Optimal Purses Are Finally Being Openly Discussed

I read with interest the Tim Ritvo interview yesterday in the LA Times. One section was of particular eyebrow raising interest:

[You could put the money into purses], but purses … and horsemen will go crazy when they hear this, are not indicative of success. [New York Racing Assn.] has all the purse money in the world and their field size has not improved; $100,000 maiden special weights struggle every day. I do not believe that people who are going to sales and buying million-dollar horses care if maiden special weights are $60,000 or $100,000 when they spend a million dollars for a horse. What they are looking for is the development of a horse to win graded races.

The everyday guy, of course, that extra $40,000 helps, keeps him in the business a little bit longer and helps pay the bills. I don’t think solutions are taking money and throwing them into purses. I think we’ve seen that in slot-filled jurisdictions. They’ve taken a lot of slot money and thrown it in purses, but not cared about racing, and we’re seeing that money being pulled away and the handle not growing.

A lot of time we raise purses and trainers go up on their day rate.

That's not a snip from the nasty and untoward Pullthepocket blog from 2009, it's actually a direct quote from the guy who is going to be running Santa Anita.

Ritvo, in three paragraphs, essentially killed the entire force of reasoning California racing had for hiking takeout in 2010.

And he's right.

If the slots world taught us anything, it's that artificially increasing the supply of purse money creates  an inefficient system. It doesn't increase the gross number of horse owners, it doesn't increase the amount of money mom and pops are spending on horses, nor does it increase the amount of money spent on racehorses. It's the 'purses up foal crops down' phenomenon we've seen for years.

And, as concluded in the major study of gambling habits in this industry, it's no great shakes for increasing betting volume either. ".... wagering would increase by only 6% if purse were doubled. This is a surprising finding considering the importance that is attached to the purse variable in all major policy decisions to increase the wagering in this industry."

Purses don't do what's intended for a few reasons:

i) Bettors bet races, not purses

ii) An artificial influx of capital increases costs (think the healthcare system), because suppliers, etc, and vets, farriers, supplement makers and a hundred other things (including day rates) see inflation

iii)  The money is not spread around, because artificial monetary stimulus creates an upside down purse structure, which attracts super stables. These factory stables do what they should - claim everything, jam, take advantage of their economies of scale - and they throw the system for a loop

Like the healthcare system, or any other like it that possesses out of whack demand and supply, economic rationing is important. And grouped with that comes optimal purses.

For the demand side - i.e. those whiny customers - optimal purses means better races to wager on. You'd think this is a no-brainer, because more money bet means more money to the business. But, it's apparently harder than advertised. The business writes races for who yells the loudest, not for who bets the most.

For the supply side, the purse level (and condition sheet) means optimal racing opportunities for a horse population. It means less demand for what goes into the horse, and more demand for buying and racing a horse. As well, an optimal purse level keeps mom and pops and small owners invested and reinvesting because the 40% hitter at 55% on claim and drops isn't particularly attracted to your races.

Optimal purses (over time) then creates an ecosystem where an optimal set of races are written, bet, and supply the most bang for the buck for the horsepeople and horse owners. 

The problem Ritvo and others have, of course, is this is an industry without a leader - it's an industry with alphabets. Ritvo, I would argue, knows what needs to be done in California - it's not like it's a Chinese finger puzzle, and what I typed above is not rocket science. But he'll have a very hard time achieving it because he's an employee of the sport, not its director.

Folks like to say racing never changes. I disagree with that. It does change, and Ritvo setting the record straight on purses is yet another example of it. It's just that the business changes because it's forced to change, rather than being smart and proactive in its own. In the end, I believe history books will record it as racing's greatest failing.

Have a nice Tuesday everyone.