Posts Tagged ‘Ogden Mills Phipps’

By Ray Paulick
For those of you wondering whether I’d gone into the witness protection program following the announcement of election results for the Breeders’ Cup board of members and trustees (where 10 of those elected were recommended here in an earlier analysis), fear not. As one of my mentors in this business often reminds me, family should be a person’s top priority, and I’ve spent the last couple of days carrying out his advice.

Several things stood out when the results were announced on Tuesday. First, I believe they represent a victory for continuing the trend toward transparency and openness for the organization. There should be no turning back to the days of secrecy with how the industry’s money is being spent at the Breeders’ Cup. Minutes to board meetings should be posted on the Breeders’ Cup web site, information about committees and subcommittees needs to be published, and decisions should no longer be made in a vacuum. I believe the board of directors, which has taken steps in the right direction over the last couple of years, has been put on notice in that regard during this year’s vote by nominators.

Second, I believe the results showed dissatisfaction with the status quo. Two members of the smaller operating board of directors, Don Dizney of Florida and Tracy Farmer, were not re-elected to the larger board of members and trustees. It’s that larger board that decides who to elect for the smaller operating board, and to be a candidate you have to be on the board of members and trustees. Dizney and Farmer will be replaced on the smaller board after having been defeated in the election.

Third, the results show the strength of stallion farms and coalitions, something I wrote about last year. I don’t think any one stallion operation has the votes to elect an individual to the board of members and trustees, but several farms working together can do so. And there was coalition building going on prior to and during this election process.

Finally, and perhaps most significantly, the leading vote getter among Breeders’ Cup nominees, Richard Santulli, is the same man rejected by a majority of members and trustees voting for the smaller board of directors last year. I wrote then that the members and trustees made a huge mistake in not electing Santulli to the board. He is a man with great energy, enthusiasm for this industry and great business experience that could be put to extraordinarily good use by the Breeders’ Cup. He is chairman of NetJets and often is mentioned as a potential heir apparent to Berkshire Hathaway’s Warren Buffet. Perhaps the “old guard” on the board of members and trustees voted against Santulli because NetJets dropped its Breeders’ Cup sponsorship, or maybe because he is closely associated with Thoroughbred Daily News Publisher Barry Weisbord, who can be a prickly critic of the status quo. It’s also widely believed that Santulli felt the Breeders’ Cup should have sought executive experience from outside of horse racing when current Breeders’ Cup president and CEO Greg Avioli was given the job in 2007. Putting him on the smaller board could add some discomfort to management.

Whatever the reason, the nominators in this election voiced strong disapproval of the vote to keep Santulli off the operating board. Let’s hope he still has the interest in giving his time, energies and insights to the industry and will submit his name for nomination later this month.

There are six open spots on the board of directors, and if dissatisfaction with the status quo and the old guard carries over into that election, we could have a significant change in philosophy on the operating board. As mentioned, the board positions currently held by Tracy Farmer and Donald Dizney are open because they failed to be re-elected to the board of members and trustees. The other four candidates that are up for re-election are Reynolds Bell, Don Robinson (appointed to fill out the remainder of the term held by B. Wayne Hughes, following the decision by Hughes to resign from the board earlier this year), G. Watts Humphrey and Bob Manfuso.

Bell and Humphrey are closely associated with Lane’s End Farm, owned by William S. Farish, the father of current Breeders’ Cup board chairman Bill Farish. For years, Humphrey and the senior Farish were the guiding force of the Breeders’ Cup executive committee, back when the organization practiced limited transparency and operated under the auspices of a self-perpetuating board.

While the old guard from the Jockey Club (Farish is a Jockey Club member, his father-in-law is chairman Ogden Mills (Dinny) Phipps and his father is vice chairman, Humphrey is a longtime member and former steward, and Bell is a member and current steward of the club) did maintain control in the last board election, their grip on power has been weakened. I expect the slate of candidates from opponents of the status quo/old guard to make a concerted effort to defeat Humphrey and Bell in the upcoming election. Sources say Bell, who does extensive bloodstock work for Lane’s End, has been hand-picked by the Farishes to replace Bill Farish as Breeders’ Cup chairman if Farish serves five years, the limit for a chairman under the organization’s current bylaws. He has served three years in that role.

There will be much more here in the coming weeks on the Breeders’ Cup board election, which takes place during a meeting of the newly elected members and trustees on July 9. Candidates seeking a position on the board have until June 30 to state their intention to run.

Copyright © 2009, The Paulick Report

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By Ray Paulick

(UPDATED JUNE 3 TO REFLECT A CHANGE IN RECOMMENDATION FOR GEORGE ISAACS)

The 25 candidates running for election to the Breeders’ Cup board of Members and Trustees may have different backgrounds, income levels and positions within the Thoroughbred industry, but I think they all share a common thread: a desire to help the Breeders’ Cup grow. All are to be commended for their interest in helping achieve that goal, even if their philosophies do not follow the same path.

There are, however, only 13 positions for these 25 individuals on the board of Members and Trustees, whose principal role within the Breeders’ Cup organization is to elect the 13 members of the board of Directors at an annual meeting, scheduled this year for July 9. The smaller board of Directors makes all major decisions regarding the operations and governance of the Breeders’ Cup and elects a chairman and vice chairman each year. 

