CRUNCH TIME FOR CUP PLANNING
Nominators to the Breeders’ Cup program and the Members and Trustees they elected in June have spoken loudly and clearly, and the 13-person board of Directors has five new members from the six positions that were voted on last week. Only one of six incumbents up for re-election managed to retain his position on the board of Directors. That’s a pretty strong statement from the nominators and the 48 Members and Trustees who select the board of Directors.
There may be distinct differences in the two factions that have sought control of the Breeders’ Cup, in areas like governance, transparency and accountability to the stakeholders. There may even be differences in defining who Breeders’ Cup stakeholders or customers are.
But the election cycle is over until June 2010, and whatever differences existed between the two camps—within both the board of Members and Trustees and the smaller operating board of Directors–should be set aside for now, so that the important work on the long-term strategic plan can be done in a collaborative and cooperative manner.
The plan, presented to the Members and Trustees last Thursday, is in itself an example of what can be accomplished if individuals, who may have differences of opinion in many areas, focus instead on what they have in common: namely, a desire to support breeders by promoting the growth of the Thoroughbred racing industry through the staging of the Breeders’ Cup competition. That, in fact, is the new mission statement of the Breeders’ Cup, and I, for one, am glad to see the organization look beyond its late-season championship event.
It’s not enough for the Breeders’ Cup to have a successful day (or two) of racing. Given the ineffectiveness of the National Thoroughbred Racing Association and other organizations like the Thoroughbred Owners and Breeders Association, the Thoroughbred Racing Associations, or the Jockey Club, the Breeders’ Cup may be the only entity that has the critical mass to better organize and promote the sport on a national basis.
Though the 400-page strategic plan has not been released and author William Field of the international consulting firm Value Partners said it is a broad strategy that does not include tactical details, it was revealed that one of the keys to this plan will be to strengthen the road to the championships. This is something that’s been tried before without any measurable success.
Satish Sanan, who deserves a great deal of credit for the cat herding he did as chairman of the Strategic Planning Committee, said racetracks have to be looked upon as partners for a racing series to be effective. “In any business, if you are going to be successful and form long-term relationships, the word partnership means you must be willing to share long-term risks and rewards,” Sanan said in a conference call with Breeders’ Cup nominators and the racing media on Friday. “Your goals really have to be aligned…I think all of the conflicts you hear about really will go away, particularly if it is an all-encompassing partnership. There is a big strategic difference in how we have done it and how we plan to do it in the future.”
That may be easier said than done, which is why it is so important for the Breeders’ Cup board of Directors to support its management team as it attempts to connect the dots the strategic plan has laid out for them. Putting together a financial and implementation plan that includes long-term partnerships with the tracks is on the shoulders of Breeders’ Cup president Greg Avioli and the other Breeders’ Cup executives. Considerations for the plan include what to do with the millions of dollars currently being used to supplement stakes around the country, whether to turn the Breeders’ Cup championships back to a one-day event, to reduce the number of races, or to cut purses. Those are big questions, and they have until December to answer them and finalize a detailed, tactical plan.
There will be time down the road to discuss the issues that divide some of the Members and Trustees and individuals on the board of Directors: election procedures and eligibility, transparency and bylaws. However, the priority between now and the end of the year has to be on turning the strategic plan into something tangible that can help the Breeders’ Cup, racetracks and the sport as a whole.
It’s crunch time.
Copyright © 2009, The Paulick Report
Savvy businesses recognize value. Advertise in the Paulick Report.
Support the Paulick Report. Make a donation today.
Sign up for our Email Flashes to get the latest news, analysis and commentary from Ray Paulick
Tags: Breeders' Cup, Breeders' Cup board of directors, Breeders' Cup championships, breeders' cup election, Breeders' Cup members and trustees, Greg Avioli, Horse Racing, Paulick Report, Ray Paulick, satish sanan, value partners, william field
July 13th, 2009 at 7:02 am
Some good observations here Ray but also a lot of latitude and a stretch of imagination! Field’s 400 page strategic plan was written prior to the elections and changes in the board. Are the “customers” discussed in the conference discussion going to have a look at the details? Will the new members be allowed to rewrite it based on intelligent debate? It starts out a lot like one of Obama’s house bills where no one has read the bill. You call it a possibility of an “all encompassing partnership.” That gap is akin to the grand canyon in understanding the two commodities. Running a racetrack and running the BC have two completely and distinctly different goals and problems. The people doing the talking at the BC wouldn’t last a week dealing with the problems confronting the racetracks. The people running the racetracks deal with a horse herd and a set of priorities and problems that have no minute resemblance to the BC. These differences are at the core of our national problems of public acceptance and perception of horseracing. Putting these two groups together in the past in a few meetings have never really presented us with a production that is truly worthy of world class. Certainly the events themselves have had some individual quality reflective of a great effort but have lacked a melange of appeal outside of the clubhouse boxes. It is a tall order that possibly will dictate and reflect much of the final curtain of American racing. I’m not there yet, based on the effort.
July 13th, 2009 at 8:09 am
” …. so important …..Directors support it’s management team …..” ??? As the current ‘management team’ , and it’s predecessors, have ‘managed’ BC to the point where Trustees clearly believed new directors to be essential, surely the Board’s most important task is to instal new management.
