Archive for the ‘Industry Reform’ Category

By Ray Paulick

One of the Thoroughbred industry’s biggest challenges may also present one of its greatest opportunities. The challenge, brought to the fore this year by a series of widely publicized events but always lingering just off center stage, is the issue of animal welfare. How the industry deals with this subject may be one of its last, best opportunities to derail our slow but steady march toward irrelevance in the eyes of the general public.

The death of Eight Belles in this year’s Kentucky Derby, from all indications, was a freak accident, one of those incidents that could not have been prevented by anyone. But her demise, along with revelations about the routine administration of anabolic steroids to many of the sport’s best performers, shined a spotlight on racing that revealed to the general public some of its darkest truths.

Foremost among those is the question of what becomes of a Thoroughbred when it is no longer useful as a racing or breeding animal. Some owners and breeders take great measures to insure either a productive second life for their horses or dispose of them through humane euthanasia. Too many horses slip through the cracks, however, and end up on meat wagons headed to slaughter houses in Canada or Mexico, or are simply abandoned.

The perception of our sport is shaped by media reports of the cruelty of slaughter or abandonment of Thoroughbreds, and it does not present an image attractive to many Americans, especially a younger generation that is more in tune with animal welfare issues.

That is the challenge.

The opportunity lies in the numerous programs and untold number of volunteers who work to find second homes for Thoroughbreds as riding, pleasure or performance horses, or as therapeutic animals used in programs for the mentally, spiritually or physically challenged, and in prisons where they have helped rehabilitate hardened criminals.

It’s time for the racing and breeding industry to fully embrace programs like the Thoroughbred Retirement Foundation, CANTER, Rerun, Tranquility Farm, Thoroughbred Charities of America and others, instead of pretending the issue of unwanted ex-racehorses does not exist.

Last week I heard a presentation on how our sport can energize its “brand” from marketing expert David Aaker at the Asian Racing Conference in Tokyo, Japan. Aaker, an advisor to Japanese advertising giant Dentsu and professor emeritus at the Haas School of Business at the University of California-Berkeley, talked about how some other businesses have energized their brands by hitching their wagons to something outside of their core business that it is interesting, relevant and compelling to their customer base.

Avon, one of the oldest cosmetic brands for women, was cited as one very good example. There was little the company could do to energize itself by making better lipstick, Aaker said, so it found an issue with great relevance and interest to its female customers: breast cancer. Avon put enormous resources into a breast cancer awareness campaign, created a foundation to support breast cancer research, and promoted an annual Avon Walk for Breast Cancer throughout the world. Breast cancer research and other social issues relevant to women were foremost among Avon CEO Andrea Jung’s program to rebuild and re-energize the Avon cosmetic brand. It has been a great success.

What social issue is of great importance to current and potential racing fans? I think that’s a no-brainer: it’s the humane treatment of the animals that give us so much pleasure and entertainment.

Look into the eyes of any fan when a horse dumps its rider in the post parade and takes off on a perilous solo run, or when a horse breaks down in a race or is carted off on an ambulance. It’s not just the champions our fans care about, either, it’s those low-level claimers they’ve followed in the first or last race on any day at any track.

Racing is fortunate to have people who are animal lovers and do what they can to protect them. Just today, Madeleine Paulson Pickens is reported to have come up with a plan to rescue from death the tens of thousands of wild mustangs who have roamed the American West and are so much a part of our culture. The late Paul Mellon bequeathed a most generous gift to the Thoroughbred Retirement Foundation that will benefit former racehorses for years to come. John Hettinger dedicated the last years of his life to ending slaughter and protecting our horses.

But it’s time for racing, as an institution, to understand that what’s good for our horses is good for our sport, to face this challenge and embrace it as an opportunity. The Jockey Club realized this with its recent announcement that it will give to horse retirement causes and offer breeders an easy way to donate funds to this cause whenever they register a foal. Suffolk Downs officials established a zero-tolerance policy against trainers sending horses to slaughter and a few other tracks have followed their lead.

But the clock is ticking. Voters in Massachusetts banned dog racing in that state Nov. 4 because of concerns over animal welfare. It’s not a stretch of the imagination to see similar measures taken against the racing of horses. Think about that for a minute.

