One To One: Q & A With Woodbine Entertainment CEO Jim Lawson

by | 01.02.2019 | 12:43pm
Jim Lawson, CEO of Woodbine Entertainment

Jim Lawson in 2015 was named chief executive officer of Woodbine Entertainment – Canada's largest racetrack company, which owns and operates Woodbine near Toronto and Woodbine Mohawk Park, a harness track 30 miles to the west in Milton. Ontario. Prior to becoming CEO, he served as board chairman of Woodbine Entertainment. Lawson is also chairman of the board of governors of the Canadian Football League and from 2010-'15 was chairman of the The Jockey Club of Canada (he is also a member of The Jockey Club based in the U.S.). In 2018, Lawson was unanimously elected chairman of Ontario Racing, a non-profit association recognized by the provincial government as the authority for horse racing in Ontario.

Originally built in 1956 on 780 acres under the leadership of renowned Thoroughbred owner and breeder E.P. Taylor, Woodbine was transformed into a racing and gaming facility with the addition of slot machines in 2000. Revenue to racing from the Ontario Lottery and Gaming Corp.'s Slots At Racetracks program was abruptly ended in 2012, forcing Woodbine and the horse industry to seek other forms of revenue. One of the side effects of the end to that program was a one-third reduction in Ontario's Thoroughbred foal crop, from 1,200 to 800, which contributed to a horse shortage that is one of Woodbine's major challenges.

Lawson discussed that and other challenges, along with opportunities he sees for growth, in an interview with Paulick Report publisher Ray Paulick.

For those of us who have not been there recently, can you give us a description of what specifically is going on with the property at Woodbine?
The east side of the site has been cleared for what amounts to a 33-acre gaming expansion. Brookfield, a major Canadian developer in partnership with Great Canadian Gaming, is building out on the first 20 acres. Their plans entail about a 200,000-square-foot gaming expansion that will enjoin to our building; a hotel with a very large trackside restaurant; a 5,000-seat music auditorium that will have multi-use; and a five-story parkade to let customers be much closer to the building. That is by all estimates about a CAN$1.25 billion expansion that will begin soon.

The site looks like a construction zone because among other things we've had to take all the parking – employee parking and and gaming parking – and move it to the west side as we prepare that additional 20 acres for the build-out.

At the same time, we are working on mass transit coming to the site, which will be a great thing if that evolves. Right now we are dealing with capital partners on the infrastructure that needs to be built here to accommodate all of this. So we are talking with some major Canadian companies who are very interested in partnering with Woodbine to not only develop the infrastructure with us but also other benefits; we have 47 acres of residential zoning, for example, on the northwest corner of the site, which is extremely attractive as it would be in most big cities.

Is the residential part long-range?
Yes. Long-range could be within 10 years. I wouldn't be surprised if that type of construction started four to six years from now.

How will the ongoing construction affect racing operations in 2019?
It won't affect the day-to-day experience for customers. We are expecting that with major construction there will be drilling and other things. I don't think it will affect weekday racing, but our training hours on the main Tapeta track will be limited. Of course we have a training track on dirt and on turf, but with the main Tapeta track, we've negotiated with contractors to stop training at approximately 9 a.m., for horse safety. That does put some pressure on our training regimen.

On the racing front, in 2018 you switched the Queen's Plate from a Sunday to Saturday on the calendar. How did that work out?
We thought pretty well. We set another record in wagering. For us, $14.6 million is a very good number. The only fair comparison is how you've done year over year, and it was substantially up. In large part, we attribute that to being held on a Saturday.

Woodbine may be the only track that has regularly scheduled some of its biggest races on Sundays, which puts it in direct conflict with the NFL in the fall. Is that something you may change?
Yes. Same reason. We won't switch them all. For example, on our Woodbine Mile weekend, the Grade 1 Natalma and Summer Stakes will remain on Sunday. It's a tradeoff. Leaving the NFL aside for a second, which is a factor in the fall, are you better off being the only major track going or better going head to head with them and just space your races accordingly? Some tracks are very good at cooperating with that and some aren't. I think the industry as a whole needs to do a better job of cooperating and coordinating. What's good for one is good for all of us and we are very much in favor of coordinating not only the timing of stakes races but coordinating during the day the timing of race cards. We're finding like many other tracks that we are better off from a wagering standpoint when we go head to head, but with appropriate spacing so tracks aren't running over the top of each other. We as an industry have to do a better job.

