America’s oldest horse racetrack is closing after working its final race on the ultimate weekend of 2024.
Freehold Raceway in New Jersey, co-owned by Penn Leisure, 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.
“Sadly, the operations of the racetrack can’t proceed beneath current circumstances, and we don’t see a believable approach ahead,” mentioned Howard Bruno, the racetrack’s basic supervisor, in a information launch saying the closure.
However trade insiders, traders and different lovers consider horse racing in the US could possibly be poised for a resurgence — fueled by new investor curiosity, improvements within the sport and a increase in legalized on-line sports activities playing.
Horse race On 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 Photos
In 2023, the game added greater than $36 billion to the U.S. financial system, supporting almost half 1,000,000 jobs, in response to the American Horse Council.
Horse-racing income comes from a wide range of sources: tickets, hospitality, merchandise purchases on the observe, licensing for TV or simulcast, sponsorships and playing.
Dependable estimates of world horse-racing revenues are onerous to return by, specialists say, partly due to the personal nature of possession and partly due to the wide range of metrics used. Income estimates vary from $44 billion to just about 10 instances that.
A number of sources agree the game might see compound annual development of roughly 9% within the years forward.
Progress in playing
No catalyst for the game’s development is extra essential for the time being than the income that comes from playing.
The deal with, or the sum of money wagered on horse races, funds the purses, or the prize cash, awarded to profitable horses. So does the casino-style playing at services related to race tracks.
For instance, Resorts World New York Metropolis, 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 presently quantities to about $120 million yearly. Of that complete, $60 million goes towards purses, $40 million goes to capital enhancements, and $20 million funds operations.
When the dimensions of the purse grows it attracts larger high quality horses, and better high quality horses appeal to extra curiosity within the sport.
In 2022, $12 billion was wagered on horse races, marking a brand new file, in response to an evaluation by the New York Thoroughbred Horsemen’s Affiliation, or NYTHA. The overall purse cash awarded that yr additionally set a brand new file, at $1.25 billion.
Followers place bets previous to the Belmont Stakes at Belmont Park in Elmont, New York, June 7, 2014.
Streeter Lecka | Getty Photos
Progress in sportsbooks in addition to the elevated entry People now must legalized, on-line sports activities wagering is fueling optimism for horse racing’s resurgence. New methods to guess on horse racing means a brand new era of sports activities lovers 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 corporate instructed CNBC that the amount of bets on Derby day hit the identical stage as Tremendous Bowl playing in the identical yr.
Crown jewel
The Kentucky Derby is the crown jewel of Churchill Downs — essentially the most vital pure-play, publicly traded firm targeted on horse racing.
The corporate introduced a major enhance in adjusted EBITDA — earnings earlier than curiosity, taxes, depreciation and amortization — throughout Derby Week in 2024, with essential sponsorships from corporations that needed to align themselves with the status occasion.
The corporate says file wagering numbers counsel the betting viewers isn’t solely rising however turning into more and more engaged as they study the game, particularly on the cellular platforms favored by a youthful demographic.
“Our operational methods current a mannequin for different racing occasions to observe. General, the Kentucky Derby isn’t just a standalone occasion however a blueprint for the way forward for horse racing,” mentioned CEO Invoice Carstanjen.
Corridor of Fame horse coach Bob Baffert mentioned the Kentucky Derby is particular as a result of it is a bucket-list race: “It is an Instagram second for everyone. All people goes. They’re taking their selfies: ‘I am right here. I am right here on the greatest occasion.'”
However the high-profile Triple Crown races and the Breeders Cup could also be outliers — a sort of World Sequence within the horse-racing schedule that in any other case is stuffed with on a regular basis competitions that draw solely a smattering of followers.
Curiosity in additional odd races has been waning for many years.
The sum of money 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, in response to the Paulick Report, a web site in regards to the horse-racing trade.
Additionally, over the previous twenty years the variety of homeowners, horses and trainers within the U.S. has plummeted, in response to the NYTHA researchers. They concluded that in 2022 horse racing had “on most days been decreased to a distinct segment market, albeit with a extremely core viewers.”
Baffert instructed CNBC he believes horse racing wants extra high-profile occasions with large purses to drum up buzz. And, like baseball, it wants superstars to attract in weekday audiences.
Baffert, who is just the second coach ever to have two Triple Crown winners, could also be horse racing’s best-known character. However controversy in recent times has overshadowed his success.
Baffert was suspended for 3 years from competing at Churchill Downs after a horse he’d educated, Medina Spirit, gained the Kentucky Derby in 2021 however examined constructive for an anti-inflammatory drug that is not allowed on race days — and was disqualified.
This summer time, Churchill Downs lifted its suspension of Baffert after he publicly took duty for the failed drug take a look at.
