How much profit do you make racing horses?

The core of PFL is obviously racing horses. But how many owners are worried or skeptical about whether they will run out of derby, the in-game currency, before the end of the season? Can you run any horse profitably with the right setup? Can you make money long term just entering everything? How selective do you have to be to find profitable spots to run profitable horses? The answer, as usual is fairly nuanced, but let's take a basic approach to try to answer some of these questions. Figuring this out will help us make better informed decisions on when to retire a male to stud, or to breed your filly. How much to pay on the marketplace and still expect a positive outcome. Which claimers might be highly profitable in the right hands.

Making money from racing horses

Racing your horses is one of many ways you can make profits from the PFL ecosystem. You could focus on breeding, or wagering, studs, or flipping claimers and undervalued horses for sale. You could invest purely in crown and ignore the horse racing altogether. Smart players have more than one string to their bow. Today we are only concerning ourselves with making money from racing. We are ignoring the future stud or breeding value of retired horses, but in reality of course you will make decisions with what happens after retirement in mind. As you should.

Let's start at the beginning. Each race has an entry fee (we will call this the fee from now on), and depending on the type of racing, number of entrants and any special conditions the highest finishing horses get a share of the purse - the more horses enter the higher the purse. However, there are also crown stimmies, incentives from the game for you to race your horse. You are paid in traded currency called crown. While derby is always $1 = 80, crown prices fluctuate. Every season the crown stimmies are reduced and players need to adapt to the changes in ratios and payback of crown. If crown increases in value, the impact of reducing stimmies for the player is offset. Accumulated crown can be staked at tracks to be eligible to receive a percentage of the profit made by each track running races, a smart method for increasing the reward and incentive to hold the currency. So we have two currencies to deal with in making our calculations, derby ($1=80 derby) and crown (varies). For simplicity in this article we are going to convert everything to derby and treat crown as being worth $1, or 80 derby, which is pretty much what it was worth on average over period of the analysis.

Our cohort

In order to remove as much variance from the analysis as possible we are focusing on one cohort - horses born in season 10. Not so far back that the game has changed too much, and not too recent so we can't see the on track performance of the horses as adults. Remember a horse born in season 10 can't race until season 12. At the time of writing we are almost halfway through season 15, so we have 3.5 seasons of racing data to look at. We are also only looking at horses who have raced at least once. Unraced horses are not included in this analysis (of horse racing!).

We have 3,785 horses who have competed in just over 100,000 races from 1 B- to 87 S+. The following chart is a survival curve where we track how many horses are still running after there "nth" run (where n is any whole number).

Across the bottom we have the number of races each horse has run to date, and vertically we are measuring how many horses are left, shown on the purple line. So 85% of ever active horses make it to their 10th race, just over 50% make it to their 20th race, and only 15% make it to their 50th race. I have included the blue line which is the percent of horses that are female, just to explain the kink in the purple line. Obviously as females get to a breedable age they are far more likely to be retired. At the beginning the population is almost a 50/50 gender split, but after 20 races it's 80/20 male/female, and quickly becomes 90/10 after that.

In that group of 15% of horses that stop racing within their first 10 races there are probably numerous recoverable projects waiting to be discovered on the marketplace or in claimers. Owners are trying to find the horses' ideal conditions and many don't find them before they give up. The gradient of the line is steepest in these horses' first season, and then becomes a straight line after 20 or so races. The line is steepest at 15-20 races which is where most careers end. This could be due to retiring, giving up racing because the horse isn't profitable, leaving the game or becoming an inactive stable - probably some combination of all of these things.

Breaking down the above table, we have a number of metrics to look at. Each row represents the horses of each grade. For each horse we calculate the number of races run on average, the winning %, the podium (top 3) %, the average winnings per horse in derby, the fees paid per horse, the profit purely in derby, we then add the crown value in derby, to come to final profit where we count derby winning and crown paid (remember converted at 1 crown = $1 which was the average rate over the period from season 10). The final two columns, we look at what % of horses are profitable from racing purely from the winnings and then the winnings plus the crown stimmie.

What do we see? Firstly, over this period (season 12 to 15.5, seasons 10-11 were the foal years), the average horse at each grade makes a loss purely in derby terms, except S+ horses. The penultimate column tells us that 21% of horses run are profitable purely on winnings versus fees.

However, when we add in the crown stimmies (which remember are going down each season) we see that 67% of horses are profitable, 81% of S and 86% of S+. By taking a cohort approach like this we are always slightly looking into the past, and these numbers may feel a bit different that what you are experiencing in season 15 itself. We could have just looked at seasons instead of the same horses over multiple seasons - maybe that's another story for another day.

A+ are the least profitable group, with only 59% of horses being profitable. A+ also win the lowest proportion of races at 10.7%. This may suggest that they are over populated and over raced. If we look at populations of racing horses, A+ horses are definitely becoming a smaller part of the population from their peak a few seasons ago.

