Archive for the ‘Thoroughbred Business’ Category

By Ray Paulick
I hate to rain on Equibase and the National Thoroughbred Racing Association’s bad news parade, but there was some good news in horse racing’s monthly economic indicators released on Thursday.

Average daily handle for the month of February increased by 4.80% in comparison to 2009 figures. Average daily purses were up by 4.29% in February. Year-to-date figures for average daily handle are virtually dead-even (down 0.14%), as is the number for average daily purses (plus 0.81%).

Those are signs, like the few glimmers of hope in the general economy, that our worst days may be behind us.

Why, then, did Equibase and NTRA only report the bad news, that gross wagering and purses were down double digits? The business figures compiled by Equibase make things look terribly bleak: gross handle down 13% in February and purses down 13.43% from 2010, and year-to-date figures down 12.51% and 11.67% in those respective categories.

They include the total number of racing days for February and for the year to date, which show drastic declines of 16.99% and 12.38%. We are not going to increase gross handle with we run nearly 17% fewer race days. Those gross numbers do not tell the complete picture, and an organization like the NTRA should be doing a better job of interpreting its own economic indicators.

The good news about February and handle comes on the heels of Fasig-Tipton’s successful sale of 2-year-olds in training at Calder race course in South Florida.

There has been severe weather this year in many parts of the country, reducing the number of race days because of cancellations. But some tracks are simply running fewer live dates, a trend that we’ll see more and more of going forward.

The days being dropped intentionally by racetracks are going to be weekdays when handle and purses are lower, so it’s logical to expect average daily numbers to increase when weekend cards represent 50% of the week’s action on a four-day racing week instead of 40% on a five-day week. Del Mar saw its average daily numbers increase last year when the Southern California track dropped its Monday programs.

So, part of this increase in average betting and purses for February is likely due to the loss of more weekday programs than weekends. The message here is that less can be more.

Call me a contrarian, since other publications focused on the negatives—the drop in gross purses and handle. However, I’m willing to take any scrap of good news I can find these days.

Copyright © 2010, The Paulick Report

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By Ray Paulick
Bradley Weisbord, recently named the finance and stallion manager for Ahmed Zayat’s financially troubled Zayat Stables, told the Paulick Report no deal has been struck to sell all or any portion of Fasig-Tipton Fountain of Youth winner Eskendereya, a leading candidate for this year’s Kentucky Derby.

“Mr. Zayat has said he is in this business to operate it as a business,” Weisbord said,. “and he is pursuing offers. There have been numerous parties involved interested in anything from 10% to 100% of the horse.”

Eskendereya won the Feb. 20 Fountain of Youth by 7 1/4 lengths, his third victory in five starts. The margin and ease of victory, combined with huge numbers from speed figure calculators, put the son of Giant’s Causeway at the top of many Kentucky Derby lists. He was a $250,000 Keeneland September yearling graduate, sold by Peter O’Callaghan’s Woods Edge Farm, where he was raised. Sanford Robertson bred him in Kentucky. Eskendereya is out of the Seattle Slew mare, Aldebaran Light,

One bloodstock agent who spoke with the Paulick Report on the condition of anonymity, said he made inquiries about Eskendereya with Zayat Stables associates and was told it would take more than $5 million for a half-interest in the colt. Weisbord wouldn’t confirm any prices being offered.

Zayat Stables was sued by Fifth Third bank for allegedly being delinquent on loans totaling $34 million, and the stable countersued the bank. Zayat Stables subsequently filed for Chapter 11 bankruptcy and is now being investigated by at least two racing commissions for possible ties Zayat had with convicted bookmakers Michael and Jeffrey Jelinsky, to whom he said he made loans totaling more than $600,000. According to sources, one of the Jelinsky brothers attended the 2008 Kentucky Derby post position draw in Louisville as Zayat’s guest.

Copyright © 2010, The Paulick Report

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As Thoroughbred racing and breeding sails through stormy waters without either a captain or a rudder on the ship, I am reminded that calls for a commissioner, a league office, a central authority—call it what you will—are not particularly new. Arthur B. Hancock III, the owner of Stone Farm in Paris, Ky., has long advocated federal legislation that would create a structure for the sport of racing and address many of the problems that have plagued us for decades.

