Michele Fischer, our North America Consultant, assesses the current horse racing landscape and explains why fixed-odds betting is in the running to become more widely accepted in the US.
As sports betting rapidly expands across the US, the opportunities are huge for those looking to capitalize on this burgeoning market. While the major US sports have been embracing the potential that legalized sports betting brings, domestic horse racing is one area that needs to examine its ongoing relationship and position in the market.
To this point, racetrack operators have been vying for sports betting licenses, but not a position on the betting menu. For one of the most established forms of sports betting in the world, it is clear that stakeholders within this vertical need to collaborate together to ensure that horse racing becomes a bigger betting product for digital sportsbook operators.
This hesitation is warranted as pari-mutuel wagering take-out rates that are common throughout North America provide a higher return to a racetrack operator. However, as we have seen in multiple territories across the globe, fixed odds betting could open the industry up to a new audience and provide the current one with more wagering propositions.
A notable case study of how fixed odds has fueled growth in horse racing is with Australia. Over the past decade, fixed odds have grown tremendously in the country with online bookmakers now dominating market share. When combined with tote betting revenues, the overall purses for racetracks has increased. This could be replicated in the US over the coming years, which would be highly advantageous to the sport and betting industry. However, it would require a culture change.
Introducing a fixed model
One of the major benefits of fixed odds betting is that it provides transparency to those bettors who want to know what they can potentially win from their bet, similar to how they wager on their favorite basketball or football teams. For bookmakers, the model delivers higher margins, and the races are quick betting opportunities, as we have seen across Europe and South America.
The devil will be in the details as to whether fixed odds betting comes to fruition. Unlike other sports, US horse racing has federal legislation protection through the Interstate Horse Racing Act. This assures that any entity who offers a bet on the product has a commercial agreement with the host track and approval of the recognized horsemen’s group. Horse racing depends on wagering to fuel its operation; therefore, the financial and distribution models will be key to the ultimate determination of success or failure of fixed odds.
In 2021, we expect to see some US racetracks dip their toe into the fixed odds realm, but to truly maximize the opportunity it will require industry-wide cooperation and understanding. As a supplier of both fixed-odds and pool betting services in markets across the globe, we certainly see the value in having both products in the market to strengthen the overall horse racing proposition. It is paramount not to cannibalize pari-mutuel wagering, but to offer wagering opportunities that the totalizator does not and provide new distribution points.
Global horse racing content
Elsewhere within the horse racing industry, we expect global content rights fees to increase as more distribution and content providers seek US horse racing products for bookmakers. As more operators evolve to become a 24/7 offering featuring live sporting action across all hours of the day, the competition for content will demand more transparency and higher fees.
The company winners will have distribution channels in up-and-coming territories as well as the long-standing established ones, such as the UK, Ireland, and Australia, where horse racing enjoys a strong heritage. While this is good news for the rights holders, it is imperative that it is priced for bookmakers to find it attractive. One area that will help boost profitability with this content will be managed trading services, which will become more prominent. Many operators are taking the advantage of either outsourcing everything or complementing their existing operations with the addition of specialist support.
The following months will be intriguing as to how the US horse racing industry evolves. As we witness more states embrace regulation, the horse racing sector must be willing to adapt to changing market trends.