02/02/2006 12:00AM

Handle decline in 2005 may signal larger trend

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When the National Thoroughbred Racing Association and Equibase released figures late Wednesday showing that handle dipped 3.5 percent in 2005, officials blamed bad weather for the declines, citing 147 fewer racing days, a drop of 2.3 percent from 2004.

Thoroughbred racing may have more dark skies ahead, racing officials said Thursday.

This was the second year in a row in which total parimutuel handle on Thoroughbred races in the United States and Canada declined. Handle had not dipped for two consecutive years in any two years since 1980, the first year in which accurate records are available. In addition, purses in 2005 dropped 1.1 percent, the second time in the last three years that purses have declined, despite hundreds of millions of dollars in subsidies from slot machines at tracks in six states.

"We're in a declining trend right now, and I don't see an end to that," said Chris Scherf, the executive vice president of the Thoroughbred Racing Associations, a trade group that represents racetracks. "What's worse is that the handle declines and purse declines don't indicate just how big the declines really are. Revenue is down even more."

According to the figures, handle dropped to $14,580,757,317 in 2005, from $15,099,011,926 in 2004. Purses dropped to $1,080,742,875 from $1,092,565,395. Race days fell to 6,276 from 6,423.

The declines have put an abrupt halt to a long trend of slow but steady growth in the racing industry tied almost entirely to the proliferation of full-card simulcasting over the past decade. Since the approximate advent of the simulcast era, in 1994, to the high-water mark in 2003, handle on Thoroughbred races grew from $10.6 billion to $15.9 billion before suffering its first decline in 11 years in 2004. Purses ballooned from $797 million to $1.22 billion over the same time period.

The year-to-year comparisons for 2005 and 2004 do not tell the full story. Gambling in the United States has exploded over the last decade to a $90 billion market, yet Thoroughbred racing's market share continues to decline, even with more and more people gambling. In addition, the industry has never spent as many dollars as it does now on national and local marketing and promotion, yet handle dollars continue to dry up.

The total handle number also masks the migration of dollars within the industry from more traditional outlets to account-wagering operations, which typically serve as expensive middlemen between tracks and customers. As more and more money is bet through the account-wagering market, racetracks - which have far higher expense structures than account-wagering operations, plus obligations to purses - receive less and less revenue. In addition, many account-wagering operations offer generous rebates to their best customers, a bonus that many tracks cannot afford.

"Racetracks are getting less and less money from betting, and it still costs more and more" to put on a race, Scherf said. "We're not in a very good competitive situation."

John Roark, the president of the National Horsemen's Benevolent and Protective Association, said that the handle declines do not reflect an erosion of interest in horse racing domestically. Instead, Roark contended, handle is increasingly migrating to offshore sites that can offer bettors rebates and other gambling games, and much of that money is not being counted in the figures because it does not enter commingled pools.

The national horsemen's association has been seeking for several years to reign in offshore sites that do not have contracts with the racing industry, and Roark said the organization is close to its goal of establishing an offshore hub that would allow the sites to come into commingled pools while returning money both to their own local racing industries and to the U.S. racing industry.

"We're going to work on expanding the market by getting that international money to come into the U.S. pools," Roark said.