News How Will Online Sports Betting Impact the US Racing Industry? October 20, 2019 News How Will Online Sports Betting Impact the US Racing Industry? October 20, 2019 By: Ryan Stillman twitterfacebooklinkedinemail Share: share on facebook share on twitter share on linkedin email this article Organized horse racing is one of America’s most popular pastimes. Since 1830, horse racing was the only sport that Americans could legally bet on- but that changed in 2018. With the fall of the Professional and Amateur Sports Protection Act of 1992 (PASPA), each US state was given the opportunity to legalize full blown sports wagering, if they wished. Now, 19 states have legalized sports betting, 13 of which have launched betting operations, and six have gone as far to permit online sports wagering. While this is good news for sports bettors across the US who are looking for legal betting options, this presents a problem for the US horse racing industry. According to a report from the Thoroughbred Idea Foundation (TIF), the North American horse racing industry is “facing a momentous threat to its business” through the expansion of legal sports betting. ( Content Continues Below Ad ) Current state of the US racing industry Betting on horse racing is currently legal in 30 states and, according to a 2018 report from The American Horse Council Foundation (AHCF), the US horse industry has an economic impact of $122bn. The majority of the horse industry’s revenue ($36.6bn) comes from the racing sector, which provides around 472,000 jobs. In 2016, approximately $11bn was wagered at Thoroughbred and Quarter Horse racetracks, and $1.45bn at Harness racetracks. Nowadays, the most popular way to bet on horse racing is online, roughly 60% of horse betting is now done on mobile and online devices via sites such as TVG, BetAmerica and TwinSpires. The most popular horse racing events in the US are the Kentucky Derby, which completed its 145th running earlier this year, along with the Preakness Stakes and Belmont Stakes. How is horse racing under threat? The legalization of sports betting has caused a massive shift in the sports betting landscape. While horse racing was the only sport that US citizens could legally bet on outside of Nevada for many years, the industry is now struggling following the repeal of PASPA. As several states have their own sports betting markets, horse racing industries in these states are having a tough time as they must compete with much more popular sports such as baseball, basketball and football. Of course, sports betting is nothing new, but it has been illegal and unorganized until recently. Now that it’s been given the green light across the US, we’ve seen the development of infrastructure to support sports wagering at an almost unprecedented level. Both companies that are based in America such as Penn National Gaming and overseas companies like Bet365, are competing for a slice of the US sports betting market. Sports betting operators are rolling out incredibly sophisticated marketing campaigns and striking marketing partnerships with the professional sports leagues, such as the NBA, NFL, NHL and MLB. Data providers like Sportradar and Genius are also cashing in on the sports betting gold rush through sales of official league data to sports betting operators. With the amount of money, and the scale of marketing campaigns, that operators are putting behind sports betting, even the most die-hard horse racing bettors could be drawn into the realm of sports betting and the many sign up offers and promotions. However, all of this isn’t to say that the horse racing industry is against the legalization of sports betting- some parties are actually championing the move, and offer their full support. New Jersey was one of the first states to legalize and launch sports betting and the state’s racetracks have supported sports betting in the hopes it will bring more people to their venues. In the Garden State, Monmouth Park is partnered with William Hill and features a William Hill branded sports book while Meadowlands Racetrack has partnered with FanDuel Sports book. Although the addition of sports betting has helped bring in new customers, it is still unclear just how much of a positive impact it is having on racing. ( Content Continues Below Ad ) The racing industry need to evolve The TIF found that the industry must be able to adapt to a handful of market conditions to compete with the sports betting industry. These are the areas in which the industry must evolve if it wishes to stay competitive: Accepting fixed odds In the US, pari-mutuel betting is the only permitted form of wagering on horse racing, with the exception of some events. This means bets go into a pool and the size of the pool determines the odds. However fixed odds, a model adopted by sports books the world over, is much more simple. The odds are set before bets are made someone bets and once a wager is placed the bet is locked in. This structure is much simpler for bettors, as they have a clearer idea of the potential return on their wagers. A new funding model Currently, each state has its own horse racing regulation, which means there’s little uniformity. However, devising a new funding model would allow the industry to find new ways to fund tracks, events and help overcome the current problem. Some states, such as Delaware, allocate a percentage of sports betting revenue is to horse racing purses. While this provides a temporary boost, it is not enough to keep the industry afloat in the long term. The US sports betting industry is growing every moment and it wont wait for the racing industry to catch up. A new marketing approach Marketing plays a huge role in the recent success of sports betting. Since the repeal of PASPA, several gambling companies have inked marketing agreements with professional teams and leagues. For instance, MGM Resorts International is now an official betting partner of the NBA, while the NHL has partnered with MGM, FanDuel and William Hill. Even the NFL, which has been opposed to gambling for decades, has partnered with Caesars. Partnerships between sports leagues and gambling companies facilitate access to customer databases, as well as permitting the use of official promotional material such as logos and photos For the racing industry to compete with this, it will need to find new ways to market and promote its products, potentially securing partnerships and sponsorships of its own. Innovation in offerings The racing industry needs to innovate and give its customers something new. Sports books up and down the country have managed to innovate by offering live in-play sports betting, the ability to create parlay bets and even proposition bets. Horse racing lends itself perfectly to a variety of different innovative bet types, but the industry has yet to take advantage of this. Live in-play betting and proposition bets are available at almost every sports book in the country and there is no reason the racing industry shouldn’t follow suit to increase fan engagement and breathe new life into the sport. For instance, bookmakers could allow bettors to create parlays on multiple races that are scheduled to take place on a certain day. Bookmakers could even offer total bets on a variety of outcomes such as how many winning horses will a jockey ride in the upcoming year. While the racing industry is currently battling against the rise of sports betting industry, it doesn’t have to continue to struggle. The industry can learn from, and take inspiration from the sports betting market to help compete. Whether that’s through adopting a new odds structure or through new and exciting marketing campaigns, the industry has plenty of options at its disposal.
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