Why Horse Racing Can Never Go Blue Sky

I saw a tweet from Craig Bernick the other day.

Horse business currently has $10 Billion in handle with 20% takeout split by various industry entities. The goal should be that by 2030, we have 10% takeout, $50 Billion in handle, with $5 Billion split.

— Craig Bernick (@Craig_Bernick) January 14, 2019

We've seen comments like this for a long while now - those of you who remember the late Cary Fotias may recall his thoughts that "racing should be doing $80B in handle" with their internet quasi-monopoly back around 10 years ago. And I totally agree. Horse racing has the infrastructure, the regulatory edge, and the technology to make that happen; or at least approach making that happen.

What it doesn't have - and what it appears it may never have - is the ability to do look past its own intransigence to do it. That's been apparent for many years, and we are reminded of it often, like yesterday.

A report stated, "CDI objection stops DraftKings' Derby futures in Mississippi" and made its way around the interweb.

An objection from Churchill Downs Inc. led DraftKings to take down its Kentucky Derby futures Saturday morning, only three days after they were posted at the Scarlet Pearl Casino in D’Iberville, Miss., a source told VSiN. The source, who is a handicapper and horse owner, said Monday morning that CDI cited legal precedent as its basis to demand a stop to the betting.

This, if true, would not surprise anyone. Like the LAPD (I watched Adam 12 when I was a kid), it's there to serve and protect, and protect it does. 

But what in this case are they protecting?

The Derby Futures wager - a pari-mutuel creation - did $1.89 million in handle last year.  It's a pittance (about 0.8%) to the $225.7 million wagered on Derby Day alone. 

If it's scrapped completely, maybe CDI loses the probable $100k or less revenue (not profit), and that's what they're concerned with. But what about the upside? What if you're Craig Bernick and want the Derby card to do a billion in handle in ten years?

For that you'd need partners, and bettors with money on account being able to access the Derby wager everywhere, and resellers reselling the product. You'd need these entities to promote for you, to encourage bettors to not only bet a future pool, but to bet a whole day because they bet a future pool. You need the wager to be on platforms everywhere, both online and brick and mortar. You'd want these wagers to be part of the fabric of a society, not just in the backwoods, via an ADW. 

You'd, well, want a DraftKings. 

It's fun to flame CDI - they're low hanging fruit for fodder - but it's not just them. This industry has had this mindset for years. 

Betfair wanted to partner with racing back in '03; racing called them "pirates" in return. This was ironic because back in 2009, when I presented on a panel at a gaming summit with one of the founders of Betfair, racetracks were surrounding him with questions after the session, wondering what great sorcery they were committing to have gained all these customers and market power. 

That was one instance, but - Derby Wars, check, fixed odds, check, worried about a roulette wager at 8% juice hurting some other pool, check, a dozen other examples, check. This has gone on forever. 

So, when people ask why racing's (very few) successes involve only the margins, like a 2% here or there, or a Derby Day doing $200 million instead of $180 million five years ago, I always answer the same way:  The sport sabotages itself so the blue sky can never happen. It's the way it was, is, and (unless something changes) appears will be the way it always will be.