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Kentucky Derby rakes in revenue by making it a multi-day event

The Kentucky Derby is the greatest two minutes of sports and sponsors are taking notice.

(Credit: Richard Mackson-USA TODAY Sports)
(Credit: Richard Mackson-USA TODAY Sports)

Brad Brown, vice president of sports and entertainment marketing for Anheuser-Busch, describes the Kentucky Derby as “the Super Bowl of Horse Racing.”  This is true, but Churchill Downs has turned the brand from an elegant and extravagant single sporting event to a weeklong festival and a multi-state casino and gambling empire. In 2005, revenue was $408.8 million, with about 300 million from Derby week alone. Since then, revenue has increased to $779.32 million for 2013, with profits increasing by almost by $155 million. Over the same decade, Churchill Downs’ stock has increased from about $40 to little over $90 in the first quarter of 2014.

Source: Yahoo Finance
Source: Yahoo Finance

Since the mid-2000’s, attendance and sales from horse racing only provides only a third of Churchill Downs’ revenue. The Derby used to provide 75 percent of the company’s revenue. What is even more shocking, the company has seen a $15 million increase in profit from Derby week over the last five years because of the increased activity before Derby day. What is the source of this new $371 million of revenue? The answer isn’t betting on the ponies because gambling on horses is on a decline. Robert L. Evans, Churchill Downs CEO, commented on Bloomberg that, “The biggest problem that there is just too much horse racing.” Betting on horses has dropped by 28 percent and the number of horses has dropped 38 percent, but the number of races have only dropped 19 percent.

Source: TiqIQ
Source: TiqIQ

 

As Churchill Downs prepares and fans excitedly dress in suits, dresses and Derby hats, the company’s owners and investors can enjoy their official Early Times Mint Juleps to the sounds of “My Kentucky Home.” This year promises to be another fun for the fans that get to enjoy a week filled with Steamboat Races, a marathon, and Thunder Over Louisville, the biggest fireworks show in the world. Also, this year is expected to be another profitable year with increased attendance, sponsoring, and seat licensing fees, which are now over $75,000. This year, Churchill Downs will earn over $75 million from Saturday alone, while the winner of Saturday’s race will take home $2 million.

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