Posts Tagged ‘Susan G. Komen’

Lexington advertising executive Fred Pope has come up with an intriguing proposal for a race between Rachel Alexandra and Zenyatta, one that would help explain how racing’s business model for simulcasting is broken and needs fixing. Will any one listen or act on the suggestion? –Ray Paulick

NYRA was reduced to this weak position because the premier track operator cannot make $400,000 from off-track wagering on the race.

That’s because of the upside-down, off-track revenue model, where casinos and off-track betting companies pay as little as 2% to the host track, while they keep up to 18% of the wager themselves.

If $20 million were wagered off-track on the proposed race, the purse account would have only gotten $300,000. The off-track bet takers would have gotten $3,400,000. That’s right, ten times more money just for taking the bet, than for the racehorse owners putting on the show.

Trying to put on a show for racing has become the Theatre of the Absurd. Host tracks cannot make the fillies’ owners “an offer they can’t refuse”. Perhaps the racehorse owners need to step in with some common sense.

Inside the Box Thinking

You are about to read a outrageous proposal for how the owners of the star attractions, Jess Jackson and Jerry Moss, can focus the sporting world on Thoroughbred racing and deliver the Filly Race of the Century.

When you do a Situation Analysis on racing today, you come to the painful conclusion that the host event gets nothing from off-track wagering on its product and nothing from the television networks for its product. Since the basic objective of providing the owners of the racehorses with a valuable purse, the strategy becomes crystal clear:

If you can make 20% from the wagers made on-track, but only 2% from the wagers made off-track, then you need to see how you can maximize the on-track wagers.

No off-track wagering and No televised coverage

Sheer madness? Maybe not, it seems to work for the NFL when they haven’t sold out a studium.

To make a statement for all racehorse owners about the upside-down, off-track revenue model that bled $500 million out of purses this year, the owners of these two magnificent fillies have a timely opportunity.

Jess Jackson knows how to market a product and Jerry Moss definitely understands the entertainment business, so let’s explore how these two racehorse owners can achieve for their sport what the industry around them cannot seem to grasp — You either control your product and its distribution, or someone else will control it.  You can increase demand for your product by limiting supply.

We are about to revisit the revenue model of 1938, when Seabiscuit was a star.

Let’s Go Retro

Hell, Jess Jackson even saw Seabiscuit race at Santa Anita, so he knows the excitement and electricity that fans feel being on the grounds at a closed sporting event.

There are three tracks big enough to handle the crowd — Belmont, Churchill Downs and Santa Anita (I know the surface problem for Jess, but this is a different consideration).

I would go to those tracks and offer the race, with these conditions. The track would get all admissions, concessions, parking, programs, etc. The track and local purse account would get the on-track takeout from a quality-packed under card of races.

For the big event, the fillies’ owners would agree the race would have no set purse amount, but instead they would get 100% of the takeout from on-track wagers on the race. In effect, the racehorse owners take the risks.

By locking out all off-track wagering and televised coverage, if we can get a crowd of 80,000 and drive the on-track handle to $20 million, the takeout for the purse would be $4 million gross. If we paid back to 6th place, there is a huge incentive for the owners of other good fillies to enter the race and drive the handle higher.

To publicize the race, the two major owners could take the satisfaction of the winner being named Horse-of-the-Year and dedicate their share of the winnings to charities like the Susan G. Komen Race for the Cure and the Race for Education. A ban on cell phones and computers at the track will further boost the on-track handle.

A replay of the race the next day will allow fans to see the great race, but the attraction of a great sporting event would be live attendance.

The tracks would need their racing commissions to pre-approve a non-traditional day, similar to Breeders’ Cup days.

With all the advances in technology and expanded distribution of wagering, the host track should be able to make a lot more money today than they could in 1938. But, because the off-track revenue model fails to pay the host event for its product, the stakeholders of racing are back where they started.

The real “True Blood”

Last July 2008 the industry was “shocked” by a series of articles I wrote on this subject. But, obviously not shocked enough to fix it.

As a result, more than $1 billion has been sucked out of racing this year. The money is lost forever to the tracks, racehorse owners, trainers, jockeys and everyone in between. The lost money has not flowed down to breeders through the sales as reinvestment in racing prospects. The lost money will not be spent at the upcoming September Sales

This past year I have traveled to Arizona for the Racetrack Symposium and throughout the year presented the problem and solution to the heads of every organization in racing and breeding. To date, not one of these organizations have done anything to change the off-track model or push for the corrections to the IHA.

Each month about $100 million is bleeding out of our sport and the rate is accelerating very rapidly through the cannibalization of bets previously made at the tracks and now increasingly made through phone and Internet companies with no connection to racing.

The Future of Racing

If we can get quick passage of the correction to the IHA and the host event starts getting 50% of the takeout from bets made at other tracks; then gets up to 75% from non-racing bet takers, and finally the future of racing is when the host event can start accepting wagers direct from customers for a virtual “on-track” revenue model. We could have 15% of the wagers going to the host event.

