Horse race At the harness racing week on the Freehold Raceway in New Jersey: a reverse race with the sulky fastened in entrance of the horse – 1930.
Robert Sennecke | Ullstein Bild | Getty Images
America’s oldest horse racetrack is closing after operating its final race on the ultimate weekend of 2024.
Freehold Raceway in New Jersey, co-owned by Penn Entertainment, tried for many years to land a on line casino however failed. Like many tracks across the nation, it grappled with declining attendance and income. It had been working for greater than 170 years.
“Unfortunately, the operations of the racetrack can’t proceed below current situations, and we don’t see a believable approach ahead,” mentioned Howard Bruno, the racetrack’s common supervisor, in a news release asserting the closure.
But trade insiders, traders and different fans consider horse racing within the United States might be poised for a resurgence — fueled by new investor curiosity, improvements within the sport and a increase in legalized on-line sports activities playing.
In 2023, the game added greater than $36 billion to the U.S. financial system, supporting almost half one million jobs, based on the American Horse Council.
Horse-racing income comes from quite a lot of sources: tickets, hospitality, merchandise purchases on the monitor, licensing for TV or simulcast, sponsorships and playing.
Reliable estimates of worldwide horse-racing revenues are laborious to return by, specialists say, partly due to the personal nature of possession and partly due to the wide range of metrics used. Revenue estimates vary from $44 billion to almost 10 instances that.
Multiple sources agree the game might see compound annual development of roughly 9% within the years forward.
Growth in playing
No catalyst for the game’s development is extra essential in the mean time than the income that comes from playing.
The deal with, or the amount of cash wagered on horse races, funds the purses, or the prize cash, awarded to profitable horses. So does the casino-style playing at amenities related to race tracks.
For instance, Resorts World New York City, which operates video lottery terminals, is contractually obligated to show over 12% of its internet win to the New York Racing Authority, or NYRA. Patrick McKenna, NYRA’s vice chairman for communications, mentioned that at present quantities to about $120 million yearly. Of that whole, $60 million goes towards purses, $40 million goes to capital enhancements, and $20 million funds operations.
When the scale of the purse grows it attracts increased high quality horses, and better high quality horses entice extra curiosity within the sport.
In 2022, $12 billion was wagered on horse races, marking a brand new report, based on an evaluation by the New York Thoroughbred Horsemen’s Association, or NYTHA. The whole purse cash awarded that yr additionally set a brand new report, at $1.25 billion.
Fans place bets previous to the Belmont Stakes at Belmont Park in Elmont, New York, June 7, 2014.
Streeter Lecka | Getty Images
Growth in sportsbooks in addition to the elevated entry Americans now must legalized, on-line sports activities wagering is fueling optimism for horse racing’s resurgence. New methods to wager on horse racing means a brand new era of sports activities fans is getting publicity to the game.
FanDuel, the nation’s main sportsbook by market share, partnered with the Kentucky Derby for a second yr in 2024. The firm informed CNBC that the quantity of bets on Derby day hit the identical degree as Super Bowl playing in the identical yr.
Crown jewel
The Kentucky Derby is the crown jewel of Churchill Downs — probably the most vital pure-play, publicly traded firm targeted on horse racing.
The firm introduced a major improve in adjusted EBITDA — earnings earlier than curiosity, taxes, depreciation and amortization — throughout Derby Week in 2024, with vital sponsorships from firms that needed to align themselves with the status occasion.
The firm says report wagering numbers recommend the betting viewers is just not solely rising however turning into more and more engaged as they study the game, particularly on the cell platforms favored by a youthful demographic.
“Our operational methods current a mannequin for different racing occasions to observe. Overall, the Kentucky Derby isn’t just a standalone occasion however a blueprint for the way forward for horse racing,” mentioned CEO Bill Carstanjen.
Hall of Fame horse coach Bob Baffert mentioned the Kentucky Derby is particular as a result of it is a bucket-list race: “It’s an Instagram second for everyone. Everybody goes. They’re taking their selfies: ‘I’m right here. I’m right here on the greatest social gathering.'”