So who nominators elect to the board of Members and Trustees is critical in shaping the smaller, operating board of Directors. The six individuals whose two-year terms on the board of Directors expire in July of this year are: Reynolds Bell, Donald Dizney, Tracy Farmer, Don Robinson (who served out the remainder of B. Wayne Hughes’ term after Hughes’ resignation), G. Watts Humphrey Jr., and Robert T. Manfuso. Only elected Members and Trustees may run for the smaller board of Directors.

Fifteen of those running for the board of Members and Trustees submitted answers to questions from the Paulick Report or statements about their candidacy (click here to see their responses in an easy-to-read or print PDF document). Biographies of all the candidates can be viewed here at the Breeders’ Cup election web site.

I have covered the Thoroughbred industry for nearly 30 years and have seen a number of these candidates in board-room settings, talked with others about issues of interest to the Breeders’ Cup and Thoroughbred racing and breeding in general, and consider many of them friends. Some are or have been advertisers of this web site. In making the following comments and voting recommendations to nominators, I have done my best to remain objective in rating the various candidates without regard to friendships or business relationships.

Here is my summary of each candidate, along with a voting recommendation:

JOHN AMERMAN: Skilled businessman who as retired chairman and CEO of Mattel certainly understands consumer products and traditional marketing. I’ve not seen great leadership or fresh ideas spring from Amerman in his various industry roles and cannot recommend a vote for him on the board of Members and Trustees.

NADIA SANAN BRIGGS: Daughter of the outspoken but highly successful businessman Satish Sanan, who has played a major role in the Breeders’ Cup as chairman of the Strategic Planning Committee. Briggs has her own independent streak and would bring a fresh, young perspective to the board. She is bright, totally committed to the industry, and would make an outstanding member of the board of Members and Trustees. Recommend for election.

JACK BROTHERS: Has played a major if understated role in the success of Frank Stronach’s Adena Springs breeding and racing operation after virtually growing up in the horse business. Doesn’t claim to have all the answers for resolving the challenges at the Breeders’ Cup, but I doubt there would be a more fair-minded or harder-working individual on the board of Members and Trustees. Recommend for election.

BILL CASNER: Few people in the industry have shown the courage to stand up to the failed, old-guard industry leadership like Bill Casner has. He understands racing from the standpoint of the blue-collar horseman and now plays the game at the highest level while not forgetting his humble beginnings. Recommend for election.

CASE CLAY: One of the up-and-coming “next generation” industry leaders, Clay is the son of Three Chimneys Farm owner Robert Clay but was not heavily involved in the farm’s operation or the industry until the last five to seven years. I do have concerns that as one of three candidates with close ties to Three Chimneys (see below), there may be an effort to “stack the deck” for a future agenda, and for that reason cannot recommend a vote for election to the board of Members and Trustees at this time.

LINCOLN COLLINS: One of three individuals (along with Case Clay and Tracy Farmer) closely allied with Three Chimneys Farm. Collins has a good reputation for honesty and integrity in his Kern Thoroughbreds bloodstock agency, though seems light on service and industry experience. Cannot recommend a vote for election to the board of Members and Trustees.

DONALD R. DIZNEY: A member of both the board of Members and Trustees and the smaller Breeders’ Cup board of Directors, Dizney has done little to distinguish himself as more than a rubber-stamp voter for the status quo. There have been suggestions among some at the Breeders’ Cup that Dizney has not been as engaged through his board or committee attendance as others, but a request for attendance records of board meetings from Breeders’ Cup secretary Jim Philpott was ignored. Cannot recommend a vote for election to the board of Members and Trustees.

TRACY FARMER: Politically powerful in Kentucky through his work and fund-raising with the Democratic Party, Farmer has been a close ally of Kentucky Gov. Steve Beshear and was appointed to the Kentucky Racing Commission, on which he serves as vice chairman. Farmer serves on both the board of Members and Trustees and Breeders’ Cup board of Directors, where sources say he has not distinguished himself as an independent voice. The Paulick Report requested minutes of Breeders’ Cup board meetings to analyze the involvement of each board member, but secretary Jim Philpott denied the request. Cannot recommend a vote for election to the board of Members and Trustees.

H. GREG GOODMAN: Houston native has been a partner with Lane’s End Farm’s Will Farish, which doesn’t necessarily suggest he will be a “yes” vote for a potential Farish-orchestrated board of Directors slate. However, his non-response to the Paulick Report questionnaire and his vague personal statement on the Breeders’ Cup voting web site does not build confidence in his independence. Cannot recommend a vote for election to the board of Members and Trustees.

GEORGE ISAACS:(UPDATED JUNE 3, FOLLOWING RECEIPT OF RESPONSE TO PAULICK REPORT QUESTIONNAIRE) Veteran horseman is well respected throughout the industry for his work as general manager at Bridlewood Farm in Florida. Relatively new to national industry organizations, but in his responses to the Paulick Report questionnaire demonstrated a commitment to adding value to Breeders’ Cup nominations and increasing accountability and transparency within the organization. i believe it is also important to have representation among Florida breeders. Recommend for election.

TOM LUDT: One of the most independent-minded, cut-to-the-chase people I’ve seen in this industry in recent years. Has distinguished himself on the Kentucky Racing Commission, having been appointed by both a Republican and Democratic governor (and without being a major financial contributor to either of their campaigns), on committees at the Thoroughbred Owners and Breeders Association, and Breeders’ Cup board of Directors. Recommend for election.