We have some very bright people in this industry, people who can understand what marketing expert Aaker was talking about with Avon and apply the same principle to help both the horses and the business of Thoroughbred racing. We can energize the Thoroughbred racing "brand" by taking on one of our biggest challenges and viewing it as an opportunity to sell our sport to a new generation.

Copyright © 2008, The Paulick Report

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By Ray Paulick

National Thoroughbred Racing Association CEO Alex Waldrop said his organization neither opposes nor supports a U.S. House of Representatives bill that would criminalize transportation of horses with the intention they be slaughtered for human consumption. A letter from Waldrop expressing the NTRA’s neutrality was entered into the record on Wednesday by Bob Goodlatte (R-Va.) during a markup hearing of the House Judiciary Committee on H.B. 6598, known as the Prevention of Equine Cruelty Act of 2008.

The bill, introduced in July, is sponsored by Democratic Judiciary Committee chair John Conyers of Michigan and 11 other House members.

In his letter to Congress, Waldrop said the NTRA supported 2003 anti-slaughter legislation, which failed to pass. He did not reference support or opposition to current legislation before the House (H.B. 103) and Senate (S.B. 311) that would prohibit slaughter and transportation to slaughter plants.

Those bills will prohibit slaughter, while H.R. 6598 criminalizes transportation of horses to slaughter plants for human consumption by amending federal criminal law and calling for fines and imprisonment. There currently are no slaughter plants operating in the U.S., the two in Texas having been shut down by a court ruling and a plant in Illinois shuttered after a state law was passed. There has been an increase in the number of horses being transported across the borders into Canada and Mexico, however, and this law provides enforcement for federal officials to end that. Horses confiscated would be under the jusisdiction of the attorney general, who, according to the bill, “shall provide for the humane placement or other humane disposition of any horse seized.”

Waldrop’s difficulty in supporting or opposing the bill stems from the makeup of the NTRA membership, which is funded in part by organizations such as the American Quarter Horse Association and the American Association of Equine Practitioners, which have opposed anti-slaughter legislation. 

Passage of the bills seems a longshot with time running out during the current session of Congress.

Following is the text of Waldrop’s letter, citing the NTRA’s neutrality and concerns with the bill:

By Ray Paulick

The change bandwagon is getting pretty crowded, both in presidential politics and in horseracing. Following on the heels of suggestions for reform at the Jockey Club Round Table in August and demands for reform by the Breeders’ Cup and American Graded Stakes Committee, the National Thoroughbred Racing Association is getting into the act. NTRA president and CEO Alex Waldrop is convening a closed-door meeting in Lexington, Ky., today beginning at 9 a.m. to seek support and funding for widespread changes related to medication and horse welfare issues, many of which were detailed in a Paulick Report exclusive in July.

Today’s invitation-only meeting at the Griffin Gate Marriott Hotel will have representation from a broad base throughout the Thoroughbred industry, unlike an earlier small gathering of insiders who met at Keeneland to draft a discussion document in reaction to the June 19 Congressional hearings that threatened federal intervention. The hearings came in the wake of revelations about legal anabolic steroid use and the death of Eight Belles in the Kentucky Derby.

The discussion document outlined reforms related to medication, drug testing, racetrack safety standards, jockey weights and insurance, 2-year-old sales and racing, wagering protocols, Eclipse Awards, and a national placement program for retired racehorses. The confidential document, which has since been amended since published in the Paulick Report, also had suggestions for implementation and enforcement, but no plan for funding, which is expected to be a major topic of discussion.

Waldrop, who has been traveling around the country with NTRA vice president Keith Chamblin to sell the reform platform to different organizations, said today’s meeting would be an “informational session.” At least 50 individuals will attend. The former Churchill Downs executive is expected to seek funding and may propose the hiring of an outside agency to serve as a “monitor” to hold the industry’s feet to the fire so that it will make enough changes to hold Congress at bay.

