerns over the sport’s diminishing appeal to boys.
Like a multitude of mass-market enterprises, horse racing will never be what it once was. Executives in the horse racing industry must get over the past–it’s not coming back–and continue to take the steps necessary to survive and even prosper as a niche sport.
Horse racing is not an isolated case of a venerable institution fighting for a better future. Consider the state of NASCAR, golf, outdoor sports in general, newspapers, and sports writers, as discusssed below.
1. NASCAR is sometimes cited as a sport that horse racing should emulate. To be sure, the car racing that originated with drivers hauling bootleg whiskey in the South has grown into a blockbuster enterprise with the most television viewers among all sports except football. But the growth trend is faltering. Forbes magazine (March 2, 2009) ran an article titled “Pileup,” in which it said: “The sport is suffering declines in sponsorship, attendance, and financial stability, and the roots go a lot deeper than the lousy economy.” Consider the following facts and statistics from the Forbes article:
- Between 1998 and 2005, NASCAR’s national television ratings outpaced every professional sport, growing by 180%. The National Football League’s TV ratings actually declined in the same time frame by 10%. From 2005 through 2008, NASCAR’s national television ratings decreased by 21%, whereas the National Football League ratings fell by 10%.
- Advertising revenues have taken a hit-for example, by 16% in 2008 for NASCAR’s Sprint Cup circuit.
- Track attendance declined in 2008 for the third year in a row from an average of 130,000 per race to 118,000. International Speedway Corporation cut admission prices for some of its seats by as much as 40% for the Daytona 500.
- Sponsorship deals are increasingly hard to get. Major sponsors have quit the sport-for instance, Coors Light, Tide, Domino’s Pizza, and Eastman Kodak.
- The way that NASCAR is structured, team owners are treated like third-class citizens, getting what is left after NASCAR and the drivers take their hefty cuts. Consequently, more and more racing teams are closing up shop or selling out, including NASCAR icon Richard Petty.
- Finally, indications are that fans are increasingly bored with the action and are resisting the ticket prices.
This is a case-in-point that every product or service has a life cycle. While NASCAR is still producing attendance numbers and television ratings that are sensational, the sport is likely to be in the early phase of a downward trajectory, comparable perhaps to horse racing at the dawn of the television age in the early 1950s. Like horse racing, NASCAR will need to find ways to attract new fans and improve its core product in an era of tremendous competition for the entertainment dollar.
2. Another sport that has been experiencing a significant downturn in the United States is golf. More golf courses have been closing than opening in recent years. According to the New York Times, the sport has lost four million players (from 30 million to 26 million) since 2000. The percentage of avid golfers, who play at least 25 times a year, fell by a third. About one million golfers quit the game every year and fewer than that take it up. One of the main reasons offered is the cost of playing and the other is that people increasingly don’t have the time to spend on a golf course, and in particular married men with children. As a result, golf industry insiders have been experimenting with attracting high schoolers, families, and women. Golf is part of a general decline in participatory outdoor sports like tennis and snow skiing.
3. The Wall Street Journal (April 7, 2009) headline read: “Baseball Writers Brace for the End.” The article began with this verbiage: “Baseball’s independent press corps, once the most powerful in American sports, is fading. As newspapers cut budgets and payrolls, the press boxes at major league ballparks are becoming lonely places, signaling a future when some games may be chronicled only by wire services, house organs, and Web writers watching the games on television…It is not clear how many newpaper beat writers and columnists will vanish.”
Horse racing commentators and fans often bemoan the fact that racetrack beat writers and columnists are on the verge of extinction. That is true, but the ranks of sports beat writers per se are being thinned because of the winds of change that are taking their toll on print newspapers.
4. Any bricks-and-mortar business whose goods and services can be delivered over the Internet is in danger of being decimated if not completely destroyed. Take newspapers. Almost all major newspapers have announced staff cuts. The New York Times is $1.1 billion in debt and is trying to sell its stake in New England Sports Ventures (which owns the Boston Red Sox), as well as its corporate jet, to make it through 2009. It may also shutter its money-losing subsidiary the Boston Globe. Well-known newspapers have closed (the Rocky Mountain Daily News), some have gone strictly online (Seattle Post-Intelligencer), others have limited home delivery (the Detroit Free Press and the Detroit News) and a number have filed for bankruptcy (the Tribune Company-publisher of the Chicago Tribune, Los Angeles Times, and the Baltimore Sun). Similarly, Borders Group (book, music, and movie stores) and Blockbuster Inc. (movies and music) are hemorrhaging losses as online companies like Amazon and Netflix seize the market.
Like a wide variety of traditional bricks-and-mortar businesses in the early 21st century, racetracks’ future is online. Game, set, match, the Internet business model has prevailed. If the racing industry is going to grow handle, it will be largely through advance deposit wagering. That is the state of affairs and nothing can be done about it except to adapt.
In this regard, racetracks have a much better future than newspapers. The Internet is a made-to-order distribution channel for pari-mutuel wagering, whereas newspapers will have a difficult time making money from commodity-like online publications. Advance deposit wagering firms provide a convenient proprietary service that customers are willing to pay for through (reasonable) takeout, whereas newspapers supply information, most of which is readily available for free. However, a special-interest newspaper like the Daily Racing Form should do very well online because of the proprietary information it provides to handicappers.
5. On an unrelated topic, Horse Racing Business ran an article on March 7, 2009, titled “Halsey Minor for Racing’s Jobs.” It proposed that high-technology entrepreneur and longtime avid racing fan Halsey Minor would be good for the sport as a racetrack owner. An excerpt reads:
“If Minor joined up with some of the bright young minds in the industry to operate a racetrack, in the right location and under the right circumstances, the results might be highly desirable. With the bankruptcy filing at Magna Entertainment this week, a few prospects come to mind.”
Minor made an attempt to acquire a large stake in MEC in October of 2008 and has renewed his effort in the past several weeks. Now that MEC has filed Chapter 11 bankruptcy and major creditors are dissatisfied with the company’s reorganization plan, Minor’s chances have improved.
Minor is a technology innovator, has deep pockets, and is clearly a proponent of Thoroughbred horse racing. I repeat here what I said in the March 7th article: “The racing fraternity should embrace Minor with open arms, as a force for change and experimentation-a straw that stirs the drink.”
Copyright © 2009 Horse Racing Business