Roses Are BlueRick Horrow and Karla Swatek
Unlike last week's NFL Draft, this year's Kentucky Derby is without a clear favorite.
As of Thursday, 22 horses were entered for Saturday's 137th Run for the Roses, two more than the allowed field of 20, so backers of long shots Ruler on Ice and Stay Away are praying that two mounts pull out so that they can trot in. And of the 22, well, never has the normally colorful Derby been colored by such mediocrity. Only nine of the horses won their last race, and just one, Midnight Interlude, comes into Louisville having won two in a row.
In this field of the undistinguished, perhaps if anyone is the favorite it's Todd Pletcher. The stakes race superstar is the only trainer with more than one horse in the field—but keep in mind his Kentucky Derby record to date is 0-24.
Outside of the Derby's four-legged newsmakers, the NBC Sports Group confirmed earlier this year that it now owns all three legs of horse racing's Triple Crown for the first time since 2005. NBC already held the rights to the Kentucky Derby through 2015, but has now filled out its stable with deals with the Maryland Jockey Club for the Preakness and the New York Racing Assn. for the Belmont, all running through 2015.
In addition to Yum! Brands (YUM), among the key sponsors at the weekend's mint julep-flavored festivities, Dodge is heightening its exposure around the Run for the Roses. Dodge Ram emblems are now clearly visible on barn roofs in the stable area at Churchill Downs. (Just call it a horse of a different color.)
And last week, 3M (MMM) announced it will sponsor Kentucky Derby entrant Mucho Macho Man, or "MMM" to racing fans, for all three Triple Crown races. MMM is one of the few horses in the underachieving field that is a consensus contender. This is 3M's first racing sponsorship; the exclusive deal will see 3M's logo prominently displayed on the jockey's silks for the Derby, Preakness Stakes, and Belmont Stakes.
Churchill Downs Diversifies
In order to survive, as annual betting on U.S. meets since 2005 has declined 21.5 percent, the business of horse racing is less and less about horses.
Horse racing, which 40 years ago was almost the only gambling platform available to players outside Las Vegas, is now a tiny part of the overall gambling market. The total thoroughbred handle in the U.S. was roughly $11 billion in 2010 and $12 billion in 2009. Comparatively, commercial casinos nationwide in 2009 brought in $30.74 billion, tribal casinos $29.4 billion, and combo racetrack/casino "racino" facilities $6.4 billion. New York State raised $2.54 billion alone from the lottery that year, and lotteries nationally raised approximately $18 billion. Also affecting the overall numbers are revenues from card rooms, bingo, and charitable gaming, plus considerable revenues from offshore Internet wagering.
The Kentucky Derby is by far the biggest public-profile event for Churchill Downs Inc. (CHDN). Since 2005, CDI's revenue has risen 64 percent. And in the past five years, the company's stock has increased more than 9 percent. CDI's stock price in 2011 has been flat, but trending lower, clearly reacting to more competition for the gaming dollar. So like a champion turning to stud, CDI is diversifying.
Last year, 41 percent of the company's earnings still came from racing. But 34 percent of revenue came from gaming, a double-digit increase over the year before. And for the first time in 2010, CDI earned more profit—53 percent—from casino gambling and online wagering than from horse racing.
CDI once owned as many as seven racetracks. The company now has four, and CDI President and Chief Executive Bob Evans told the Louisville Courier-Journal it is "possible that number could shrink." But the paper stated that diversification, Evans noted, "has allowed his company to weather the recession even as the racing industry as a whole has declined."
Race Handle Down Across the Board
According to numbers from Equibase, the thoroughbred industry's statistical database, wagering on U.S. thoroughbred races fell 7.33 percent in 2010, to $11.4 billion, the fourth consecutive annual decline. The 2009 total was $12.3 billion, down from the nearly $15 billion that previous years had averaged. (The average handle for the 13-race Derby card at Churchill Downs is upwards of $150 million. After 16 years of unprecedented growth, the track saw declines in 2007-10.)