In every political structure (where elections - real or rigged - result in a new ‘government’) it is the permanent civil servants who actually hold power. They continue to do what they believe is right and they can thwart every attempt at change unless it suits them.
Consequently, the first action of a remade or reshuffled Board should be to instal a new Chair and a new management / executive staff.
July 13th, 2009 at 9:19 am
At one point back in the day, the BC was a “must-see” event that was a lure for sports fans who follow the Triple Crown and maybe the big stakes event in their area, if a track is nearby. Now, it’s a sprawling mess that can’t be easily explained to a new viewer./fan. Coordination, a real TV package and grass roots promoting will be relevancy….if there’s the energy and will to undertake this monumental task.
July 13th, 2009 at 9:48 am
How can a race reack be a partner when the BC wants all the money on those days? It was bad enough when they took all the money on Sat. Now they want fridays cash. Friday was the only chance for host track to make a buck. Greed is killing this game. The two days is a good idea if they run the lesser races that day. Breeders Cup doesn’t need transparency, it needs new leadership. Sanan might be a nice little guy but his record in racing is a litttle weak. He forces himself on all these boards. Farish needs to step up and due something big soon or let someone else take over. Avioli is in way over his head or he is just getting bad advice.
July 13th, 2009 at 10:11 am
This article sounded like it came from the BC PR department. It is important to be positive but I was hoping you could give details. If you can’t measure it you can’t improve it. Details is what crunch time is about not the same ol lip service.
July 13th, 2009 at 10:36 am
Ray,
Please note that I am responding to this blog and Bob as an individual and a major stakeholder in the industry and not as a director of the Breeders Cup board. Bob makes some very good points. Let me first clarify a few points and then try and answer a few. I am better able to do that because I led the strategic planning initiative:
1) The plan ( summary board paper) is not a 400 page document, it is more like 20 pages; but note that a number of interim reports were delivered to those who participated (anywhere from 25-45) in the planning process, including Breeders Cup (BC) management;
2) In spite of consultants recommendations to the contrary, the Chairman of the board decided to dissolve the strategic planning committee. The task of converting the strategic plan from a high level (but doable) strategy to an operational and tactical plan has now become the challenge and responsibility of the management with support from various sub-committees of the board and is not the responsibility of the new board. The new board members will however have to approve the final plan;
3) How the various sub-committees and their respective chairmen and the BC management engages with the track management and customers discussed during the conference is yet to be seen. It is imperative in my opion that that dialogue takes place in the spirit of true partnership and making the plan work for all parties concerned. For the sake of long-term success and survival of our industry, if there is a desire to achieve real progress then there is nothing that should stop us from achieving our goals - I truly believe in that and have followed this principle throughout my successful business life;
3) History is for learning. Just because it has not worked in the past does not mean that it will not work in the future. By being collaborative and using a partnership approach, far more has been accomplished in other sports, world politics and businesses than the differences that exist in our industry. If we examine carefully the objectives of each stakeholder involved, their business and strategic goals, their philosophical approach to business and put the industry first, then I am convinced that we can solve our differences, reach a compromise and revive the sport of horse racing and our industry to its glory days again; and
4) The challenge begins now for the BC management to develop detailed functional plans ( series, track partnerships, customer focused marketing plan, financial plan etc. etc.) to support the long-term strategy developed by the consultants. The ultimate success is going to depend more upon the ability of the management to execute the plan than the strategy outlined by the consultants. A poorly developed plan well executed is better that a great plan poorly executed. Let us all wish them well!
On a separate note, we need notes of encouragement for the Breeders Cup management and members of the board than constant criticism and cynicism. Let us all work together to make our sport of horse racing what it once was!!
July 13th, 2009 at 11:06 am
Or, 4) The ultimate success is going to depend more upon the ability of management to PUT THE HORSE FIRST
July 13th, 2009 at 11:08 am
Ray,
I am once again compelled to respond to Surfer Joes comments:
1)Reveal your name so that we all know who you are and what you have accomplished in our sport?
2)Your comments should be based upon facts and not conjecture;
3) I am on only one board, the Breeders Cup board and was elected by a large majority and do not push my-self on various boards;
4)Please check the facts before making comments; Padua Stables has accomplished more in 12 years than any other outfit I know in racing in its short 12 year history – 4 Breeders Cup wins, 3 Eclipse awards including Horse of The Year, placed in the Derby, won the Preakness, placed in the Belmont, won the Haskell and many graded stakes wins. In the process created many a stallion (including major ownerships both in Curlin and Any Given Saturday) and a world class breeding operation including Vindication, Exchange Rate, Yes its True, Proud accolade, Dance Master just to name a few. If that is not success, I do not know how Surfer Joe measures success?
I leave the rest of his comments to reader’s intelligence and imagination!
July 13th, 2009 at 11:50 am
There was no good reason to alter the original concept of the Breeders Cup. Why try to fix something that wasn’t broke in the first place. I mean, for example, was it really necessary to change the name of the Distaff to the Ladies Classic?
Revert back to the way it was. Get rid of the new races … they offer nothing but dilute the product. And stop forcing synthetic racing on us! Isn’t it obvious most people don’t care for it. All it’s doing is driving good horses away from the Breeders Cup.
