The Sports Professor Rick Horrow, in conjunction with promotional partner Northern Trust, takes a look at the big business of thoroughbred racing before the 131st running of the Kentucky Derby.
Even with a favorite named "Bandini," this week's running of the 131st Kentucky Derby at Louisville's Churchill Downs brings a rosier-than-usual business picture.
Thanks to "Seabiscuit," and Smarty Jones' improbable run last year, the horse racing business has picked up nearly 13 million new fans in the past 12 months. A TNS poll found that 48 million people expressed interest in horseracing, up from 34.8 million the year before. At last year's Belmont Stakes, internet hits exceeded 13.1 million (compared to 5.7 million in 2003). Wagering on the 130th Kentucky Derby smashed North American betting records: a whopping $99,348,706 was wagered on the signature race, and total betting on the 12-race Kentucky Derby Day card was $142,775,857. Overall, over $15 billion was legally bet on horseracing last year, and the industry seems poised for a new surge of growth.
Even Smarty Jones must be smiling. Though his bid for horseracing immortality evaporated at last June's Belmont Stakes, owners Roy and Pat Chapman sold 50 percent of his breeding rights to Three Chimneys Farm for over $20 million. In just nine career starts, Smarty Jones earned $7.6 million, making him the fourth richest racehorse in North American history. With his stud fee likely $75,000-$150,000 a coupling, Smarty Jones is clearly the biggest winner of last year's meets.
Looking at the 2005 thoroughbred season, areas to focus on include (1) the business of the Kentucky Derby and Churchill Downs; (2) the health of horseracing in general; and (3) marketing issues impacting the thoroughbred industry.
THE BUSINESS OF THE KENTUCKY DERBY AND CHURCHILL DOWNS
While Monday's announcement that Visa will end its Triple Crown sponsorship at the end of this year set Preakness and Belmont Stakes executives on a search for new sponsorship, Kentucky Derby marketers celebrate a new five-year deal with the credit card giant.
Churchill Downs itself is in the final stages of a massive $121 million public/private partnership modernization plan. The first phase (completed in 2003) included $26 million worth of Jockey Club suites – 64 in all. The second phase included the $95 million clubhouse, opened this year.
Like its "stick and ball" sports brethren, Churchill Downs has turned to selling 3,118 30-year PSLs to raise approximately $15 million. Each PSL costs $18,000-$75,000, giving customers "the right to buy finish line seats at the Kentucky Oaks and Kentucky Derby."
Derby Week festivities continue to be a major boom to the greater Louisville region. An economic impact study commissioned by Churchill Downs indicates that the financial impact of Derby Weekend exceeds $217.8 million. The weeklong Kentucky Derby Festival, in operation for over 50 years, generates another $93 million.
HORSERACING HEALTH – THE RACE FOR NEW REVENUES
While horseracing experienced a mini boom last year, the business has experienced revenue decline in the new millennium. The New York Racing Association (NYRA) lost $6.7 million in 2002, and $19.8 million last year. The Laurel Park, Maryland winter meet ended two weeks ago reported a 4.7 percent wagering decline, and other tracks are feeling the same pinch. Thus, the industry is investigating new channels to increase revenues.
First, tracks are hosting alternative entertainment events. Gulfstream Park in Hallandale, Florida has advanced plans to create the "Village at Gulfstream Park," an entertainment, retail, and mixed-use project. The Del Mar Thoroughbred Club in Southern California supplements its racing with "4 O'Clock Friday" concerts by such popular acts as Pete Yorn and Donavon Frankenreiter. Other tracks are following suit.
