An More Complicated Industry (Spring 2008) by Drew J. Couto
At the risk of stating the obvious, when TOC became the official representative of California Thoroughbred horsemen in 1995, it was a far less complicated industry than it has become.
The core responsibilities then transferred from the California HBPA included the negotiation of contracts with each of the racing associations and fairs, the provision of consent under the Interstate Horseracing Act, the monitoring of legislation impacting racing, regulatory matters before the CHRB, and service of the boards of the Northern and Southern California off-track wagering corporations – NCOTWinc and SCOTWinc – and for California Horse Racing Information Management System (“CHRIMS”). More...
Objectively Measuring "Success" in the Racing Industry (Winter 2008) by Drew J. Couto
An opinion is one thing there will never be a shortage of in the racing industry!
Ask a horseman for his opinion on just about any subject, and be prepared for one of the most passionate expressions of personal belief you may ever observe. Never mind if there isn’t any factual basis for the opinion, it is bound to be expressed as forcefully, and with as much conviction, as one would expect from a scientist who had devoted her entire professional life to the study of a single issue! More...
Advance Deposit Wagering is an Industry Asset (Fall 2007) by Drew J. Couto
Putting Safety First Occasionally Requires the Taking of Some Risk (Summer 2007) by Drew J. Couto
Sometimes tragedy – such as the unfortunate breakdown of a horse – is an uncanny motivator. It is perhaps the single most common aspect of racing to motivate owners to reject complacency in the search to find new means to reduce – if not eliminate – the risk of injury to horse and rider alike. In the course of that search, nearly five years ago certain California track and horsemen’s interests began taking a closer – much closer – look at engineered racing surfaces in use in Europe. More...
Almost 32 years ago, shortly after my 16th birthday, I awoke at 4:15 a.m., got dressed, and pedaled my borrowed Stingray bicycle to the old stable gate at Bay Meadows. I chained the bike to the fence, showed my license to the guard, then went "to work" in Dent Caton's barn. More...
As our Chairman points out, for 2007 the TOC Board has set its sights on achieving a few key objectives, perhaps none more important than the following... More...
Cue the music: "Hooray for Hollywood…something, something, something, Hollywood."
Objectively Measuring "Success" in the Racing Industry
by Drew J. Couto
An opinion is one thing there will never be a shortage of in the racing industry!
Ask a horseman for his opinion on just about any subject, and be prepared for one of the most passionate expressions of personal belief you may ever observe. Never mind if there isn’t any factual basis for the opinion, it is bound to be expressed as forcefully, and with as much conviction, as one would expect from a scientist who had devoted her entire professional life to the study of a single issue!
It’s all well and good to have an opinion on a subject; heck, it’s our right as Americans. But, is it really the only basis upon which we want to make important, critical decisions about the future of racing in this great state?
In just about every other aspect of our lives – personal or professional – most of us go out of our way to gather as much information as possible about a subject before we make a decision that will have anything other than a trivial impact on our lives. When we’re sick, and our doctor is unsure of the origin of the illness, we see a second, or a third, and sometimes a fourth doctor about our condition. In choosing a school for our children, we visit the campus, look at the graduation rate, research its professors, we do everything possible to ensure that we are giving them the best chance to succeed in life. God forbid any of us ever get involved in a lawsuit, but if you do, one thing is for sure, you’re going to want the best lawyer you can find, who will leave no stone unturned in getting to the truth and facts that will exonerate one of liability!
Why then when it comes to making critical decisions about the future of California racing, are we content to have such decisions made based largely on opinions devoid of factual basis? To do so in any other aspect of our lives would seem irresponsible, yet it is precisely what a few noisy antagonists are advocating this industry do: “Ignore verifiable facts about the many improving aspects of California Thoroughbred racing since the first engineered surface was installed, and go back to archaic dirt racing surfaces.”
Huh…?
After years of seeing declining average field sizes, California racing has been enjoying increasing field sizes since the introduction of engineered surfaces. Players fromaround the country have noticed this fact, and welcomed it, as is evidenced by increasing out-of-state handle. Overall, there have been far, far fewer breakdowns than was the case on our old dirt tracks; demand for on-track stall space is approaching all-time highs; there are stunning increases in the number of horses working over these
surfaces compared to prior years on dirt surfaces; out-of-state stables have come west to run in California for the first time in many years; horses are making more starts; and, the best news of all: purse revenues are up!
All of these trends reflect increases in the traditional indicators by which the success of racing has been measured! Yet, despite that success, the antagonists have seized upon Santa Anita’s Cushion Track failure to drain during a severe early January rainstorm as some form of definitive proof that the decision to employ this new technology was a horrible mistake that must be reversed immediately. In my opinion, they are incorrect! While that one Cushion Track surface may not have been the “all-weather surface” its manufacturers said it would be, until the deluge it was clearly a far safer racing surface than the prior dirt track!
