Freakonomics Radio

653. Does Horse Racing Have a Future?

November 14, 2025

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  • The Keeneland September Yearling Sale is the world's largest and highest-quality auction for unproven thoroughbreds, where buyers invest millions based on pedigree, physical attributes, and veterinary assessments, hoping to find the next champion. 
  • The high prices seen at the thoroughbred auction, including a $2 million sale for Hip 144, are driven by a shrinking supply of quality horses and the potential for massive returns through breeding stud fees, rather than reflecting a boom in the racing side of the industry. 
  • The overall U.S. horse racing industry is in decline, evidenced by falling betting handle and track closures, leading some tracks to rely heavily on subsidies, such as revenue from Historical Horse Racing (HHR) slot-like machines, to remain financially viable. 
  • The host concludes the series on the horse industry by thanking economist Thomas Lambert and acknowledging the vast amount there is still to learn about horses, despite the host's initial personal apprehension. 
  • The host highlights the enduring, evolving utility of horses beyond transportation and manufacturing, citing the therapeutic riding charity Gallop NYC as an example. 
  • The episode production team, including producers Augusta Chapman and Ellen Frankman, and contributors like economist Constance Hunter, are specially acknowledged for their roles in creating the series for *Freakonomics Radio*. 

Segments

Keeneland Sale Overview
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(00:01:20)
  • Key Takeaway: Keeneland’s September yearling sale is the world’s largest and highest-quality auction, with champions often originating from its sales pavilion.
  • Summary: The September sale at Keeneland features about 4,700 yearlings, and historically, about 40% of major U.S. race winners were purchased there as yearlings. The complex includes extensive facilities like 46 barns, and the sale relies on many personnel to operate smoothly. Buyers attend with the hope that their yearling will become the next legendary racehorse like Secretariat or American Pharaoh.
Breeder Perspective and Hopes
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(00:03:24)
  • Key Takeaway: Hinkle Farms, a family-run broodmare operation, maintains a niche by only selling horses they have bred themselves, budgeting conservatively for sales.
  • Summary: Hinkle Farms, established in 1926, primarily functions as a broodmare farm but retains some cattle operations. Ann Archer Hinkle expressed hope that their horses would sell for several hundred thousand dollars, with a chance of hitting seven figures. They budget conservatively because successful sales are not guaranteed every year.
Stallion Value and Market Impact
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(00:05:34)
  • Key Takeaway: The success of a stallion’s offspring directly and dramatically increases the stud fee, as seen with Not This Time’s fee rising from $15,000 to $175,000.
  • Summary: Not This Time, a stallion standing at Taylor Made Farm, has experienced an incredible run of success with his progeny winning races. This rising tide of success affects the value of all horses sired by him in the sale, not just those consigned by Taylor Made Farm. The stallion’s owners only receive the stud fee and do not share in future sales or purse earnings.
Sale Preparation and Pricing
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(00:07:02)
  • Key Takeaway: Keeneland sales operations involve extensive pre-sale inspections across hundreds of farms to ensure the best physical athletes are presented, influencing their placement in the sale books.
  • Summary: Traffic (buyer visits) to Taylor Made Farm was up 15% compared to the previous year leading into the auction. Sellers set a reserve price, often at two-thirds of their perceived value, though this is undisclosed. Keeneland’s sales team inspects over 3,200 yearlings across about 410 farms to curate the catalog and determine optimal placement across the 12 sale days.
Buyer Assessment Factors
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(00:10:45)
  • Key Takeaway: Buyers assess yearlings based on a combination of athletic look (conformation), pedigree, and veterinary soundness, recognizing that success is highly unpredictable.
  • Summary: While genetics account for about 35% of racing ability, the environment and the horse’s will to win account for the rest. Buyers often cite an ‘athletic look’ as the most common factor in their assessment, followed by pedigree and vet checks. Investing in an unproven horse is not a rational return on investment, but a small chance of hitting a huge success that can create a ’living, unlimited ATM machine.’
Auction Dynamics and Records
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(00:15:11)
  • Key Takeaway: The Keeneland September Sale is a live auction structured across 12 books where the median price drops significantly from the first day ($450,000) to later days ($150,000).
  • Summary: The auction process is a fast-paced, live event where horses are shown hundreds of times daily before entering the ring for about 60 seconds. The September sale has grown in prominence over the July sale, partly because the yearlings are older and more mature. The previous year’s total take was $428 million, and Keeneland operates as a for-profit entity whose earnings are reinvested into the industry.
Hip 144 Sale and Buyer Motivation
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(00:25:42)
