Summary of 653. Does Horse Racing Have a Future?

Overview of 653. Does Horse Racing Have a Future? (Freakonomics Radio)

This episode is the third and final episode in Freakonomics Radio’s mini‑series on horses. Host Stephen Dubner visits Keeneland—the world’s premier yearling auction in Lexington, Kentucky—to watch the September yearling sale, meet buyers, sellers, bloodstock experts, and academics, and explore the economics, culture, and future of American Thoroughbred racing. The episode mixes on‑the‑ground auction reporting (including a $2 million filly sale), interviews about bloodstock valuation and stud economics, and broader analysis of why racing has declined and what could sustain it going forward.

Key sections covered

• Visiting Keeneland and the yearling sale: scale, logistics, and why buyers come (Cormac Brannock, Keeneland sales staff).
• How horses are evaluated and presented: cataloging, inspections, vet checks, pedigree vs. physical (Brannock, consignors).
• A buyer/seller case study: Hinkle Farms (consignor) sells “Hip 144” (a Not This Time filly) for $2 million to buyer Scott Heider.
• The breeding/stallion economics: example of stallion Not This Time (stud fee rising from $15k to $175k) and how stud fees and race success shape value (Emily Plant).
• Betting and wagering dynamics: pari‑mutuel markets, rise of computer teams, last‑click effects, and the changing profile of gamblers (Marshall Graham).
• Industry decline and policy/market responses: falling races/attendance, HISA (safety/regulation), racinos and Historical Horse Racing (HHR) machines, subsidies from sports‑betting revenue (Thomas Lambert, others).
• Prospects for the sport: likely survival of premier tracks/events but continued pressure on lower‑tier tracks.

Main takeaways

• Keeneland’s yearling sale is the global center for high‑end Thoroughbred trading: thousands of yearlings, serious global buyer participation, and huge money at stake (past sales totaled roughly $400M+).
• Price ≠ predictability: pedigree, conformation, and veterinary exams matter, but buying unproven yearlings is high‑variance—rare winners can generate enormous downstream breeding/stud income (“living ATM”).
• Stud economics amplify winners: a stallion or a champion racehorse can drive very large stud fees and valuations, but the upside is concentrated and risky.
• Supply is shrinking while top prices rise: fewer foals are being produced (cultural shifts, fewer tracks, declining race days), which can push up prices but does not signal a broad racing boom.
• Wagering landscape has changed: simulcasting, online betting, and specialized computer models have moved bets off the track, attracted sophisticated (often computerized) players, and reduced the casual on‑track audience.
• New revenue sources are propping up racetracks: racinos/HHR machines and pockets of sports‑betting revenue transfers help fund purses and operations; in some states, sports‑betting dollars subsidize racing.
• Safety and integrity reforms (HISA) aim to address animal welfare and medication concerns, but the industry still faces reputational and structural challenges.
• Likely future: premier tracks and flagship races (e.g., Churchill Downs, Breeders’ Cup) will persist; many smaller tracks and racing days may continue to decline unless business models adapt.

Notable numbers and facts

• Not This Time stallion fee: reportedly rose from about $15,000 to $175,000 as his progeny succeeded.
• Keeneland September: catalog around ~4,700 yearlings in the season described; team inspected ~3,200+ yearlings across ~410 farms for sale preparation.
• Recent annual industry handle: peaked (nominal peak ~2002) at about $11 billion; later reported roughly $4.7 billion—roughly a 50–60% decline from peak when adjusted for context discussed.
• Past Keeneland year: reported ~$428 million total (including post‑sale deals).
• Record auction statistics referenced: dozens of yearlings sold for $1M+ in a sale year (56 horses over $1M mentioned).

(Note: some numeric transcript fragments were garbled; above are the clearest figures reported in the episode.)

Notable quotes & insights

• “If you make the right decision, you can end up with essentially a living, unlimited ATM machine.” —Emily Plant on hitting a major breeding success.
• “Horses are born to run.” —Argument used by industry insiders to counter claims that racing inherently exploits horses.
• “Drop the hammer, drop the hammer.” —Momentary auction psychology described by buyers when winning a final bid.
• “A rising tide raises all ships.” —Mark Taylor on how success by one stallion (e.g., Not This Time) elevates demand across offspring and related bloodlines.

People and organizations to know (mentioned)

• Keeneland (auction complex, Lexington, KY) — Cormac Brannock (Senior Director of Sales Operations)
• Hinkle Farms — Ann Archer Hinkle (consignor)
• TaylorMade Farm — Mark Taylor (major consignor/stud operator)
• Emily Plant — marketing professor & thoroughbred market analyst
• Scott Heider — buyer/investor who purchased Hip 144
• Marshall Graham — economist, horse player, and academic on wagering markets
• Thomas Lambert — economist (University of Louisville) focusing on racino & HHR economics
• Richard Migliore — former jockey and TV analyst
• HISA — Horse Racing Integrity and Safety Authority (federal law and private body overseeing safety/medication)

Topics discussed (detailed)

• Auction mechanics: catalog, vetting, book/day placement, reserves, buyer flows.
• How buyers appraise yearlings: conformation, pedigree, vet reports, videos, family performance.
• Stakes and payouts: how a top racehorse becomes a valuable stud and the financial flows around stud fees and stallion deals.
• Wagering mechanics: pari‑mutuel system, takeout, impact of computerized bettors, last‑click volatility, tournament culture (National Horse Players Championship).
• Industry trends: long‑term decline in race days and attendance, shrinking foal crop, cultural disengagement, competition from broader legalized gambling.
• Alternative revenue and survival strategies: racinos, HHR machines, state subsidies/transfers from sports betting, and the question whether racing will be kept alive primarily as an adjunct to casino operations.

Implications and (implicit) recommendations

• Improve fan engagement and succession: attract younger, casual fans who will sustain betting and attendance in future generations.
• Continue and strengthen safety/integrity reforms (HISA) to address welfare concerns and public trust.
• Reevaluate business/pricing structures: racetracks may need to reconsider takeout rates, distribution of wagering revenue, and regulatory engagement to stay competitive versus other gambling options.
• Leverage diversified revenue (racino/HHR, sports‑betting allocations) to support purses, but be mindful of long‑term sustainability if racing becomes dependent on casino income.
• Use better data and analytics (as Emily Plant provides) to help breeders, buyers, and investors manage the high risk/variance of yearling investment.

Who should listen to this episode

• People curious about the economics of niche auctions and collectibles.
• Horse industry participants (breeders, consignors, buyers, trainers).
• Sports economists and gambling analysts interested in pari‑mutuel dynamics and the effects of online wagering/computerized players.
• General listeners who enjoy behind‑the‑scenes reportage and stories about high‑stakes markets.

Bottom line

The Keeneland sale showcases both the romantic allure and the raw economics of Thoroughbred racing: sky‑high prices, high risk, passionate participants, and deep cultural history. But long‑term industry health faces structural threats—shrinking supply, slipping casual audiences, competition from broader legalized gambling, and welfare concerns. The short‑term future likely keeps flagship races and premier tracks alive (backed by racino revenues and wealthy owners), but the broader ecosystem will need significant adaptation to remain viable for the next generation.