REILEY McDONALD: Has many years of experience in the auction arena, most prominently as co-owner of Eaton Sales. Has not been as involved in industry leadership positions as I would like to see for someone with his knowledge and insight, though it is encouraging to see him step up at this critical time. However, I cannot recommend a vote for election to the board of Members and Trustees.

MICHAEL McMAHON: One of the individuals running who is completely invested in the Thoroughbred industry and its future, McMahon may lack in national industry organizational experience but more than makes up for it in passion. My instinct is he will add a truly independent voice who takes his responsibilities seriously. In his reply to the Paulick Report questionnaire, McMahon repeatedly spoke of the importance of increasing participation at the grass-roots level among breeders, by adding value to the program for nominators. Recommend for election.

CLEM MURPHY: Coolmore principals and associates are often guarded in what they say to the media, but I’ve found Murphy to be accessible and a source of innovative thinking when it comes to both the Breeders’ Cup and the racing industry. Recommend for election.

OGDEN MILLS PHIPPS: The phrase “lead, follow, or get out of the way” comes to mind. The Jockey Club chairman has had his opportunities to lead (New York Racing Association declined during his years of power), has not shown much interest in following, and that leaves one alternative. Cannot recommend a vote for election to the board of Members and Trustees.

DAN PRIDE: Believes in accountability and transparency, and has brought fresh ideas and enthusiasm to Fasig-Tipton since joining the auction company from Darley. Pride does a good job representing a younger generation of leaders that have real-world experience. Recommend for election.

ANDRE REGARD: For a relatively young man, Regard has a broad base of knowledge, and I think there is little doubt that he will be a growing influence in future years as he gains experience in the industry and its various organizations. One to keep an eye out for in the future, but at this time cannot recommend a vote for election to the board of Members and Trustees.

RICHARD SANTULLI: An enormously successful businessman, Santulli is a no-nonsense kind of guy who brings independence, integrity and a serious commitment to the Breeders’ Cup because of his passion for the Thoroughbred game,first as a fan and horseplayer and later as an owner and breeder. Last year’s effort by the old guard to keep Santulli off the smaller board of Directors represented a low point in the history of the Breeders’ Cup. Recommend for election.

JOSEPH V. SHIELDS JR. Has served on the board of Members and Trustees and board of Directors, but has not publicly articulated a clear vision for how the Breeders’ Cup can grow. Closely associated with old-guard Members and Trustees who have lacked innovation. Cannot recommend a vote for election to the board of Members and Trustees.

JOHN SIKURA: Fiercely independent and driven to build his own business, Sikura has a vision to grow the Breeders’ Cup to become an even more important world championship by incorporating horses from different parts of the globe. He is one of those “all in” horsemen who do not look at the Thoroughbred industry as a part-time hobby but as a full-time commitment of his time and financial resources, and his personal success is tied to the growth of events like the Breeders’ Cup. Recommend for election.

OLIVER TAIT: Represents Darley USA, one of the most important contributors to the Breeders’ Cup in terms of nominations and participation in the world championships. Tait may not be a household name in the U.S. at this stage of his career, but he has accumulated extensive international experience in Europe and Australia. Recommend for election.

DUNCAN TAYLOR: Listening to your customers seems like a logical approach to any business, but I don’t think that has been a strong suit of the Breeders’ Cup board of Directors or management in the past. Taylor Made has developed into the industry’s leading sales agency because of its customer-centric approach, an approach that can only help the Breeders’ Cup. Recommend for election.

ROBERT TRUSSELL JR.: Was a member of the Gainesway Farm team when John Gaines created the Breeders’ Cup in the early 1980s, so he has a great depth of knowledge and history of the organization. However, it is difficult to grasp where he stands on issues of importance given his lack of response to the Paulick Report questionnaire and the absence of a personal statement accompanying his biography on the Breeders’ Cup election web site. (In the original version of this article, I reported the Breeders’ Cup web site did not include a biography of Trussell; that has since been added here.) Cannot recommend a vote at this time for election to the board of Members and Trustees.

ROB WHITELEY: If you are in favor of maintaining the status quo, Whiteley is not your candidate. He was an outspoken critic of the decision last December to suspend the stakes supplement program, and I believe his leadership on that issue led to a quick reversal by the board of Directors. Strongly believes in accountability, transparency and fiscal responsibility. Recommend for election.

JACK WOLF: Knowledgeable about the importance of the Breeders’ Cup in the industry and bullish on the role the organization can play to increase the popularity of the sport, something it has not yet been able to do. Refreshingly candid, independent and with outstanding credentials both in racing and in the outside business world. Recommend for election.

Copyright © 2009, The Paulick Report

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By Ray Paulick
The Breeders’ Cup has begun to let the sun shine on the annual election process that determines who ultimately sits on the organization’s board of directors. For the first time this year, the Breeders’ Cup has decided to publish a roster of eligible voters and their available number of votes; complete results of its elections, with vote counts for winners and losers; it is requiring candidates for the board of directors be declared prior to the annual meeting, with no nominations to be accepted from the floor; has established on-line voting for both the members and trustees election and for the board of directors; and its officers have agreed to abstain from voting in the board of directors election.

