Racing business metrics - what are they?

[DJofSD]

Some random thoughts here -- just throwing them out there to generate some discussions.

If thoroughbred racing and wagering is a business, what are the key business metrics?

What sector of the economy does it fall into? Entertainment? That's what Joe Harper thinks. But I don't think that's what the breeder's would agree to.

Is a key metric the equivalent as same store sales (SSS)? That would really not apply since tracks don't run year round. But ADW companies do.

What about gross margins?

And another random thought, is there any one reporting things like total gross purses paid, year over year? How does the U.S compare to the rest of (the) workd (ROW)?

[kenwoodallpromos]

Il'll bite!
Breeding is producing a business product, and metric is gross ROI.
Racing is a business service, and metric is ROI for wagering and total gross for all else.

[Good4Now]

DJ you da' MAN!

You've opened the door on the real root of all evil. The Legislators who can't or won't think see it as a subset of Agriculture but to give them some credit they do realize it's Tax generating ability.

They ALL want to SPEND that money racing generates and have for years gotten away with Zero base budgetting for it.

In this Ultra high tech world why would you want to be labelled as Agriculture Friendly?

The one true thing that has made this Nation as "powerful" as it is quite simply is that we have un paralleled FOOD SECURITY thanks to our agricultural base.

[DJofSD]

Well, I could be the man but that's not what I'm aiming to do.

Part of the thinking involves (1) following the money, and (2) presuming there is a "wagering non-betting action" (read strike) some day as a protest, how are you going to know if there's been an impact? (You can't change something that is not measured.)

[Good4Now]

Have you ever been to Sant Anita?

I recall seeing all the Badged Ticket writers standing as a group on an un-used staircase waiting to see if they were going to work that day OR have the day off.

[46zilzal]

The problem is that most of the organizations behind management think it is entertainment with all manner of stupid "extras" on hand thinking they will hook the crowds out to the track with their gimmicks and they will stay to bet. As these background gimmicks get more grandiose, the racing keeps getting shifted further and further to the back burner. At the U. of Arizona symposium on racing they mention how important it is to keep racing as the prime factor at racinos, but management is not listening.

[Good4Now]

The problem is that most of the organizations behind management think it is entertainment At the U. of Arizona symposium on racing they mention how important it is to keep racing as the prime factor at racinos, but management is not listening.
What's that you say?? I've got beans in my ears!!!

Add to that the Legislators in Non-Racing States who desire to PROTECT their Citizenry from the evil that is gambling.

[garyoz]

The gaming industry is categorized by Wall Street as a subset of the Entertainment Industry (partially because because it involves discretionary income and is not a staple). Hal Vogel, former equity analyst at Merrill Lynch, has written a classic book in multiple editions called "Entertainment Industry Economics" which included the casino industry. I have never seen an academic book that includes "racing industry economics." Maybe someone from the University of Arizona program in Racetrack Management could suggest a source.

Financial analyses of racetracks that I have seen tend to focus on real estate and the underlying value of the property as the ultimate "out" for being in the business.

The most important factor that is overlooked (IMHO) is the revenue to the States in taxes and the role they play in keeping an asset (property) being used for racing rather than be used for something that would generate a greater ROI (real estate development--malls, residential property, etc.).

In terms of metrics for a racetrack, it is very simple handle=revenue. Not rocket science. The split on origination fees vs. simulcast outlet/TVG seems to be where the industry focus is. Chump change in the long run if the industry can't get its act together.

[DJofSD]

The most important factor that is overlooked (IMHO) is the revenue to the States in taxes and the role they play in keeping an asset (property) being used for racing rather than be used for something that would generate a greater ROI (real estate development--malls, residential property, etc.).

I'd like to break that down a bit.

To just address the status quo, it would be in the respective interest of each state to at least maintain current revenues especially since it is the tendency of the legislators and budget analysis to project increases. And, at some point, the secondary aspects of tax revenues from related industries.

Now to the point of the possible change of use of the real estate involved, would it or could it be a significant difference in the cash to the state treasuries? Where does the economic benefits derive, current, present or future use? Would increase handle resulting eliminating the current barriers present a tempting fruit to the states?

[trigger]

IMHO, for a public racing organization without slots , the key financial/investment metrics of racing are net revenues from handle (gross takeout less commissions to distributors of signal), and profit (measured on a per share basis).
For non profits (NYRA), and privately owned tracks, it's more difficult to figure some of these operational measures but , in the end, these types of tracks need to rank high in the same metrics as the for-profit tracks.
Normally, these metrics are driven by quality racing (i.e., excellent purses), high integrity reputation, customer service (including low takeout) and , to a somewhat lesser extent, the location and physical plant. Also, important is the demographics of the bettors..the younger the better.
To me, many tracks don't make enough out of their beneficial impact on the environment...i.e., providing an economic reason to maintain vast amounts of land used for horse farms open and essentially undeveloped.

[garyoz]

I'd like to break that down a bit.

To just address the status quo, it would be in the respective interest of each state to at least maintain current revenues especially since it is the tendency of the legislators and budget analysis to project increases. And, at some point, the secondary aspects of tax revenues from related industries.

Now to the point of the possible change of use of the real estate involved, would it or could it be a significant difference in the cash to the state treasuries? Where does the economic benefits derive, current, present or future use? Would increase handle resulting eliminating the current barriers present a tempting fruit to the states?

Excellent points. I'm not a real estate geek. But often the commercial projects get tax breaks, so it would probably be a case by case basis. Personally I have very limited knowledge of real estate taxes. I do know that multiples and comparables are the standard for looking at the asset coverage provided by race tracks to creditors who finance acquisitions. That's why I am so certain Ernie Dahlman will get his cash plus interest back from NYRA once it emerges from bankruptcy.

[kenwoodallpromos]

Excellent points. I'm not a real estate geek. But often the commercial projects get tax breaks, so it would probably be a case by case basis. Personally I have very limited knowledge of real estate taxes. I do know that multiples and comparables are the standard for looking at the asset coverage provided by race tracks to creditors who finance acquisitions. That's why I am so certain Ernie Dahlman will get his cash plus interest back from NYRA once it emerges from bankruptcy.
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In my state, Ca does not collect real estate taxes, the counties do. And the rate I believe is below the rate of takeout+ breakages, not to mention that the counties do not get income and much of the sales tax, Ca collects that.