Sunday, June 7, 2009

Handle, Purses on the Down Escalator

Thanks to Ray Paulick for posting the latest Equibase figures on handle and purses. Both figures dropped in May, as compared to a year ago.  Total US handle was off by 8.26%, to $1.375 billion, even though May, 2009 had one more weekend/holiday race date than the same month in 2008.  Purses for the month declined by a lesser percentage -- 6.73% -- to $105.1 million.

For the first five months of the year, through May 31st, total US handle was down 9.22% from the corresponding period last year, while purses declined by 5.54%  

While purses are generally set as a fraction of total handle or takeout, there are a couple of reasons why the decline in purses has been somewhat milder then the decline in total handle.  First, some tracks use slot machine revenue or other gambling income (e.g., the casino supplement in New Jersey) to augment the purse account.  Second, there's a time lag in the calculation of purses; tracks set an initial level for a race meet based on what they estimate the handle will be; when handle doesn't meet expectations, the purse account is subsequently adjusted downward. But eventually, purses will catch up to the drop in handle, making a tough business for owners and trainers even tougher.

While the 2008-2009 declines in betting and purses can be, and are in most industry circles being, blamed on the general US economic malaise,  the longer-term trend, which predates the financial crisis of the past two years, is equally depressing.  As this chart from Equibase shows, total US handle reached a peak in 2003 and has since been on a downward path; the total for 2008 was less than the amount for 1999, even before adjusting for any inflation in the intervening years. The final numbers for 2009, now that the big spring meets at Churchill and Santa Anita are ending, and the Triple Crown races are in the past, seems unlikely to do anything better than continue the trend that's been established so far this year.  Paulick estimates that this year's total handle will be the lowest since 1996.

With purses declining, or, at best, flat, and with costs increasing, owners are getting squeezed even more than is customary.  The rule of thumb used to be that purse money nationwide was equal to about half of the total cost of keeping all US race horses in training. And that's before taking into account the costs of breeding or buying those horses. That was bad enough, but I suspect that, when the final numbers are in for 2009, it'll be more like 40-45% of our costs being covered by purses. It's tough to stay in business on those terms, no matter how much one loves horses. At this point, if slot machines were installed at Aqueduct tomorrow, I couldn't be confident that those of us racing in New York would have a fair chance to break even.

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