Lets have a look at the the numbers.
The CTHS Select Sales held just over a week ago produced this:
"A drop in average price of just over 29% was the biggest in at least 10 years - from $39,131 (all figures in Canadian funds) last year to $30,142.
The sales gross of $4,672,000, for 155 yearlings sold was down from $5,830,500 for 149 sold.
The median sunk from $27,000 to $22,000."
The CTHS Open Sales numbers on Saturday were abysmal: "A total of 148 yearlings sold for $851,800, a 35 percent lower gross than last year, when 153 horses sold for $1,309,200. The average, $5,755, was 32.7 percent less than last year's average of $8,557. Forty-nine yearlings were listed as not sold, compared to 70 in 2008."
Sure, the easiest thing to do is blame the economy, and yes, it is partly to blame, but when you see the purses that are offered at Woodbine which have held steady, the economy is not the main factor here. Betting is down around 11% in North America this year, and it is not just the economy either. And I also know Keeneland's Yearling sale is also getting clobbered currently, and again, it isn't just the economy. For example, in the US purses have declined, yet costs have remained the same, unlike what has happened here in Ontario.
I'm not sure who to blame, or who mostly to blame, for the Ontario sales numbers, in other words, who has final say in the rules here that has made Ontario an even worse place than ever before to breed horses. Is it the CTHS?, The HBPA?, or Woodbine Entertainment? My best guesstimate is that it is a combo of the three.
Simple economics 101 make it easy to understand that prices are down because there aren't enough buyers. But why are there not enough buyers for Canadian bred horses?
Outside of the economy there are two major reasons why sales numbers have dropped significantly: 1. The effect of high takeouts (believe it or not) and 2. Not enough incentives for owners to buy Canadian.
HIGH TAKEOUT KILLING THE GAME
I know I've written at lengths regarding high takeout and the fact that by not allowing existing horseplayer's bankrolls to last, the result is that horseplayers become increasingly disillusioned to play, and they find other ways to gamble, whether it is offshore betting, sports betting, lotteries, internet poker, etc.
Because there are no visible winners who beat the takeout without substantial rebate, those marketing horse racing have basically no tools in which to attract new bettors. Gamblers want to know they have a chance to win. There are winners at Betfair, and while horse racing handle has stagnated, Betfair handle has skyrocketed. There are many blogs out there by Betfair players who consistently make money at it. This is the best advertisement for growth possible. And it is sorely lacking in horse racing, an industry that will not advertise the fact that there are winners, but these winners are being rebated significantly.
The choice the industry must make is lower takeouts significantly, or open the door to advertise the winners and the fact that these winners make their money because they are getting rebated.
So what does this have to do with the breeding game in Ontario? Simple, every owner in the game started somewhere, and most of today's owners got their start being introduced to the game by friends, family or coworkers.
Back in the 60's, 70's, and even the 80's, winning, breaking even, or losing a little wasn't as difficult a task as it is today. There were only 8 or 9 races to play a day and there were not nearly the amount of high takeout exotics available to play each day either. The collective takeout today at Woodbine is around 21-22%, back then it was around 16-17%. And of course, there was lots of mooch money in the pools as well back in the good ole days. Only around 1 in 3 in the crowd relied on past performances to make their decisions which meant the pools were full of dumb money. That dumb money has since left because of competition from slots and lottery mainly. It actually started in when the Blue Jays came to town, and went downhill from there.
The point of all this is that back then one could go to the track with $50 or $100 each day, be able to play the double and a few exactors and maybe a triactor, and still have a good chance to come home with money. This was true especially in the late 60's when there was only one double and two exactors offered each day. All a player had to do was cash a win bet or a win place bet in the last 4 races, and he or she was set to go to the track the next day.
The more a player goes to the track, or today, bets on horses, the more likely they are to get friends, family, and coworkers involved, or at least exposed to horse racing. The key is allowing the player to last longer. Many of the today's owners are the friends, family, and coworkers of horseplayers back in the 60's, 70's and 80's.
Many ownership partnerships have been formed by people who have hooked up because of their interest in horse racing. But the interest came about because there was a time that player's bankrolls to lasted longer. Ask any owner how they were introduced to horse racing.
In light of today's competition, horse racing has not tried to compete for the gambler's business. They assume they have a right to the bettor, but that assumption is just plain out wrong, and by sticking with the high takeout mentality, it has helped shrink the audience, and with it, the potential owners and buyers of yearlings that could have been.
NOT ENOUGH INCENTIVE TO BUY CANADIAN YEARLINGS
The cost to get a freshly bought yearling to the races is significant even if one pays a few thousand for that yearling. Many horses don't start until they are 3 or even 4, and a few times even older. And there are those who don't make it as race horses as well. What about those who make their first start at Fort Erie for a $5,000 tag, who are shooting for a net prize of something like 4 grand?