Following is the complete text of a speech Hancock gave nearly 20 years ago at the University of Arizona’s Symposium on Racing in December 1991. What was true then is true today.—Ray Paulick
 

 
When uncertainty and troubling times swirled about him, Winston Churchill quoted a profound poem, “The Clattering Train”
 
          Who is in charge of the clattering train,
          The carriages creak and couplets strain.
          And the pace is fast and points are near,
          But sleep has deadened the driver’s ear.
          And the whistle shrieks through the night in vain,
          For death is in charge of the clattering train.
 
          We are all gathered together here in Arizona to speak out and do what we can to help our sport, Thoroughbred racing.  I refer to our industry as a sport because in essence that is exactly what it is, just as football, baseball, and basketball are sports.  We must never forget that the essence of racing is the competition of the horses and the romance, enthusiasm, and wagering that permeates that competition.  A track that I love, Keeneland, has a slogan, “Racing as it was meant to be”.  Ladies and Gentlemen, envision the first race long ago when several farmers or businessmen got together and bragged on the horses and to settle the issue, everyone lined up on Main Street for the big race on a Saturday afternoon and cheered for and bet on the horse of their choice. There was something deep within the people that was stirred by those horses roaring down Main Street, straining every nerve.  Well, this was racing as it was meant to be, and if we neglect and forget the essence of our sport, we lose sight of what it is that enables us to survive as an industry and to compete with other forms of entertainment.
 
There was a time when we were the only game in town and if you didn’t go fishing, you’d go to the races.  Today, there are many games in town.  We have riverboat gambling, jai alai, dog racing, baseball, casino gambling, Indian gaming, football, soccer, tennis, golf, basketball and lotteries.  How are we going to compete with these if we are not in control of our own destiny and if we are perceived by the masses of fans and potential fans as being dishonest and riddled by drugs and thugs? The answer is, we cannot compete.  Something has to be done and done quickly or racing as it was meant to be and life as we have known it is over.  We are riding a runaway train.
 
There are many important entities in our industry, but all of them put together are not as important to us as our fans, the bettors.  Without them, we have nothing.  With them we have everything.  It is imperative that we present to them an image of absolute integrity.  The question is how do we do this?  In order to have a fair game, we have to have a level playing field.  And we must be able to enforce the rules of the game with penalties.  Also, the rules of the game must be the same everywhere, be it in Kentucky, California, New York or Texas.  Since ours is a gambling game, it is absolutely necessary that everything about our game be completely above-board and strictly enforced.  Perception counts as much as reality.  Some may say, oh, a few drugs in minor doses is O.K. Well, by example, shall we make Little Johnny president of the Boy Scouts of America if he only snorts cocaine once or twice a year?  No, we can’t because Johnny’s image is already tainted.  By the same token, any kind of drug use on horses will convey the same perception and it will stop the people from wanting to watch the game as well as play the game.  There is nothing glamorous or romantic about drugging horses, and when you lose the romance of racing, you lose the essence of racing, racing as it was meant to be.
 
So far, the integrity of racing has been dealt a lot of smaller blows but a life-threatening death blow has yet to occur.  What do you think would have happened if Go For Wand had been running on Butazolidin or Lasix?  I shudder to contemplate it, but someday the same thing will happen again and the horse will be on drugs.  When the press and animal rights activists finish with us, there won’t be much left.  This nightmare hangs above us every day in every race we run.

 
We might still say, even in the face of stories about drugging helpless horses, who have no say in the matter, that it is inhumane to race horses without drugs if they “need” them.  Would you give your child drugs to make him perform better?  Is it humane to send him out to perform when he is in pain?  And what about the on-going deterioration of public opinion?  Oh, but drugs are necessary so that races can be filled and so that the little man can stay in the business!  Well, here is the answer to that question in black and white:
 
 
          In 1960 horses made over 11 starts a year
          In 1970 they made 10.2 starts per year
          In 1980 horses made 9.2 starts per year
          In 1990 horses made 7.9 starts per year
 
 
This is a drop of 28% in only thirty years.  By the year 2000, horses will make 6.3 starts a year if this continues – a remarkable drop of 43% from 1960 when drugs were not allowed.
 
So what have drugs done for racing?  Have they helped the little man or any man for that matter?  I’ll tell you one thing that medication has done, is doing, and will continue to do.  It is polluting the gene pool because horses are running on chemically induced ability instead of their natural ability.  In another twenty years our children probably won’t be able to breed a sound horse in America and buyers will be going to Newmarket or Sydney to purchase their yearlings.  Remember, we are the only nation on the planet to allow permissive medication.
 
