PAULICK REPORT FORUM brought to you by Breeders’ Cup: YOU CAN’T HAVE IT BOTH WAYS, FOLKS

by | 11.17.2010 | 12:47am

By Ray Paulick

Everyone, it seems, is a critic. In last week's Paulick Report Forum, Dennis Mills, CEO of MI Developments, talked about the outreach program he recently launched at www.racingfuture.com, where he is soliciting the public to offer their ideas for the future of the sport. The ideas will be judged, and the “best idea” will receive half ownership of a horse bred by Mills, with no training bills or vet expenses.


Some readers commented that Mills–who is paid a handsome salary to run the real estate company that took over ownership of Santa Anita Park, Gulfstream Park, Golden Gate Fields and the Maryland Jockey Club tracks following the bankruptcy of Magna Entertainment—should come up with his own ideas. Of course, some of these same critics regularly blast racetrack management for not listening to their customers.


You can't have it both ways, folks.


Mills is a former Canadian politician, so I suspect his skin has grown thick over the years. He's been subjected to a great deal of criticism, much of it justified in my opinion, from racing regulators, shareholders at MI Developments and bankrupt Magna Entertainment, and from people in the racing industry, including fans and horseplayers. Yet, to his credit, he is undeterred and remains upbeat about finding solutions to the challenges the industry faces. He has been associated with Magna boss Frank Stronach for nearly 30 years and shares many of Stronach's views, particularly on regulation and the concept of free enterprise. In part two of our interview with Mills, he spoke about Stronach's appearance at last month's meeting of the California Horse Racing Board, and what Stronach means when he talks about free enterprise. Click here for part one of the Forum.

Frank Stronach's appearance in front of the California Horse Racing Board was puzzling and non-specific. Did he perform as expected or were you hoping for something different from him?

The biggest challenge we have is causing people to reflect on what Frank was saying. I would debate that he was non-specific and say to you that he was so specific it came across as simplistic. When you go in to make a presentation you can try and sell 10 different points, or you can try and drive home one all-powerful point. Where I think Frank could have improved was when he started to talk about the fact that if you run a store you should be able to run that store and keep it open when you can have the most customers. What should be reinforced is that may mean we race Friday to Sunday, it may mean that it's Thursday and Friday nights and all day Saturday and Sunday. The specific model has yet to be refined.


His message was, 'Let us operate the business when we can get the most customers.' We are getting quotes for super lights for Gulfstream and for Santa Anita. We believe that because of when most people work, we would have a better shot at attracting the most customers for twilight racing. Should we decide to do this, working with horsemen, maybe we should start later, and have twilight programs only.


Frank wanted to get one powerful message across: the regulator is not the entrepreneur. The regulators should be supporting the entrepreneur, who will risk the capital and risk the reputation because he is trying to service his customer. That is really the message he is trying to get through. The current structure isn't working anywhere.

 

I do note that efforts in Kentucky (Churchill Downs) for evening racing have been a tremendous success. That's a market that is a fraction of what we have in South Florida or 20 minutes from Los Angeles, with 50 times the concentration. If we picked up on that model used in Kentucky, it could cause an explosion of interest of new people for Thursday or Friday night models. Frank's message was you should let us try that instead of putting us in leg chains and handcuffs.

 

His second message was having a bet that could compete with lottery jackpots. It was a single but powerful point. I support it totally. You've got to let us try to do things we believe can work and not tell us what to do. He used the expression free enterprise, which means let the entrepreneur be innovative.

The decision by Stronach to give the Oak Tree Racing Association a reprieve and lease Santa Anita for another year seemed to be an unexpected and out-of-the-blue move. Were you surprised by his change of heart, or was it the plan all along to extend Oak Tree another year?

I'll tell you what happened. I was sitting next to Frank when this happened. We were about three feet from John Harris (a member of the CHRB). Frank has a very high regard for John Harris, who leaned over and said to Frank, in a very calm way as only John Harris can do, 'Frank, do you really want to put 1,600 young people out of work?' I knew right then and there a nerve had been struck.