The process began on Monday, May 4, when stallion and foal nominators could begin nominating candidates to run for 13 openings on the 48-person Breeders’ Cup board of members and trustees. By now, nominators should have received a letter from the Breeders’ Cup with a customer login and passcode to access a secure voting website that will be open for one week until May 11. Individuals must receive a minimum of 50 votes to be nominated (one vote is assigned for each foal nominated to the Breeders’ Cup and one vote for each $500 in stud fees for nominated stallions). There are 39 elected positions on the board of members and trustees, each with three-year terms, and 13 positions are up for election every year. The other individuals on the board of members and trustees are founding members of the Breeders’ Cup, past presidents and corporate officers.

When nominators go to the voting site, they should have access to a complete list of nominators and the total votes each nominator is eligible to cast. The disclosure of the nominators and number of votes is new to this year’s election.

The next step (from May 12-15), following the closing of nominations, is tabulation of the list of nominees. Individuals that received the required 50 votes are sent a consent form and will be requested to provide a short biography and suitable photo.

On May 18, True Ballot, a company that specializes in elections for labor unions, professional organizations, etc., mails nominators a letter with customer login and password information for secure online election voting. Nominators may request a paper ballot if they prefer.

Voting for the members and trustees election is open from June 1-15 among all nominators to the Breeders’ Cup program.

Following are the 13 members and trustees whose terms are expiring this year: John Amerman, Boyd Browning, Alice Chandler, Donald Dizney, Tracy Farmer, Tom Ludt, Clem Murphy, B. Wayne Hughes, Ogden Mills Phipps, Dan Pride, Richard Santulli, John Sikura, and Frank Stronach. These members and trustees whose terms are expiring are automatically re-nominated unless they opt out of the election.

On June 22, True Ballot will report the results of the members and trustees election and Breeders’ Cup will publish the results. Those results won’t be made official, however, until the annual meeting of members and trustees is held on July 9, and the candidates with the most votes are put up for election by the existing members and trustees. Prior to the vote at the annual meeting, according to section 4.2 of the Breeders’ Cup bylaws, nominations from the floor can also be made by members and trustees.

All members and trustees wishing to be candidates for two-year terms on the smaller board of directors have until 5 p.m. on June 30 to submit their names to Jim Philpott, the Breeders’ Cup corporate secretary. While the election for those open board positions (there are six this year) is conducted during the July 9 annual meeting of members and trustees, individuals unable to attend may vote through the election web site or via proxy, provided the member holding the proxy reveal the identity of each proxy he or she has received at the annual meeting. Each member is entitled to vote for up to six candidates.

The six board members whose two-year terms expire in July are: Reynolds Bell, Don Dizney, Tracy Farmer, Don Robinson (who is serving the remainder of the term of B. Wayne Hughes, who resigned from the board in January), G. Watts Humphrey, and Robert Manfuso. There are 13 elected board members, plus Breeders’ Cup president/CEO Greg Avioli.

Breeders’ Cup will publish the results of the board election, including votes, at the conclusion of the July 9 meeting.

Officers are elected at a subsequent meeting of the newly elected board of directors. According to Breeders’ Cup bylaws, no individual may serve more than five consecutive years as chairman or vice chairman of the board. Bill Farish of Lane’s End Farm is in his third year as chairman.

In a memo to the Breeders’ Cup members and trustees, Farish outlined the changes to this year’s election (publication of vote totals by nominator, full election results, on-line voting for both elections, proxy procedures, and officers electing to abstain in board of director election). “These changes to the election procedures are intended to provide full transparency to all nominators and ensure confidence in the election process,” Farish said in the memo.

The changes were requested by members and trustees who felt previous elections lacked sufficient transparency.

Additional changes have been requested, including amendments to the bylaws that would eliminate voting in the election for the board of directors by current officers (they have voluntarily abstained from the upcoming election); voting in the board of election by past presidents (James E. Bassett III and D.G. Van Clief Jr.); and voting in the board of election by founding members of the Breeders’ Cup, some of whom are no longer active in the Thoroughbred industry.

I’ll have my own thoughts on the Breeders’ Cup election process in a follow-up commentary tomorrow.

Copyright © 2009, The Paulick Report

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By Ray Paulick
Will a bet-processing tote division be the newest sibling in the Jockey Club’s family of companies? That’s the word I’m hearing from a variety of sources within the industry who say the not-for-profit breed registry is itching to get into the tote business with a new, for-profit subsidiary along the lines of Equibase, the horse industry’s official database for racing information that the Jockey Club owns in partnership with the Thoroughbred Racing Associations of North America.

Alan Marzelli, the Jockey Club’s president and chief operating officer, declined to comment when asked by the Paulick Report about the company’s possible entry into the tote business.

It makes perfect sense for the Jockey Club to take over yet another segment of the Thoroughbred industry, though it would be a move that is not universally supported. Would its entry into the tote business be a case of merely doing what’s right for the industry, or an opportunity for empire building by the Jockey Club, which already has six for-profit divisions? Those divisions are Jockey Club Information Systems (a data provider to industry publications, sale companies, and others); equineline.com (which sells breeding and racing statistical reports); Equibase (which sells past performance information to Daily Racing Form and for programs sold at racetracks and provides some free information to the public); TrackMaster (which sells customized handicapping information); InCompass (which bills itself as a technology solutions company for the industry and is involved in such areas as racetrack paymaster accounts); and TJC Technology Services (which provides technological infrastructure and support for the various Jockey Club companies).

