Posts Tagged ‘John Gaines’

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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