One invited participant said it would be a “miracle” if the industry supports the proposals but gives Waldrop high marks for his efforts. “Where is the money going to come from?” he asked. “The NTRA doesn’t have it, racetracks are strapped, and state governments are cutting budgets on racing commissions and drug testing labs.” Another said the plan needs to be scaled down and more realistic. “The Jockey Club Round Table made all these proposals about what the industry needs to do, and I said, ‘Hey, what about the proposals you made last year? When are you going to get around to addressing those?’”

Copyright © 2008, The Paulick Report

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By Ray Paulick

The Labor Day announcement that Stonerside Stables has been sold by Robert and Janice McNair to Dubai’s Sheikh Mohammed is troubling news – not over concerns that the sheikh’s Darley operation may become a dominating force in American racing and breeding but because of the symbolism of McNair’s departure from active participation in our sport.

With the exception of a few horses they are retaining, the McNairs sold the multi-state breeding, training and racing operation lock, stock and barrel for an undisclosed sum that surely approaches or exceeds $100 million.

The McNairs began development of the farm and racing stable in 1994, a mere 14 years ago. And now, just like that, they are getting out. Pfft!

Why?

The press release announcing the sale said Robert McNair found it increasingly difficult to devote enough time to Stonerside in light of his ownership of the National Football League’s Houston Texans, a franchise that McNair bid $700 million to buy and which played its first NFL game in 2002, five years after the Houston Oilers moved to Tennessee and were renamed the Titans. Despite going their first six seasons without a winning record, the Houston Texans were appraised by Forbes magazine as the fourth most valuable team in the NFL (behind the Dallas Cowboys, Washington Redskins and New England Patriots) with an estimated value of over $1 billion.

To get the Texans and return the NFL to Houston, McNair outbid entertainment mogul Michael Ovitz and billionaire oilman Marvin Davis, among others, who wanted to bring a franchise back to Los Angeles, which had lost the Rams to St. Louis and the Raiders to Oakland. McNair knew that the NFL was the sports world’s most valuable league, and understood the power that a strong league office, with the support of team owners, had in shared media rights, merchandising, sponsorships, and marketing. Stepping up with a bid of $700 million seemed like a big risk, but now it looks like a bargain.

While McNair was busy starting his NFL team, he also lent his support, time, personal resources and expertise to a project that the Thoroughbred Owners and Breeders Association was trying to launch: the Thoroughbred Championship Tour (TCT). The TCT was a property Thoroughbred owners would create through an investment of $25 million, hosting a series of races showcasing top horses in divisions tied to the Breeders’ Cup at tracks throughout the country. The TCT would control media and wagering rights for those races.

McNair was named chairman of the TCT, which after its public unveiling in 2003 was slow to get off the ground for a variety of reasons, including TOBA’s staffing inadequacies. TOBA board members and TCT officials went to the Breeders’ Cup and National Thoroughbred Racing Association (which at that time were effectively one organization) for support, but they were stonewalled by some of the same people who helped kill previous initiatives, including Fred Pope’s National Thoroughbred Association. Leading the charge against the TCT was G. Watts Humphrey, who along with Will Farish controlled the executive committee of the Breeders’ Cup until its governance was changed and its board elected by nominators.

The stonewalling worked. After a series of meetings among racing organizations that went on for years, TCT announced in 2005 that it was “suspending operations” – which might be a stretch. There never really were any operations…only discussions.

The opposition of Humphrey and other “old guard” Thoroughbred owners and breeders to the TCT and its “new guard” supporters had carryover effects beyond this attempt to create a series of races for the best horses in training. There were hard feelings by people like McNair who were trying to bring change to an industry that has long resisted it. Some in the new guard kept pushing for change through the Breeders’ Cup election and governance process, which still remains under the control of the old guard. Others have backed away from industry initiatives after getting a bad taste in their mouth from their experience with the TCT.

McNair is getting out of the horse business almost entirely, instead putting all of his considerable energy into the NFL, where there is more enlightened leadership and, as a result, heightened opportunities to grow a business.

This much we know: the NFL’s gain is the horse industry’s loss.

By Ray Paulick

Fred Pope just won’t give up.

For more than 16 years, since he first used advertising space in Bloodhorse magazine to publish an article entitled “Whose Game Is it?” Pope has been trying to convince Thoroughbred owners that they can control their own destiny in racing.

