In the state of Washington, racing is hanging-on.

A rule change notice posted by the Washington Horse Racing Commission (WHRC) in July cites the negative impact of the pandemic on their ability to continue regulating the sport due to diminished funding sources.

“With the COVID-19 pandemic and the closure of OTB's and Emerald Downs for live in-State wagering from March to June, WHRC revenue has decreased substantially, while expenses remain consistent. On-line wagering thorough the Advance Deposit Wagering firms has increased greatly but the WHRC does not receive any revenue from out of State residents who wager on Emerald Downs. In order to maintain a fund balance required by [the state], the WHRC must increase in revenue to protect its ability to remain in operation therefore allowing live racing and simulcasting to continue.”

The WHRC is seeking to adjust the source market fee it receives on Washington residents’ ADW bets. Previously, it received a net 7.5 percent of the total source market fees withheld but if the new regulation is adopted in September, it will increase to a total of 10 percent, what equates to an overall increase of one-third.

In its previous fiscal year, more than 60 percent of WHRC revenues came from taxes assessed on betting at racetracks and OTBs, while just roughly 25 percent came from its share of the fee on ADW betting. With the on-track business unlikely to return any time soon, the WHRC settled on this plan.

Much to their credit, and through negotiations with both Emerald Downs and the Washington Horse Owners and Breeders’ Association, the actual fees are not increasing, just being shifted to the WHRC to keep racing going.

In reality, the WHRC receives 10 percent normally, and deposits 25 percent of that, 2.5 percent overall, to a bonus fund and breeders’ award account. Under the proposed rule, Emerald Downs will do that, giving up 2.5 percent to fund the owners' and breeders' awards while enabling the full 10 percent to remain with the WHRC. A vote to adopt this change is expected in September.

Working together, making adjustments, Washington racing will carry-on.

ADWs Thrive, But At What Cost?

Most ADW outlets do not have streams of online wagering other than horse racing.

While ADW operators are likely happy to rake in profits as handle is directed mostly through their channels, the reality of what “racing” needs to continue operating is different.  As the impact of the pandemic evolves, more remedies are likely needed to situations like that which emerged from this unusual situation in Washington.

The Washington shortfall also helps exhibit that, to some degree, a renegotiation is possible to keep racing and wagering active.

Racing may have been the only sport still going strong during the pandemic, but it did not translate into a boon for all.

While handle declines for the year are just shy of seven percent, purses distributed nationwide are down 36 percent through July in figures reported by Equibase this week. Yes, race days and total races are down similarly as purses. Profits from online wagering at Churchill Downs Incorporated, operator of TwinSpires, were reported up 39 percent in the second quarter of 2020 over the same period a year ago which included the 2019 Kentucky Derby.

Without question, shifting variables across racing make "like-for-like" financial comparisons endlessly tricky, the pandemic-imposed shift to nearly all handle coming via ADWs makes this particularly difficult. But the difficulty that comes with interpreting the data does not suggest there is value in just ignoring the financial realities facing the present, and seeking an improved future. 

Survival is key.

North of Washington, in Vancouver, British Columbia, the measures taken by dedicated horsemen are particularly extreme. Stakes purses at Hastings Racecourse are being funded “nearly 100%” by contributions from incredibly generous owners according to Glen Todd, a perennial leading owner at Hastings. Workouts are being clocked just four times weekly, instead of the standard of six days. While this presents some integrity challenges, it is a symptom of the current state of affairs.

Todd reports that income from sources which feed purses is down substantially. C$7.87 million was paid over 51 live days in 2019 (C$154,313 per day), with just C$2.78 million available in 2020 across 25 days (C$111,200 per day). While it is a per-day decline of 28 percent, the total available to be distributed to horsemen is down 65 percent.

Horsemen have responded at the entry box, with field sizes “the highest in years.”

Hastings recently shifted its race dates to Thursday and Sunday mid-afternoons, beginning August 2, away from jammed schedules on Mondays and Tuesdays while seeking greater televised coverage.

Horsemen finding a way to "make due" is understandable in the present. Fixing the broken business model of racing is a necessity for the future.