For the last 50 years of Frank Stronach's life–and I've known him for 30 of those years–all Frank has done is create jobs for people. He prides himself on the fact he has created 80,000 jobs—35,000 of them are in the United States–and always felt his legacy would be how many jobs he's created. That's his mantra.  In 1985 he gave a speech that said jobs will be the currency of the future. Frank's whole life has been focused on job creation, and when John Harris asked that question, I'll be honest with you, it was almost a miraculous moment. None of us put that question to Frank. When John asked the question, I could see Frank change. That's when Mace Siegel came and sat beside Frank and spoke to the board. But John Harris's question penetrated. He struck a nerve.

Recently, a Maryland court ruled that slots could be allowed at Anne Arundel Mall in lieu of what many believed would be a Laurel Park racino. Are you surprised by this ruling and would Magna have made the investment had you known this would be the result of the Maryland slots bill? (Note: on Tuesday, after this interview was conducted, the appeals court reversed the lower court ruling, and a public referendum will be held to determine the fate of slots at Anne Arundel Mall.)

First of all, we weren't shocked, and had the judge supported us, our opponents would have appealed. So we appealed (and subsequently won). Maryland's governor has said the public policy objective was that slots be at the racetracks. I would never suggest the governor has any influence with the judiciary, but the fact he has taken such a publicly declared position, we think gives us some optimism.


The tax rate (on slots) is very high in Maryland. In the legislation there are two elements that work for the racetrack system. First of all, there is a percentage of those monies that go to purses from all 15,000 slots when they are up and running–wherever they are. There is a second provision in the legislation that is key: there is a committee that is attached to the lottery commission, and a certain percentage of the winnings go to this committee, and it's made up of people in the horse industry. It's a fund to support capital improvements at the track. The trick is it's matching dollars. It's 50 cent dollars for capital improvements. It's a substantial royalty, but it won't really kick in for two and a half years until the system is mature. Between now and then, it doesn't matter whether you are in New York or Maryland, you have to be working seven days a week to get where we need to be to create sustainability. Nobody is suggesting the next couple of years will be an easy ride. We are all going to have to work hard.


On another point, we are very excited about our partnership with Penn National. They are the quarterback of the gaming experience. We'll be the quarterback of the racing experience. Should we not get slots, it becomes a real challenge, and then some of the excess land on those sites will have to become more of a real estate play. There's a lot at stake in Maryland. Having said that, they are great locations. We own property in Howard County across from Laurel, and we are ready to go there for retail and commercial development.

The renovation of Gulfstream Park and the surrounding “village” has drawn hot and cold reviews with many lamenting the fact that a Breeders' Cup can no longer be held there due to a lack of seating. What was the vision for the renovation and why was the choice made to limit the seating area?

First of all, you saw the old Gulfstream. The washrooms for men and women were substandard. You've got to understand one thing bout Frank. His obsession that the customer is king is never to be debated. When he went to Santa Anita, the Frontrunner restaurant was created, he cleaned up the track apron. Going to Gulfstream, that place had no shot with its existing structure. He wanted to reinvent the model, and that was the entrepreneur in him. Can we make improvements at Gulfstream? Absolutely. We do not have enough betting machines. On Florida Derby day there were literally thousands of people who could not get their bets in. it was a disaster. With technology we'll fix that. The fact people could not bet was catastrophic. That was a flaw in the design. Thank God for technology. We can fix that.

 

If we want to do a special event, do we have the capacity? We do not have the capacity to do 80,000, but we can do close to 38,000 people. We are looking at Pan American Invitational next March, and we will test that. You don't set up a permanent infrastructure for 40,000 when you only use it once a year for something like the Breeders' Cup. I want to express my admiration for Greg Avioli and his team at the Breeders' Cup. They have built a very good model there. We are going to try and copy that model with a Pan American Invitational, with horses from different countries . If we can do that, and do it well, we'd want it to be an annual event. It certainly would not be the size of the Kentucky Derby or Breeders' Cup, but we do think it could be very successful.

Copyright © 2010, Blenheim Publishing LLC

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

Twitter Twitter
Paulick Report on Instagram