Posts Tagged ‘horsemen’s benevolent and protective association’

By Ray Paulick
The California racing and breeding industry appears to have the stability of a bowl of Jello. Two tracks, Santa Anita Park and Golden Gate Fields, are owned by bankrupt Magna Entertainment and their future is cloudy. Hollywood Park is in the hands of a land developer that already bulldozed Bay Meadows and has similar plans for the Inglewood facility, though when he gets the money to develop the property is anyone’s guess. Del Mar is run by a non-profit association whose contract will soon expire. Training centers are being shut down, farms are closing and the foal crop is sinking. The former head of the California Horse Racing Board pleaded guilty to a crime most often committed by juvenile delinquents. The Thoroughbred Owners of California has been without an executive director for the last several months. And now the state’s Thoroughbred trainers are forming a circle, pulling out their weapons and getting ready to fire.

In a word, it’s a mess.

It’s been more than 15 years since the late Ed Friendly—the Emmy-winning television producer of such shows as “Laugh In” and “Little House on the Prairie”–led a revolt that ejected the Horsemen’s Benevolent and Protective Association from its traditional role representing the state’s owners and trainers and created the Thoroughbred Owners of California. TOC would be responsible for negotiating purse and simulcast contracts with racetracks and represent owners in front of the CHRB and state lawmakers. At the same time, a new group called California Thoroughbred Trainers was formed and certified, and their role was to deal with track management and the CHRB on issues related to backstretch conditions, track safety and benevolence.

Owners in other states have tried similar maneuvers but failed, in part because they lacked a leader with the tenacity and commitment of Ed Friendly and also because they didn’t have a focal point to rally around. For Friendly and his fellow owners, that focal point was a trainer-led boycott of Friday night racing at Hollywood Park in 1992. The trainers didn’t want to race at night, and Friendly said it wasn’t up to them to decide when to race his and his fellow owners’ horses. Friendly persevered and won the fight, getting legislation passed that created TOC and neutered the HBPA.

The two groups have pretty much stuck to the script since then, with TOC representing owners not only in California but on national organizations like the National Thoroughbred Racing Association. CTT has focused mainly on backstretch issues. How well has the arrangement worked? It depends on who you ask.

A group of prominent trainers have become increasingly unhappy with the situation and with the representation they were getting from the CTT. When an general election was held in June for three of the CTT’s board seats, trainer Jim Cassidy, who had served as president for the previous year, was voted off  the board. The following month, when the newly seated board met (John Shirreffs, Clifford Sise and Ed Moger were elected in June, joining incumbents Dan Hendricks, Jack Carava, Bill Anton, Gloria Haley and Tim Bellasis), their first order of business was to appoint a replacement for Eoin Harty, who had resigned from the board with one year left on his term. Harty said he was spending an increasing amount of time out of state.

The board voted to replace Harty with Cassidy, who had the fourth-highest number of votes for the three board positions in the June election. After being put back on the board, Cassidy was then re-elected president on the second ballot (three individuals nominated on the first ballot each received three votes, and one of the candidates withdrew his name from consideration prior to the second ballot).

That sequence of events didn’t sit well with the trainers who voted to keep Cassidy off the board in June. Much like the Friday night boycotts motivated owners to form the TOC, the appointment of Cassidy and his subsequent reelection as president galvanized CTT’s critics. They formed an ad hoc group called California Horsemen for Change, and began laying the groundwork in an effort to replace CTT as the organization representing trainers. Members of the California Horsemen for Change and others met with the CTT last Friday (click here for a press release from the California Horsemen for Change), and urged the CTT’s board to vote for a new election to fill all nine board seats. The CTT board agreed, by a 5-4 vote according to a source, but additional changes in the bylaws will be required before they can wipe the slate clean and elect a new board of directors. According to a published report, one CTT member has challenged the legality of the board’s decision to hold a new election.

