Signs of Life for US Racing

With or without a historic win by Funny Cide at the Belmont Stakes Saturday, the horse racing industry will continue to see record growth in the Internet space, although the first Triple Crown victory since 1978 could certainly be a boost.

Only eleven horses have won all three legs of the Triple Crown, and a field of only five competing horses stands between Funny Cide and racing immortality.

The media frenzy accompanying the achievement of that feat would draw welcomed attention to race betting among casual bettors.

Last year, according to a report in USA Today, the racing industry saw a record $15.9 billion in handle--a figure that's expected to be surpassed, in part because an increasing number of U.S. states are adopting race betting. Chief among those states is California, which last year legalized Internet wagering on horse races.

Funny Cide's remarkable run--the horse was a virtual unknown in March--could contribute to breaking the record as well. Handle could reach the $20 billion mark in 2003.

The timing couldn't be better for the racing industry either. Just like tournament poker has seen a rise in popularity (thanks, in part, to the Internet and Hollywood's love affair with the game), horse racing could see a similar resurgence.

Similar parallels can be drawn to the state of racing. Universal Studios is schedule to release a movie this summer based on the best selling book, "Seabiscuit," about a horse that captured the hearts of America during the Great Depression.

In the next five to 10 years, how the racing industry adapts to changes could determine its success. The onset of new delivery options has lifted betting to an all-time high in North America, but attendance at tracks continues to decline.

At least one gaming analyst attributes the increased popularity of horse betting to the expansion of gambling as opposed to a renaissance for racing.

Sebastian Sinclair of Christiansen Capital Advisors pointed out that the growing presence of slots at race tracks (turning them into "racinos") has added a new dimension to the business.

More states are considering similar initiatives, and Sinclair predicts that by 2005, most, if not all, states that allow horse racing will create regulations for racinos.

In addition to creating new tax revenue for the states, slot money has led to higher purses, which can be the difference between a third-rate facility and a marquee one attracting the top riders and horses in the country.

Delaware, West Virginia, Iowa, Louisiana, New Mexico and Rhode Island allow slots at racetracks, and New York and Minnesota are on schedule to legalize slots before the end of this year.

From a betting perspective, the biggest development for racing has been the Internet and the introduction of advance deposit wagering systems in California. Youbet.com, one of California's three ADW licensees, is reaping the benefits. The company this week announced record numbers in handle, total access deposits and unique bettors for the month of May (traditionally the best month for racing operators because two of the three Triple Crown races are run during that period).

Youbet's handle in May reached $27.6 million, surpassing the previous record of $20.9 million, which was set in March of this year. Total handle in May 2002, meanwhile, was $15.1 million.

Also in May, Youbet customers deposited $7,067,625 into their accounts, surpassing the old record of $5,158,071 set in April and blowing away the $2,968,672 deposited in May 2002.

While the record handle and deposits are good indications of where Youbet is headed, the most telling record could be the site's 12,285 unique bettors during the month. That's 1,900 more than the old record of 10,357 set in October of last year. In May 2002, the system handled 9,962 unique bettors.

Officials with Youbet.com, and other operators, are hopeful that Funny Cide's attempt to become the first Triple Crown winner since Affirmed in 1978 will help June start with the same excitement that propelled May to record highs.

Regardless of whether Funny Cide makes history, though, the popular trend of betting on horses through interactive means should help the racing industry stay healthy for years to come.