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 ENOUGH IS ENOUGH (Part 1)- THE PRIZEMONEY MYTH IN RACING
Despite all the doom and gloom from Racing NSW in regards to a future 20% cut in prizemoney, I pose the question, so what? What if there are prizemoney cuts?
 
Before owners string up me by the neck on the nearest tree, let me state my case.
 
If TAB distribution levels have remained stagnant for five years, then why have the racing clubs in this country
been continuing to increase prizemoney? Have they not dug themselves into their own hole, and if so, why do they continue to blame the corporate bookmakers and exchanges?
 
Let's clear up a couple of economic realities not being recognised by the owners, racing fans and perhaps even the
committee members and executives themselves.
 
WHO PROFITS MOST FROM PRIZEMONEY INCREASES?
 
ANSWER - The Owners? Absolutely WRONG! The correct answer is the Australian Breeding Industry.
 
While owners would receive an immediate increase in their income, the overall costs of buying and leasing racehorses
in this country would also rise immediately with increases in prizemoney. The reality is that most owners now do not get much of a return on their investment on average, so would a slight drop in prizemoney really chase many them out of the industry?
 
Don't believe me? Then let's look at another recent economic example. On the 1st January 2009, the Australian
Federal Government increased the first home buyer's grant to $21,000 for new properties, and $14,000 for existing properties, for a period of six months. The Government and the media reported this as a "big win" for new homebuyers, but were they the biggest winners? No. In effect, the grant was a "big win" for sellers, not buyers, as the lower end of the market such as apartments in city areas in Australia had an almost instant growth of $15,000 to $20,000, once the announcement was made.
 
The grant was effectivily pocketed by the buyer. Anyone who has sold an apartment in a city area in the last five
months is fully aware that their investment realised an immediate increase in value from what was available pre-January 2009. Sure, the new home-owner was able to more easily afford their deposit and entry fees, but the grant effectively increased their total repayment amount by even more than the grant, and with compounding interest over a 25 to 30 year loan, they are actually much worse off overall. This is a not a theory, but a fact, recognised by anyone involved in the property industry.
 
Now let's imagine if the Australian Federal Government tomorrow found a budget surplus, and promised the racing
industry a grant for prizemoney of half a billion dollars a year each to be used as prizemoney strictly for Australian owned and bred horses over the next decade. Enough of a grant to push the prizemoney of all Group One races to $5,000,000, and all of the classics to $10,000,000.
 
Current owners would be wringing their hands with joy? Yes? But what be the immediate impact for the breeders? Stallion fees
and yearling prices, especially at the top end of the market, would skyrocket. The value of a service fee to a stallion such as Redoute's Choice or Encosta De Lago would go through the roof.
 
For the average owner, it would be a turnoff, because to buy share in a reasonably bred horse would no longer be
viable.
 
While the racing industry should always be eager to attract the high flyers in the business industry like the Jack
Inghams and the Nathan Tinklers of this world, for racing to really survive and prosper in the long term, they need to be attracting the average Australian into the picture.
 
A lot is certainly made of racing syndicates where hundreds of owners share in two or three horses. There is
certainly a place in the industry for these type of syndicates, and they may assist the members of the public turning into more prominent owners at a later stage in their life. Good luck to the success of them.
 
But having said that, there are also a lot of future owners who don't want to be such a minority share owner, with a
partial sense of embarrassment to say that they own a 1/1500th share of a Group 3 winner.
 
I dare say that that many owners can not feel like a "real" owner unless they are in the parade ring listening to
the instructions of their trainer to their jockey, and around the saddling enclosure when their horse finished first.
 
A racing industry aspiring to producing ever increasing record levels of prizemoney may only lead to yearling prices
increasing to amounts where a sixth share in a horse becomes an impossibility. Rather than being a twentieth shareholder without their name in the race book and being in a lottery draw to be an owner on a weekly basis, they find another pursuit to spend their leisure time and hard-earned dollars.

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Which leads me to the main point of this article:
 
PRIZEMONEY IS SEXY, BUT REBATES ARE HEALTHY
 
I wonder if the racing industry knows what they are really achieving by thinking that prizemoney levels is all that
matters.
 
But unfortunately, the emphasis remains on prizemoney levels being the "be all and end all", and the only report
card for the industry. We have the ridiculous situation at the Magic Millions carnival each year, highlighted frequently by Phil Purser's Just Racing website, where ridiculous nomination fees are requested, (which are refunded as 'unplaced' prizemoney immediately after the race), in order to promote prizemoney levels which are in fact totally unreal.
 
We also have an unspoken competition between Victoria and New South Wales to be the first to raise Saturday
metropolitan prizemoney levels to $100,000 per race. Has anyone at the higher levels of officialdom questioned whether this so-called challenge is actually healthy for the industry?
 
A few years back, we saw a number of clubs in New South Wales introduce rebates for costs of transporting horses and
starting fees, which was a wonderful initiative. These rebates really assist owners in offsetting the cost of training their racehorses, especially those geldings that race on for many years, and provide the quantities needed to make race a proper betting medium.
 
Racecallers will often publicly congratulate the owners of a gelding who finally achieves prizemoney of half a
million, or even a million dollars after racing year in, year out, until seven or eight years of age. But the truth is that much of this prizemoney is swallowed up in training fees, acceptance fees, transportation and vet bills, with five or six years of continual racing.
 
These "soldiers" provide much of the betting revenue, but the costs to owners are lopsided in comparison to the
Golden Slipper placegetter who is whisked away to stud after maybe only being in training for two or three short preparations.
 
But rebates aren't sexy, and don't get the same sort of kudos as an announcement from a raceclub director advising
that their premier race prizemoney has increased to a new high. Some of these rebates have quickly evaporated from the landscape, and high administration costs are being partly to blame for such incentives not being taken up.
 
Prizemoney and black-type status actually seems to reward horses to be retired early, which once again only serves
the profit margins of breeders and studs - a quick return in prizemoney followed by a quick return at stud for those few runners that exceed at the highest level quickly.
 
It is a "powerball" mentality which does nothing to really serve the industry long term. Very few people win at
powerball. Very many get frustrated after many months of competing.
 
Which is especially why that in this "economic crisis" period, our clubs and state bodies should be concentrating on
more rebates within the industry, keeping current struggling owners afloat, rather than being so focused on prizemoney levels.
 
Yes, they are not "sexy", but rebates will do much more to provide fourteen runner fields in racing, which will
increase  betting turnover, and ultimately pay for the rebates and some prizemoney increases that will not threaten the viability of the sport for the average Australian.
 
It is high time that the media stopped repeating Peter V'Landys' tunnel vision "doom and gloom" rhetoric on dropping
prizemoney levels due to the incorrect accusation of a lack of return to the industry from corporate bookmakers and exchanges.
 
I wonder if the racing industry knows what they are really achieving by believing that prizemoney levels are the be
all and end all of success…
 
Kevin Skene, TRACKDATA, 29/05/2009

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