Interestingly, the trainer said to be behind this new organization is Darrell Vienna, one of the leaders of the Friday night boycott at Hollywood Park in 1992 that led to the HBPA being ousted and the trainers losing much of their clout. According to a source, Vienna, who is one of a number of trainers unhappy with the CHRB’s synthetic surface mandate at California racetracks, spoke up against the synthetic tracks at a CTT meeting earlier this year where the CHRB’s equine medical director, Dr. Rick Arthur, presented statistics comparing equine fatalities on dirt versus synthetics. Vienna “got into it” with Arthur, the source said, demanding to see the data of the study. At that point, Gloria Haley, a CTT board member from Northern California, was said to have reprimanded Vienna, reminding him that he was “guest” at the meeting. The comment apparently infuriated Vienna.

“When we had the vote three months ago I asked Vienna personally to run for the board,” Cassidy told the Paulick Report. “He refused. He said ‘I’m not getting involved.’” It looks as though he’s changed his mind.

Vienna didn’t answer questions when contacted by the Paulick Report, instead deferring them to Chris Knight, a recent law school graduate and son of trainers Chay and Mary Knight who has been brought on as interim executive director of the California Horsemen for Change. Knight downplayed any discord between any individuals within the two organizations or anger with the recent election, instead saying the “CTT and California trainers in general are dissatisfied with California racing. We’ve capitalized on the momentum and will be holding a new general election, having everyone involved.”

Knight said there are a number of critical issues, including:
- the pending closing of Fairplex Park to stabling and training due to revenue shortfalls;
- the poor economic state of the racetracks and the uncertainty over the future of Hollywood Park, Santa Anita Park, Golden Gate Fields and Del Mar;
- questions about the safety of the synthetic tracks;
- a desire to be more closely engaged with TOC (according to sources, there have been recent talks between CTT and TOC to bring the groups closer together).

Cassidy said the individuals within the two groups share common ground in many areas, including a desire for higher purses and greater stability in track ownership. “A lot of them have their own agendas including a change in surfaces, and I understand all that,” he said. ”I tell them we work on what we can. I’m at so many of these meetings that my head spins. I hate to see what’s happening, because people are desperate and angry, but those are the times we are in right now. I feel like the Lone Ranger.

Copyright © 2009, The Paulick Report

Savvy businesses recognize value. Advertise in the Paulick Report.

Sign up for our Email Flashes to get the latest news, analysis and commentary from Ray Paulick

The racing industry is like a three-legged stool with the horseplayers and fans, owners and breeders, and racetracks and wagering companies comprising each of the three legs. Take one away and the stool collapses.

Horseplayers, as we all know, are the least organized, though some individuals from that group bet massive sums of money and can inflict economic punishment or rewards by shifting their action from one track to another.

Tracks are more organized than ever, largely because of the consolidation by Magna Entertainment and Churchill Downs, their respective wagering companies, ExpressBet and TwinSpires.com, and their joint venture simulcasting consolidator TrackMedia.

Owners and breeders are somewhere in between. Negotiation of purse and simulcast contracts with racetracks are negotiated by local horsemen’s groups (state division of the Horsemen’s Benevolent and Protective Association, Thoroughbred Horsemen’s Association, the Texas Horsemen’s Partnership, and Thoroughbred Owners of California).

Following the startup of TVG and other account wagering companies during the past decade, some of these horsemen’s groups began to notice a troubling trend. Increases in handle were being accompanied by a decrease in purses. The terms "leakage" was entering the racing vernacular and it was not the kind of leakage a package of Depends could help control.

This leakage of purse revenue was caused by multiple factors: more money was being bet off-track, with off-shore rebate betting shops and with fully licensed and state-regulated account wagering or advance deposit wagering (ADW) companies.

The economic pie (wagering on horse racing) was previously cut up with the biggest slice going to horseplayers, and the next largest divided equally between tracks and purse money for horse owners, and a smaller slice going to state and local governments.

A new player began bellying up to the table and demanding its own slice: account wagering companies.