July 13th, 2009 at 12:25 pm
Mr. Sanan:
I appreciate your coming here to clear up some of the items and to a lesser extent, defend yourself.
Unfortunately, you are going to find quite a few ‘deaf ears’ in this forum. To be clear, I’m not one of them, and am happy to listen to (and support) any/all ideas that will make the BC a better and stronger event and organization.
What I don’t understand is this. The BC has apparently paid a consultant to tell the Board and it’s staff what it should already know. Having done so, it appears the Board is already ignoring the advice if if what you say is true and and the Chairman is disolving the strategic planning committee already.
Even a business school student knows that strategic planning is essential for any business. Given the past few years of performance, and since the Board hired a consultant to help with this very important business function, it’s clear to those of us on the outside looking in that the current BC staff is incapable of proper strategic planning. Many of us also doubt that they could execute a plan that’s handed to them. Since the idea seems to be ‘let the staff come up with a plan’ the Board must start at the top and re-evaluate the staff to have any chance at success.
If you want my opinion on things to consider …
The BC made a clear mistake of trying to expand the BC Championships. It should go back to being a one-day event, as many people have said here and elsewhere. The media doesn’t care enough about racing to give any more coverage and the additional day just dilutes it. It also hurts the prospect of getting the program on a major TV netowrk. It’s hard enough to get one day of racing on national TV, much less two. Look at where the KY Oaks ended up this year. Take the purse money that was added tor the additional races, use some of it to beef up the original group, and use the rest for your supplemental stakes program which assists the smaller breeders.
Please get rid of the purple saddle towels. The standardized colors are so much easier for everyone to follow, especially on TV where 90% of the handle now comes from. I understand tradition, but look where tradition has gotten the racing industry.
I know that having the BC in California is something that from a media perspective is desirable. I also like giving the SoCal fans the event as a thank you for supporting that racing program year-round. However, the vast majority of bettors (who support the purses for the event in a major way) hate betting on synthetic tracks. Back to back years of this was a terrible decision, and whomever made it should be the first one shown the door from strategic planning meetings. Anyone who has bet on horses more than casually knows the vast majority of players hate this stuff.
And finally, keep the ticket prices in-line. I haven’t been to a BC in years because the ticket prices were insane if I wanted to have any shot at a decent seat. Between the going to two days and ticket prices, as of late many fans feel like they are being fleeced.
Good luck with this process. I hope you are successful in righting the ship.
July 13th, 2009 at 12:53 pm
Amen Aunt Bea.
Horses, our unique and magnificent asset, seem to be incidental to the BC. It success is tied to how the whole of racing is accepted by our increasingly urban society. The BC can either be enhanced or tainted by the other 364 days of racing. As the roof of the industsry, no matter how glorious it can be made to look that single day (hopefully), it has to be supported by sound foundation and weight-baring walls.
July 13th, 2009 at 1:39 pm
Mr. Horn,
Thank you for comments and suggestions; I agree with most.. Please call me or send me an email directly and I will explain this in much more detail. You can get my cell number from Ray.
July 13th, 2009 at 2:49 pm
Mr. Sanan,
Exactly what is it you are going to explain in much more detail, privately, to Mr. Horn? He has made comments in this forum. Why not explain here, so that everyone may have a better understanding of whatever it is you promise to explain?
What about this now overworked word “transparency”? Was that not a promise for the future?
Candidly, having tried in vain to enlist your help in exposing the rigged elections, I don’t have any real expectation that much will come of this.
July 13th, 2009 at 2:50 pm
Do the majority of bettors hate synthetic tracks? Or is it a small number of haters who make the most amount of noise? I’m a synthetic surface agnostic–I don’t have a strong opinion on them either way. Handle might be down in California and at Keeneland, but it’s also down at many tracks with dirt surfaces.
July 13th, 2009 at 3:04 pm
Mr. Sanan, first let me say that we appreciate you responding to us directly. Most of us are familiar with your investments and successes in our industry and acknowledge your vast business acumen. But let me attempt to interpret our collective fears about a sport and industry that is currently reaching a period of desperation. Horse racing is mainly being destroyed domestically from within, not from without as is the general perception of many and demonstrated by the impotence of many in leadership. The creation of the BC was truly a culmination of knowledge and deed, which was supported by but not originated by the elected leadership at that time. It was a unique ascension by horse racing in this country to a higher level of public visibility and was the first meaningful creation of an American classic event outside of Great Britain. Needless to say, the event reached the immediate goal of being embraced by every participant in horse racing. It was unanimous! Like most coveted symbols, either corporate or national, or even our grade I events, it was thought protected and tamperproof. But desperate times bring desperate measures. The founding fathers of the BC are mainly gone and the crown jewels are perceived to be at the mercy of some seriously destructive decisions. What was conceived as a very noble tool to energize and proliferate U.S. pedigree while being self sustaining and symbolizing our horse racing and its theaters has been seriously misunderstood by some non racing neophytes
who have made drastic decisions. These decisions are and have been highly questionable by even the most novice in our midst.
Those questionable decisions have been magnified by repetition. Many connected with the industry are aware that England, for example wagers almost double our amount per annum from approximately an eighth of the number of races and with no slots and suffers from the same of perhaps worse economy than ours. Based on what has been accomplished elsewhere, our future should be in front of us, not behind us.
thank you for the attention.
