by | 11.17.2010 | 12:46am
The Breeders' Cup board of directors meets Wednesday, and they've got a lot to talk about. The organization that hosts the two-day world championships is facing difficult financial challenges caused by a steep reduction in stud fees that contribute toward a significant portion of the Breeders' Cup annual operating budget. Foal nominations also are expected to be down in 2009. The 2008 event, hosted by the Oak Tree Racing Association, failed to produce the $5-million in on-track revenue that Oak Tree guaranteed to the Breeders' Cup, and the two organizations are negotiating a settlement on the difference. This year's event, scheduled at Santa Anita, is projected to produce well short of $5 million.

Compounding these financial pressures was the loss of approximately $11 million in the stock market, dropping Breeders' Cup cash reserves from $40 million to $29 million. As a result of the declining revenue, market budgets and racing telecasts have been cut. The board initially voted to suspend the Breeders' Cup stakes supplement program, but reversed the decision after an outcry from nominators. To make up for revenue shortfalls, the board voted to use some of its cash reserves.

Some industry stakeholders are beginning to speak out, suggesting that the Breeders' Cup management team and board of directors may be jeopardizing the future of the program with some of their decisions. Among those critics is Peter Blum, a longtime, Atlanta-based owner and breeder who
wrote a guest commentary in the Jan. 10 issue of Thoroughbred Times saying the time has come for breeders to “take back” the Breeders' Cup from those who currently run it.

Two weeks later, Breeders' Cup board member Satish Sanan responded with a counterpoint to Blum that was also published in the Thoroughbred Times. Sanan
spoke with the Paulick Report about Blum's criticism, and also outlined a Breeders' Cup strategic planning committee that Sanan is heading.

Blum wrote a response to Sanan's commentary that was published as a letter to the editor in the Jan. 31 issue of the Thoroughbred Times, and also copied the letter to the Paulick Report. In the interest of continuing the dialogue about the Breeders' Cup management and governance issues, we are republishing the letter below in its entirety.

Blum's viewpoints printed here do not necessarily represent those of the Paulick Report. I spoke with Blum over the weekend, and learned more about the specific criticism he has with how the Breeders' Cup board of members and trustees and its smaller board of directors are elected, and how the board can be more transparent. Those comments will appear in tomorrow's Paulick Report. –
Ray Paulick

Management changes are needed at Breeders' Cup

Election process flawed; all breeders should have input into the organization's direction

By Peter Blum
I feel compelled to respond to Satish Sanan's guest commentary in the Jan. 24 edition of Thoroughbred Times.

It is apparent that Mr. Sanan has contributed in major ways to several positive accomplishments achieved by the Breeders' Cup, and I applaud his efforts and his commitment to “the Cup” and to the industry. I hope, also, that Mr. Sanan and other genuinely involved members of the inner Board do not take my comments personally, as my comments are not intended to be personal in nature. Even more importantly, none of my comments are an “attack” on the Breeders' Cup itself. In no way do I wish to damage the concept or viability of the Breeders' Cup per se and our important festival of racing. 

My intention is simply to speak out about the poor fiscal decisions made by management and the way our money is invested and allocated. I am also greatly concerned that the original purposes of the Breeders' Cup have been re-directed further away from benefitting the breeders who write the checks that make the Cup races possible. The shocking decision to eliminate the 121 supplemental stakes races is powerful evidence of a management culture and a decision-making process that is off-track and out of step with constituents who already receive a paltry amount of breeders' awards in return for their contributions.

Although the decision was quickly rescinded because of widespread outrage, the mindset that led to the original announcement is disturbing.   Many options were available instead of eliminating the entire supplemental program. For example, the program could have been scaled back in number, or all supplemental purses reduced by a certain percentage. In addition, purses for the Breeders' Cup festival could also have been scaled back. The title of Breeders' Cup “champion” is a huge motivator and, to most owners, worth more than the purse money.

