Steven Pearlstein explains what the problem is with the horse racing industry.
Even as interest in horse racing has increased thanks to "Seabiscuit," satellite broadcasts and Internet betting, attendance continues to decline. Most tracks barely break even, and many, like Pimlico, are distinctly down at the heels. And in Maryland, so many patrons and horsemen are going elsewhere that the state is in danger of losing the Preakness along with its storied reputation as a center for thoroughbred racing and breeding.
You'll hear all sorts of complicated explanations for why this is so and who is to blame. But the reason is pretty simple: This is the kind of mess you get when 50 state governments all try to micromanage an industry.
It started decades ago when politicians discovered they could raise revenue without raising taxes by legalizing a relatively harmless form of gambling. As part of the deal, legislators and governors took it upon themselves to decide how many tracks there would be, who would own them, how many days or nights they could race and how the betting pot would be divided.
In time, however, these arrangements proved so useful to the states that there were too many tracks, too many racing dates and too many horsemen for any to operate profitably.
Tracks had no choice but to cut back on marketing and modernizing their facilities, leading to a cycle of declining quality and falling attendance.
And a number of states, facing the prospects that their money-losing tracks might actually have to close, came up with the brilliant idea of subsidizing them with the proceeds from yet another form of state-sponsored gambling -- slot machines.
As a result of this fiscal shell game, states such as Delaware and West Virginia are now funneling millions of dollars they could use for schools or health care to second-class tracks so they can fatten purses and lure the best horses and jockeys. The better horses and jockeys, in turn, steal away tens of millions in bets from gamblers in other states, who either drive across the border or place their wagers electronically. The gambit has been so successful that Pennsylvania is now threatening to join in the game with its own slots plan. And that has led even die-hard opponents in Annapolis to acknowledge that Maryland slots won't be far behind.
This is nothing more than a fool's game that, in the end, will have no winners other than a handful of top jockeys and the manufacturers of slot machines. The higher, taxpayer-subsidized purses will induce more breeding and even higher stud fees. And the industry will continue to suffer from endemic overcapacity and anemic profitability.