Further, total purses awarded dropped 6.07 percent, to $1 billion, and the total number of live race days in the U.S.—individual programs at each track—dropped 7.75 percent, to 5,473. Threatened and actual track closures in New York and New Jersey, among other states, and the December closure of the nation's largest off-track wagering outlet, New York City Off-Track Betting, didn't help matters. In New Hampshire, 2010 was the first time since 1933 that there was no live parimutuel racing in the state.
In more of an unhappy ending, the U.S. racing industry closed out 2010 with a total December handle of $679 million, down 9.3 percent from $748.7 million in December 2009. December live race days declined 5.4 percent, to 314 from 332, and purses fell 3.7 percent, to $56.5 million from $58.7 million.
National Thoroughbred Racing Assn. CEO Alex Waldrop surmised that the 2010 totals appeared directly related to the cutbacks in live racing days. "While these numbers are no cause for celebration," he said in a statement, "it seems that this year's wagering drop was much more a function of the decline in racing days—compared [with] 2009, when wagering declined 9.8 percent and race days were down only 2.6 percent."
When compared with 2007, when betting totaled $14.7 billion, the 2010 figures reflect a decline of 22.5 percent.
How to get the horse-crazy crowds back? "The best way to increase handle is to make the product more attractive to the bettor," says Bob Mieszerski, publicity director at Los Angeles' Hollywood Park and a handicapper and turf writer for the Los Angeles Times for nearly 19 years. "Bigger fields lead to larger handle. That is easier said than done, but the industry needs to make it more attractive for owners," Mieszerski continues.
Accordingly, Hollywood Park in 2011 has raised its purse structure from 2010, especially for lower-level horses, which can lead to more people wanting to be involved as owners. "The purse for a $12,500 claiming race on Friday's card at Hollywood Park, for example, is $23,000," Mieszerski says. "The owner of the winning horse gets 60 percent of that, so a person can claim a horse for $12,500, win a race, and be 'out'" on their investment.
To attract more bettors to the racetrack's current spring meet, Mieszerski adds, "we also instituted a Player's Pick 5, a wager with 14 percent takeout, the lowest takeout for any bet offered in California. The bet is a 50¢ minimum wager, and it's off to a good start."
The TV Derby
The horse racing industry's inability to present racing effectively on TV has been another frequent target when critics are analyzing the industry's decline. "The problem," laments one expert on ESPN's horse racing blog, "has been that we have never been able to show the sport to its best advantage on TV. It's much like ice hockey—an exciting sport to watch live—but hard to follow on the tube. We have never been able to make the sport move quickly. And we have never been able to produce announcers who seem to be the voice of the sport. There is no racing equivalent of Vin Scully, Red Barber, Mel Allen, Keith Jackson, John Madden, or Marv Albert."
To this end, on the hooves of the network's five-year deal to broadcast all three Triple Crown races, NBC just announced that it has tapped Sunday Night Football Producer Fred Gaudelli to lead Saturday's Kentucky Derby broadcast, according to the Thoroughbred Times. Gaudelli's on-air talent includes jockey Laffit Pincay Jr., Jay Privman, and Randy Moss (not the former NFL player). The crew's Sunday Night Football experience will also "play a role in NBC's social media presence surrounding the Derby, including Twitter feeds, a community area, live photo and video updates, and Kentucky Derby Extra, which is modeled after Sunday Night Football extra," according to the report.
The entire NBC family of channels will be trackside at Churchill Downs throughout the weekend to help the network play up the Derby's celebrity, fashion, and lifestyle elements. NBC's Today, Late Night with Jimmy Fallon, and Access Hollywood will all help promote the Derby, with the Today anchors broadcasting trackside. CNBC, E!, and the Weather Channel will also integrate Derby elements. Versus alone will carry more than 11 hours of coverage through Saturday.
NBC Universal Television Group Chief Marketing Officer John Miller claims that the Derby "has been NBC's highest-rated show in terms of total viewership in the second quarter of each of the last two years." Besides the Olympics, Miller points out, "the Derby is the only sporting event that attracts more female viewers than males." (Perhaps, like the Royal Wedding, it's all about handicapping the hats.)
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