What's the reason for adding a second turf course where the Standardbred track used to be?
We spent a lot of time studying this, particularly with impetus from horsemen. Our Mohawk harness track is about a half hour west of Woodbine and it has 50 training centers within a 10-minute drive. We were racing at Woodbine harness during the winter months on Friday and Saturday nights – also on Monday and Thursday – and the horsemen at those training tracks had to fight heavy traffic, which is akin to Los Angeles or Boston or New York. When you add snowstorms to that, what should be a half-hour or 45-minute drive became two hours. It just wasn't good for the horsemen. We also looked at our wagering and how much was over the Internet and where it was coming from. There was some concern, but we haven't lost wagering. So after moving the harness races to Mohawk, we were sitting there with that track, and it just called out for a seven-furlong inner turf, which you may recall we had years ago.

Woodbine's new turf course will be ready for the 2019 season

There is now more interest in turf racing all over North America. Look at what NYRA is doing (added a second turf course at Aqueduct to replace the inner dirt track) and the way Gulfstream uses their turf track. There's not a perfect business case for it on a rate of return basis, but in terms of keeping and attracting horses it's sure going to be good to have that second turf course. We spent a lot of time with Mick Peterson (racing surface consultant) planning the most modern of technology and surfaces in terms of drainage and grass. We invested a lot in fiber to have what I will describe as a very thin surface. If you walk on the outer turf it's like walking in the rough at a U.S. Open (golf tournament). Walking on the new surface is like walking on a fairway. It's a thin surface with a fiber that's going to adhere to sand with great drainage. We're expecting we'll be able to withstand a fair amount of rain and be able to stay on the grass – much more so than our other course. We'll have some decisions to make when we move races off the soft outer course whether we move to the Tapeta or to the new grass. That will be a decision for the racing secretary.

Will the 2019 season run longer than in previous years?
By just one week. Our experiences have been that the horses are slower to move up from Florida and Kentucky early in the year and it's been light to start the season here, so we are moving it a little bit. Having said that, I think we may open our backstretch a little earlier, including our main Tapeta track. We've always had the dirt track open the last week of February, but we may move the opening of the main track earlier to give horses a chance to get ready earlier. We're starting slower with a couple of weekends and then we'll run the same length, a 133-day meet to the middle of December, which is a week later.

What is Woodbine doing to address the major challenge many tracks face, the shortage of horses?
One of the things that is unique to Woodbine, and we are not unlike the state of California, is that we sit somewhat on an island up here. We are not as far away from other tracks as California is, but there's this thing called 'the border' that I think is mostly imaginary. We think it's pretty seamless, but we need to get horsemen to understand that it's not a long trip from Kentucky or the New York tracks to come here. We are going to spend some time on that this winter, educating people that it's a great place to come, and we are going to address that through recruiting efforts.

Another thing we are looking at, and these are rough numbers, but about 25 percent of our Ontario foal crop from 2017 sold at Keeneland or Fasig-Tipton as yearlings – about 200 horses. We have to do a better job of getting owners of those horses to race here. We are looking at things like writing races for 2-year-olds that have gone through any sale in North America. We've got to do a better job of attracting those Ontario-breds, and many of them are our best Ontario-breds that sell at Keeneland and Fasig-Tipton.

The third thing is the new turf course. We're going to offer six to eight new stakes this year on turf. Everyone loves black type, particularly for the fillies and mares, so that may be a good tool to get some of those Ontario-breds for black type. A regular menu of five or six turf races every day should attract horses up here, and I do think if we are attracting horses to run up here on turf, if a race does have to be moved to the main track, most turf horses run well on Tapeta (synthetic surface). We know we have a great backstretch and how well things are run. We have to do a better job of letting the North American horse racing world know that, and also showing that the border isn't as big an impediment as some might think.

Is part of that impediment immigration?
Immigration is an issue in the sense of making sure people can get good labor. We've been working with the HBPA here with an on-track program that has produced 20 to 25 grooms a year. We are investing money in our backstretch for accommodations. Immigration is one of the concerns – just being in a different country. That sounds strange to us, because we don't see it that way.

The Canadian dollar being weak has hurt a little bit, too. (Currently, a Canadian dollar is valued at 73 cents in U.S. currency.) Having said that, our purses are really strong. We've just announced a deal with the HBPA where we are scheduled to pay $61 million in purses next year. On a North American basis, not only do we rank very high on overnight purses, but I look at it this way: that $61 million for one racetrack to pay out over the course of a year is a great thing potentially for owners and for trainers, as they can come here and stay here.  That's why the people who do that, love it, because they don't have to ship their horses out, ship their labor around. There are few individual racetracks – Gulfstream being one exception – that actually pay out more in a year on a Thoroughbred basis than we do.