Frankly, it is hard to stomach an investment strategy that led to losing approximately 25,000 foal nominations in a high-risk stock market. Knowing that paid-in money had to be paid out, this failure of fiduciary responsibility is inexcusable. 

Furthermore, I am concerned about the process involved in electing the inner Board and the skewed voting structure that is in place to keep the same people in power. The deck is stacked when Breeders' Cup officers, past presidents, and founding board members are also allowed to vote (if necessary) on who gets in the inner circle. It appears that four officers, six founding members, and two former presidents are eligible to vote on the composition of the inner board. This virtually ensures that the same small group of people maintains their power and control over the Board. 

We need a cross-section of industry participants with an effective mix of fresh ideas and high-level business expertise to develop new strategies that serve the breeder, while preserving our championship events in the best way possible. However, I fail to see how a new mix of people and ideas can be put in place unless the election process is changed.

I am further troubled by the lack of communication on important issues and decisions between the management/inner Board and the many accomplished and dedicated horsemen on the outer Board. The fact that many members of the outer Board first learned by e-mail of the decision to drop the Supplemental Stakes Program, just one hour before the press release went out, is hard evidence of leadership operating in a vacuum.

As with Mr. Sanan, my comments about Greg Avioli's leadership are intended to be descriptive, and not personal. In my Jan. 10 guest commentary, the only mention of Mr. Avioli's name came about because the Thoroughbred Times editorial staff inserted his name in place of my titular reference to “the CEO of the Breeders' Cup.”

If mentioning Mr. Avioli by name suggests anything that needs addressing, however, then let him speak up about the many questions and observations regarding his leadership that have recently appeared in print. A leader must be held accountable for his actions.

I have been deeply moved to hear from so many concerned breeders and respected industry participants who have thanked me for my efforts to bring attention to what I and many others see as poor strategic decisions. I have been told a humbling number of times how much my being a voice for their concerns is appreciated.

I asked a number of questions in my commentary which Mr. Sanan chose to ignore. The only one I believe he tried to answer resulted in his stunning statement that our industry is better off today than it was in 2006 when he became involved as a Breeders' Cup inner Board member. I am not sure we are looking in quite the same way at an industry with falling attendance, lower handle, shrinking purses, a steadily declining fan base, and a continuous exiting of owners. Even Las Vegas not that many years ago accounted for 10% of the national handle, but now only brings in 4% of the total. Readers can decide for themselves whether or not we are better off today.

On a positive note, I agree unequivocally with Mr. Sanan's last paragraph which reads: “In difficult times like these, we need more dialogue and less name-calling. We need constructive people looking for solutions who are willing to work together to make things better.” And, I thank Mr. Sanan for his leadership on a Breeders' Cup strategic planning committee that is currently seeking to obtain input from professionals outside the industry related to formulating an effective long-range plan. Gaining perspective and ideas from “outside” is an intelligent way to proceed, but it will still be up to the Breeders' Cup management and inner board to evaluate the sense of specific ideas and strategies. Therefore, it is essential that we elect the best and most representative people as possible to fill decision making positions on the Board.

I believe that if people are not part of the solution, they are part of the problem. Where Mr. Sanan and I differ, perhaps, is about who should be the constructive people looking for solutions. In this regard, however, the recent addition of Don Robinson of Winter Quarter Farm to the inner Board is a welcome development. As a relatively small but successful breeder, Mr. Robinson brings a needed perspective to the table. Hopefully, he will be an active and assertive voice to represent many other small breeders who often seem to be forgotten.

This is a time to speak up or, before long, we may not have much to speak up about. It is clearly a time when we need to put our egos aside and work cooperatively and cohesively toward injecting more effective ideas into the formulation of crucial decisions that affect the entire industry. The same small group of people in power should not have the ability to re-elect themselves year after year.

We cannot continue down the same path that has led us to the sad place where we find ourselves today. Together, we can make a difference to bring about much needed change.

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