July 13th, 2009 at 3:08 pm
Mr. Sanan, I didn’t mean to upset you but I was talking about what great horses have you bred. Breeders Cup is about Breeding, remember?
July 13th, 2009 at 4:05 pm
Satish does not need to be defended. His accomplishments inside and outside of this industry are well established.
It is unfortunate to learn the strategic planning process has been interrupted. The exercise was very worthwhile and it will bear fruit in the future. During the planning sessions, the Breeders’ Cup board members and staff were brought face to face with the issues of the industry, not just the isolated issues of the organization. It was good for them. Everything was exposed and discussed, which was part of the process to define the mission and scope of the Breeders’ Cup.
We all have our own subjective opinions of what the Breeders’ Cup is and what it should be within the industry. Obviously, the desire of some to expand it is directly related to voids in racing’s current structure. I think we all know that if racing was a successful enterprise, then it would not be so critical for the Breeders’ Cup to do everything perfectly.
For the past several years, some of the best and brightest in the industry, have put a tremendous amount of energy into changing the governance of the Breeders’ Cup.
For the past six months, breeders in Kentucky have spent an incredible amount of energy trying to get slot machines at the tracks.
Let’s put the Breeders’ Cup and the Kentucky slots initiative in perspective. The Breeders’ Cup is a $30 million enterprise. The slots issue in Kentucky could someday deliver $50 million a year into purses and breeders’ premiums.
So, those two endeavors could amount to $80 million in the sea of $2.7 Billion of racing revenue from wagering alone. There is a deadly serious problem with how that $2.7 billion is getting split up and virtually no energy in the industry is focused on that big pie.
I have spent the past year talking about our off-track business model being upside-down and how easy it is to fix it. The estimate is $1 billion will be shifted to live racing tracks/purses at the expense of non-racing bet takers. For the first time in twenty-five years, host tracks would have an incentive to package and present a good racing product. Racing would have a future.
Satish invited me to speak at one of the Breeders’ Cup strategic planning meetings, however those attending concluded the business model was not their problem. Last week, I presented it to the Kentucky Thoroughbred Association and they seemed to conclude the same thing… it is not their problem.
So, I’ll ask this forum. If it is not their problem, whose problem is it? Who will lift a hand and spend a little energy on the business model of Thoroughbred racing? If you will correct the IHA, the problems of the Breeders’ Cup and the sport will be lost in many episodes of Good News Friday.
July 13th, 2009 at 4:12 pm
Cavonnier-
Here is an email I got from a handicapper friend in Arizona this morning…he recently travelled to Hollywood Park.
“This polycrap is completely unpredictable and inconsistent from race to race, day to day. Almost to the point where I’m just a pick 4 and turf race bettor when betting Socal. I might have to swtch to dirt tracks, but its difficult with this bizzaro off track betting we have in Arizona and the time change. But it is out of control at HOL. Plus I saw the surface up close when I visited and its a bunch of rubber tires and other junk, awful hazardous material.”
July 13th, 2009 at 4:29 pm
Cavonnier,
Do you think it’s good for the sport if the leading candidate for Horse of the Year passes on the Breeders Cup just because of the surface? It’s not just the handicappers that are complaining. There is no good reason for the switch to synthetics … just like there is no good reason to tinker with the original concept of the Breeders Cup.
July 13th, 2009 at 6:45 pm
I don’t know if ‘Bob Hope’ is a nom-de-plume and it does not really matter to me; I like his sage and reasoned comments. Same goes for Fred Pope.
If Hope and Pope can stay on this topic and can engage Satish Sanan in an open discussion of the entire subject, we may get somewhere.
July 14th, 2009 at 12:30 am
It’s encouraging that Mr. Sanan is willing to include fans and readers of the Paulick Report in the dialogue rather than continue the “closed loop†mentality that has traditionally dominated the governance of the Breeder’s Cup. Let’s hope this attitude is representative of a new perspective among the board rather than an isolated example of a lone voice of reason among the powers that be. I also agree with Mr. Pope that it is folly to question Mr. Sanan’s credentials.
That said, I profoundly disagree with one of the points in Mr. Sanan’s comments. It is not necessarily true that “a poorly developed plan well executed is better than a great plan poorly executed.†While the horse racing industry can afford neither a poorly developed plan or poor execution, measurable progress will not be achieved in the absence of a comprehensive plan that serves as a detailed, step-by-step blueprint for both the immediate and long term future, with special emphasis on marketing in the near term. The subtext of his comments seems to suggest a lack of confidence in the very plan his initiative spearheaded but a greater confidence in management’s ability to execute.
Time is short. The sun is setting on the sport we all love. I am not optimistic about management’s ability to execute on any plan – poorly developed or otherwise. So, I have a series of questions that I’m hoping Mr. Sanan will weigh in on:
1. Given management’s track record, what is the source of your optimism in management’s ability to execute? Is this based on an assumption that the board will take a more active oversight role than in the past?
2. Where do marketing and promotion stand on the list of priorities for both the plan and its execution? Specifically, what steps are contemplated to bring NEW fans to the sport?
3. What is your position on Mr. Pope’s frequent discussions about the off-track model being upside down? Do you believe the Breeders Cup organization has a place in this discussion?