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 formidable $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, in response to BloodHorse, a publication for homeowners and breeders that tracks gross sales and the state of the market.
Barnes gained by a nostril in his debut.
Wall Road funds
Some well-known Wall Road names have earned a popularity for recognizing — or creating — alternatives in horse racing.
Danny Moses, a dealer made well-known in “The Massive Brief,” is a sport fanatic, avid gambler and investor in race horses. And although he is recognized for his quick 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 Eternally Younger, ridden by jockey Ryusei Sakai to win the a hundred and fiftieth working of the Kentucky Derby at Churchill Downs on Could 04, 2024 in Louisville, Kentucky.
Michael Reaves | Getty Photos
Moses is one in every of 14 in an elite group of traders in Starlight Racing, which presently owns 26 race horses. It is headed by former hedge funder Jack Wolf, and it produced 2018 Triple Crown winner Justify and 2020 Derby and Breeders Cup winner Genuine, each educated by Baffert.
Over a bit greater than twenty years, Starlight-owned horses have completed within the cash greater than 50% of the time, raking in additional than $64 million in complete purse cash.
Wolf mentioned his expertise in hedge funds helped him to ascertain an modern mannequin to spend money on 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 have been world wide with our partnership. That is what they’re investing in,” Wolf mentioned. So far as concrete monetary returns go, he mentioned, “We have been profitable some years, and a few years we have not been. It is a very powerful enterprise, a really powerful approach to make a return in your cash, however it may be executed.”
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: House owners paid $1 million every for a spot within the race, which they may use, promote or lease.
The race’s $12 million purse was the richest on this planet.
Although the Pegasus has reverted to a standard race mannequin since then, Australia has embraced the “gate race” or “slot race” construction, with among the highest purses globally.
And Moses is lobbying for extra U.S. races to observe the bizarre mannequin, pitching racetracks similar to Monmouth, Santa Anita and others.
Ramping up regulation
There stays a thorny downside for the U.S. horse-racing trade: It is lengthy been seen because the Wild West so far as laws and oversight of horse welfare are involved, in response to Lisa Lazarus, CEO of the Horseracing Integrity and Security Authority, or HISA. The group was established by the Federal Commerce Fee to supervise the integrity of horse racing throughout state strains and in numerous racing services.
Buyers don’t desire their cash hooked up to potential guidelines or ethics points, Lazarus instructed 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 instructed CNBC. “This dedication not solely fosters belief but additionally creates an atmosphere the place innovation can thrive, attracting new homeowners, contributors, and followers.”
However powerhouse operators Churchill Downs and the New York Racing Affiliation, 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 principles and legality are clearer.
In 2020, racing horse deaths within the U.S. amounted to 1.41 per 1,000 race begins, in response to HISA, which launched a observe 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 dying charges in the UK, Japan and Australia, in response to Lazarus.
House owners and trainers hope that can assuage issues by lawmakers and regulators and discourage the sort of backlash that might hinder development of the game.
New age of racing
Even when the game can overcome the widespread notion of its remedy of horses, racetrack services are in determined want of an overhaul. Outdated services discourage followers from attending.
“They do not wish to go to a racing facility that is been there for the reason that Sixties with previous infrastructure, with previous bogs,” mentioned Donna Brothers, NBC Sports activities 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 permitted $400 million to overtake Pimlico, house of the Preakness Stakes.
The sphere of jockeys and horses begin the a hundred and fifty fifth working of the Belmont Stakes at Saratoga Race Course on June 08, 2024 in Saratoga Springs, New York.
Al Bello | Getty Photos
Brothers mentioned the trade goes to must embrace new know-how, similar to cellular apps, to go together with the bodily enhancements.
Dennis Drazin, CEO and chairman of Monmouth Park Racetrack and Sports activities E-book, mentioned the game’s true potential can solely be realized by way of a number of income streams.
“Racetracks should embody gaming, leisure, fan expertise and innovation of their system for achievement,” Drazin mentioned.
NYRA, for one, is seeing a serious increase from expanded nationwide tv protection of its races. Fox Sports activities, a minority fairness proprietor in NYRA Bets, airs 1,000 hours of horse racing all year long. NYRA mentioned that boosted complete wagers on its on-line platform 127%, from $306 million in 2016 to $696 million in 2023.
FanDuel purchased racing broadcaster TVG and has develop into 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.
Regardless of the Freehold Raceway closure, Penn Leisure mentioned in a press release it is seeking to develop gaming tied to horse racing.
“In these states the place business gaming isn’t but permitted on the racetracks, similar to Texas, we proceed to teach 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 larger purses, enhanced breeding applications and the preservation of household farms and open area.”
