Letter to NYRA: Time to Maximize Revenue
As the New York Racing Association continues its latest transition under new president and CEO Chris Kay, discussion has focused on the need for NYRA to increase revenues and cut expenses as it works toward re-privatization. NYRA trustees have also indicated the agency has to figure out a way to be profitable without dependence on Video Lottery Terminal (VLT) revenue that is out of its control.
In an open letter to NYRA, Lexington advertising executive Fred A. Pope urges decision-makers to look at an obvious source of revenue that is being ignored.
There are a lot of very smart people on the NYRA board. In their careers, they knew exactly what business they were in and its mission. I'm not sure a single one of them today would write out the correct mission for NYRA. They are not alone.
I submit the mission of NYRA is to produce Thoroughbred horse races and maximize the revenue from them.
When off-track betting started, NYRA lost its way to taking bets on other tracks' races. The tracks made a deal that was soon perverted, as non-track bet takers were allowed into the market, the rate paid to live racing hit bottom. Instead of the 20% NYRA made from on-track bets, the off-track bet takers paid 3% and kept the rest. Today the rate has climbed a couple points, but bet takers still keep the lion's share of the bet.
As the leading producer of live racing, NYRA has lost more than anyone. It has sufficient handle to make a lot of money and restore purses, marketing, staff for live racing and infrastructure. But, it cannot achieve its mission to maximize revenue from its races without changing the amount it receives from off-track wagers.
NYRA exports 5 times more than it imports. Last year the races generated over $1.8 billion in off-track handle. Every 1% increase NYRA earns on its exported races is worth $18 million to its bottom line. That new revenue can make NYRA racing profitable in 2014. This is not increasing takeout rates; this is increasing the amount NYRA receives from off-track bets on its races. In the short term, NYRA can earn over $100 million in new revenue by solving this distribution problem.
The huge demand for NYRA races can drive partnerships with other major producers, direct distribution to customers and revised distribution agreements. Anyone saying it cannot be done has the mindset of a bet taker, not a producer. NYRA board members are experienced business and entertainment producers. Once the mission focuses on live racing, they will have lots of ideas to contribute.
As a non-profit, NYRA returns everything back to the sport, racehorse owners and breeders. As our largest, most-sophisticated market, New York is and always has been Thoroughbred racing's True North.
Embrace the mission that built NYRA and every decision will be easy.
Fred A. Pope