4. When, if ever, do you expect to make public the actual details of the plan? It’s unreasonable to expect those of us who follow the sport closely to abandon our criticisms and cynicism and replace them with optimism in the absence of details. The limited view we’ve been given is hardly enough to build confidence among the stakeholders.
I commend you for your efforts and wish you and your colleagues on the board nothing but success. Ultimately we all will share in your success or failure.
July 14th, 2009 at 10:05 am
Mr. Sanan and Mr. Pope,
Please keep pushing your ideas forward. The industry is dying a slow death that so many of these socalled industry leaders who were born on third base and thought they hit a triple either don’t see or don’t care about. The only thing that will save racing is a smarter industry willing to take chances.
July 14th, 2009 at 2:51 pm
Mr. Pope’s comment concerning the the KTA’s supposed position on the simulcasting business model differs from what I heard in the meeting, which I attended. In fact the board has instructed me to gather information regarding various assertions Fred makes in his proposal (1) substantiate his figures (economic analysis), (2) assertain the realavency of opening up the IHA (3) is there industry concensus. With repsect to #2, if there is industry concensus there is no need to involve the Federal Government. If there is not industry wide concensus it would be most difficult if not impossible to pass Federal Legislation or change exisiting legislation. We will continue study this and certainly are not dismissive of his suggestion. We look forward to vetting Mr. Pope’s proposal.
July 14th, 2009 at 3:28 pm
Mr. Switzer,
Make sure when you vet Mr. Pope’s proposal, you realize that ADW handle will not remain static but will drop by at least 50%. Simulcast handle will not remain static either as smaller tracks will go out of business or will stop taking simulcast signals from high host fee tracks so they can keep their bettors wagering dollars at their facility.
July 14th, 2009 at 3:59 pm
So many people so confident of what they say, please provide a link when you say “will not remain static but will drop by at least 50%”
If every track agreed to: 10% to horseman (7% approx today’s figure) 60% to host track and 30% to the person taking the bet - for all of their take out where would the drop come from?
July 14th, 2009 at 4:11 pm
Mr Horn brings up the best criticism of the BC, dilution. Baseball has a World Series, but MLB isn’t bending over backwards to invite a Japanese team to the game. It’s just a name. But the BC adds the Juvenile Turf Races, puts the races on Synthetic 2 years in a row, and gives away a ton of purses to European raiders. How can the BC claim relevance when the big winner was a horse many casual American fans had never heard of? That’s just not good for business.
The way out of this mess is hopefully when one group, it may be the BC, or NTRA, or AGSC, TOBA, Jockey Club, take your pick of alphabet soup does something for the good of the sport and looks for nothing in return. The BC now wants tracks to cooperate with them. What are they giving in return?
Mr Sanan, please take a look at the free report a bunch of fans put together:
http://www.ntra.com/creativeservices/content/NTRAOnlineTaskForce_080922.pdf
And please take a look at this if you wish to strengthen the W&YI format into something useful for both the BC and the host tracks:
http://handride.blogspot.com/2009/07/tactical-plan.html
July 14th, 2009 at 5:31 pm
Whatever, if you drop the ADW to 30%, there will be no to little room for rebates. I know that personally, I wind up betting 3-4 times as much when getting around a 7% rebate.
You want to destroy horse racing completely? Follow Mr. Pope. He is absolutely out of touch with reality with his proposal. But I’m sure he is a nice guy just the same.
July 14th, 2009 at 6:12 pm
“If every track agreed to: 10% to horseman (7% approx today’s figure) 60% to host track and 30% to the person taking the bet - for all of their take out where would the drop come from?”
I don’t blame you for not understanding that. You do not bet. Just like I do not know how to take care of a colicking horse. We all have our strengths and specialties and I respect that.
In a nutshell, with a churn rate of seven, when you cut the rewards an ADW can give, handle will drop. Mr. Pope has neglected to offer that reality out in any of his pieces, and I sincerely hope that horsepeople who will have a say on some of these issues do their homework by speaking to bettors and industry folks who understand gambling, before following Mr. Pope’s ideas. I do not think I can stress strongly enough that your livelihoods depend on being educated on gambling economics and the realities of what horse betting has become in the 21st century.
PTP
July 14th, 2009 at 6:23 pm
Still waiting to the economics paper you all are citing. In the end I don’t care what the breakdown is, but in order of importance for takeout it should be
HOST
then
Person taking the wager
then
Horseman
There is no economical argument otherwise. Maybe there shouldn’t be rebates period and just let everyone have the same low rate. You don’t see casino’s giving their best players free money, you see them giving them perks and benefits that have little cost, like free PP’s, access to videos, for $0 would be the equivalent.
July 14th, 2009 at 6:41 pm
If the host was run by gambling people I would agree, but the reality is that they are not, thus your order has a severe problem. The perks and benefits you allude to could have been offered by “hosts” for upwards of 100 years as they took all the betting during that time Unfortunately, they failed to even give the customer a free coffee. In the internet age and 21st century gambling world with the host controlling the purse strings it does not take a brain surgeon to know that the status quo will be protected and handle will fall precipitously, just like it has been for decades (in real $ terms). There is a reason Betfair takes in huge amounts of handle, while Churchill Downs does not. Therein lies all the evidence you need.