  • Key Takeaway: Hip 144, a filly sired by Not This Time, sold for $2 million, exceeding the seller’s expectations and demonstrating the buyer’s focus on long-term residual value as a broodmare.
  • Summary: The Hinkle Farms filly sold for $2 million, a figure that was significant enough to potentially make the farm profitable for the year, covering high annual costs like stud fees and labor. The buyer, Scott Hyder, who focuses on purchasing female horses for their broodmare value, set a mental ceiling of $2 million and pushed past his $1.5 million valuation for the horse he ‘really wanted.’ The total sale set a world record, with 56 horses selling for over $1 million.
Industry Decline and Competition
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(00:35:01)
  • Key Takeaway: Record auction prices are a result of shrinking supply, as cultural shifts have reduced the number of people familiar with horses, leading to a smaller foal crop.
  • Summary: The decline in the foal crop is attributed to cultural shifts where fewer young people have familiarity with horses compared to previous generations. Horse racing popularity has fallen dramatically since its peak in the 1960s and 70s, with the betting handle falling 57% inflation-adjusted since 2002. Concerns over animal welfare, despite industry efforts like HISA, also contribute to public disinterest.
Betting Market Structure and Competition
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(00:41:24)
  • Key Takeaway: Horse racing utilizes a pari-mutuel betting system where players bet against each other, not the house, which means sophisticated players face other professionals and computer models, unlike fixed-odds sports betting.
  • Summary: The pari-mutuel system ensures the house cannot lose, as their cut (takeout) is fixed, making the game a competition among bettors. This environment has become increasingly dominated by computer-assisted bettors, leading to dramatic price shifts in the final moments before betting closes (’last-click betting’). The overall betting handle has fallen from a peak of $15 billion in 2002 to $11 billion currently.
Future Outlook and Subsidies
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(00:59:06)
  • Key Takeaway: The future of U.S. horse racing is viewed as discouraging due to poor adjustment to competition and high takeout rates, forcing some tracks to rely on subsidies from new forms of gambling.
  • Summary: Racetracks spend significant time lobbying politicians for better revenue splits and tax incentives rather than focusing on the fan base. A major subsidy comes from Historical Horse Racing (HHR) machines in states like Kentucky, which function essentially as slot machines using past race data. This casino revenue supplements purses, leading to the question of why racing continues if the casino side is so profitable.
Concluding Thanks and Reflection
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(01:02:40)
  • Key Takeaway: The future of lower-tier horse racing tracks remains an open question.
  • Summary: The fate of lower-tier horse racing tracks is presented as an unresolved issue following the main investigation. The host expresses gratitude to economist Thomas Lambert and others for educating them on the horse industry, history, and the animals themselves. The host admits to entering the series with a slight anti-horse bias due to personal history with the animals.
Host’s Personal Horse Anecdote
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(01:03:16)
  • Key Takeaway: A frightening incident involving a girlfriend’s horse bolting in Central Park solidified the host’s reluctance to become a ‘horse person.’
  • Summary: The host recounts a past experience arranging a Central Park horse ride for a former girlfriend, which ended when the horse bolted down Central Park West, causing traffic chaos. The host remains amazed that no one was injured during the incident. Despite the adventure, the host states they loved learning the economics, science, and soul of the horse industry during the series.
Special Thanks and Charity Mention
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(01:04:20)
  • Key Takeaway: Economist Constance Hunter was instrumental in initiating the series and is involved with Gallop NYC, a therapeutic riding charity.
  • Summary: Special thanks are given to Constance Hunter, whose presence at an economics conference led directly to the creation of this series. Hunter is involved with Gallop NYC, an organization providing therapeutic riding services to disabled New Yorkers. This demonstrates people finding new uses for horses over a century after they were displaced by technology for transport.
Production Credits and Credits Wrap
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(01:05:08)
  • Key Takeaway: Augusta Chapman and Ellen Frankman were key production staff for this episode and series.
  • Summary: The episode was produced by Stitcher and Renbud Radio, with Augusta Chapman and Ellen Frankman handling production and editing, respectively. Eleanor Osborne mixed the episode with assistance from Jeremy Johnston. Special thanks were extended to Nick Nevis for field recording in Kentucky and the entire Keeneland team.
Empirical vs. Psychic Claims
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(01:06:02)
  • Key Takeaway: The concept of ‘horse psychics’ or animal communicators is contrasted with empirical methods used in the economic analysis.
  • Summary: A brief, lighthearted exchange questions whether claims made by ‘horse psychics’ could be classified as empirical. The host jokes that friends who use animal communicators might be upset by the implication that their methods are not scientific. The segment ends with a brief tag for the Freakonomics Radio Network.