Commentary

2009 not so good for business

Updated: December 30, 2009, 12:24 PM ET
By Paul Moran | Special to ESPN.com

While Rachel Alexandra and Zenyatta carried the 2009 racing season into a special place in memory, the industry at large looks toward the new decade in well-founded fear. The year at our backs has opened a curtain on an uncertain future for racing. The good news during 2009 took place between white rails. The bad news was everywhere. If the stock market had mirrored the racing business, it would still be March.

The U.S. financial markets rallied in the second half of the year, but the ripple effect failed to impact any aspect of the racing industry. In the waning days of 2009, betting handle is on pace to drop 10 percent year over year to about $12.3 billion, the second straight year in which handle has declined by more than $1 billion. Purses are on pace to decline about 5.8 percent to $1.09 billion, a figure comparable with 2005.

Optimists suggest that the market for horses may be improving with a revival of the general economy. For realists: Not so much.

Racing's great depression has a wide wingspan and its fiscal difficulties are exacerbated by the umbilical cord that connects its every element to dimly witted political whim.

The New York Racing Association, having once emerged from bankruptcy, is again at the verge of insolvency. Why? After eight years of astounding incompetence by what is arguably the nation's most corrupt and dysfunctional state government, the Empire State's solons remain incapable of or unwilling to choose one from among several applicants, organizations that would finance and operate a video lottery terminal casino at Aqueduct that has the potential for enormous profit.

Governor David Paterson, whose approval ratings are behind Swine Flu's, and state legislative leaders, a term employed here in the most obtuse sense, remain at unexplained gridlock over which of five bidding groups will operate the 4,500-maching Aqueduct VLT casino, first approved in 2001. The state, itself insolvent and facing unprecedented deficits, has turned its back on an estimated $400 million a year. NYRA, horsemen and breeders are seeing at least $60 million a year unrealized because of the unconscionable delay. Allowing for a year to construct, equip and staff the project, the state's taxpayers have seen about $3.2 billion and the racing industry roughly $480 million lost to incompetent government.

But racing's economic suffering at the hands of dysfunctional government is certainly not unique to New York. Pick a state.

In the heartland of the American thoroughbred breeding industry, poultry has become the most important agricultural commodity in Kentucky, once identified primarily with horses, bourbon and tobacco. The world has indeed changed.

In June, the Kentucky House of Representatives approved video lottery terminals, a measure supported by Gov. Steve Beshear. The Republican-controlled Senate refused to advance the bill out of committee, the export of broodmares to other states with more lucrative, slot-fueled incentives accelerated and with them money and jobs. A subsequent attempt by racing leaders to elect more sympathetic legislators failed in November.

In Maryland, slots were approved in 2009 but it appears that they are destined for locations other than the state's long-neglected racetracks, which exist hand-to-mouth surrounded by insurmountable competition blithely ignored by those who occupy the salons on Annapolis. New Jersey and Ohio politicians have taken no measures to support racetracks and those dependent upon the industry in those states. More American racetracks, including most of those which are -- or were -- part of the crumbling Magna Entertainment group, face bankruptcy than prosperity at the end of 2009.

Economic erosion is no less global in racing than in the financial markets to which every segment of the industry is tethered.

Only a few months before the government-owned Dubai World went hat in hand to its United Arab Emirates brethren Abu Dhabi in need of a bailout, construction continued at the beyond-lavish Meydan racetrack, Sheikh Mohammed was at Saratoga, propping up the Fasig-Tipton Sales Company newly acquired by Dubai interests while spending lavishly for the progeny of his own stallions and the last yearling offspring of Storm Cat offered at auction. In the process, while the situation at home deteriorated, the real estate market withered, development slowed and the airport parking lot filled with abandoned luxury automobiles the unemployed former owners of which had fled the emirate, Sheikh Mo was single-handedly responsible, smoke and mirrors notwithstanding, for what was the summer's only successful sale of yearlings.

Meanwhile, though concern is dismissed in the region of the Persian Gulf, the face of racing internationally will be changed should the leaders of Dubai find it necessary to reduce their level of participation, which to some degree touches every continent on which the sport is conducted.

Optimists suggest that the market for horses may be improving with a revival of the general economy. For realists: Not so much.

The market is in contraction. Projected foal numbers for 2010 are the lowest since 1979 and the commodity least in demand during the second half of 2009 was the less-than-proven-stakes producing broodmare, especially those owned by small-scale breeders forced out of a bearish bloodstock market. The equine victims are countless.