These Jockey Club companies are all inter-related. For example, Jockey Club Information Services and equineline.com require pedigree information, which is provided by the Jockey Club’s registration department. Racing results from Equibase are fed into TJCIS, equineline, and Trackmaster products for consumers and into software applications in racetracks. A bet processing or tote company and an account wagering division currently are missing pieces in a Jockey Club strategy to cover as many of the industry’s bases as possible. The various companies must pay for the data, but the money essentially shifts from one pocket to another.

Let’s look a little more closely at the state of the tote industry. The three existing companies – Scientific Games Racing (Autotote), AmTote and United Tote – each has roughly one-third of the North American market. All have been struggling for years, in part because racetracks have played one company against another in contract negotiations and have marginalized their business. As a result, they have not made the kind of profits that lead to substantial investment in research and development, and the end product has been one that is technologically inferior and suspect in its ability to maintain absolute integrity in wagering pools.

All three companies are for sale. AmTote, which Magna Entertainment acquired for $17.4 million in a two-phased purchase agreement in 2003 and 2006, is part of that company’s bankruptcy filing. Last month, Scientific Games, a company that makes most of its money in lotteries, hired a financial consultant to look into selling its pari-mutuel division, formerly known as Autotote. Youbet.com, an account wagering company that has not been profitable, paid $49 million for United Tote in 2005 (at least two times higher than the appraised value of some industry insiders). One year ago, Youbet.com officials said they were hoping to find a buyer for United Tote.

At this stage, a purchase by the Jockey Club of United Tote seems the most likely, and sources say a deal could be announced in the coming weeks. The company has contracts with the New York Racing Association, which walks in lockstep with the Jockey Club. United Tote also serves Keeneland, whose president, Nick Nicholson, was instrumental in the development of the “family of companies” strategy when he worked as executive director of the Jockey Club. United Tote has contracts with the other Kentucky racetracks, including Churchill Downs, which employs AmTote at the other racetracks it owns.

All of the uncertainty involving the three leading tote companies comes at a time when the integrity of the Thoroughbred industry’s pari-mutuel wagering systems is being questioned by racing commissions, track operators, and, perhaps most importantly, horseplayers. Autotote, in particular, has been at the center of several controversies, including the 2002 Breeders’ Cup pick six scandal when three of the company’s employees had the only winning ticket and were in line for a $3-million payout. It was discovered they hacked into the system and processed their pick six tickets after the first four races had been run.

Racing executives familiar with the tote business suggest that United Tote may have the best tote machines, while the back end or software infrastructure for AmTote is the most advanced. Scientific Games is viewed as the laggard of the three companies, from a technology standpoint.

SHADES OF EQUIBASE?
This all sounds a bit similar to when Equibase was created in 1990. The Daily Racing Form had been owned by Walter Annenberg’s Triangle Publications for well over a half-century when he sold it to Rupert Murdoch’s News America Corp. in 1988, ending what had been a very cozy relationship between the Form and the racing industry. Whether this upstart Aussie (whose publishing empire includes the New York Post, Fox and other major media outlets) upset Jockey Club pooh-bahs like chairman Ogden Mills (Dinny) Phipps or they were worried about price-gouging or additional changes in the Form’s ownership will probably never be known. But under the banner of the racing industry collecting and owning its own data (versus a private company like Daily Racing Form doing it), Equibase was established in the imposing shadow of the Jockey Club.

At the time, there were pronouncements that the industry needed to provide more information to fans. Alan Marzelli, then the chief financial officer of the Jockey Club, said the “promotion and betterment of racing is behind the decision” to start Equibase. David Haydon, a longtime Jockey Club employee and the first Equibase president, took it one step further, saying the new company would “address racing’s need for fan base expansion.” Jockey Club chairman Phipps himself said, “Everyone in the industry realizes we have to make a day at the races more enjoyable and less intimidating for the general public.”

Equibase has succeeded as a business. Now, instead of competing with the Daily Racing Form, which eventually closed its track and field data collection operations, the Form is its biggest customer, purchasing past performance information to provide in its daily newspaper and for its online products. Most racetrack programs now include past performances – at a fee to consumers.

But where exactly has Equibase succeeded in expanding the fan base or making the races less intimidating?

Other sports, from Major League Baseball to the National Football League, National Basketball Association, and the PGA Tour, provide extensive data at absolutely no cost to the fans. This information is used by fans to make watching the sports action that much more enjoyable, and allows them to be more informed, whether it’s for their own general knowledge or to participate in the fantasy leagues that have become so popular, especially with young people.

Racing, or more specifically Equibase, insists on charging its fans for some of the most basic data. Lifetime past performances of a single horse cost a consumer $8; lifetime stats on a jockey or trainer cost $7 on Equibase’s sister site, equineline.com. If you want career statistics for a baseball player, just go to Google and type “Barry Bonds stats” and you’ll have a plethora of choices for free.

If you want to look at a simple race chart that’s more than a few days old, Equibase charges you $1.50. You want the box score of an NBA game from last month? Go to NBA.com, and click on scores. They’ll provide you with more stats on the game than you could possibly ever want – at no charge.

“It is symptomatic of our industry being a step behind,” said one racing executive who has grown wary of Equibase’s profit-driven motive and thinks the company has strayed from its original mission. “It’s short-term thinking. If our objective in racing is for the horseplayers to win, we should do everything we can to help him, and increase the churn. That’s where the revenue for our business should come from, not from the statistics the horseplayer needs.”

