Monday, March 20, 2023

Racing's Internal Growth Impediments

I was reading the Financial Post this morning and came across an article on mining in the Tundra

This industry has always been a soft spot for me, living and working in it in my early life. And the way this industry historically ran was quite simple - you'd find something good, raise some money, see if it was feasible, and raise some more money privately to generate revenue. Now it's much different. The new government blocked new projects because of climate concerns, so the money dried up. Then, when the same governments decided new metals needed for things like batteries had to be produced, the money and pipeline through private investment wasn't there, and these projects continued to wither. 

So, to get them off the ground the feds decided they had to subsidize these projects. Big companies now do nothing and wait. $27M here, $100M to BHP there, all from the taxpayer. Chuck Fipke and his stable likely wouldn't exist if he found something today, unless he was given public cash. 

Mining's customer is now the government. And as the article alludes, they know it. 

I saw a tweet from o_crunk last week talking about purses --

"More than half of the purses distributed in US t-bred races this year will be derived from supplements, subsidies and other non-racing gaming. Would seem that "racing" knows who their customer is."

Racing's customer, it can be argued, has always been the government. It's always been highly regulated. However, 50 years ago it was different, because the revenues received came from betting. More handle, more money to taxation, more money to purses. Purses rose, governments did well. Racing was still beholden to this metric. 

Now, with handle meaning so little, and being constrained by decades-old archaic policy (where amazingly tracks can't even charge lower pricing without going through some board or commission if they want to), it's not even a customer anymore. In other words, customers aren't customers. 

This is not the way other jurisdictions work. Although still regulated, racing downunder has been doing at least 'okay' the last twenty years. You can start a betting company in Australia with racing at the fore. You can operate an exchange, or fixed odds, or a tote. If your tote company makes more money at 8% juice, you're allowed to do that. If you offer racing, the people who run the Cox Plate aren't after you for a higher signal fee or threatening to cut you off. Tracks who do well with lower takeout and any subsidy at all certainly aren't looking to raise takeout like Kentucky Downs; they'd think that was silly.  

And what follows is probably not that surprising. The sport functions better. 

Racing's customer in North America, and anywhere really, will always include the government. HISA, new whip rules, lasix, having an old white haired guy cut ribbons will be around forever, and this signaling is for one entity.  


But in some instances the sport works without shackles because the customer still makes up the majority plot in their focus. They're allowed to promote the betting, promote the product and price the product. They're allowed to entice wagering, and they consider profit ahead of margin. That, in the end, if done correctly, can mean more purse money. 

Canadian miners are sitting on the corner, hard hat in hand, lobbying for money because the age-old tenets of business - delivering an end-product to customers - don't apply to them anymore. Welcome to the club old friend. 

Have a nice Monday everyone. 

(graphic, Thoroughbred Idea Foundation)

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