July 15th, 2009 at 11:02 am
• First of all, Satish Sanan and I are in agreement on the need to change racing’s off-track business model through correcting the IHA. We have spent many hours discussing the problem from every angle as it impacts racetracks, racehorse owners, gamblers, fans and the entire industry. There are many major players in the sport that are also in agreement.
• For exactly one year, I have traveled and presented the problem and solution to the heads of the RCI, AHC, The Jockey Club, HBPA, Breeders’ Cup, Chairman of TOBA, KTA, and the NTRA PAC. The tracks heard it at the Racetrack Symposium They do not question the problem. Overwhelmingly the audiences support fixing the off-track model, however, there are concerns about the solution and we are continuing to discuss those and why conventional means will not solve the problem. Change is hard for this industry, that’s why entities that can move fast are able to game the current business model.
Horse racing is a pretty simple business. The track facility gets all the admissions, parking, concessions, sponsorship and any other funding that usually goes to a facility. Then when the races are conducted, the track and racehorse owners have a deal where they split gambling proceeds 50-50. The track bears the costs of taking the bets, tote system, etc. and the racehorse owners supply the horse talent and pay the human talent, the jockeys. Each side agreed they had a similar level of investment in putting on the show.
Off-track wagering should be just as simple, as the track expands distribution of the wagering product and takes bets away from the facility. At one time the off-track wagering was only within the state, then with the IHA, they could cross state lines. Today, technology allows the tracks to take wagers from anywhere. An off-track business model was allowed to get started and mutate into something that robs the host track partners of the fruits of their labor. The federal legislation that permits it can be fixed and quickly returned to a normal business model, which controls the distribution and pricing of the product to benefit all involved in racing.
So today if there were no barriers, the host track and their partners the racehorse owners could agree to put on a racing show and the track would take wagers on the product from every legal jurisdiction. With technology, the costs of taking the bet transactions decline each year and like every industry, there are be ancillary suppliers and service models that lose and gain viability.
How the track and racehorse owners agree to price and market their product should be up to them and the state government where they are licensed. If they do a better job than their off-track competition, they will make money. If their product cannot successfully compete, the facility will go out of business and the racehorse owners will either move to another facility or get out of the business as well.
Everything else is just noise that occurs in the evolution of business.
Thoroughbred racing is not a public utility. It is private business, regulated by government and thus politics. It has never been allowed to control and benefit from the gift of off-track distribution. All the pundits of how racing is currently packaged, presented and marketed will be amazed at the transition and innovation that comes from a profit motive to deliver a good racing product to consumers.
Thoroughbred racing can have a simple, successful business model, where the two partners putting on the show will grow and protect the sport and support an established breeding program, or the two partners can lose it all.
The current off-track business is certain death for Thoroughbred racing and that doesn’t bode well for any ancillary businesses.
This isn’t a time for committees and study. It has been a year since this problem was disclosed and it is time for leadership or we will lose it all.
July 15th, 2009 at 12:36 pm
Fred,
As you know I completely agree with you. We must find the right entity (eg. NTRA) in our industry and the necessary leadership with business acumen, respected industry position and the balls required to drive this business model both through our industry and if necessary, through the appropriate government entities.
It can be clearly demonstrated that what you propose is good for all industry constituents including the racetracks, the horsemen (including owners) and most importantly for all gamblers including “whales†who depend a great deal on rebates.
Your proposed economic model is good and as a result, if implemented, the overall revenue pie will get bigger. Hence everyone will get a bigger piece of the absolute larger pie but not necessarily the same % of the pie as they get today. As we all know “a smaller piece of a much bigger pie is much better than a bigger of a smaller pieâ€, particularly as this overall pie is shirking at a rapid pace.
If we do not grab the bull by its horns and fix this problem soon, our industry as we know it today, will die a slow death. It is just a matter of time. Keep pushing and keep up the good work - you can count on my unyielding and absolute support.
July 15th, 2009 at 1:46 pm
I am now becoming a fan of yours Mr. Sanan because you are listening to the right person ( Mr Pope). Our leaders get hooked up with the wrong people giving them ideas and everything goes bad. We don’t need people from over seas. Pope laid it out perfectly. Just follow his lead.
July 15th, 2009 at 4:18 pm
This is just sickening.
Raising prices on ADW’s so that the bettor gets his perks-benefits taken away.
I, as of today, own 23 horses and am embarrassed by my fellow owners and the lack of respect they have for the bettor/customer.
In fact, I’m so mad, I’m really thinking of taking a couple of months off and going around to all slot funded/want to be slot funded states and explaining to the various govt entities why racing SHOULD NOT be funded by slots. Why should a bunch of chest-thumping multi-millionaires that care nothing about their main revenue source be subsidized in their overspending pursuit to be a big shot in their hobby. When I show that a vast majority of the money goes to millionaires, they will listen and realize that others need the money more.
July 15th, 2009 at 4:40 pm
Big shot millionairs keeps the game alive. Without them there is no business. The problem is that most of them won’t stand up and speak. Sanan seems to be running with the football now. Thats a good thing.
