Recently, Hall of Fame trainer D. Wayne Lukas, who has won practically every big race imaginable, including the Kentucky Derby four times, weighed in on the future of horse racing. While I agreed with the majority of what he said, one of his statements left me flabbergasted, flummoxed and frustrated.
“Gambling does not drive the industry,” Lukas told Thoroughbred Racing Commentary. “The purse structure, although it’s gotten better in this country, if we just had to depend on that, I think the industry would greatly suffer.”
Gambling does not drive the industry? Say what?
Look, I’ll grant you that Lukas and I have different perspectives on this. The man affectionately dubbed “The Coach” — partly due to his tenure as the boys basketball coach at Logan High School in LaCrosse, Wisconsin, and partly due to his mentoring of other top horsemen like Todd Pletcher and Kiaran McLaughlin — has obviously made a lot of money on the breeding side of the game.
Lukas has advised a host of high-profile clients over the years, including Allen Paulson, William T. Young, Robert and Beverly Lewis, Michael Tabor and even rap star MC Hammer. But it was his relationship with the late Gene Klein that arguably took Lukas to the pinnacle of the sport. And that relationship is worth examining, as, earlier in his chat with Thoroughbred Racing Commentary, Lukas opined that horse racing should be run more like the NFL and Klein was once the majority owner of the San Diego Chargers.
This is where Lukas’ argument that it is breeders that “fuel and drive the industry” falls apart, because the NFL is first and foremost a profitable business. When Klein and a group of investors bought the San Diego Chargers in August of 1966, they paid $10 million — a record amount for an NFL franchise at the time. When Klein sold his interest in the team 18 years later, however, the Chargers were valued at $80 million. Even accounting for inflation, that’s a great investment (consider that, over the same approximate time period, the Dow Jones Industrial Average rose just 54 percent).
It’s also worth noting that NFL teams generally make money on a consistent basis (that’s one of the reasons franchise values have risen so steeply).
Take, for example, the Green Bay Packers, which operate as a public company and, therefore, must share their financial data. In 2017, the organization accrued profits of $34.1 million, which was down from $65.4 million the previous year, according to Reuters. How many thoroughbred owners or partnerships do you think are making that kind of money each year (and, remember, we’re talking profits here, not revenue)?
Klein sure didn’t.
Despite immediate success — the first $600,000 he spent with Lukas resulted in Gene’s Lady, who was a multiple graded stakes winner that earned nearly $1 million, and Hall of Famer Lady’s Secret, who retired with 25 wins from 45 starts (remember those days when racehorses actually raced?) and banked $3,021,325 — Klein was not exactly rolling in racetrack riches.
When asked if he’d made a profit in the game, Klein was noncommittal. “I think so,” he said, “if I discount what my wife has bet.”
Now, remember: Klein’s success was the stuff of legends. He won seven Breeders’ Cup races, along with the Preakness Stakes and Kentucky Derby (with the filly Winning Colors in 1988). He collected 11 Eclipse awards and, by his own account, won more than 300 races and $25 million in his six and a half years in the sport.
Lukas himself said he didn’t “think in the history of racing an owner ever had a six-year run like Gene did.”
Yet Klein wasn’t sure he made money?
The fact is racing was never set up to be financial haven for breeders and owners — the primary goal has always been to better the breed, which is why geldings were often excluded from competing in prestigious events like the Belmont Stakes (from 1919 to 1956).
As William Nack noted in Sports Illustrated:
[Horse racing] was largely an insider’s game, dominated by old money and by men who took pride in breeding and racing their own best horses. Making a profit was not the primary object. Among the old family breeders the unspoken wager was a sporting one: “I bet I can breed and race a better horse than you can.” In 1920, when Sam Riddle was offered a blank check for Man o’ War, old Sam declined, saying, “This horse is not for sale at any price.”
The biggest change between then and now is that Klein and others opened the door for independent owners — some who were hoodwinked into thinking they could make money at the game and some who simply enjoyed the sport, despite the costs. But bloodstock prices have yet to reflect this reality.
Over the past 20 years, the number of weanlings and yearlings sold at public auction has declined by 23 percent, yet the amount spent on those horses has increased by 25.2 percent. The average price of a weanling was $39,154 in 1998 and $64,553 in 2017, while the average price of a yearling was $42,787 in ‘98 and $68,923 last year.
Meanwhile, handle is down 16.8 percent over the same time period, according to the Jockey Club.
So, what we are witnessing in the horseracing industry is, in essence, the very opposite of what Lukas believes. Increased purses, financed by — you guessed it — bettors (although not exclusively horse bettors), is allowing owners and breeders to continue to ignore financial realities.
It is a shell game that one day will end, just as surely as the dot-com mania and bitcoin bubble came to a screeching — and, for some, painful — end.
It is naïve to think that horse owners and bettors will continue to foot an ever-increasing bill.