It was a year during which the nation's many organizations dedicated to rescue of neglected horses and those whose owners could no longer afford their upkeep saw unprecedented need of their services. Early in 2009, dozens of emaciated horses were discovered on a New York farm operated by the once prominent now infamous owner, Ernie Paragallo, who was later charged with cruelty to animals and stripped of whatever racing licenses he still held. By autumn, many farms in New York were forced to padlock gates at night after desperate, struggling owners began turning loose horses under cover of darkness.

While abandoned horses were found languishing in various stages of neglect in almost every part of the country, thousands were rescued, treated and relocated. Sadly, uncounted others suffered less fortunate fates as rescue efforts broaden and gained support but nevertheless lag the need despite the best, wide-ranging efforts of humans. Through November, an Internet-based organization headed by exercise rider Alex Brown, placed 540 horses with new owners. In December, the owner-funded California Retired Management Account contributed $264,000 to a dozen organizations caring for retired West Coast racehorses, an increase of approximately 50 percent from the amount distributed in 2008, the organization's first year of fundraising.

"We are extremely proud of the work we have done over the past 12 months. These funds will help buy much needed hay, feed and medications. Hopefully this will give a financial cushion to each of the charities," said CARMA Board Chair Madeline Auerbach. "We're able to see a tangible difference at the farms and facilities where the horses live. As we go out and visit organizations throughout the year, our directors are seeing the money put to work."

If tireless humane efforts like these gained momentum during the past year, other important areas of concern long left begging for reform remain stagnant.

No progress was made during 2009 in the areas that have become festering issues plaguing a hopelessly fragmented industry: Uniform medication rules, standards and penalties; absence of central leadership, accountability and transparency. Public perception that all in racing is not entirely above board persists. The structure and expansion of the Breeders' Cup remains a subject of controversy. The sport's once-robust profile in the mainstream media has never been lower and shows no sign of regained life.

The question of synthetic racing surfaces saw a gap in support widen while the industry awaits a comprehensive study on breakdowns. The Fair Grounds, Turfway Park, Arlington Park and other tracks experienced rashes of breakdowns during the year.

Two of those breakdowns at Arlington claimed the careers of the jockeys involved and raised serious questions among riders regarding the safety of Polytrack, the synthetic surface in place at the suburban Chicago track. After veteran Rene Douglas, a six-time leading rider at Arlington, and apprentice jockey Michael Straight were left paralyzed by accidents last summer, riders voiced concern and raised questions about the safety of the surface they once supported.

Terry Meyocks, president of the Jockeys Guild, says the Guild doesn't have a stance -- pro or con -- on synthetic surfaces.

"We've got to keep monitoring it," said Meyocks, who noted that three jockeys have died during racing over the last 15 months, none on synthetic surfaces. "We are going to be talking to tracks about a database on riders' injuries. It would be nice to get an idea on the impact of surfaces."

While most of bankrupt Magna Entertainment, once the leading owner of American racetracks, is sold off in pieces, Churchill Downs Inc. and Betfair positioned themselves to dominate the growing U.S. advance-deposit wagering market. The British firm Betfair purchased Television Games Network for $50-million in January and Churchill's pending $126.8-million purchase of Youbet.com announced in November will expand significantly its Twinspires.com platform.

While the 2009 season was unquestionably an artistic success that has culminated in great public interest in the Horse of the Year debate there is no other aspect of a diverse industry that begins the new decade in a position of comfortable, queasy certainty.

Fewer thoroughbreds will be born in 2010. Quite likely, when old enough they will race for less money at fewer racetracks. The year just past may well be the beginning or the steepening of a downward spiral the end of which we cannot yet see and hesitate to imagine. This is not entirely the fault of those involved even at the thing and crumbling upper crust of what passes as leadership. The larger global economy is a factor but so is the arrogant abdication of responsibility on the part of those who occupy elected office.

Unlike other sports and businesses, racing -- because of an unhealthy dependence upon state regulation and the self-interested political local influences at work in almost every jurisdiction -- there is no guarantee that the industry will follow the larger economy out of recession into a more robust business cycle. While horses provided one of those years that has been nothing short of memorable, these are far from the best of times in the racing game.

Paul Moran is a two-time winner of the Media Eclipse Award, and has received various honors from the National Association of Newspaper Editors, Society of Silurians, Long Island Press Club and Long Island Veterinary Medical Association. He has also been given the Red Smith Award for his coverage of the Kentucky Derby. Paul maintains paulmoranattheraces.blogspot.com and can be contacted at paulmoran47@hotmail.com.

• Paul Moran is a two-time winner of the Media Eclipse Award among several other industry honors. He also has been given the Red Smith Award for his coverage of the Kentucky Derby.
• You can email him at pmoran1686@aol.com