But the high-profile Triple Crown races and the Breeders Cup could also be outliers — a sort of World Series within the horse-racing schedule that in any other case is crammed with on a regular basis competitions that draw solely a smattering of followers.
Interest in additional strange races has been waning for many years.
The amount of cash wagered on pari-mutuel racing — the place bettors gamble in opposition to different bettors and the chances consistently change forward of the race — has declined by about 55% since 2000, when adjusted for inflation, based on the Paulick Report, a web site concerning the horse-racing trade.
Also, over the previous 20 years the variety of house owners, horses and trainers within the U.S. has plummeted, based on the NYTHA researchers. They concluded that in 2022 horse racing had “on most days been diminished to a distinct segment market, albeit with a extremely core viewers.”
Baffert informed CNBC he believes horse racing wants extra high-profile occasions with massive purses to drum up buzz. And, like baseball, it wants superstars to attract in weekday audiences.
Baffert, who is simply the second coach ever to have two Triple Crown winners, could also be horse racing’s best-known character. But controversy in recent times has overshadowed his success.
Baffert was suspended for 3 years from competing at Churchill Downs after a horse he’d skilled, Medina Spirit, gained the Kentucky Derby in 2021 however examined constructive for an unlawful anti-inflammatory drug and was disqualified.
This summer time, Churchill Downs lifted its suspension of Baffert after he publicly took duty for the failed drug check.
Baffert returned to the storied racetrack the day earlier than Thanksgiving, with a 2-year-old horse named Barnes that had by no means raced earlier than however had fetched a powerful $3.2 million at an public sale in Saratoga, New York, from now-owner Zedan Racing Stables.
The median value to buy a race horse is about $30,000, based on BloodHorse, a publication for house owners and breeders that tracks gross sales and the state of the market.
Barnes gained by a nostril in his debut.
Wall Street funds
Some well-known Wall Street names have earned a repute for recognizing — or creating — alternatives in horse racing.
Danny Moses, a dealer made well-known in “The Big Short,” is a sport fanatic, avid gambler and investor in race horses. And although he is recognized for his brief calls, he mentioned he is lengthy on horses.
“I believe the worth of horses are going to go up,” Moses mentioned, pointing to the larger payouts and purses introduced in by the increase in legalized on-line sports activities playing.
Mystik Dan #3, ridden by jockey Brian J. Hernandez Jr. (R), crosses the end line forward of Sierra Leone #2, ridden by jockey Tyler Gaffalione and Forever Young, ridden by jockey Ryusei Sakai to win the one hundred and fiftieth operating of the Kentucky Derby at Churchill Downs on May 04, 2024 in Louisville, Kentucky.
Michael Reaves | Getty Images
Moses is considered one of 14 in an elite group of traders in Starlight Racing, which at present owns 26 race horses. It’s headed by former hedge funder Jack Wolf, and it produced 2018 Triple Crown winner Justify and 2020 Derby and Breeders Cup winner Authentic, each skilled by Baffert.
Over a little bit greater than 20 years, Starlight-owned horses have completed within the cash greater than 50% of the time, raking in additional than $64 million in whole purse cash.
Wolf mentioned his expertise in hedge funds helped him to determine an progressive mannequin to put money into horses, the place all companions share within the potential upside for a group of horses. He mentioned traders must issue within the expertise and the enjoyment of the game into their expectations for return on funding.
“We’ve been world wide with our partnership. That’s what they’re investing in,” Wolf mentioned. As far as concrete monetary returns go, he mentioned, “We’ve been profitable some years, and a few years we’ve not been. It’s a really robust enterprise, a really robust strategy to make a return in your cash, however it may be completed.”
Wolf is now trying on the races themselves. In 2017 he was CEO of the Pegasus World Cup at Gulfstream Park in Florida. The race set a brand new mannequin: Owners paid $1 million every for a spot within the race, which they might use, promote or lease.
The race’s $12 million purse was the richest on the earth.
Though the Pegasus has reverted to a standard race mannequin since then, Australia has embraced the “gate race” or “slot race” construction, with a number of the highest purses globally.
And Moses is lobbying for extra U.S. races to observe the bizarre mannequin, pitching racetracks equivalent to Monmouth, Santa Anita and others.
