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Freehold Raceway, recognized as the oldest horse racetrack in America, is set to close its doors after concluding its final race during the last weekend of 2024. This New Jersey venue, co-owned by Penn Entertainment, has struggled for many years to secure a casino venture but has faced persistent challenges. Like numerous racetracks across the country, it has dealt with dwindling attendance and revenue despite a legacy of more than 170 years.
Howard Bruno, the general manager of Freehold Raceway, expressed the difficulties in continuing operations under the current circumstances, stating in a news release, “Unfortunately, the operations of the racetrack cannot continue under existing conditions, and we do not see a plausible way forward.”
Despite this unfortunate closure, there is palpable optimism within the horse racing industry regarding a potential revitalization in the U.S. This sentiment is fueled by a surge in investor interest, innovations within the sport, and the rapid expansion of legalized online sports betting.
In 2023, horse racing contributed over $36 billion to the U.S. economy, supporting nearly half a million jobs, as reported by the American Horse Council. Revenue streams for the industry are diverse, including earnings from ticket sales, hospitality services, merchandise, licensing agreements for broadcasts and simulcasts, sponsorships, and gambling activities.
Quantifying the global horse racing market remains challenging, with various estimates suggesting revenues that range dramatically from $44 billion to much greater figures. Nevertheless, industry experts project a steady annual growth rate of around 9% as the sector evolves.
The Gambling Boom
A significant driver behind the expected growth in horse racing is the increasing revenue from gambling. The total amount wagered, known as the handle, directly impacts purses awarded to winning horses and is also bolstered by associated casino gaming operations.
For example, Resorts World New York City operates video lottery terminals and is contractually bound to remit 12% of its net winnings to the New York Racing Authority (NYRA), which translates to about $120 million annually. This revenue supports purses, capital improvements, and operational costs.
With larger purses, the sport can attract higher-caliber horses, subsequently pulling in more spectators and bettors. In 2022, the gambling handle at horse racetracks reached an all-time high of $12 billion, with purses likewise hitting a new peak of $1.25 billion.
The landscape for sports betting is undergoing a transformation as well. Increased access to legalized online wagering platforms and the proliferation of sportsbooks are drawing in a new generation of fans to horse racing. For instance, FanDuel, a leading sportsbook, partnered with the Kentucky Derby again in 2024, reporting similar betting volumes on Derby day as seen during the Super Bowl that year.
The Kentucky Derby’s Influence
The Kentucky Derby stands as the quintessential event in American horse racing and is a key focus for Churchill Downs, a leading publicly traded entity dedicated to the sport. The company reported significant increases in adjusted earnings during Derby Week in 2024, highlighted by enhanced sponsorship deals from brands eager to associate with the prestigious event.
Record wagering figures from the Derby signal a growing and more engaged audience that is increasingly exploring the sport through mobile platforms popular among younger demographics. CEO Bill Carstanjen noted that the operational strategies utilized at the Derby could serve as a model for other racing events, suggesting that the Derby is much more than a singular occurrence; it is a template for the future of horse racing.
Trainer Bob Baffert commented on the unique allure of the Kentucky Derby, describing it as a must-attend experience that draws attention far beyond the racing community. However, while marquee events attract significant crowds, everyday races are seeing a continued decline in interest.
Data reveals that the volume of wagers on pari-mutuel racing has dropped approximately 55% since 2000, adjusted for inflation. Additionally, the number of racehorse owners, horses, and trainers has significantly decreased over the years, with research indicating that horse racing has largely become a niche market despite a dedicated core audience.
Baffert suggested that revitalizing interest in horse racing requires more high-stakes, high-profile events sprinkled throughout the racing calendar, akin to the focus on star athletes in baseball. Despite being one of the sport’s most renowned figures, Baffert has faced controversy that clouded his recent successes, including a suspension related to a failed drug test involving a horse he trained.
This past summer, Churchill Downs concluded Baffert’s suspension after he accepted responsibility, allowing him to return to the track with a promising new horse purchased for $3.2 million, marking a commendable comeback.
Wall Street’s Interest
Notable figures from Wall Street have begun to recognize the potential for investment in horse racing. Danny Moses, known for his role in “The Big Short,” embraces this opportunity and predicts the value of racehorses will rise, driven by the expansion of legalized sports gambling.
Moses is part of Starlight Racing, an elite group of investors currently owning 26 racehorses, which has produced multiple champions, including Triple Crown winner Justify. The group adopts an innovative investment strategy allowing participants to share in the potential profits across several horses, balancing enjoyment and financial returns as part of the equation.
Meanwhile, innovative racing models, such as the Pegasus World Cup at Gulfstream Park, where owners purchase spots for a significant entry fee, demonstrate a shift towards lucrative race structures. Although the Pegasus has transitioned back to traditional formats, the ‘slot race’ approach has gained traction in Australia, showcasing high purses that attract global attention.
Addressing Regulation Concerns
One persistent issue in horse racing is the lack of stringent regulations regarding equine welfare. Lisa Lazarus, CEO of the Horseracing Integrity and Safety Authority (HISA), underscored the necessity for consistent and transparent practices to enhance trust in the sport. HISA was established with the aim of ensuring integrity across various racing facilities and state lines.
Resistance from major operators such as Churchill Downs and NYRA, who are currently in litigation over fees charged by HISA, complicates efforts to improve oversight. Nevertheless, Lazarus is confident that establishing comprehensive regulations will encourage investment in the sport akin to that seen in industries like sports gambling.
HISA’s recent initiatives have contributed to a reduction in horse fatalities during races, achieving a milestone of less than 1 death per 1,000 trips, placing the U.S. in line with safety statistics from the UK and Australia.
A Revitalized Experience
Going forward, racetracks must modernize their facilities to attract a broader audience. Outdated infrastructure has deterred fans from engaging with the sport. Noteworthy renovations are underway at prominent venues, including a $300 million investment at Churchill Downs and a $500 million facelift for Belmont Park.
Industry experts suggest that embracing new technologies, such as mobile applications, is essential in conjunction with physical upgrades to enhance the overall fan experience. Dennis Drazin, CEO of Monmouth Park, emphasizes the need for racetracks to expand beyond traditional racing by integrating gaming and entertainment into their operational strategies.
NYRA has seen substantial growth due to expanded national television coverage, reporting a surge in online betting since partnering with Fox Sports. This increasing visibility is elevating wagers and engagement levels, highlighting the potential for a complete revitalization of the sport.
The closure of Freehold Raceway represents a significant moment for horse racing in the United States, sparking discussions regarding the future of the sport. However, with new investments, innovative strategies, and a focus on modernization, stakeholders remain hopeful that horse racing can reclaim its prominence on the American sports landscape.
Source
www.cnbc.com