Letter To The Editor: Craig Bernick

No business can change what it does not measure. Racing's public measurement of support, via wagering, hides serious issues.

Recent stories have continued to cite declines in total handle, wondering just what is at play. How that handle has been derived has changed dramatically, but that's not reflected in the overall numbers.

Over the last century, U.S. racetracks have reported total handle on their races and, for most of that time, it was one metric that accurately depicted the health of the business. But in our modern era of simulcasting, rebating and high-frequency betting from professionals, often called computer-assisted or robotic wagering (CAW/CRW), total handle figures actually deceive industry stakeholders more than anything.

Just over $12 billion was bet in 2022, which is roughly the same as in 2000. Adjusted for inflation, total wagering is down nearly 50% in the last 20 years. To compound the issue, research conducted by the Thoroughbred Idea Foundation (TIF) estimates that roughly $4 billion of total handle from 2022, around one-third of betting, was from the CAWs/CRWs. Others think the figure is probably higher.

Racing industry stakeholders should know how much is being wagered, through which channels, how much of those wagers are going towards purses and how that has changed and continues to change. But racetrack operators and executives in the betting space seem to have little interest in publicly discussing how their CAW/CRW business is thriving while their mainstream business appears to be floundering. That lack of transparency wasn't always the case.

Big Changes Over 20 Years

In 2004, an NTRA-commissioned study showed the burgeoning CAW/CRW space represented about 7-8% of total betting. Now, it seems headed towards 40%. This does not have to be the problem it has become. On its own, betting from CAW/CRW groups represents a modern, tech-based, intelligent and efficient form of betting. It should be something we can embrace and improves the overall business.

NASDAQ estimates that high frequency trading now represents half of all stock trading. But trading and investing from mainstream investors has never been cheaper or more accessible. Racing has not evolved similarly.

Racing's costs–through takeout–have grown for mainstream customers while rebates for high-frequency bettors are believed to be higher than ever. The amount the public actually loses, “effective takeout” also seems greater than ever. TIF research, led by Pat Cummings, has uncovered public data which shows mainstream ADW customers are losing far more than the traditional blended takeout rate at tracks in Florida. A figure that should be approximately 20% is often closer to 30%, and it typically gets worse on mandatory payout days.

While racing should be able to embrace a future with more tech-enabled betting, it cannot do so at the expense of mainstream customers. All of the evolution has focused on CAW/CRW bettors, making it easier to bet and at lower price points, while mainstream customers are still paying full-freight on a product that has not evolved for them…and they have fled the sport in droves. Total handle figures hide that shift. The higher the takeout, the more room there is to rebate the sport's biggest players. And they have responded! The segment that has actually grown is the segment with the lowest takeout!

Using inflation-adjusted figures from that NTRA study, published in 2004, CAW/CRW betting has likely tripled in the last 20 years. That means mainstream betting is probably down about two-thirds since then. This is an atrocious trajectory from racing's largest customer base–rank-and-file horseplayers–and has occurred during a period where racing had a veritable monopoly on legal, regulated betting via the Internet.

Now racing's inferior, expensive product for mainstream bettors has to compete with legal sports betting. Good luck.

Great Purses Should Not Buy Our Ignorance

Owners and breeders have enjoyed purse supplements through additional gaming revenue for over two decades now. Combined with poor reporting of actual wagering trends, these supplements have also succeeded in buying our general ignorance of the core product–betting on racing. That's incredibly problematic in the long term.

Horseplayers are some of our sport's greatest advocates, and many of our biggest owners were first introduced to racing as $2 bettors. Not only do we risk losing a generation of future owners if our sport is no longer relevant to mainstream bettors, but we are also squandering the business acumen of leading owners on industry boards by failing to give them an accurate picture of how wagering on the sport has evolved.

More than ever before, racetrack operators are owned, or controlled, by gaming companies. Combined with racing stakeholders' ambivalence towards wagering, gaming corporation ownership often does not seem to rate daily racing as a long-term priority. For many of them, owning and operating racetracks has been a not-so-subtle trojan horse for gaming machines.

Particularly in jurisdictions with heavily-supplemented purses, owners should be advocates for reduced takeout and a healthier evolution of the wagering product for all customers. This will drive future participation. It has gotten easy to ignore how the betting business has evolved when tracks run maiden races for over $100,000, when auction prices climb and the business of buying and selling horses is so lucrative. It defies logic that purses have grown considerably thanks to purse supplements but yet takeout remains high for our mainstream customers.

Industry stakeholders–specifically, owners and breeders–must be more attentive to the alarming trajectory of the wagering business, demanding both more transparent reporting and a product that can grow all customer bases–not just the high frequency bettors at the expense of rank-and-file horseplayers.

I'm all for technology. I'm not against CAW/CRW play. I want all customer segments to grow. I want a bigger pie for everyone. I'm FOR horse racing. We all enjoy bigger purses, but the realities of our core wagering business, which sustains the sport and keeps it in the public consciousness, is really alarming. Most owners and breeders don't see it because it has been, relatively, hidden behind antiquated methods of reporting handle.

I encourage owners, breeders' and horsemen's organizations to demand far greater transparency–both of operators and regulators–as it relates to racing's wagering business. We need to be stewards of our sport and not merely accept elevated purses while ignoring the economic fundamentals that impact our largest base of customers.

Craig Bernick  is President and Chief Executive Officer of Glen Hill Farm, a breeding and racing operation based in Ocala, Florida. He founded the Thoroughbred Idea Foundation.