July 15th, 2009 at 4:48 pm
Mr. Sanan, Congrats on a fitting tribute to Fred Pope for his time and attempt to bring a new economic model to the industry. That being said we must also recognize that it is not the economic model that is influencing the erosion of our fan base. Those who can remember understand that the sport that we all knew has changed dramatically in just a few short years. The priorities of new and ever changing managements and their sordid styles, devoid of horsemanship, experience and understanding beyond the depth of a shabby numbers game, have been the single driving force behind the mass exodus of our spectators and especially women. Using the crutches of economies, changing lifestyles, a shortage of horses, the lack of slots and a plethora of other self inflicted ills are not reason enough to erode the basic fundamentals of a majestic sport. The lines of distinction have been blurred. The product has been mismanaged. They have lost the manual of class and presentation and purpose of our existence. And I know for sure Mr. Sanan that you and your family were not attracted this game as a result of its current conduct and presentation. Sadly it has been changed in a few short years….and the spectators have not been kind to the desecration of such a noble sport!
July 15th, 2009 at 4:51 pm
Without the bettor there is no business. None. Zero. And guess what, bettors will find something else to bet on. Most of us already have, at least with some or all of our gambling money.
Following those like Pope and Sanan, those who are out of touch with reality when it comes to bettors and race track owner’s greed, a greed that by the way, flushes common sense and ingenuity down the toilet, will kill racing faster than it is dying right now.
In the real world, my 7% rebate means that I bet around 3 to 4 times more than I did before. It also means that I spend more time handicapping and betting horses than ever before, which also means that I am likely to get friends and family at least exposed to horse racing because it becomes such a big thing in my life.
That is reality. What Pope is preaching is to make it so that I bet one third of what I bet today, and be wishy washy as to whether I bet today, tomorrow or the next week. I’ll wind up going back to exchange betting or just plain betting with bookies on football with much of my bankroll, because although it isn’t my first choice when it comes to betting, it will be my only chance I have to make money betting, and my bank roll will last longer betting on those venues.
It is the racing execs and horsemen that have all but killed horse racing, it is time that the industry follow the bettor.
July 15th, 2009 at 5:54 pm
Mr. Pope,
Your ideas must make organizations like the Poker Players Alliance very happy.
Your idiotic ideas, if implemented, will force many horseplayers that play online right out of the game, and off to Poker or sports betting, where the juice is not as high as THIRTY ONE PERCENT.
Ask any horseplayer that pushes through $100K or more a year. Take away the rebates and how many are going to leave the game?
Your ignorance, and ignorance of many executives in the racing industry is mind numbing.
July 15th, 2009 at 7:06 pm
Cangamble,
I’m not trying to pick a fight but please help me understand how a 7% rebate results in a 300-400% increase in your betting? Is that increase in betting strictly your emotional reaction to getting the rebate or is there some kind of actual methodology to support the idea that such a small rebate results in such a huge increase in the amount you push through your ADW accounts? I can certainly understand that the rebate results in some increase but the numbers you cite seem disproportional. Perhaps I’m missing something.
July 15th, 2009 at 7:26 pm
Bob, it makes me close to a winner, depending on the month or quarter I am a winner or a marginal loser. But bottom line is that I know I’m just a few more steps from being a constant winner (at least in my mind), so I devote a heck of a lot more of my personal time watching races and betting races.
No matter who the person is, a rebate like that will get players to last longer. More times than not, they will lose exactly if not more what they would have lost in a year (and probably more because they will not have time or want for other forms of gambling), and there is a very good chance that they get some people close to them involved as well, because of all the extra time they spend watching, handicapping and betting horses.
That is how you get positive growth.
Pope and Sanan’s approach will lead to negative growth. Guaranteed.
July 15th, 2009 at 8:25 pm
Cangamble,
Thanks for the reply. It gives me a better understanding of the psychological impact of the rebates and the resulting increase in the dollars you (and others) push through the system. I’m a smaller bettor (averaging about $15 - 20,000 annually in wagers) but I understand that the sport can ill afford to lose more serious bettors such as you and the true “whales” that are even further up the food chain. While I do have an ADW account I still do the overwhelming majority of my wagering, including simulcast wagering, from the track where I can also view live racing because I love the thrill of seeing the horses run in person.
While I do not have the expertise to thoroughly evaluate the impact of the specific ratios proposed by Mr. Pope, I do agree that a part of the equation is upside-down and that a disproportionate amount of the wagering “vig” is going to the bet takers as opposed to those putting on the show. As a result, the quality of the show has suffered and that continues to contribute to the decline of the sport. As an Internet technology professional, I am convinced that economies of scale and improvements in technology should continue to drive down the marginal costs of operation for the ADWs on a “per-dollar-wagered” basis. Will those economies of scale sustain a 7% rebate for those who wager the amounts you do? I don’t know. But I do believe that if any party in the equation should be pressured to cut their margins it is the ADWs. I want a better live racing product and I’m not going to get it unless more money flows through to those hosting the events.
Is there a compromise equation for the distribution of funds equation that results in enough of an increase in overall wagering revenue and commensurate profit without sacrificing your 7% rebate?
July 15th, 2009 at 8:44 pm
Bob,
ADW’s spend money on advertising, cultivating new bettors, free data for their players, rebates, free contests, and other perks all with the premise of increasing handle and promoting wagering with a hopeful emphasis on new bettors.
