12/06/2016 10:37PM

Racing urged to reach out to academics for analysis

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TUCSON, Ariz. -- The racing industry could benefit from richer academic analysis of its varied businesses by forging relationships with universities and making data more accessible to researchers, a panel of academics said on Tuesday afternoon at the Symposium on Racing and Gaming in Tucson, Ariz.

The panelists included three professors who already have relationships with the racing industry, though all stressed that the industry’s myriad sectors, from breeding to wagering, could benefit from a stronger partnership with university research programs. They also stressed that many aspects of the racing industry remain difficult to study because many racing businesses view specific sets of data as proprietary, limiting the reach of academics to conduct deep studies of several important topics, such as the sensitivity of wagering handle to takeout changes.

Dr. Mick Peterson, a mechanical engineering professor at the University of Maine who has been hired to head up the University of Kentucky’s Ag Equine Programs and who has collaborated on a number of racing-surface projects, said that racing has lately done a much better job in collecting data, citing projects that are now tracking equine and rider injuries and collecting information on a vast range of track-surface parameters.

But he also said that universities are capable of conducting a wide range of research that could benefit racing indirectly, citing the work done by entomologists in tackling the cause of Mare Reproductive Loss Syndrome in the early 2000s, which caused 30 percent of Thoroughbred mares bred in Kentucky in 2001 to abort. As a result, he said racing organizations need to forge stronger relationships with academics of all stripes, especially when many academics are eager to take on new areas of research, as a way to quickly address new topics that are not yet well understood.

Dr. Marshall Gramm, the chair of the department of economics at Rhodes College in Tennessee, said that he would be able to more quickly conduct economic studies in his own specialty – the efficiency of wagering markets – if he were able to easily tap databases of existing data. But that effort is hampered by the reluctance of racetracks and account-wagering companies to provide detailed betting data, even when the purpose is academic research, Gramm said.

Gramm is a high-stakes bettor well known to many horseplayers, and he has conducted numerous studies showing that pari-mutuel markets are highly “efficient,” meaning that the prices set in the pari-mutuel system are correlated significantly to results on the racetrack. But he said that the industry as a whole suffers from a dearth of good studies on the effects of takeout changes, which remain a topic of intense interest and some recent experimentation.

“In the modern era, a great study of [takeout changes] has not been done,” said Gramm. “That could be very valuable.”

Ann Gillette, a professor of finance and economics at Kennesaw State University in Georgia, also cited takeout analysis in her list of “mutual beneficial low-hanging fruit,” citing the benefits that would flow from such a study to both the industry and the academic world. But she also called on the racing industry to be more open with its data, noting that the most richly studied areas of the industry were all those that had plentiful sources of public data, such as the bloodstock market. 

Tenuous marriage

In the last panel on Tuesday, several racing officials detailed their projections for the marriage of racetracks and casinos, a relationship that has begun to show strain in many places, concurrent with the rapid legalization of casino gambling in states across the country.

In Florida, legislators last year attempted to forge a grand bargain among the state, the Seminole Indian tribe, the pari-mutuel industry, and the casino industry with a convoluted piece of legislation that eventually broke apart under its own weight. But the core element of the agreement to Thoroughbred interests – that pari-mutuel facilities should be able to “decouple” from their casino operations, resulting in the closing of their racing operations – is expected to be resurrected this year, according to Lonny Powell, the executive director of the Florida Thoroughbred Breeders and Owners Association.

“We’re going to be dealing with it again this session,” Powell said, outlining the steps the FTBOA is taking to counter efforts that would damage racing and breeding in the state.

That effort to decouple racetracks from casinos is also expected to find some support in other states next year, including New Mexico and West Virginia, where gambling markets have matured. If decoupling is authorized, it is likely that racing and breeding operations in those states will face existential threats, considering the industries there receive tens of millions of dollars in subsidies from casino operations.

Chris McErlean, the vice president of racing for Penn National Gaming Inc., which has racinos in six states and casinos in 11 jurisdictions, noted that casino revenues tended to peak around seven years after coming into operation, with revenues beginning to decline after that. As a result, racing interests in states where the “honeymoon period” has ended need to be aware that legislators and casinos will likely soon begin to apply pressure to the existing relationships governing the marriage.

Finally, Greg Martin, the vice president of wagering for Woodbine, took attendees through the wrenching changes the Canadian racing industry underwent after the provincial government restructured casino gambling in 2012, a decision that Martin said caused the loss of 3,000 jobs connected to Woodbine’s operation. Martin said that Woodbine was blindsided by the province’s decision – which has since been modified to be more beneficial to the racing industry – and he had a piece of advice for attendees facing a similar situation:

“Hire a lobbyist,” he said.