NEWS
Evans expects less, but more profitable, racing in next decade
Posted: Tuesday, December 07, 2010 1:32 PM
by Ed DeRosa
Churchill Downs Inc. President Bob Evans expects breeders to produce fewer horses and racetracks and owners to race fewer horses over the next decade, but he expects those entities that do survive to be more profitable than they are now.
Evans delivered his comments on Tuesday as the keynote speaker at the University of Arizona Race Track Industry Program’s Symposium on Racing and Gaming, which runs through Thursday in Tucson.
Citing Jockey Club figures projecting a reduced foal crop through 2014, Evans said it is clear breeding and racing activity will decrease and that racetracks with expanded gaming will be in a better position to make the downsized product profitable.
“It will become increasingly difficult to fill a race,” Evans said. “If we’re down 28% between 2010 and 2014, the number of three-year-olds available when factoring in higher percentages going overseas will be down an even larger percentage, and tracks without slots are looking at a 40% or even 50% drop in their horse population.”
Still, Evans was careful to note that racetracks must be profitable with expanded gaming, not because of expanded gaming. One business model he discussed included gaming revenue to operating costs and purses but not as a bailout.
“It’s a mistake to use gaming profits to subsidize racing operations,” Evans said. “Tracks do it, and I think that’s a mistake.
Evans said that revenue from gaming will account for about 70% of growth in purses from this year through 2020 and that in 2011 racino purses will exceed non-racino purses for the first time.
In the model Evans discussed, contraction would affect racetracks (cut in half over next ten years), race days (down to 3,100 from 6,600), and races (down to 31,000 from 56,000), but handle per race (up to $495,000 from $230,000), average purse (up to $55,000 from $22,000), and average field size (up to about 12 from 8.2) all would increase.
“This is a racetrack business model that works; it provides 5% return on capital. It’s a smaller business, but it’s a healthy business,” Evans said. “Owners and trainers who know what they’re doing should prosper in that environment. The breeding industry is sure to be smaller, but the ones who survive—and hopefully mine will be among them—should thrive in this model.”
Evans owns Tenlane Farm in Versailles, Kentucky, a 475-acre facility that typically houses about 25 of Evans’ own horses, including ten active broodmares.
Evans said that racing’s customers still respond to quality, and that if the downsized industry keeps more of the quality product and reduces the poor end that the industry should thrive. To illustrate that point, Evans noted that handle on the top 25 races actually increased 18% in 2009 versus 2003, even as total handle during that period declined 19%.
In trying to make each of Churchill’s four racetracks profitable on its own, Evans said his mantra has been to “create one more profitable day,” an idea that helped the company develop night racing at its flagship track in Louisville.
Ed DeRosa is news editor of Thoroughbred Times