Then on big race days, if we have $50 million in off-track handle, the revenue at 15% to the host event would be $7.5 million for the day. That’s how you bring Rachel Alexandra and Zenyatta, or Curlin and Big Brown together in races.

That’s when you have the star power to fill the seats and make racing a viable sport again. So that no matter where the bet is madej, or how the bet is made, the majority of the revenue goes to those producing the show.

Once the IHA is corrected, the opportunity for creative, innovative thinking on how racing is packaged and presented will abound, because the host event can make money on the show.

But, until then we will continue in the Theatre of the Absurd, where the off-track bet takers walk off with all of your money and your sport.

By Ray Paulick
Can the cable network Bravo do for 3-year-old female Thoroughbreds what it’s done for countless wannabe runway models or packs of shallow housewives in New York City, Atlanta or Orange County, Calif.?

Come to think of it, I’m not sure I really want that to happen.

But with Bravo — the sister network to NBC Sports in the NBC Universal family of media companies – televising this year’s Kentucky Oaks for the first time on May 1, it’s anybody’s guess the type of programming we’ll see. A press release from Churchill Downs says the one-hour telecast (5-6 p.m. Eastern) will focus on the “food, fashion and celebrity experience” associated with the Kentucky Oaks. The NBC Sports production and on-air team televising the Derby on May 2, led by host Tom Hammond, will be available for the Bravo telecast, so here’s hoping they’ll be able to find time to show the horse race, too. With a possible field that includes Stardom Bound and Rachel Alexandra, it could be one of the most interesting and best Kentucky Oaks in recent history.

First, though, let’s give Churchill Downs management credit for hooking the Oaks with the Susan G. Komen for the Cure breast cancer organization. It’s a most worthy cause, and if Friday is still considered by some to be “ladies day,” there may be no better time for the horse racing industry to raise awareness and research money to help find a cure for breast cancer.

But let’s be real for a second. The Kentucky Oaks is one of the best and most important fixtures on the Thoroughbred calendar, and a perfect setup to the following day’s Kentucky Derby. It’s been part of ESPN’s Derby week coverage for many years. Moving the Oaks to Bravo – a network best known for shows like “Project Runway,”
“Top Chef,” “Real Housewives of …” and “Tabatha’s Salon Makeover” – is a sign that Churchill Downs is giving up on growing the Oaks as a sporting event and making it more about fashion and celebrity.

That apparent shift in philosophy (the Kentucky Derby web site is also putting a great deal of emphasis on fashion, parties and entertainment) coincides with business developments involving the longtime horse racing provider to ESPN, the Tulsa, Okla.-based Winnercomm. Winnercomm, for years known as Winner Communications, the company founded by Chris Lincoln and Jim Wilburn, was purchased earlier this year by the Outdoor Channel.

Winnercomm has traditionally been horse racing’s gateway to ESPN, but many of Wilburn’s close associates at ESPN are no longer at the network, so he doesn’t have the “juice” he once had. Winnercomm’s deal with Churchill to provide Derby week coverage ended, as did his agreement with the National Thoroughbred Racing Association to produce racing telecasts.

Churchill Downs opted to negotiate directly with ESPN for programming (without Winnercomm), and in this difficult economy they didn’t really want to be on the hook for the cost of the programming without having assurances they would be able to generate enough revenue through advertising to pay for it. ESPN apparently wasn’t interested in trying to sell the programming, and Churchill didn’t want to work through Winnercomm. Thus, there will be no “Breakfast at Churchill Downs” programming on ESPN or ESPN2, and no “Kentucky Derby Draw” or “Kentucky Oaks” telecasts. ESPN will televise some of the Derby Day undercard, which traditionally has attracted a relatively large audience. The Oaks and other Derby week programming has not done very well in the ratings, though Wilburn always managed to sell advertising for them.

Sources have said ESPN will not have live programming from Pimlico during the week of the Preakness, either, though there may be programming from Belmont Park leading up to the Triple Crown’s final jewel. The Derby and Preakness telecasts are shown on NBC, while the Belmont is on ABC, a sister network to ESPN.

Complicating all of this is the fact that Churchill Downs and Magna, which owns Pimlico, home of the Preakness, are partners in the racing cable network HRTV. If the Oaks and Pimlico’s Black-Eyed Susan (which, like the Oaks is on a Friday), were telecast on ESPN or ESPN2, that network most likely would have wanted exclusivity, which would have prevented HRTV from showing the races live.

Like many things in racing, there is no central leadership here. The NTRA, which has its own deals with ESPN for prep races leading up to the Kentucky Derby, has never been given the responsibility of negotiating TV time for the Triple Crown tracks, which have done so on their own or through Triple Crown Productions. The Triple Crown itself is now divided between NBC (Derby and Preakness) and ABC (Belmont). Bob Evans, the CEO of Churchill, is widely viewed as someone who is more interested in technology than television. Magna, of course, has its own problems with bankruptcy, Wilburn, horse racing’s former “go to” guy for getting the sport on ESPN, has lost his clout with the “worldwide leader in sports.”

Perhaps all of this might make a good reality show … on Bravo!