Hank Zeitlen, the current president of Equibase, said fans can get deals for free past performances from some of the account-wagering companies (which, of course, have to pay Equibase to buy the data) and there is often past performances for “feature races of the week” that Equibase makes available at no charge.

 “If you look back to 1990 and see what information was available and how it was made available, we’ve accomplished a lot,” said Zeitlen, who added that it’s unfair to compare racing with other sports. “The economic models of other sports are different than ours,” he said. “Each of those leagues has revenue coming from television. We don’t have that. And Equibase is not a handle-driven business.”

Zeitlen overlooked the fact that the tracks in the TRA that own two-thirds of Equibase (the Jockey Club owns one-third) are handle driven businesses.

JOCKEY CLUB’S THIRST FOR PROFITS
Perhaps it’s this thirst for profits that makes more than a few people wary that the Jockey Club may be getting into the tote business. There are some in that industry who say the Jockey Club, despite its claims, is not a very savvy technology company, and that its entry into the business would not be a giant leap forward – particularly if they wind up with a monopoly. Others believe the Jockey Club should focus on its core business, registering foals, and let private enterprise take care of other segments of the industry.

It was 10 years ago that Tim Smith, then commissioner of the National Thoroughbred Racing Associations, tried to forge a deal between the North American racing industry and IBM Global Services, which promised to modernize the tote system. An IBM executive told the Jockey Club Round Table in 1999 that he had never seen an industry so far behind in technology. The IBM proposal was blown up by some tracks who didn’t see the need for change or improvements in the industry’s tote and simulcasting technology.

Ten years later, we’re even farther behind. It’s clear something must be done to guarantee that the process of handling wagers is improved. If not, the industry will continue to lose the confidence of horseplayers, many of whom are convinced that past-posting of bets and tampering within wagering pools is all too common.

Is the industry ready for the Jockey Club’s family of for-profit companies to grow? Do we really have a choice?

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By Ray Paulick

Random notes while waiting for the ice to melt …

The devastating snow and ice storm that hit Kentucky earlier this week has created serious economic hardships on Thoroughbred farms, many of which are without electricity and have suffered major damage, just as the foaling season is hitting full swing and the breeding season about to begin. Let’s hope organizations like the American Horse Council, the NTRA, Thoroughbred Owners and Breeders Association, the Kentucky Thoroughbred Association and the Kentucky Equine Education Project are in contact with government officials to seek relief, now that Gov. Steve Beshear has asked the Obama administration to declare a federal emergency.

Horse farms are already under extreme economic pressure because of the plunge in bloodstock prices, and this latest problem is only making things worse for them. It’s at times like these that these alphabet soup organizations can actually do some good.

DID FRANK STRONACH’S ONE-VOTE MARGIN over IEAH Stables in the Eclipse Awards outstanding owner category come by virtue of several racing secretaries who work for him? I have a great deal of respect for Stronach’s racing and breeding operation, which has produced solid numbers for many years now, but I just can’t fathom how 2008 was an Eclipse Award-winning year for him.  Ahmed Zayat’s stable earned slightly more money but only ranked sixth in the number of first-place votes. IEAH had a far superior year in terms of Grade 1 winners. George Strawbridge’s Augustin Stable had a better year when the number of starters was taken into consideration, as did the racing stables associated with Sheikh Mohammed. Here is the year-end ownership standings by money.

Apart from the National Turf Writers Association, which has historically published how its members vote, there is no disclosure from Daily Racing Form or the National Thoroughbred Racing Association about who votes – never mind who each individual votes for. But the NTRA should insist that racing secretaries or any other voters who work for racetracks owned by Stronach’s Magna Entertainment not be allowed to vote in categories where there is a potential conflict of interest. That would include the leading owner and leading breeder categories. The awards are too important to permit any conflicts of interest or suspicions of impropriety.

In the owner and breeder categories (the latter of which was for years determined by a committee vote), there seems to be little imagination or thought put in by voters, who more often than not look at which owner and breeder is at the top of the money list that is supplied with the ballot. If the people who vote for Academy Awards were that lazy, then “Paul Blart: Mall Cop” would win the Oscar for best picture this year.

Opportunity (the number of starters) should play a role in voting for outstanding achievement by an owner or breeder. Twice in the last eight years, a breeder who produced two individual champions in the same year from a small band of broodmares (Virginia Kraft Payson, with Farda Amiga and Vindication in 2002, and Aaron and Marie Jones, with Speightstown and Ashado in 2004) did not even get enough votes to be among the three finalists! That’s insulting to the thousands of Thoroughbred breeders who either can’t afford to or don’t choose to maintain massive numbers of broodmares.  (Click here to see what I wrote about this issue a few years ago at Bloodhorse.)

The NTRA needs to address this, either by eliminating the vote and simply giving the awards for leading owner and breeder to whoever wins the most money, or by changing the system of selecting the outstanding individuals in these two categories. I don’t think enough voters understand the importance of this category or what “outstanding” means when it comes to owning or breeding Thoroughbreds.