Why was it important to get the four-year purse agreement done before the 2018 meet ended?
It's well documented that the Ontario racing industry has been through a lot. The previous government took a very bad step when they cancelled the Slots-At-Racetracks program. It's been a slog it out tough time for five or six years. Any time we can encourage and show people that there is stability, it's important to do. We are entering into the breeding season the first week of February, so that is a factor, just to give people the certainty and stability that, hey, here is a sign of our commitment. Even though wagering is down, Woodbine is generating and plans to generate additional income from its real estate and other sources that we're working on. We wanted to give people, as did the HBPA, the confidence that, firstly, the industry is secure – and the timing was related to breeding, so breeders could have confidence – and secondly, good news as people were packing up to go to Louisiana or Florida or Maryland or wherever they go. We want them to know that we'll have strong purses next year to give them some good news and that we look forward to having them back. It was a great time to make that announcement.

What is the status of incentive programs for Ontario breeders? I am hearing some discontent from that community.
There is a longstanding government takeout rate to support the Horse Improvement Program that is based on a percentage of wagering.  I think it's 3 percent of wagering, so, for example, if there's $800 million of wagering in Ontario, that's $24 million for the program. Nothing has changed there. The program hasn't changed. Some of the rumblings you may have heard is that when the government put together this new funding program to support racing for 20 years, they put in a new governance structure to deal with the Horse Improvement Program. The governance they now have has representatives from all levels of Standardbred tracks and breeders representing Quarter Horses, Standardbreds and Thoroughbreds. The mandate of it now, in theory, is that there is a single unified voice for the entire racing industry. Ontario Racing, which has board members from all different constituents, is assuming the management of that $24 million. As far as I know, they don't have any plans to change the program. The money hasn't changed – it's just putting it under the management of Ontario Racing.

I think the rumblings are that CTHS (Canadian Thoroughbred Horse Society) has long had its own program. With this new governance, it's going to fall under Ontario Racing, the industry association.  There have been concerns expressed about that step. The HBPA, Woodbine, Fort Erie and the CTHS all sit on a committee which directs and designates how that funding will be used to support the industry and support breeders. It's always been considered a horsemen's improvement program, and I think it can work if people give it a chance and the governance and committee structure is designed to give everyone a say-so.

With so many different constituencies, how do you make everyone happy?
I don't think you do. It (the new governance) gives everyone a say, but those who understand the inner workings of this industry, know it is competitive by nature, and I'm not talking about competitive on the track. There are only so many revenue generating opportunities. Most of that comes from pari-mutuel wagering. There are just natural conflicts and, therefore, natural different interests are at stake, between breeders and owners, racetracks and breeders, breed vs. breed – the list goes on and on. So when the pie is somewhat finite, which it is, and it may be shrinking, I don't think you do keep everyone happy. It may be very idealistic on my part, but people just have to take off their own hat and look at what's best for the industry, to try and sustain the strongest industry that we can. It's not ideal, but there are going to have to be some choices made. Not everyone around that Ontario Racing constituency is going to be happy with what may be some inevitable choices on how best to keep this industry going.  By its very nature, there are different interests.

What other major challenges is the industry facing?
There is no lack of challenges. Certainly the horse supply is the biggest, and that is tied in part to whether this industry is doing a better job of attracting and courting new owners. Does that start with new guests and giving them better customer service? We're cognizant of all that. That's a challenge.

Sports betting is a big challenge. It's inevitable that it's coming to Ontario. We feel that Woodbine can play a fundamental role with single game sports betting, given our structure, our backbone of infrastructure. We can run single game sports betting off our tote system, our infrastructure, our HPI (online wagering) system and our customers.  We can run that next week, which reduces a lot of risk for anyone coming into sports betting in this province. We need to make a lot of noise to have the regulators and the politicians embrace the fact that horse racing can and should play a role with its infrastructure in sports betting.

I'm not talking about doing it for Woodbine, I'm talking about doing it to support the entire industry and all the people employed in it. We're happy to do that. We're effectively a non-profit corporation. We're for-profit for tax purposes but we don't have any shareholders.

Sports betting is going to be a big challenge going forward for us and we want to make sure that we have a role in it. The competition we all face in the industry, the reduced horse supply and the demographics of our ownership are big challenges. We certainly have them all here in spades right now. Looking down the horizon, we see sports betting coming and we've got to position ourselves to play a meaningful role.

Won't sports betting highlight different pricing between that and horse racing, where the takeout is much higher?
We constantly look at our margins to make sure we are competitive in our pricing to customers. As you know, our larger customers are acutely aware of takeout and pricing. We manage a lot of it through player rewards to make sure we are competitive. It's a very competitive business. Putting sports betting aside, we are faced with offshore wagering on our product. We don't get a lot of help from the people who are supposed to be policing that, so we are competing with horse wagering shops that don't pay for any of the infrastructure or costs, any of the purses that go into racing. That makes it difficult. And we are somewhat disadvantaged because we have certain additional regulatory costs in Ontario that we are fighting all the time. Our margins are thin. The proper answer to your question is that we know we have to be competitive, but it's not an equal playing field.


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