ALL YOU WANT TO KNOW ABOUT THOROUGHBRED HORSERACING IN THE PHILIPPINES

By Philip M. Lustre Jr.

(Author's Notes: I wrote the following three years ago as background material for a feasibility study on a horseracing project. I have decided to post it to provide readers with some ideas on the local horseracing industry. Excerpts:) 

Overview

Horseracing, as an equestrian game, has global status because of its presence in many countries, particularly in North America, Europe and Asia. Most countries allow public betting. It is a wholesome but profitable mode of public recreation and diversion. 

Over the centuries, horseracing has cultivated rich traditions due mainly to the challenge of crossbreeding to produce champion horses for various surfaces and competitive races that have resulted in numerous surprises.

In the Philippines, thoroughbred horseracing has taken a solid foothold, as it has become a principal mode of recreation and relaxation for tens of thousands of stressed Filipinos. The following represents an overview of thoroughbred horseracing in the country.

A.     It is an industry

Thoroughbred horseracing is not just a sports but a multibillion peso industry that involves billions of pesos in investments and infrastructures, includes hundreds of entrepreneurs, employs thousands of trainers, jockeys, and support personnel, and entertains millions of racing aficionados. 

It provides livelihood for about 5,000 persons, who are directly employed by the racing clubs, stables, breeding farms, among others, and tens of thousands of others, who depend or are indirectly connected to the horseracing business.

B.     Horseracing has rich traditions

Horseracing has rich traditions since 1867, when the Manila Jockey Club was founded and held the first horse racing in the country. By the turn of the century, the Manila Jockey Club had its racetrack at the old familiar site of San Lazaro in the Sta. Cruz district. Traditions flourished when US Governor-General William Howard Taft allowed public betting and opened the racetrack for people from all social strata. 

By 1937, the country had two racing clubs with the entry of the Philippine Racing Club, Inc. Since then, the two clubs alternated in holding races every week, until the third racing club has joined in 2013.

C.     Horseracing is part of Philippine culture

Horseracing has evolved to become part of Philippine culture. The horseracing traditions have cultivated a subculture among the people directly involved in the sports and the racing aficionados. 

Horseracing has its own language, value system, and social influence. Outstanding jockeys like Elias Ordiales, Jesus Guce, and Eduardo Domingo Jr. are regarded as sports icons.

D.     Horseracing is a regulated sport

The Philippine Racing Commission, or Philracom, is the state agency that has regulatory powers over the conduct of horseracing in the country. Philracom, a collegial body, ensures the integrity of all races. 

It issues license to a racing club to hold horseracing. It empowers the five-man Board of Stewards to exercise control and supervision over all races. It issues licenses to horse trainers, jockeys, grooms, and helpers. 

Philracom mandates the racing clubs to hire support personnel to include veterinary doctors to look after the fitness of every participating racehorse, doctors to look into the jockeys’ physical fitness, clockers, handicappers, starting gate personnel, and gate helpers, among others. It metes out fines, suspensions, and other forms of punishment to erring persons involved in horseracing.

D.     Horseracing is a heavily taxed sport

According to Philracom, the Manila Jockey Club Inc. (MJCI) and Philippine Racing Club, Inc. (PRCI) had generated combined gross sales of P7.9 billion in 2011 and P7.6 billion in 2012 and paid direct taxes of at least P1.0 billion and an unquantifiable amount in indirect taxes. 

Horseracing is one of the heaviest, if not the heaviest, taxed sports business in the country. Taxes are imposed on bets, winning tickets, and prizes of owners of participating horses, trainers, and jockeys in every race.

E.     Horseracing is for the masses

Horseracing has the support of ordinary people. It is the sports of the hoi polloi, or the masses. Ordinary citizens could place bets as low as two pesos in every race. No other sports have the support of the ordinary citizens.

Important details about horeracing in the Philippines

A.     Seven-day a week horseracing

Horseracing in the Philippines is a seven-day affair. Philracom rules has at least seven races; Monday, Tuesday, Wednesday and Thursday, eight races each; Friday, nine races; and Saturday and Sunday, 12 races each, or an average of 66 races a week. 

Of the over 2,000 Philracom-registered racehorses, 60 to 70 percent can compete at any given time. Off-form and injured racehorses stay in different farms either to mature or recuperate. 

Racehorses compete in regular races or stakes races sponsored by state agencies, private corporations, or private parties. Horse owners decide on the participation of their horses on specific races.

B.     Outstanding bloodlines

Several outstanding thoroughbred bloodlines are present in the country. Progenies of champion horses from the United States, Australia, and New Zealand now participate in local races. In short, thoroughbred horseracing has come of age in the country. 