SPEAKING OF THE NTRA, what is its future? The organization is a shell of its former self, when it had widespread industry support and a mission to improve the economics of racing and breeding through increased pari-mutuel handle, marketing and greater exposure on television. Following its split from the Breeders’ Cup, the NTRA has lost much of its economic clout and influence, as it no longer has the annual championships to promote to the general public or to race sponsors that were tied in to group purchasing (i.e., John Deere, NetJets, Dodge), which only a few years ago produced upwards of $100 million a year in sales. Following the NTRA-Breeders’ Cup “divorce,” group purchasing through NTRA Advantage has dropped significantly.

Today, the NTRA seems to be playing more defense than offense, reacting to crises (i.e., the death of Eight Belles in the Kentucky Derby, Congressional inquiries, totalizator problems) but not really having the resources to go on the offensive in any areas, including marketing and promotion.

Complicating matters (and this isn’t new) is the ongoing struggle to maintain membership in the NTRA. Churchill Downs Inc., which is tabbed to pay approximately $400,000 in dues for its various tracks in 2009, hasn’t recommitted to membership. A source says Churchill might considering paying $200,000 in dues.  An NTRA official told the Paulick Report he hopes Churchill executives see value in the NTRA’s legislative activities, the “Racing to the Kentucky Derby” television series on ESPN, NTRA Advantage purchasing, the National Handicapping Championship, and the Safety and Integrity Alliance. The interesting thing about the latter, I’ve been told by sources, is that Churchill Downs CEO Bob Evans is the one who insisted the NTRA do something about the safety issues that led to the creation of the Safety and Integrity Alliance.

Magna apparently hasn’t committed to renewing its NTRA membership, either. If the NTRA loses the two largest track ownership companies, it will be further weakened, perhaps terminally.

CORPORATE SPONSORSHIPS ARE A CHALLENGE in the current economic climate, whether it’s the PGA Tour, NASCAR or horse racing. But it was, nevertheless, a surprise to see Bessemer Trust drop its sponsorship with the Breeders’ Cup. I would think the wealth management firm formerly chaired by Ogden Mills (Dinny) Phipps and now run by his cousin, Stuart Janney Jr., is encountering the same economic challenges that many financial institutions are (though Bessemer’s investment strategy is believed to be conservative).  

Janney responded to an email with the following comments: “I would say our reasons for dropping out are as follows. First, we have been a sponsor for some time, which means many of our clients have been entertained at a Breeders’ Cup event and having them back again is possibly less appealing than providing a different venue. Second, the two-day format works better for others than it does for us. Third, we have never been able to really derive full value from the TV ads as our target audience is very narrowly focused. Fourth, as we look at other sponsorships and ways to thank our clients or meet prospects, it helps in tighter times to have this money available. We believe our involvement with the Breeders’ Cup has been beneficial to Bessemer and the staff at the Breeders’ Cup has been a pleasure to work with.”

Copyright © 2009, The Paulick Report

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By Ray Paulick

One of the first projects that landed on my desk when I joined the Thoroughbred Times as managing editor in 1988 was a feature story on the Jockey Club, the organization historically entrusted with registering Thoroughbreds and being the keeper of the Stud Book. The article was accompanied by a lengthy mail-in survey of Thoroughbred Times readers. The story and the survey results were of great interest, for at the time I had no idea how broadly the Jockey Club reached across the entire industry and how unhappy rank and file breeders then were with the organization’s service, pricing and activities.

It should be noted that there was an agenda to the article. The Thoroughbred Times was then owned by Richard F. Broadbent, whose Bloodstock Research Information Services was facing new competition from a subsidiary of the Jockey Club. There were questions about whether a tax-exempt breed registry like the Jockey Club should create a subsidiary to compete with a private enterprise company like BRIS, which supplied statistical data to breeders, owners and various publications. A few years later, the Jockey Club helped form another for-profit company, Equibase, which competed with the Daily Racing Form to collect racing results (the Form eventually closed its track and field operations and became Equibase’s biggest customer). The Jockey Club has since started other for-profit businesses.

One of the things that struck me was the comparison between how the Jockey Club and the American Quarter Horse Association conduct their business. The Jockey Club is clearly a breed apart from its Quarter Horse counterpart. The AQHA, then and now, is a relatively transparent organization, one whose membership is open and whose leadership is democratically elected through regional and national elections. There is a board of directors, from which comes an executive committee and elected officers. The AQHA has term limits that prevent individuals from maintaining longstanding control of the organization. The AQHA web site publishes a great deal of information about its governance and membership rules, which can be read here.

By comparison, membership in the Jockey Club has always been by invitation only. Click here for an explanation about membership. It is "governed" by a rotating board of stewards, though that term is used loosely since the Jockey Club has been under the firm control of just two men since 1982, when Ogden Mills “Dinny” Phipps was named chairman and William S. Farish became vice chairman (pictured left). Click here to see the current list of Jockey Club members, stewards, and officers.

The AQHA is a huge organization that maintains the registration of more than five million Quarter Horses, with 135,000 registered in 2007 alone. There are nearly 350,000 AQHA members. According to Internal Revenue Service Form 990 for tax exempt organizations, the AQHA generated $54.4 million in revenue in the 2005-06 fiscal year, the most recent year available. At that time it had $73 million in total assets, including nearly $49 million in investment securities. Click here for the AQHA Form 990.

The AQHA, like the Jockey Club, maintains pedigree records, but also promotes the Quarter Horse breed through horse shows and publishes three magazines (the Quarter Horse Journal, the Quarter Horse Racing Journal, and America’s Horse) that had total circulation of over 400,000 in 2006.