Pope is a Lexington, Ky., advertising agent who for many years was closely associated with Gainesway Farm and its founding owner, John Gaines. Both men loved the power of ideas and both wanted to see Thoroughbred racing grow out of a parochial, tradition-steeped existence that encouraged inertia over creativity. Gaines started the Breeders’ Cup, which he had hoped would become a vehicle to market the sport to a wide audience that currently does not participate in racing. He went to his grave disappointed that his big dream was not fulfilled, even though the Breeders’ Cup has been widely hailed as racing’s best innovation of the 20^th century.
 
Pope saw the power of the event, which at the very least gave racing the championship day it never had. The Breeders’ Cup has evolved from a one-day on-track experience with a relatively large television viewing audience to a two-day event in which racing fans throughout the country can participate through simulcast betting at their local track, OTB or via account wagering. The television audience has plunged in numbers over the 25-year history of the Breeders’ Cup, even as handle has grown substantially.

The bottom line is that the Breeders’ Cup may capture the attention of most racing fans for a weekend, but it isn’t creating very many new enthusiasts for the sport.

Pope believed racing needed more than just one big weekend in the fall to help the sport grow, so he began trying to find ways to define a “major leagues” for racing. He kept going back to the fact that the racehorse owners, the people who own the “talent,” should be in control of the game. “Control” means licensing, scheduling of major races, marketing regulations, contractual agreements over distribution and revenue. It’s the kind of control defined by the most successful major league sports, including the National Football League (controlled by the team owners) or the PGA Tour (controlled by the players).

After studying various sports and how the team owners or players exert control, Pope formed the National Thoroughbred Association, which would create a major league for horse racing by, among other things, reversing what he called the upside-down revenue model currently in place for simulcasting, which now accounts for nearly 90% of wagering. The upside-down model, in brief, pays five times more to the business handling a wager (the simulcast outlet or account wagering company where a bet is made) than it pays to the track and horsemen who puts on the race on which the wager is made.

One of the first people Pope convinced that his idea would work was John Gaines, who along with Pope started convincing some of the most powerful owners in the business to get on-board. Eventually more than 100 owners signed up, each contributing $50,000 to the NTA as seed money, and the NTA was off and running in the summer of 1996. A board of directors was formed and Robert Clay was elected president of the NTA.

(Author’s note: In an article on Breeders’ Cup governance published by the Paulick Report in June, I mistakenly credited Gaines with creating the NTA. Pope deserves full credit for its creation.)

Pope brought in two people familiar with the model, Tim Smith and Hamilton Jordan, who had worked together in the Jimmy Carter White House and later on several other projects, including professional tennis, which  had been transformed into a sport controlled by the players – not the tournament sites. Smith also had worked as deputy commissioner on the PGA Tour.

In early 1997, as the NTA’s plans continued to be formulated, Jockey Club chairman Dinny Phipps got involved and called Clay and a few others to a private meeting in Palm Beach, Fla. Neither Phipps nor William S Farish, the Jockey Club’s vice chairman, supported the NTA. Farish was also the chairman of the board of publicly traded Churchill Downs and a major consignor of yearlings at Keeneland. The latter role led Farish to have ambivalent feelings about the NTA, he told Gaines privately, because “I have to sell yearlings” to many of the people who had signed up in support of the NTA or who sat on its board of directors.

Clay was almost breathless in his enthusiasm for the “all hands together” approach that Phipps proposed during the Palm Beach meeting, that called for the Jockey Club, Breeders’ Cup and Keeneland to get involved. Other groups eventually were also brought in, including racetracks, and what had been an owner-driven initiative was now, for lack of a better term, a fustercluck of industry organizations which, by their nature, could never paddle in the same direction.

Phipps effectively killed the NTA, morphing it into the National Thoroughbred Racing Association, which is now a lobbying organization in Washington, D.C. , and a trade association for the industry. The NTRA is not a league office and has not done anything to transform racing into a major league sport.

As Pope said during a talk he gave to a group of equine attorneys last year, “The NTRA looked like the NTA, sounded like the NTA, and promoted itself with the terms such as ‘Commissioner’ and ‘league office’ but without the basic elements of a Major League. It was a fake major league.