It has at least 50 stallions representing known thoroughbred bloodlines to serve a number of mares for crossbreeding and provide a steady supply of competitive racehorses. The supply and demand of racehorses is not a problem due to the presence of a competitive racehorse breeding industry. 

Philracom rules allow breeders are allowed to import racehorses to improve further the genetic stock of local racehorses.

C.     Competitive racetracks

The Philippines has three horseracing clubs, with each club possessing a racecourse outside Metro Manila, to conduct daily races. These are: Manila Jockey Club, Inc., which operates the 50-hectare San Lazaro Leisure and Business Park in Carmona Cavite; Philippine Racing Club Inc, which operates the 65-hectare Saddles and Club Leisure Park in Naic Cavite; and the Metro Manila Turf Club Inc, which operates the 45-hectare Metro Turf Park in Malvar, Batangas.  

They are reputed to have competitive racetrack facilities. They hold races on a rotation basis set by Philracom. The PRCI and MJCI are publicly listed corporations. They have been posting modest profits over the past two years.

D.     Corps of Professionals

Horseracing has a sufficient universe of horse owners, who, as the main entrepreneurs, compete in the horseracing business. It has horse breeders, competent veterinarians and medical doctors, horse trainers, jockeys, grooms, helpers, and other personnel, who could provide support services for horseracing in the country. Ownership, professional services, and manpower supply do not constitute a problem in local horseracing.

E.     Network of OTBs

The three racing clubs have a network of more than 300 off track betting stations, or OTBs, which serve as their virtual marketing arms outside their racetracks. They collect public bets and pay dividends to winning tickets. 

These OTBs are scattered mostly in Metro Manila. Some OTBs are situated in the outlaying provinces outside Metro Manila. The three racing clubs accept telephone bets, but they have not been substantial.

Discussions

Thoroughbred horseracing has enormous potentials in the country. Since thoroughbred horseracing is part of Philippine culture, it should not just be left to deteriorate and die due to indifference and official inaction.

The imperative is for the government and various stakeholders to reinvent thoroughbred horseracing as a wholesome and socially accepted sport and recreation. The reinvention should stress its wholesome character, not its gambling side.

Moreover, thoroughbred horseracing has to be reinvented and presented as a family sport. Attending races could be an occasion or activity for family bonding.

This reinvention requires a three-year reengineering program, which would revolve in the entry of a well-funded dominant player that would pursue aggressively market expansion to population centers in northern, central, and southern Luzon, the Visayas, and Mindanao and use modern technology for nationwide coverage.

Reinvention

The reinvention – and eventual transformation - of thoroughbred horseracing from a form of state-abetted public gambling into a more wholesome family sport and entertainment would require a new dominant player, which would subsequently introduce a business model and reengineering program that would turn horseracing upside down.

It is ideal that the dominant player is a major conglomerate that has an existing nationwide network, which could be used to spread an equally nationwide public betting network, and allied businesses that could be used as platforms to complement the operations of a nationwide thoroughbred horseracing business.

Issues confronting the horseracing business

Despite its rich traditions, horseracing has not been a nationwide sport or form of recreation and diversion. It is mainly based in Metro Manila and some outlaying areas and provinces. It has many issues, which restrict its growth and hamper its expansion and potentials. These issues are multifaceted and overlapping. These issues include the following:

A.     High taxes

The government has imposed taxes on bets, winning tickets, and prizes of owners of participating horses, trainers and jockeys. After all those tax deductions, only 65 percent of the betting pie goes to dividends. 

The remaining 35 percent go to a combination of taxes, operating expenses, and the Club’s commission for holding the races. Because of the taxes and other incidental expenses, the dividend for winning tickets becomes smaller, becoming a disincentive for the betting public.

B.     Stagnant sales

Gross revenues of the two racing clubs have been stagnant, if not on a steady and gradual decline over the years. Philracom said the Manila Jockey Club Inc. (MJCI) and Philippine Racing Club, Inc. (PRCI) had posted combined gross sales of P7.9 billion in 2011, but it went down to P7.6 billion in 2012. 

The average daily sales is around P24 million, which is many times lower compared to gross sales in Hong Kong, and other horseracing cities in Asia. Because of stagnant sales, profitability is adversely affected; the racing clubs could hardly go to any expansion mode. As a result, their betting niche has hardly expanded over the years.