The AQHA charges as little as $25 to register a Quarter Horse foal if done within seven months of birth. The organization is based in Amarillo, Texas, and its highest-paid officer, longtime executive vice president Billie G. Brewer, earned an annual salary of $424,928; treasurer Lee Callaway was paid $221,965 (both figures are from the IRS Form 990.) The two executive salaries represented 5.5% of the AQHA’s total payroll of $11,725,124.

The Jockey Club is also a rich organization, one that is exempt from federal taxes but also has several wholly owned for-profit subsidiaries. The Jockey Club’s 2006 IRS Form 990 states that it registered 37,300 foals that year. The Jockey Club generated $13.2 million in revenue in 2006, the most recent year the figures are available. It claimed $32 million in total assets, including $21.6 million in investment securities. Click here for the Jockey Club Form 990.

In addition, the Jockey Club claimed that its subsidiaries generated over $25.7 million in income for 2006 ($13.7 million by TJC Holdings Inc. & Subsidiaries, which is engaged in information services and software solutions; $4.9 million by The Jockey Club Racing Services, for the collection of Thoroughbred racing data; and $7.1 million by The Jockey Club Technology Services, Inc., for its technology services). Click here for more information on those subsidiaries, which include shared ownership in the data collection company Equibase, and full ownership of TJCIS (The Jockey Club Information Systems  and data supplier Equineline), and InCompass Solutions, which provides software systems for racetracks.

The Jockey Club’s IRS Form 990 lists its annual Round Table Conference in Saratoga Springs, N.Y., publication of its Fact Book, and providing financial support to other industry organizations among reasons for its tax-exempt status, in addition to its breed-registry responsibilities.

The Jockey Club charges $200 to register a Thoroughbred foal, considerably higher than the AQHA’s fee. Its last increase was in 2000, when it was upped from $175. The Jockey Club, which for many years was known as the “New York Jockey Club,” relocated its registration department from New York to Kentucky in 1988. 

Its highest-paid officer is president Alan Marzelli  (pictured, left), who earned $672,796 in 2006, 58% more than the AQHA’s top executive. The Jockey Club has three executive vice presidents: James Gagliano, with a salary of $256,885; Daniel Fick, $243,546; and Laura Banllaro, $243,804. IRS Form 990 also lists but does not itemize another $542,776 in 2006 pension plan contributions for those officers. The salaries represented 39.1% of the Jockey Club’s total payroll of $3,626,092 (exclusive of its subsidiaries, each of which have its own executive staff and employees).

The Jockey Club’s 2006 tax return came to light recently when an entity called “CTBA Boardwatch” (which generally concerns itself with the inner workings of the California Thoroughbred Breeders Association) distributed IRS Form 990 to numerous individuals. A number of those people contacted the Paulick Report and were outraged over the salaries paid to Marzelli and his three executive vice presidents.

I don’t know the going rate of executive compensation for a tax-exempt company in New York, where three of the four Jockey Club officers are based (only Dan Fick, a former AQHA executive, is located in the Lexington offices of the Jockey Club). Perhaps those numbers are perfectly in line with other non-profits. I would imagine, though, that the going rate for an executive staff is higher in New York than it would be in Kentucky.

It does seem strange to me that the Jockey Club continues to maintain a nicely appointed office in the high-rent district of midtown Manhattan, on 52^nd Street just off Park Avenue. I doubt that it’s gotten many walk-in customers seeking to register their foals since the registration department was moved to Lexington more than 20 years ago. It is conveniently located near the headquarters of Bessemer Trust, the Phipps family-run wealth management firm whose offices are just a few blocks away on Fifth Avenue.

I asked Jockey Club communications officer Bob Curran why the Jockey Club continues to have a New York office 20 years after the organization’s primary function was relocated to Lexington. A few days later I received the following statement from Jockey Club president Marzelli: “Beginning in 1989, when the first of our commercial subsidiaries was incorporated, The Jockey Club has created and developed a group of for-profit subsidiaries and strategic partnerships, each designed to serve specific segments within the industry by utilizing highly efficient, state-of-the-art technology platforms. We have built and managed this growing list of technology-based companies with a corporate office based in New York and operations centers in Lexington, Ky., and Mountain View, Calif.”

That didn’t really answer the question “why a New York office is necessary” although it did tell me something I didn’t know; namely, that the Jockey Club now has a division in California’s high-tech Silicon Valley town of Mountain View.

The bigger question is who is the Jockey Club accountable to. Is it simply Phipps and Farish and their hand-picked stewards? Is the breeders who have paid registration fees over the 100-plus years of its existence? Is the Thoroughbred industry at large? If there is accountability to the industry, why isn’t there more transparency in the operational and financial activities of the Jockey Club and its various subsidiaries? Why is its membership so restrictive and its governance so secretive?

James Gagliano, one of the aforementioned executive vice presidents, touched on some of these questions, during the Jockey Club Round Table in August in which he discussed some of the activities of the Jockey Club and its affiliate for-profit companies. Click here to read Gagliano’s remarks.

Are you satisfied that the Jockey Club is properly and responsibly representing the best interests of the Thoroughbred industry? Let us know in the comment section below, or take the Daily Paulick Poll about the Jockey Club and its activities, located on the left-hand column of the Paulick Report home page.

Copyright © 2008, The Paulick Report

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