Try getting a free form at a racetrack or getting anything more than a $10 voucher for $2500 wagered as a rebate.
Tracks do absolutely nothing to cultivate new players and try to increase handle. If you don’t believe this, why have many race tracks in slot subsidized states which have received $100’s of million not given anything back to the player nor really even care about cultivating new handle?
July 15th, 2009 at 8:52 pm
“Is there a compromise equation for the distribution of funds equation that results in enough of an increase in overall wagering revenue and commensurate profit without sacrificing your 7% rebate?”
Sure, take the 7% out before you do the split, put it aside for “customer service” — that can be the data offerings, video streamings, rebates, free coffe mugs, whatever.. At current scale, the ADWs require around 4-5% to operate. Maybe in the future that could be lower, I don’t think it is right now. If you want online customers, those costs are going to be incurred — it doesn’t matter if it’s the tracks or 3rd party ADWs that are doing it — the costs are the costs.
Which leaves around 8% or so the tracks and horsemen. I don’t see where anyone thinks they can conjure a billion dollars out of thin air that can be put to some *new* use. There isn’t a billion dollars in profits at the ADWs to take. That is just an absolute fact. Taking a billion dollars out of online services would completely destroy the online customer base.
I have never heard of another industry, in 2009, that actually publicly considers destroying their online business in such a fundamental way.
July 15th, 2009 at 9:01 pm
Bob, the worst part of the game is the fact the takeout is 20% on average. It is ridiculously too high.
Let me ask you something, if a tracks upped their takeout on win from 16 or 17 to 35%, do you think they would make twice as much money in the long run?
Do you think that if blackjack tables gave the tie to the house that they would make more money?
Of course not. More and more people would be dissuaded from even betting blackjack or WPS. If the industry thought it could make more money doing that, they would.
Slots have a house edge of around 10%. Why don’t slot operators up the take to 15 or 20%? It isn’t because they feel compassionate about the player. They know that it would mean that players would lose too quickly and get discouraged in the long run from coming back.
According to studies, the optimum takeout level is not near 20% but closer to 10-12%.
If the industry wants growth, that is where they need to go.
July 15th, 2009 at 9:03 pm
“I have never heard of another industry, in 2009, that actually publicly considers destroying their online business in such a fundamental way.”
Great line.
The worst part? Racing has an online monopoly. Offshore poker sites, football sites and other gambling businesses would kill for what racing has and probably would have doubled handles by now if they ran it. It’s an absolute shame.
July 15th, 2009 at 9:03 pm
ITP,
I get your point but as a percentage of either their overall revenue or profit I seriously doubt that ADWs are spending more to market the sport than the tracks. Don’t get me wrong, I am among the most serious and regular critics of the tracks themselves, and in particular their utter failure to effectively market the sport. That said, the ADWs are not white knights in that regard.
July 15th, 2009 at 9:13 pm
Cangamble,
I completely agree with your point on the takeout. I’m not trying to make a case for increasing the takeout or suggesting that it isn’t already too high. I fully understand its impact on wagering at any level and for any game. But actually that’s a separate discussion from how that money is split between the various parties involved.
If the takeout were lowered significantly would you be willing to sacrifice all or a significant portion of your rebate in return? My guess is yes but I’m interested in your perspective of what that would look like at various levels of reduction in the takeout.
July 15th, 2009 at 9:14 pm
Bob,
Here is an article and simulation which shows how a bettor, with a 5% break goes from $24,000 to $333,000 in handle. The math is right.
http://www.harnesslink.com/www/Article.cgi?ID=59759
Also, here is another example of a small player, using a system who with 7 points less juice bet $1.3M versus $30,000. This was when the Internet Act was being passed by congress to eliminate the offshore pirates. The business was in glee because “all this handle lost to the pirates would flow back into the pools”. Bettors told the business it would never come back because they could not do what this person did with a rebate. This is not a whale, this is a smaller player, and this - in a nutshell - explains why Betfair is the 3rd largest internet company in the world. This is also why Mr. Pope’s plan is a path to $5B or less handles.
“I was using pinnacle offshore until the debacle. Because of the rebate I found a way to make place bets profitable. I wound up with a 3.2% loss, but a rebate of 7%. It actually was a rebate of 6.2% as they did not give a rebate on 2.20 horses.
Now the kicker is, I went from betting about 30 to 50k to 1.3 million that year.It made the churn factor possible. If takeout is lowered it may have the same affect. I now have changed my play where place betting is profitable, but it is so small that I have stopped. I would definitely go back if takeout is lowered significantly.”
Hope that helps explain what we all go through, and why so many of us have left racing to play other gambling games.
July 15th, 2009 at 9:21 pm
I’m fine with lowering my rebate by whatever the amount takeout reduces by. It isn’t rocket science.
July 15th, 2009 at 9:22 pm
Bob,
That’s my point.
The ADW’s market wagering…..the tracks market the sport.
Which creates more handle?
Bet the P-6 carryover + any other race you like and we’ll give you free programs, bris data, free video and a generous rebate on all your bets.
or
Come out and watch Rachel Alexandra beat a 3 horse field by 20 lengths at 1/9 after paying for parking, admission, program, form and overpriced crappy food.
Try marketing the sport on a Tues at Mnr or Wed at EvD