by Bob Carson

Editor’s Note: The USTA website is pleased to present freelance writer Bob Carson and his popular “Outside the Box” features. This monthly series is a menu of outlandish proposals presented with a wink — but the purpose behind them is serious. The views contained in this column are that of the author alone, and do not necessarily represent the opinions or views of the United States Trotting Association.

“We are either progressing or retrograding all the while. There is no such thing as remaining stationary in this life.” — James Freeman Clarke

“Conformity is the jailer of freedom and the enemy of growth.” — John F. Kennedy

“A business exists to create a customer.” — Peter Drucker

Bob Carson

Growth is difficult when you are restricted to a few severely monitored plots.

States that allow pari-mutuel horse racing operate under a crushing burden. All gambling, like alcohol and cigarettes sales, is both heavily regulated and heavily taxed.

States that forbid horse racing are difficult to understand. At this point in history, anyone can flip open a laptop or cell phone and gamble away the family inheritance on internet poker, the stock market, real estate short sales or snooker matches in the United Kingdom.

Still, the majority of states continue to defend their pari-mutuel prohibitions as if they were defending their inheritance. Not only do state restrictions physically keep horse racing out, psychologically, this Scarlett letter taints us. What makes state embargos of pari-mutuel racetracks incomprehensible to many of us it that jobs and revenue that racing could bring go wanting. And…..Ah…., that’s an old, frustrating story.

Let’s look at the world the way it is.

Pari-mutuel horse racing is taboo in many states and these states do not appear to be rushing to change their state regulations.

Autumn Ryan graphic

This wild pitch is aimed directly at the heads of state breeding industries. The idea is to create a harness racing presence in non-racing states; plant seeds in new markets. It would be wise to have a foothold if non-racing states ever sit up one day and discover that money can be made racing horses.

What if a handful of Standardbred breeding farms attempted to get a foothold in a state that does not have harness racing? What if this consortium of breeders ran their own harness racing program in this non-racing state? What if these breeders ran the entire show for their customers? What if they ran the program without gambling and the costs, hassles and stigma involved in being a gambling entity? And most radically of all, what if a new harness racing state formed a business model that bypassed pari-mutuel wagering?

Of course, it is always about money.

Before you roll your eyes, this is not a new concept. Horse racing was a very popular sport across the U.S. long before legalized gambling. Until the introduction of the tote machine in 1927, a relatively small cadre of horse enthusiasts bought, sold, bred and raced horses. If gambling took place, and it usually did, the races were wagered privately or surreptitiously.

Here’s a hypothetical scenario. Let’s use one of my favorite states, North Carolina, as our stalking horse.

North Carolina does not have pari-mutuel wagering racetracks; so our harness racing hoof print is virtually non-existent. North Carolina does have a beautiful racing facility at Pinehurst that is used for winter training. North Carolina has nice weather, friendly people, an agricultural base, a government anxious to encourage new economic growth and many citizens looking for recreation and diversions.

North Carolina has wealthy snowbirds that flock down each winter. North Carolina is innovative and seeking new industries. Without the pari-mutuel yoke, harness racing is a new industry.

Could a clever group of breeders step up to the plate and create a harness racing scenario in a state like North Carolina? Could they create and promote a system where harness racing could be fun and not fiscally suicidal for owners? To do so would require a new business model because the plan would be without the traditional pari-mutuel structure. It would be a system where owners would be racing exclusively for their own money. Harness racing in North Carolina, for now, would be a participatory hobby/sport. Research from businesses like kayaking and bicycling clearly demonstrate that money, big money, can be made from participatory sports.

Put yourself in the shoes of a potential participant/customer in the theoretical NC harness racing program.

Imagine you have been presented an intriguing new formula proposed by a band of breeders that have registered stallions in North Carolina. You may live in North Carolina or, (thanks to the computer) you may live in Ohio or Dubai — but after reviewing their prospectus, you decide to purchase NC yearlings at auction. You are buying because the new program offers fledgling Standardbred owners guaranteed purses and guaranteed racing opportunities. The new system will give you a chance to have fun, a chance to earn some money back, and the ever-dangling carrot of finding that champion horse.

You head to a sale or two where there is a smattering of NC eligible yearlings. You purchase a trotter. So far, except for the startling sight of “North Carolina Eligible,” this is nothing unusual. But now things change slightly.

To be eligible to race in the North Carolina program you must pay $5,000 per horse, per year in stakes payment fees. This is steep. It would pain many of us to reach for our checkbook, but freedom is not free.

The breeders have a plan. They have shared it with you. After taking out a small percentage for operational costs, the NC breeders put your stake payment and all available revenue streams into a pot of money which will be returned to fund racing.

Here are several options the NC breeders consortium can put on the table to entice people to participate in this new, non racing model.