The promise was that these companies were going to help bake a bigger pie and fatten everyone up. In truth, there has been only small growth in handle and more redistribution of wagering from on-track and inter-track to telephone and internet bets through account wagering companies. The net result is a reduction in the percentage of each dollar wagered ending up in purses for horse owners.

Some people think horse owners get enough in purse money already. I guess if you think a dollar invested should be rewarded with a half-dollar in return, you’re right. Horse owners put over $2 billion into the game each year so they can fight over $1 billion in purses. That’s not a very sound investment strategy.

Tracks were hurt by this trend, too, at least in the beginning and until they realized the need to operate the account wagering companies themselves.

State horsemen’s groups started talking to each other about this "handle up, purses down" phenomenon and formed a study group to seek solutions. Late last year, after determining that the economic business model for distribution of account wagering dollars wasn’t working, they decided to form a company, the Thoroughbred Horsemen’s Group, in an attempt to change the model.

Thoroughbred Horsemen’s Group counts 18 horsemen’s organizations among its members in 16 jurisdictions (California, Kentucky, Florida, Texas, Pennsylvania, Ohio, Louisiana, Maryland, Delaware, Arkansas, Virginia, West Virginia, Oklahoma, Minnesota, Indiana and Ontario).Collectively these groups negotiate contracts with 52 North American tracks.

Bob Reeves, a third generation horseman with decades of executive experience in the health, insurance and venture capital fields, is president of the TGH. He’s been head of the Ohio HBPA and that state Thoroughbred Owners and Breeders Association. TGH’s sole employee is Wilson Shirley, a consultant who formerly worked for the national Thoroughbred Owners and Breeders Association and Thoroughbred Owners of California.

Reeves and Shirley, on behalf of their member organizations, are negotiating with account-wagering companies to reshape the distribution formula from one that favors the wagering companies to one that puts more money into purse money, which will strengthen live racing and, ultimately, the racetracks themselves. "We are a shared resource," Reeves told the Paulick Report, in reference to the Thoroughbred Horsemen’s Group, which he called an "intermediary" in negotiations.

Sort of like William Shatner and Priceline negotiating with hotels for the best deals on behalf of consumers.

"We are trying to change the model to one that distributes the account wagering revenue based on a percentage of takeout instead of a percentage of handle," Reeves said.

Reeves said the Thoroughbred Horsemen’s Group has hired attorneys intimately familiar with anti-trust issues and is confident the organization is not in violation of the Sherman Anti-Trust Act. Churchill Downs Inc. has sued the Thoroughbred Horsemen’s Group, alleging violations of the Act.

The formulas for distribution of account wagering revenues are complicated. Account wagering companies first pay a host fee to the track and horsemen where the live race is being run on which a bet is placed. There sometimes is a source market fee, if the bet is made by someone who lives in a racetrack market. That fee is divided between the local track and purse accounts for that track. But more often than not, a bettor does not live within 25 miles, so the account wagering company pays no source market fee and retains the money as profit. That is where a big part of the leakage occurs. The net result is that the company handling the bet is getting more money than the horse owners who are putting on the live race on which the bet is made.

That’s like a retail store making more on a product than the manufacturer of the product. It’s backwards.

Naturally, the account wagering companies - especially those owned by the racetracks - don’t want to change the formula. The wagering companies see greater profits for themselves as more people stay home and bet rather than drive to a track or OTB. (And with $4-plus per gallon gas, that number could soar.) There have been stalemates in negotiations involving account wagering, which is why horseplayers were not able to bet by phone or computer on Churchill Downs, Lone Star Park, Calder and other tracks. Churchill reported large declines in handle and purses at their spring-summer meeting.

Horsemen won in their negotiations with Ellis Park owner Ron Geary, who threatened to close his track rather than change the previous account wagering structures. That victory should inspire the local horsemen’s organizations to stay the course in the current and upcoming negotiations. There may be short-term pain but remaining firm in their position will result in long-term gain.

"I am delighted with the resolve the different horsemen’s groups have shown," Reeves said. "We are trying to save racing." 

By Ray Paulick

Copyright ©2008, The Paulick Report