Choosing the Hardest Path to Victory

Company A is in the widget business, they make a really good niche widget, and are a leader in the space. On its income statement, $700 million is realized from widget sales, and $10 million is realized from sales of accessories for their widgets. There are accessory for widgets companies that do some really good stuff, and widget company A doesn't do that part near as well.

Strategy A: Spend capital and time to increase widget sales to a global market that is much bigger than the $700 million you sell.

Strategy B: Spend capital and time creating new products and gain market share for the $10 million, against market leaders you probably have little hope in competing with.

Strategy A, because it's easier as a leader to grow, and because of pure math, seems to make the most sense. A 10% increase in revenue yields $70 million. You could double the 'other' part of your income statement and only realize $10 million.

Racing, which yields about $700 million for purses a year from wagering, runs on wagering. The money it does gain from television, for example the Triple Crown, is small. Most of the racing you see on TV is paid for by the sport, not the other way around. To increase the $700 million, it needs to attract more money through various means, most of them (Equilottery, exchanges, fixed odds, lower juice, new bets, exporting a signal) not tried in earnest. To increase the $10 million, they have to compete and defeat NFL Football, dozens of other sports, gain sponsorship against hundreds of other sports, and a lot more super-tough stuff.

Why do people want to spend limited capital, time, effort, on trying to grow the 'other' part of the income statement? I think most of it is explained from insiders wanting a market it wishes it had, instead of the one it does have. We all love racing and we want it on cereal boxes, talked about on Sports Center and on Dancing With the Stars, even in non-Triple Crown winner years. We want to tap people on the shoulder and say 'look at us, we're fun and this is a great sport', and anyone who has an idea how to do this - even if it's silly - is listened to.

The bottom line is that in North America the path of least resistance for racing's core growth lies in two areas: i) more slots and ii) more handle. Wishing it wasn't doesn't make it so; it only provides a not-needed distraction.