01/08/2004 1:00AM

Business wasn't feel-good story in '03


How was business in the American racing industry in 2003? Figures released earlier this week cut both ways.

On the positive side, total parimutuel handle increased for the 10th straight year, a compelling statistic that belies the constant depiction in the general media that racing is a declining game. Betting on American races was an impressive $15.2 billion last year. That's a lot of exacta boxes.

Yet the increase over 2002 was less than 1 percent, the smallest rate of growth since a decline from 1992 to 1993 and well below the average annual growth rate of 5.2 percent over the last decade. The relatively minuscule increase may seem especially disappointing because 2003 was supposed to be a charmed year for the sport, and numerous industry officials had predicted the exploits of Funny Cide and the release of the "Seabiscuit" movie would send business soaring.

Such expectations were fanciful and unrealistic, and industry leaders were too hasty in congratulating themselves when third-quarter business spiked briefly in the wake of the Triple Crown and in the midst of the movie release. Business promptly plummeted in the fourth quarter. It is impossible to gauge how much the two feel-good stories helped business, however briefly, but if they helped even a little, then the sales figures may have been down for the year without them. Another discouraging possibility is that if a few more people did sample racing because of Funny Cide and "Seabiscuit," it would appear that they tried it once but didn't come back.

Inclement weather played a part in the fourth-quarter plunge. There were 78 fewer racing dates year over year in the last three months of the year. The weather was not, however, a factor in California, where strong third-quarter meets at Del Mar and Fairplex were followed by sharp fourth-quarter declines at Oak Tree and Hollywood that prompted purse reductions at both meetings.

Purses for 2003 are a tricky read. In releasing the 2003 figures, the National Thoroughbred Racing Association highlighted the fact that purses were down $20 million from 2002, declining 1.86 percent from $1.07 billion to $1.05 billion despite the handle uptick. It was the first time that total purses had declined since 1993, and there had been an increase of at least 3.6 percent each year since.

Given that total racing days were down 1.7 percent, however, purses per race were essentially flat. As simulcasting and account-wagering continue to replace live handle, a slightly smaller share of commissions is finding its way back to purses, but this is being offset by slot-machine revenues being redirected to purses in some jurisdictions.

The outlook for 2004 is not heartening for anyone expecting an 11th straight year of growth in handle, for several reasons.

First, the primary factor in the decade of increases was the expansion of simulcasting availability, which is now nearing completion and utter saturation on a national scale. Now that most major jurisdictions have instituted virtually unlimited full-card simulcasting, with account wagering filling in many of the remaining gaps, there are fewer opportunities for growth through expanded betting opportunities, at least until international business becomes significant.

Second, nothing good is happening in the world of takeout, where reductions historically have spurred handle growth and increases lead to declines by taking money out of circulation. A looming 0.5 percent increase on multiple bets in California seems likely to reduce handle in 2004. New York's commendable takeout reductions are scheduled to sunset in June and may not be renewed.

Finally, the new year is off to a distressing start at two major venues. While ontrack business has had some bright spots, total handle at the winter's two premier meetings, Gulfstream and Santa Anita, has alarmingly been down in the early days of those meets, with the drop almost entirely from interstate betting. No one seems to have a good explanation. Magna Entertainment, which owns and operates both tracks, has antagonized some players with restrictive new policies on outside account-wagering companies, but the decrease in betting is larger than the entire account-wagering portion of the handle.

This past Wednesday, for example, combined total handle on Gulfstream and Santa Anita was $12.85 million, down from $16.32 million on the comparable Wednesday a year ago. Gulfstream ran one fewer race than last year, but the total handle per race for the two tracks Wednesday was down 16 percent from last year. Both meetings are young, and their biggest days are ahead, but these are not encouraging starts.

Over the last decade, despite a widespread belief that the industry has been stagnant at best, total economic gains have been strong. Handle grew from $9 billion to $15 billion, purses from $700 million to over $1 billion. The question now is whether the far more modest growth of 2003 represents a temporary levelling off or the peak of a graph that could now start heading in the opposite direction.