Attacking the bookends
In the coming weeks, venture capitalist TK Kuegler will bring that mindset to the racing industry, turning an analytical eye on what the industry can — and should — do to grow its business.
by TK Kuegler
Recently, I was asked, “What is the one thing you would do to fix the racing industry?”
My answer was, “I would attack the bookends.”
There are only two things that really matter in the racing business: increasing the handle and bringing more owners to the game. The current picture in that regard is not pretty. Handle, which topped $15 billion over a decade ago, has been under $11 billion for five straight years. And the size of last year’s foal crop, 20,600, is about half of what it was in 1990. These are the two bookends of the entire industry, and if we focus on them, everything else will solve itself.
Bookend #1: Increasing the Handle
For anyone interested in the racing world, we must accept one key tenet: this is an entertainment business.
We compete against movies, theatre, Broadway shows, the NFL, March Madness, etc. for the entertainment dollars of our fans. It is their attendance, media viewing, and general passion for the sport that will allow the entire engine to go.
Unlike many other businesses, we also have the added opportunity to find revenue from the handle that comes when those same fans make wagers on the four-legged athletes we love. The expanded fandom and the correlated handle increase will create larger purses and more marketing cash to attract even more fans interested in the entertainment excitement. We need to be creative in our efforts to bring new fans to the sport and allow them to understand the ways they can enjoy the sport from a viewing and betting perspective. If we see the handle increase, we will see all kinds of talented, creative people look at ways to invest in the game. All of this will build momentum that will help all facets of the sport.
Bookend #2: Bring More Owners to the Game
If increasing the fandom and handle are the gasoline of the racing engine, more owners coming to the table is the lubricating oil. Horse owners are the investment dollars of the business. They make the large bets that are required to take the athletes from foaling to retirement.
We need to find ways to move down stack and attract owners who are not just the uber-wealthy of the world. We need infrastructure in the owning process that is both engaging and transparent to new owners. If we attract this new flock of owners, their investment dollars will help breeders, auctioneers, consignors, bloodstock agents, trainers, jockeys, grooms, farmers, and so on. But few new owners will join this game if they feel like they are going to be ripped off or confused about what the process really is. We do not need to make this a zero-sum game; if we help new owners join the game, the pie we have to eat gets larger.
These two bookends are inseparable in order to fix the racing business. Without the investment dollars from new owners, the product suffers. Without the increased handle, few new owners are going to jump in the game. But if we do everything we can to explore creative and progressive ideas to attack both of these bookend issues, what we will create is a library full of great books for everyone to benefit from. We are at a place where every initiative in this business needs to ask, “How does this help the handle or attract owners?” If the answer is vague or ambiguous, then we shouldn’t do it. Focus our efforts and we all will be in the winners circle.