The severe January weather was not limited to Southern California, as Northern California saw more than its fair share of wind and rain. By all accounts, Golden Gate’s Tapeta surface handled the rain extraordinarily well, draining as represented. Unfortunately, after a long period without incident, there was what seemed to be a rash of breakdowns on-track, at least in comparison to the prior period. Again, and true to form, the nay-sayers saw that misfortune as an opportunity to proclaim that these surfaces are failures. In doing so, they have chosen to overlook the fact that several of the horses breaking down were making either suspicious, severe drops in class or running at the very bottom levels, after having demonstrated no or suspect physical abilities.
If it is fair to blame a surface for all such breakdowns, one must ask at what point is it also fair to question the judgment of individual horsemen who choose to get one more race out of a sore horse, or who drop a horse of deteriorating physical ability in the hopes of making it someone else’s problem? In my forty plus years of running around the backstretch, I have found very few horsemen willing to accept responsibility for the breakdown of a horse. Does that mean they are never, in some fashion, to blame for such misfortune? I don’t think so, but that’s just my opinion.
What is not opinion is that, by all traditional metrics, engineered surfaces have been good for California Thoroughbred racing! They have provided safer racing and training surfaces for our horses, and have been integral to the improvement of our basic business; the carding of attractive racing and wagering opportunities, and increases in track and purse revenues!
ADW
By Drew J. Couto
In January of this year, the industry began the process of revising California’s advance deposit wagering ("ADW") laws in the hopes of avoiding a last minute, proverbial "food-fight" in front of state legislators. Over the ensuing five plus months, the parties exchanged approximately 15 drafts, representing the thinking of most stakeholders; tracks, horsemen, and ADW providers. Some took the effort very seriously, others didn’t.
In the end, forced together by extremely strong leadership from Senator Dean Florez – Chair of the Senate’s Governmental Organizations Committee – the industry worked until 3:30 a.m., on the very last day possible, to fashion a compromise. No one was completely satisfied with the end product, but it did include a number of concessions that will enable the continuation of telephone and internet wagering in the State.
Going forward, as California’s existing exclusive ADW deals come to an end, any ADW company seeking an exclusive wagering rights or distribution arrangement should expect only to do so if it is willing to pay – top dollar – for such valuable rights. Absent such compelling economic reasons to do so, TOC expects that the right to wager on a California Thoroughbred race will be more equitably distributed among licensed ADW providers such that race fans will be able to wager on the provider of their choice, not as selected for them by some racing executive pretending to understand what the patron really wants in terms of a provider. Broadcast distribution partners, including TVG and HRTV, will however be compensated by any and all ADW providers that accept wagers on California races but don’t broadcast the races themselves. There will be no free rides, as our broadcast partners deserve to, and will be, compensated for that service.
"Exclusivity" in terms of ADW broadcast and distribution rights may not be a dead concept in California, but one thing is for certain, those wanting to continue the model must expect to pay more – substantially more – for such rights, particularly given that California accounts for about two-thirds of the entire U.S. ADW handle. This is an extremely valuable market, with an extremely valuable signal. The industry must treat it as such, and utilize the new ADW law as a means of doing so!
After further due diligence inquiries including the evaluation of potential toxicity threats, environmental concerns, maintenance practices and schedules, replacement costs, etc., it seemed the industry unanimously agreed: Prudence dictated that we embrace these new technologies, as they were demonstrated and, perhaps more importantly, perceived by those who actually use them on a daily basis to provide a more consistent, safer racing surface.
Yet, as with any "new technology," we did expect there to be a "learning curve;" i.e., some period of adjustment and refinement in the materials, practices, and personnel used to maintain the surfaces. We also anticipated that during this period second-guessers would step forward in "I told you so" fashion, suggesting that it was unwise to adopt this technology until every uncertainty was known and assessed. Evidently, they are not as convinced that whatever yet to be identified "risks" associated with these new surfaces were substantially outweighed by an immediate and genuine need to minimize the risks of injury to horse and rider. Thankfully, most California racing associations rejected calls for the status quo, electing instead to pursue these new racing surface technologies. Del Mar is the latest to do so, and we thank and commend them for the investment, and for the courage to take "a risk" in seeking means to improve safety! Polytrack – admittedly a "work in progress" – has shown great promise and, based on early reactions from horsemen, represents a vast improvement over the track’s prior dirt racing surface. Make no mistake; the majority of horsemen training on Polytrack surfaces nationally feel strongly that a less than perfect Polytrack is far better than a "good" dirt track. To everyone’s credit, California’s efforts to improve safety do not begin and end with the installation of engineered racing surfaces. Rather that is but one part of an ongoing effort to improve safety conditions both in the barn area and on track. Under the oversight of the California Horsemen’s Safety Alliance ("CHSA") – a non-profit joint venture of the TOC and CTT initially established to improve backstretch safety conditions as a means of reducing the industry’s workmen’s compensations costs – additional safety programs have been implemented or are being developed. Those programs include bilingual safety materials and videos for backstretch workers, the establishment of "best practices" for common stable operations, development of new safety helmets and vests presently undergoing rigorous ASTM testing, coordination of a detailed national study of actual and potential dietary health risks for riders, the acquisition of over 100 sets of wire reinforced so-called "safety reigns" for use and evaluation by licensed California riders and trainers, etc. Every day, the CHSA and its staff work to find new ways to protect from injury those who work in this industry. They do it largely as an invisible, underappreciated force, to whom we all oweour gratitude! On behalf of our 9,000 members, TOC says, "Thank You!" As responsible Thoroughbred owners, please do your part to improve safety conditions on the backstretch and race course. Make certain to remind your trainer to take full advantage of the various programs California racing offers. Doing so will benefit not only that stable, but the totality of the industry by further reducing insurance and other related business costs, and more importantly by protecting our horses and their riders from avoidable mishaps! After all, we’re in this together, so let’s act that way! Have a great summer!