“The NTRA could not package, price, or distribute the sport. It did not have the rights from the racehorse owners, it did not have rights from the racetracks, nor did it seek to change simulcast pricing. Instead of the proven Major League sports structure, the NTRA tried to include not just all of Thoroughbred racing, but also included all of the Thoroughbred industry, as well as other horse breeds and dog racing industries.

“Instead of a real Major League structure, the NTRA presented a fantasy structure selling the premise that if everyone would close their eyes, join hands and sing Koombaya, then Thoroughbred racing would be restored The political operators had everyone drinking the NTRA Kool-aid.

“If Mr. Phipps thought stopping the major league NTA, to start another trade association, then in my opinion he is incompetent. If he did it only to stop the NTA, then he and people who helped him are guilty of something more sinister and owe the industry an apology. Although Mr. Phipps is the acknowledged head of the industry, I have never read about his vision for Thoroughbred racing. Every time someone else has put forward an idea, he has moved to stop it. To the point now, no one has offered anything new in the last ten years.”

Pope made those comments in May 2007. Since then, the industry’s prognosis has gone from bad to worse. This year alone we’ve we had the death of Eight Belles at the Kentucky Derby, the admission by trainer Rick Dutrow that Kentucky Derby winner Big Brown raced on anabolic steroids, medication positives for the trainers of the Horse of the Year, the Kentucky Derby winner and the Kentucky Oaks winner, the possible implosion of Magna Entertainment (the largest racetrack owner in the country), ongoing disputes over simulcasting and account wagering, and Congressional hearings that made the industry’s leaders look incompetent.

I think we are right next to a calamity,” Pope told the Paulick Report.

For that reason, he’s not giving up on the same basic premise that started in 1992 with the question “Whose Game Is It?”

Last month, Pope published an op-ed piece in the Thoroughbred Daily News discussing racing’s upside-down distribution model and the need for owners to get involved. That article got a lot of horse owners talking about the need for change.

I’m afraid we are seeing the total collapse of the economic model that’s in place right now,” Pope told the Paulick Report. “The objective of the NTA was to change from a simulcast buyer’s market to a seller’s market. It’s finally coming to fruition in some very bad ways, and it’s only a matter of how much damage has been done.

In the Aug. 16 issue of Bloodhorse magazine, Pope has repeated that message and has called for Congress to change one word in the Interstate Horseracing Act that will empower owners across the nation.

We have a long list of national organizations, but not a national racehorse owners association,” Pope wrote in a magazine that, coincidentally, is owned by the national Thoroughbred Owners and Breeders Association. Several organizations say they speak for racehorse owners; however, they are actually controlled by breeders, tracks, or trainers. It seems everyone wants to speak for racehorse owners, except racehorse owners.

Currently, the Interstate Horseracing Act gives simulcast approval to what it calls “horsemen,” which has been defined as owners and trainers. Pope wants the word “horsemen” to be changed to “racehorse owners,” mandating that the owners step and get involved in key decisions relating to simulcasting contracts.

One problem is that horse owners, to paraphrase what Robert Clay said many years ago, didn’t join the country club to cut the grass. They joined so they could play golf

Jess Jackson is one owner who believes in Pope’s idea, and that can be viewed as a blessing or as a curse. Jackson is a powerful individual whose written testimony before the Congressional hearing in June included a lengthy article written by Pope. He has access to members of Congress that many others might not have. He is respected and appreciated by some in the industry for what he has done in the area of auction reform, but there are others who may automatically get on the other side of the fence from Jackson on any given issue because they don’t like his tactics.

That shouldn’t be the case. This issue is too important. Racing is in far worse shape than it was in 1996 when Pope and more than 100 owners stepped up to make a difference, only to be shot down by Dinny Phipps and his sycophantic followers.

The idea then was to grow the business by having owners take control of the sport and create a new business model for simulcast distribution. The reality today is that the various parties are fighting over scraps. The focus needs to return to growth, and there is only way for that to occur.

Racehorse owners must support change to the status quo.

Copyright © 2008, The Paulick Report

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