There’s no way of telling when the sport of racing horses began, nor is there any date that can be attached to its origins as a betting event. Currently, the best guess is that the sport dates back to around 4500 BC where the nomads of Central Asia sought to challenge each other to determine the supremacy of their horses. It was these Central Asian nomads that first domesticated the horse so it’s not hard to make a case that this is where the ‘Sport of Kings’ had its genesis. The most amazing thing about horse racing isn’t how old it is—instead, its the fact that its still relevant in the early 21st Century. Horse racing has had its share of ups and downs to be sure but it’s still one of the most widely attended spectator sports in the United States and much of the rest of the world.
We’re a long way out from the early 20th Century when horse racing was the undisputed king of sporting popularity in the United States but that doesn’t mean it’s irrelevant. There have been very significant changes in horse racing as well as the broader sports and gambling ecosystem. You can take a look at live track attendance and the picture isn’t pretty. As recently as 1989, over 50 million spectators attended live horse racing events in the United States. Today, the annual attendance is less than 20 million. Actually, current nationwide US audience metrics are tough to come by since horse racing industry groups quit releasing macro attendance data a decade ago. The sport is holding up better internationally though most other countries are also seeing declining attendance and on-track revenues.
The game has changed, not just for horse racing but for all forms of sports and entertainment. In 2018 there’s just no need to go to the local racetrack when you can handicap, bet and watch the action from your computer or smartphone. Online horse betting offers a wider range of tracks and betting options and is significantly more convenient. Over the past decade or so, horse tracks have sought to subsidize their revenues by adding casino gaming but obviously that experience is available online as well.
PARIMUTUEL BETTING MEANS ‘THE HOUSE’ DOESN’T CARE WHO WINS
In sports betting, much of the challenge is getting down at the right price. This is a function of timing, intuition and ‘shopping points’ but it’s essential. Sports bettors who consistently beat the closing line are significantly more likely to turn a profit than those who don’t. Horse racing is different. The track just facilitates the betting and acts as a middleman, handling the money for a fee (15 to 25 percent of the parimutuel pool). The track odds are determined by how much money is bet on each horse. If everyone bets on one horse—whether it is the best horse, or just has the catchiest name—it will go off as the favorite. Long odds on a horse doesn’t necessarily indicate a bad horse, but just one that isn’t popular with the betting public.
The ‘fee’ charged by the track is called the ‘takeout’ and there’s a school of thought that suggests one of the problems with horse racing is that the ‘takeout’ is just too high. Reasonable people can disagree on what the takeout should be but it’s hard to argue with the fact that it’s very excessive compared to other forms of gambling. If you head to Las Vegas and play video poker you’re working against a ‘hold percentage’ of 5% or less. Sports betting isn’t quite as cut and dried statistically, but it’s also in the same neighborhood. You’d be hard pressed to find any casino game with a house edge as high as horse racing—keno and the ‘Big Six’ wheel are the exceptions but they’re also infamous for being among the worst bets available.