The highs and lows of racing

IBISWorld estimates that the horse and dog racing industry will contract by 1.8% over the five years to 2009-10. This contraction is largely the result of the lingering effects of Equine Influenza (EI), which struck Australian racing in 2007.

Races were cancelled in Queensland and New South Wales, while the Melbourne Cup Carnival, the industry’s largest event, saw diminished attendance, falling ticket sales and on-site gambling. As prize money had already been announced, this cost couldn’t be controlled and resulted in the need for government assistance to keep the industry alive.

Horse and greyhound racing clubs in Australia are basically non-profit organisations operating on Crown Land, under lease arrangements. The flow-on effects of the EI scare were calamitous for these groups. Horse breeding plans were disrupted and it is likely that the drop in quality of racing events will lead to diminished attendance numbers, prize money, overseas visitors and TAB distributions.

There are other threats facing the industry. There is a large moral backlash against the inhumane nature of jumps races, in which many horses are killed due to sustaining an injury on the track.

Harness racing is experiencing a significant fallout. Just prior to the EI outbreak, this segment was preparing to implement a major marketing campaign, with the aim of taking the industry back to its heydays of the 1970s and 1980s. Many races had to be rescheduled and prize money was lowered significantly in the following season.

The profitability of the industry has always been slim or non-existent, as most trainers and most clubs operate on a break-even basis, and this industry generally has a low profit rate, given the high number of not-for-profit clubs.

IBISWorld forecasts that this industry will grow by 1.7% over the five years to 2014-15. Despite the return to positive revenue growth, this industry will still not reach the heights of pre-EI times. The industry is also expected to see continued interest in horse racing, as well as strong attendance numbers and wagering levels at the major peak autumn and Spring racing seasons.