IT is widely accepted that securing new investment from owners is key to driving the recovery of the Irish thoroughbred industry.

It appears that, in more prosperous times, owners often made sentiment-driven investment decisions without necessarily expecting any financial return from racing. However, this may no longer be a workable model and would-be new owners are likely to place significantly greater emphasis on the potential for an economic return.

My study set out to identify ways that racehorse owners themselves could improve their returns from horseracing. New owners could be recruited as the industry’s value proposition improves.

Interestingly, this ‘inside-out’ strategy for attracting new investment can be pursued independently of state funding, making it a sustainable method to fortify the wider industry into the future.

The study found racecourses to be among the most powerful actors in the Irish thoroughbred industry; a product of their concentration relative to owners and the substantial portion of their operating budget that is devoted to prize money. This means that, within reason, racecourses are motivated to constrain it where possible.

My study also identified that benefits-in-kind, such as hospitality options for owners, are a key feature of the racecourse-owner exchange. While such features are typically uncommon in buyer-supplier relationships, incorporating them into future studies can not only offer a more holistic account of the transaction but also potentially identify opportunities for owners to actually leverage these benefits in their favour.

The study suggests several opportunities for owners to improve their competitive position. Firstly, owners can improve their bargaining power while achieving better prize money per horse by sending their horses to race in the UK and France.

Indeed, a collective gravitation toward overseas racecourses would drive up prize money at Irish racecourses. Without a doubt, home based racecourses would be forced to compete with those abroad to attract the better horses. Thus, owning and racing horses in Ireland would become a more rewarding exercise.

Opportunity

Secondly, forward integration provides an exciting but radical opportunity for owners to improve their collective competitive positioning. This would involve racing owners integrating forward in the industry value chain to host their own racing events. It would require a large capital investment, but not so much to put it beyond large owners or groups of smaller owners.

In effect, this would mean that owners could set prize money levels that they themselves deem acceptable. Irish racecourses would then have to compete with those levels to attract the best horses.

The Dubai World Cup Carnival is a prime example of such a strategy in action – and it is indirectly driving up prize money on a global scale.

Thirdly, there is potential for a strong collective lobbying effort. However, lobbying is typically more successful when substantiated by a credible threat of action. This means that it may be best enacted in conjunction with one or more of the actions described above.

Analyses of the owners’ exchanges with all industry forces (including buyers, suppliers, new entrants, competitors and potential substitutes) demonstrated that the prosperity of existing owners and the wider industry are not perfectly aligned.

For example, this study found that some owners were dissatisfied with the Association of Irish Racehorse Owners’ attempts to attract new owners. They suggested that this was the responsibility of Horse Racing Ireland and others. The inference is that these attempts deprioritise the incomes of the Association’s existing members and might run contrary to its mission of promoting and protecting the interests of Irish racehorse owners.

This highlights how the interests of owners and the wider industry actually diverge beyond a certain point. However, this challenge will only become apparent as the threat of new entry rises, which itself is dependent on industry growth.

These preliminary findings all suggest that improving the returns for existing owners is in the wider industry’s best interests in the short and medium term. And although the study clearly demonstrated that owners have the capabilities to empower themselves, there is undoubtedly a role for all industry stakeholders in supporting this overall progress.

Tadhg’s co-author and supervisor for the study was Dr Jack Murphy.

Email: Tadhg.RyanCharleton@nuim.ie