The following chart is a quick look at the changing mix of horses by season. A grade horses overall are now a smaller population that S grade horses. (this data reflects all horses not just our cohort.

We can split our cohort of horses up in other ways too. Let's look at the same table of data split by the number of total attribute stars a horse has. We have previous covered how important preferences are in this post - https://aipaddock.com/how-much-do-preferences-matter. Spoiler alert - they matter.

Okay so same table format as before - columns are the same - but this time we are looking at the number of stars (direction, surface and condition) with a maximum of (3x3) 9 stars.

Just as in the previous post horses with high stars, ignoring everything else, win far more often than those without. 80% of 9 star horses are profitable when factoring in crown and derby, and 44% when just looking at fees and winnings. This suggests if you are sharking for 9 star talent on the marketplace, you have a much greater chance of finding a profitable horse to run. Sellers of high star horses should make sure they are charging the right premium. Scouting cheap claimers is another way to find a cost effective high star horse.

From the original table split by grades we can get some idea of what the "lifetime value" or LTV of a horse by grade. This gives us a benchmark over which we probably shouldn't be paying. If an S- on average earns 18k for its track endeavours (see the first table for other grade LTVs), then purely from a racing perspective (eg a colt) why would you pay over that amount unless you knew for sure it was a racing certainty? An S- is unlikely to attract much in the way of stud fees.

If we ranked all the S- horses in this cohort from most profitable, Saturday Savings, to the least profitable, Solnushko, we can create the following "Pareto" chart.

Our Pareto Effect, or 80:20 rule here is in full effect. In fact 90% of all the profit generated from racing S- horses comes from the top 20% of horses. So you really want to get a horse in the top 20% of the grade. Those horses generate all the value. The bottom 33% make a loss as we saw earlier (67% of S- are profitable to race), and the remaining 47% in the middle will have you grinding out a living and at the mercy of crown prices. I know it sounds obvious but all the profit is made by the 20% of each grade - so your number one question to ask yourself is whether your favourite horse is a top 20% percenter or not. If he or she is - great - you can race them for a bunch of profit. The pattern is similar for other grades.

There is a similar pattern also for stables - again 90% of the profit generated is coming from 20% of the stables. This pattern occurs everywhere - in business, in life, so maybe we shouldn't get hung up on it too much. However there are clearly some stables executing their strategy very well with or without superior horses. Without doing any research whatsoever on my part I found two interesting stables, GD Stables generated over 10k average derby value in crown per race - the highest by a large margin, and Rein It In, generated an incredible 3:1 ROI over 60 races with this cohort, again unmatched. I recommend you do your own research into how the best stables in the game operate if you want understand their strategies.

Some thoughts on racing profitability

We get a lot of feedback in the game that tells us whether we are derby positive or not. Its great to be derby positive, but it's not the right question to ask. You should be determining whether you are derby+crown positive or negative. This is clearly a more nuanced question because it factors in your view on the value of crown. Retrospective analysis like this isn't available in real time when planning the future - but hopefully there are some clues in here about the need to be selective on which horses you race, what margin of error you have, and what your expected hit rate is for profitable runners.

The game is always changing, the population of horses is moving away from As to Ss. This will affect which grades are more or less profitable now and in the future. As the SS- tier opens up, S+ and S horses will be knocked down a step.

A couple of thoughts having conducted this analysis are that whenever you buy a horse be realistic how much money you can make back from racing it. Obviously that is less important in extremely high end males where stud fees may come into play, and for females you want to breed from. But if you feel yourself being drawn into buying that well bred S- colt foal, just compare the price against the likely lifetime earnings if you want to make a positive return on your investment. Either go for guaranteed quality and pay the premium for it, or buy many cheap tickets into the raffle and be smart in which horses to double down on.

Secondly it is clear not all horses are profitable to run. You must be cold-blooded in your evaluation of your horses. Make sure you know if your horse can be run profitably, what your exit strategy is if not - remember most horses are declining in value as they get older, whether your horse has declined to the point where it can no longer race profitably. These should be mathematical questions with an actual correct answer - not wish fulfilment on your part. Your fastest path to profit might be how fast you can let go of marginal horses and focus your efforts and your funds on the profitable ones.

Conversely you might find others giving up on horses too quickly, before their optimal conditions are found. This happens all the time - and if you know what to look for you might find a bargain in the claimers or marketplace. Just remember what a good price is by grade/gender/stars/age.

Taking a cohort and tracking it over time has some weaknesses but it also isolates the effect of time to some degree. In the future we will look at other ways to find profitable horses to run, and how to run horses profitably.

Join the fun and put these insights into practice at PhotoFinish.Live and if you are considering starting your own stable please consider using my referral code: PADDOCK or just click on this link: https://signup.photofinish.live/?referralCode=PADDOCK

Please remember this is a web3 game where your spend your own money. Nothing I write about should be considered financial or investment advice.