Ramping up regulation
There stays a thorny downside for the U.S. horse-racing trade: It’s lengthy been seen because the Wild West so far as laws and oversight of horse welfare are involved, based on Lisa Lazarus, CEO of the Horseracing Integrity and Safety Authority, or HISA. The group was established by the Federal Trade Commission to supervise the integrity of horse racing throughout state strains and in numerous racing amenities.
Investors don’t desire their cash connected to potential guidelines or ethics points, Lazarus informed CNBC.
“By prioritizing constant and clear practices, HISA goals to reassure followers and the general public that horse racing operates with integrity and security at its core,” Lazarus informed CNBC. “This dedication not solely fosters belief but additionally creates an surroundings the place innovation can thrive, attracting new house owners, members, and followers.”
But powerhouse operators Churchill Downs and the New York Racing Association, or NYRA, are suing HISA over charges.
In a press release to CNBC, NYRA insisted it is broadly supportive of HISA’s mission however is protesting “illegal, extreme and disproportionate monetary assessments.”
Lazarus mentioned that in the long run, HISA’s oversight and regulation will gasoline extra funding — just like that of sports activities playing or cryptocurrency — as a result of the foundations and legality are clearer.
In 2020, racing horse deaths within the U.S. amounted to 1.41 per 1,000 race begins, based on HISA, which launched a monitor security program in July 2022. After the company standardized doping laws and enforcement, horse deaths fell to an estimated 0.9 per 1,000 race begins in 2024.
It was the primary time the U.S. has achieved something beneath 1 within the metric and places it on par with demise charges within the United Kingdom, Japan and Australia, based on Lazarus.
Owners and trainers hope that may assuage issues by lawmakers and regulators and discourage the sort of backlash that might hinder development of the game.
New age of racing
Even if the game can overcome the widespread notion of its therapy of horses, racetrack amenities are in determined want of an overhaul. Outdated amenities discourage followers from attending.
“They do not need to go to a racing facility that is been there for the reason that Nineteen Sixties with outdated infrastructure, with outdated bogs,” mentioned Donna Brothers, NBC Sports racing analyst and commentator.
Churchill Downs is spending $300 million on enhancements to its paddock and grandstand. Belmont Park is present process a $500 million renovation, funded by a mortgage from New York state. And Maryland’s legislature in April authorized $400 million to overtake Pimlico, dwelling of the Preakness Stakes.
The area of jockeys and horses begin the a hundred and fifty fifth operating of the Belmont Stakes at Saratoga Race Course on June 08, 2024 in Saratoga Springs, New York.
Al Bello | Getty Images
Brothers mentioned the trade goes to must embrace new expertise, equivalent to cell apps, to go together with the bodily enhancements.
Dennis Drazin, CEO and chairman of Monmouth Park Racetrack and Sports Book, mentioned the game’s true potential can solely be realized by means of a number of income streams.
“Racetracks should embody gaming, leisure, fan expertise and innovation of their formulation for achievement,” Drazin mentioned.
NYRA, for one, is seeing a significant enhance from expanded nationwide tv protection of its races. Fox Sports, a minority fairness proprietor in NYRA Bets, airs 1,000 hours of horse racing all year long. NYRA mentioned that boosted whole wagers on its on-line platform 127%, from $306 million in 2016 to $696 million in 2023.
FanDuel purchased racing broadcaster TVG and has grow to be a number one operator in horse racing alongside NYRA and Churchill Downs’ TwinSpires, which licenses its playing operations to different sportsbooks together with FanDuel and DraftKings.
DraftKings grew to become a naming sponsor for the 2024 Travers Stakes in Saratoga.
Despite the Freehold Raceway closure, Penn Entertainment mentioned in a press release it is seeking to broaden gaming tied to horse racing.
“In these states the place industrial gaming is just not but authorized on the racetracks, equivalent to Texas, we proceed to coach lawmakers on the success we have seen,” mentioned Eric Schippers, senior vice chairman of public affairs for Penn. “Gaming has helped to revitalize racing, driving increased purses, enhanced breeding applications and the preservation of household farms and open house.”