Ladies and Gentlemen, the way to help the little man or any owner is for breeders to breed them good, rugged, healthy, sound horses, and to do that we have to assess the true merit of horses without their performance having been enhanced by drugs.  When we breeders sell someone something, we had better try our best to make sure that they have a chance to make money or they’ll be gone forever.
 
In my opinion, we have a crisis in integrity and a crisis in an ailing industry.  We are dying of a disease, corruption, and the high fever is caused by greed.  Again, our game must be totally above-board before anyone can be truly interested in watching it or playing in it.  To quote another statistic of the 91 horses running in the Breeders Cup this year, 76 of them were running on drugs.  If it’s allowed to be used, it will be abused.  Perception counts more than reality.
 
So what do we do?  How do we get together to solve our problems, Ladies and Gentlemen, because Thoroughbred racing and wagering now is involved in interstate commerce through simulcasting?  Congress not only has a right but a duty to regulate it.  This will happen!  We must act now in a concentrated, cooperative effort to get a benign bill passed which will regulate horse racing in the way we want it regulated.  Let’s face it; it is already regulated, so let’s get it regulated right, with no half measures.  We must regulate ourselves before the Federal Government sees fit to do it for us.
 
Today, I propose that we join together in a united front and go to our congressmen and senators with an idea, and that idea is:
 
The Racing Act of 1992
 
The points in this bill would be as follows:
 
I.       All foals born in 1992 will run drug-free in 1994 as well as older horses.  No           medication will be administered to a horse within 48 hours of a race, and trace levels will be determined by the commissioner.
 
II.      Anyone caught drugging a horse or fixing a race will be subject to specified       penalties for specified offenses, and there will be rigid enforcement of racing’s rules and regulations with certain knowledge of swift and sure punishment to be administered by the commissioner.
 
III.     No convicted felon may hold a racing license.
 
IV.     Uniform licensing will be implemented.
 
V.      A racing commissioner or czar will be appointed by The Jockey Club, The        TRA, The RCI, The TOBA, The HBPA, The Breeders’ Cup, The American Horse Council, The National Turf Writers, and The Jockey’s Guild.  Each organization will have one vote and may nominate a candidate if they so choose.
 
Drug testing will be done according to the RCI’s quality assurance program with the Commissioner assigning certain areas to certain labs as to efficiency and cost control.  This bill will include regulation of other segments of the entire horse industry, such as Quarter horses and Standardbreds, with those segments electing their own respective commissioners, if they wish.
 
In closing, I am reminded of a parable.  There was once a large fine house wherein lived a number of mice.  There were plenty of scraps of fine cheeses, breads and cakes, and the mice flourished.  Then the owner decided to get a cat and this cat wreaked havoc on the mice and their comfortable lifestyle.  All of the mice convened in an effort to find a solution to this life-threatening problem, and they decided to put a bell on the cat. This was considered to be a wonderful idea and was hailed throughout mousedom.  Then one of the mice said, “But who will be the one to put the bell on the cat?”
 
Ladies and Gentlemen, we need to give someone the authority to put the bell on the cat.  We need a Commissioner of Racing.  At the moment, we are all passengers on the clattering train.  Let’s get ourselves an engineer.  We need desperately to create the perception of credibility, honesty and absolute integrity, and we need to rid ourselves once and for all of drugs and thugs.  Once we do this, our future can be as bright and unlimited as that of any sport in this world, and our light will shine for all to see.  Let’s do it because it’s right.
 
Thank you for listening, thank you for your consideration, good luck, good racing, and good day.
 
Arthur B. Hancock III, University of Arizona Symposium on Racing, 1991

In perhaps the most extensive piece written about the Zayat bankruptcy, especially in a non-industry publication, writer Hugh Morley gets up close and personal with the controversial owner. Among other things, Zayat insists that he wants to pay the Fifth Third bank but not on the backs of depressed value for his assets (horses).

"God forbid. I want to pay them. But I want to pay them when I am supposed to pay them. I am a victim of very bad people. I am a victim of a very bad environment."

Read it at NorthJersey.com

Then come back to the Paulick Report and let us know what you think

- Bradford Cummings

In an attempt to increase their state coffers, Georgia officials are looking at Augusta as a likely site for a new track.