Bottom line, no matter the breeding or the confirmation, buying a yearling is probably the riskiest way to be a horse owner. Existing horse owners know this. New owners generally get into the game through the claiming side.
How to lower the risk? Right now it is pretty much a feast or famine situation for yearling buyers. Yes, you can buy a potential Queen's Plate winner, but you can also buy lottery tickets as well. If you are lucky enough, you can find a horse that may win a few Ontario sired special races, and maybe an Ontario sired stake race. But again, the odds are that you are going to wind up buying a horse who struggles to break its maiden for $12,500 at Woodbine, or $10,000 at Fort Erie. And some horses who compete at these lower levels sometimes get better, and then go on to be competitive in Ontario sired events, so from an owners standpoint, why not wait to see if there is potential to win these event without going through the expense of buying them somewhat blind, breaking them, and training them just to make the races?
The biggest problem is once an Ontario sired horse has shown that they don't have the potential to win Ontario sired events, they are pretty much worthless, as they have to face Kentucky breds in claiming events. It is just fact that Kentucky attracts the best sires and the best dams, and many dams from Ontario travel to Kentucky to be bred and then are brought back here or they wind up staying there. They produce a superior product there, and I have no immediate answers that will change that fact.
If you buy an Ontario bred who doesn't compete at the restricted allowance level, you are forced to run against better quality horses, especially at the higher claiming levels. Once an Ontario bred ekes out its conditions at low levels (ie at Fort Erie), they are pretty much not worth racing, and because the probability is that they will be that type of horse, why buy them at the sales in the first place?
Woodbine's purse structure has made it very appealing to American outfits like that of Steve Asmussen's to race here profitably. Does making the Woodbine product American friendly help? I don't think the pluses of better quality outweighs the damage that giving the purse money away to these outfits does to the breeding game and Canadian owners of Ontario sired horses. From a bettors standpoint too, quality doesn't matter that much. Double the purses and betting only increases 6%.
Woodbine would be doing the game here a huge favor if they would shave off some of the higher end purses and put that money into Ontario sired or Ontario bred claiming races.
By giving owners of Ontario breds more outs, it increases the incentive to buy Ontario breds. This means that the cheapest Ontario breds will be worth more than they are today, and if the cheapest ones raise in price, the more expensive ones will also rise in value.
Also, the game is designed for the rich right now thanks to the disparity between what a an allowance horse runs for and what a lower end claimer runs for. A key element to raising demand for new owners is to keep the small owners in the game (much like the lower takeout scenario). Knowing that a horse has to win 3 races at Fort Erie in one year just to break even, hardly attracts new owners, and it hardly keeps old owners in the game.
In Fort Erie's case they need to run fewer races at higher purse levels, and they also need more subsidies from the CTHS in the way of extra bonus money so that they can put on Ontario sired claiming races at the $5,000 and $10,000 level.
In Woodbine's case, they need to run Ontario sired claiming events. They also need to increase the purse structure for lower level events, but make it so Kentucky breds run against Kentucky breds. Eventually, owners will only want to own Ontario breds.
Recently, Ontario brought in a new rule that actually works against the breeding industry (as I predicted when it was introduced). If someone claims an Ontario bred horse, they are no longer able to run for the full purse, in other words, they might as well be be bred in another jurisdiction.
I believe the motivation for this rule was to try to get owners away from claiming Ontario breds, and trying to force them to buy at sales. This just shows that the decision makers are not in touch with reality.
Many owners of race horses are out to make a buck, or not get hurt at least. They only start buying yearlings once they've had some moderate success (which includes breaking even or losing just a little) racing horses. By reducing the demand to claim Ontario breds, all that has happened is that it has caused a greater demand for foreign breds. This rule has devalued Ontario breds, and owners of these horses know this, because it also becomes very difficult for them to unload their runners.
And what about those ridiculous B maiden allowance and allowance races run at Woodbine? Who exactly is that for? Mainly, for those owners who have higher priced Kentucky breds or Ontario breds that have foreign sires. It is a way for these owners to protect their horses and earn some allowance type when dealing with mares.
It also takes away from the free market. If these horses can't win an allowance A, they should be forced run in maiden claimer. The more horses run for the levels of what they are really worth as runners, the more claiming will happen, and with that, more potential owners.
How do these B races help the Ontario breeding industry in any way, especially the ones who own Ontario stallions? Isn't it telling that Kinghaven Farms has very few (I remember seeing one this year) Ontario sired horses, yet they have quite a few Ontario breds?
Sure, sales vouchers, and Ontario bred bonuses help a bit, but they only help those who win a few races, and with the cost of training a horse, they don't help nearly enough.
HAPPY BIRTHDAY HORSEPLAYERS ASSOCIATION OF NORTH AMERICA
HANA was formed one year yesterday. I'm proud to be on their board and the progress we have made in the past year, and I am looking forward to the future.
Take a minute, and join HANA here.
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