C.     Changing business models

Because of the declining sales, the two major racing clubs have not depended much on horseracing sales. They have cultivated their real estate business, which has been triggered by the sale of their erstwhile racecourses in Metro Manila and their transfer to those racetracks in Cavite province. Their business models appear to have changed drastically as indicated by official data.

According to its website, the PRCI registered net horseracing sales (minus taxes, operational expenses, franchise commissions and other expenses) of P316.9 million in 2011, P324.5 million in 2010, and P321.7 million in 2009. It posted a net profit of P228.1 million in 2011 and net losses of P33.9 million in 2012 and P58.5 million in 2009. 

Its profit turnaround is attributed to the sale of the old Sta. Ana Racetrack, a 21-hectare prime real estate at the heart of Makati City. The PRCI entered into its book a net profit of P284.3 million from its sale to Ayala Land.

According to its website, the MJCI recorded net sales of P749.7 million in 2009, of which P279.9 million came from horseracing, P311.4 million from real estate transactions, and P156.4 million from its rent of horse stables and condominium units. 

It posted net sales of 731.3 million in 2008, of which P273.4 million came from horseracing, P311.8 million from real estate, and P146.2 million from rent, and net sales of P756.9 million in 2007, of which P331.7 million came from horseracing, P296.1 million from real estate, and P129.1 million from rent. 

Its net profit reached P41.2 million in 2009, P21.2 million in 2008, and P47.9 million in 2007. MJCI has been concentrating largely on its real estate and rental businesses, making them part of its core business.

Meanwhile, MJCI’s net assets declined to P3.63 billion in 2009 from P3.68 billion in 2008, while PRCI’s net assets rose to P2.84 billion in 2011 from P1.97 billion in 2010 largely from the sale of its racetrack in Makati City.

D.     Lack of perceptible marketing programs

The two racing clubs have hardly launched aggressive marketing programs to capture a bigger market. Despite the changing technology, horseracing is still confined to Metro Manila and some outlaying areas. Its betting niche is limited to the silver generation, or people, 40 years of age and above, 90 percent of which belong to the C and D market. 

It has neither expanded to the northern, central, or southern Luzon, the Visayas and Mindanao nor enticed people below 40 years of age to try horseracing, or those in the higher income bracket, mainly the A and B market.

E.     Inability to use the digital technology

Modern technology, specifically digital technology, has been consistently and persistently developing to enable racing aficionados to watch – and place bets on – actual races on a nationwide basis. This is also possible overseas. 

The racing clubs have not exploited this technological capability. Thus, the three clubs are limited to its traditional base of operations – Metro Manila with its old core of bettors. They are enmeshed in the traditional ways of betting, as they rely on their off-track betting stations (OTBs) as their marketing arms.

F.     Difficulty in putting up new OTBs

The political environment has been considered generally restrictive to put up new OTBs because of the difficulties to get permits from local officials – from the barangays to the city government governments. The inability to put new OTBs means stagnant sales. 

Moreover, the ridiculously low commission, or 0.75 percent of gross sales, which the three racing clubs give to OTB operators, has been a disincentive for prospective OTB operators. Hence, the three racing clubs have to depend on the 300 OTBs scattered mostly in Metro manila and its outlaying areas.

G.    Public perception of rigged horse races

The public perception that certain horse owners resort to game-fixing to earn a windfall has dampened the bettors’ enthusiasm. This leads to the declining sales in horseracing. This is a lingering issue, which the racing authorities deal squarely by imposing severe punishments on erring horse owners, trainers, and jockeys. But it persists.

H.     Presence of illegal bookie joints

Illegal bookie joints compete with the officially sanctioned off-tracks betting stations (OTBs) of the three racetracks. A one-peso bet is usually given an added value of between 10 to 20 percent. Illegal bookie joints have flourished in many areas, where the three racing clubs hardly have presence. 

They become the convenient substitutes for OTBs. This is a police matter that has not been adequately addressed. Those illegal bookie joints have become part of the underground economy. It has been estimated that they take bets equivalent to the daily sales of the three racing clubs.

I.        Underinvestment

The three racing clubs have hardly invested on modern technology, limiting their presence on their traditional base of operations. They neither possess expansion plans not marketing programs. 

They are essentially timid in pouring new investments in horseracing. Because of the changing business models, the two traditional racing clubs – MJCI and PRCI – are more interested in real estate business. 

J.      Notorious gamblers as horse owners

This issue continues to affect the legitimate horse owners, who feel that other horse owners who are chronic gamblers and part of illegal gambling syndicates destroy the public image of horseracing as a wholesome sport. 

They could not take the presence of these horse owners, who are also perceived to be jueteng lords.