"…given the fact the state is going to be looking at billion dollar deficits now through 2013, it doesn’t surprise me there are groups looking to generate new revenues," said Mayor of Augusta Deke Copenhaver.

Did I read this right? A state that’s looking at horse racing as an additional revenue stream? Quick, someone get down there and make that happen before they change their minds!

Click here for the rest of this article

Then come back to the Paulick Report and let us know what you think.

- Bradford Cummings

By Ray Paulick
Perhaps it’s more hope than optimism, but the second annual poll of Paulick Report readers looking ahead to the new year suggests a belief that the Thoroughbred industry may have better days ahead—or at least may have hit bottom in 2009.

When we first asked readers in late 2008 if the new year was going to be better, worse or about the same as the year just ending for the Thoroughbred industry, the pessimism was palpable, and well-founded. Only 24% of those responding thought 2009 would be a “better” year than 2008, while 52% said it would be a “worse” year. Twenty-four percent thought it would be “about the same.”

The pessimists were right, at least concerning the economics of the industry. As calendar pages were flipped from December 2008 to January 2009, there were multiple crises: the Breeders’ Cup was in turmoil over its cash reserves and governance issues; the late-season breeding stock sales were in free-fall to the point many in-foal mares brought prices that didn’t even cover the stud fees their breeders owed; pari-mutuel handle had declined significantly; Magna Entertainment, the largest racetrack ownership company, was in deep trouble and filed for bankruptcy in March.

Some but not all of the racing industry’s problems were related to the general economic crisis, a situation that may have stabilized somewhat over the past few months.

So when we asked the same forward-looking question of Paulick Report readers last week, there was a tepid increase in optimism but, perhaps just as important, a more sizeable decrease in pessimism. The percentage of respondents who said 2010 would be “better” than 2009 rose from 24% to 30%, while the percentage who felt the upcoming year would be “worse” fell from 52% to 39%. Thirty-one percent believe 2010 will be “about the same” as 2009.

There remain significant challenges: breeders selling yearlings in 2010 are going into a soft market with horses produced from record-level stud fees in 2008. Some banks are moving out of equine lending and calling in credit lines. On the racing side, there has been no resolution concerning the ownership of Magna’s biggest racetracks, Santa Anita Park, Gulfstream Park and the Maryland Jockey Club. The New York Racing Association has said it may run out of money before summer.

Not all the news in 2009 was bad. Bloodstock markets were down generally, though many breeders were braced for worse results than they experienced. November’s weanling market, in particular, was stronger than expected, and international investment played a key role.

The game’s resilience and appeal were never more evident than in 2009, when 3-year-old filly Rachel Alexandra and 5-year-old Zenyatta turned in performances for the ages. When we no longer have horses that stir our emotions, then, perhaps, all hope has ended. Fortunately, that isn’t the case.

Paulick’s Predictions: My view of the upcoming year is that we will see further retraction in mares bred, in the number of races offered in North America, and in total pari-mutuel handle. (Year-end betting figures for 2009, expected to be announced tomorrow or Thursday, are likely to show a 10% decrease from  2008, the second consecutive annual decline of $1 billion. Declines in 2010 will be much smaller.)

As the economy slowly improves and investment markets continue to rebound, the prospects for additional money coming into 2-year-old and yearling sales are much better. Ownership issues of the Magna tracks will be resolved (it is likely Frank Stronach will manage to retain control of Santa Anita Park and Gulfstream Park), and the long-delayed VLT issue at Aqueduct will finally be determined. Texas will edge closer to expanded gaming, but Kentucky’s Republican politicians will continue to keep their heads in the sand, setting up explosive and expensive re-election campaigns in the fall.

That’s not all good news, but it’s not all bad, either, especially looking back on the year that just ended.

Copyright © 2010, The Paulick Report

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There has been much talk about how to widen racing’s audience in the United States. Quite frankly, there should be more discussion of it on these and other pages. To me, it’s the single most critical step after a state gets slot machines. As Ray has said in the past, slots are a necessary band-aid. How we heal the wound will determine the future of racing.

British racing seems to be wrestling with the idea and have come up with several programs to bring the sport closer to the masses. Offering jocks training in dealing with the media and appearance fees and a central PR campaign to promote racing more effectively to a wider audience.

Will this effort work or is it a misguided if not well-intentioned attempt to put racing back on top?

Click here for the Reuters article in the New York Times

Then come back to the Paulick Report and let us know what you think.

- Bradford Cummings