• Guarantee a slate of at least eight racing dates at three levels (let’s call them A, B, C) that will be available from August 15 to December 15 for eligible horses meeting minimum qualifying standards.
• Expand the NC staking program to 4-year-olds for the top tier horses. If you get a very good horse, you get to race that horse one more year.
• The purse money will be guaranteed at all three levels.
• It is important to include this middle tier (in PA this is the wonderful stallion level). This extra level is critical to interest potential customers.
• Enthusiastic, private enforcement of chicanery.
• You are free to shoot for the moon and stake your horse nationally.
• There will be eight exciting days of racing at Pinehurst spread throughout the season.

Why would harness horse breeders want to take on this responsibility?

1. A revolutionary non-pari-mutuel program would open new markets without impacting our current racing.

2. The breeders control the show.

3. The state would not take out a piece of the pie because this is no longer a pari-mutuel gambling entity. State agencies (agriculture/tourism) may even chip in to subsidize a new industry.

4. Without the gambling albatross, states may work with you; maybe compete for your business.

5. The stakes program basically becomes a private game where players race against each other, for each other’s money.

6. Harness racing is no longer at the mercy of others and can have a bit of an elitist attitude and patina.

7. While money is always important, we are now more of a sport, less of a gambling game.

8. A fresh start, a restart, stability and a move forward that does not conflict with racing as we know it.

9. A foothold, a nudge, for non-racing states to open up their legislation to pari-mutuel wagering.

10. If pari-mutuel horse racing should be implemented in non-racing states (and such legislation is on the table in Georgia), the transition could be made seamlessly and horse breeders in the new racing state would have a leg up.

Here is where I delve deeper into the murky waters of mathematics (frightening territory for a guy who failed High School Algebra, twice, despite aggressive and creative cheating). The numbers I am pulling out of the air could be larger or smaller — the market will, as it always does, determine the value. Today there is zero Standardbred market in many states.

Let’s say that 200 North Carolina yearlings are sold for this new breeder operated model. A pricey $5,000 staking fee per horse in February is the new norm. That means (let me get my calculator), there would be a million dollars for purse distribution for this crop of yearlings. There are four divisions that will hit the tracks in late spring (2YOFP, 2YOFT, 2YOCP, 2YOCT). Each division will have three levels (A, B, C). Each level of each division will offer eight racing opportunities over the season with purses and points accumulated towards the finals.

Phew, this is starting to feel like one of those SAT questions.

So, 4 (divisions) X 3 (levels) = 12 (categories of races for each Pinehurst meet).

12 (categories) X 8 (seasonal meets) = 96 races.

Now we have 96 races + 12 finals = 108 races that need funding.

For funding, we go back to the original million (from the $5,000 per yearling staking fee). When we divide the 108 races into the 1 million you have an average of $9,259 available per race. For discussion purposes, let’s say the middle tier races go for this amount, the top tiers could go for twice, and the lower tiers could race for half.

Enough of this — my head is starting to hurt.

If you decide to buy a yearling in North Carolina’s private harness racing program, you know that you will have eight opportunities to race your horse at whichever level the horse is competitive. The $5,000 stake fee per horse is hard to swallow — but the concept that you know you will have a much improved opportunity to recoup some of your heavy staking fee will take some of the sting out.

As consumers (owners), our chances of getting a viable horse are improved. If only 200 NC eligibles are in the new game and the normal eight classifications are in play, you will probably only have about 25-30 horses to compete against. Your horse will not need to be unbelievably fast to compete at the lower level.

Racing for points to get into the finals would be fun. Racing would be much more of a sport. Competitors would become familiar with each other after a season of racing head to head. Pondering what level to race your horse at would be intriguing. Just to add to the sporting stew, it might be fun to force owners to “lock in” at a level by the second or third of the eight race programs of each year.

Theoretically, I could go to some pals and say: “Here’s the deal. They are starting a harness racing program in North Carolina. If we buy a yearling horse for 10 grand, we pay 5 grand to race and we pay 10 to have the horse tended and trained. Our nut is 25 grand.

“Our first task is to see if the horse can go a mile in at least 2:25 in August (note the later yearling season to give horses more time). If our horse has any ability at all, we are in business. If not, we wait until next year or sell the horse to cut our losses.

“We have a pretty good shot at getting our horse in the game because they offer three levels of racing and we will be competing against modestly priced yearlings. If our horse makes it, we will have a blast and we will take several trips to North Carolina to watch our horse race (pack your golf clubs). We are going to travel the state and meet some folks. You will be learning the game and even though we will not get rich, we have a crack at some decent money.”

Obviously, NC (or Georgia, or Missouri or Tennessee) breeders will want to eventually sell higher end yearlings. The new markets will determine if this is possible. If a new private market offers enough entertainment value and appeals to enough customers (and in this private market the number of players does not need to be huge), who knows what possibilities might emerge, what revenue streams might grow? Like any business, the early years may be modest. But if you believe in the sport, that harness racing ownership is a fascinating business/hobby, you have the opportunity to grow new owners.

Harness racing can no longer rely on politicians, or states, or referendums, or casinos. We cannot even rely on our dwindling fan base, or pari-mutuel system. We can’t rely on anyone. We must find our own ways. This may be one of the ways.

Next month: Into the Dead Zones