Almost 32 years ago, shortly after my 16th birthday, I awoke at 4:15 a.m., got dressed, and pedaled my borrowed Stingray bicycle to the old stable gate at Bay Meadows. I chained the bike to the fence, showed my license to the guard, then went "to work" in Dent Caton's barn.
It was early summer. I was out of school, sleeping on the floor of my brother's apartment, and immensely proud of just having been licensed as a stable employee by the CHRB. I could now "officially"work on the backstretch. It was an exciting and fun time, doing whatever I was told to do, running from the main track to the training track, and back to the barn. Every day was a wonderful learning experience, and provided what I later appreciated as the foundation for my love of and commitment to California racing!
I spent part of almost every summer thereafter – through high school, college, and law school –working on the backstretch, in some capacity or another, in Northern California. I won my first race as an owner, at Bay Meadows, in 1987. It was there too that I made acquaintances that later developed into longtime friendships, and where I accepted gratefully the advice and guidance more learned horsemen generously offered, and to whom I owe much of my appreciation for what they do on a daily basis.
Make no mistake; racing in Northern California holds a dear and special place in my heart. More accurately put, it is the people there who I believe are the heart and soul of racing in the North, and who deserve TOC's utmost attention and support!
No one who has ever been part of the Northern California racing circuit sees the impending closure of Bay Meadows Racetrack as anything other than a very sad day. No one. Its closure represents the end of a glorious era, severing our ties to memorable performances by great horses such as Seabiscuit and Native Diver. But its closure was certain. Its owner – the Bay Meadows Land Company ("BMLC") – had for years warned everyone that the track was slated for development, and had already demolished the old barns, graded the training track, and long ago built a diverse, more profitable commercial and retail center on the property. All that remained was the setting of a date certain for the closure of the track.
Over the past six months, senior Bay Meadows management has – at different times – informed TOC's Northern Directors and staff, and officials with Golden Gate Fields and the Fairs, that it was "highly unlikely" that the track would race beyond its Fall 2007 season, then that it may run during the first half of 2008, and later that it might seek to run through that entire year. Each such disclosure came in the midst of meetings intended to plan for the future of Northern California. While seemingly welcomed news, we requested of Bay Meadows to receive assurances that it would provide the industry with sufficient "lead time" to assure that we could have in place contingency and long-term plans for a new – and hopefully – improved racing circuit in the North, at facilities and on track surfaces horsemen and fans deserved, but the track's ownership and management consistently refused to do so.
Honestly, when Bay Meadows recently applied to the CHRB for a two-year exemption to its mandate requiring engineered racing surfaces by January 1, 2008, our hopes were buoyed that the request signaled a decision to continue operation of the track. However, when asked point-blank by the CHRB if the request represented a commitment to continue operating for two more years, Mr. Liebau indicated that it did not. Despite the request, nothing had changed.
With literally thousands of jobs dependent on the continuation of a vital racing circuit at risk, and with the future of investments made by countless owners and breeders in the State uncertain, TOC – and the rest of the California racing industry – had little choice but to accept that now was the time to move on. Whether this disappointing reality were to occur in 2008 or sometime thereafter, we all needed to move forward with plans to improve existing or develop new racing/training facilities in the North. The key word here being "new!"
If we expect Northern California racing to regain its strength – to be a vital racing circuit – then it is time to make the difficult decisions we must, and to embrace these changes, sad as they may be, as a good thing! Life repeatedly teaches us that from difficult times often wondrous and wonderful things emerge, if we look to make such things happen.
BMLC long ago elected to purchase, close, and develop the Bay Meadows racetrack. That was its decision, and its decision alone.However, it is now up to those that wish to see a successful racing circuit reborn in the North, to step forward, accept this change, and to move on toward a new future.
I, personally, will have wonderful memories of Bay Meadows. But, I'm confident that I will have another opportunity to create more such memories on a new racing circuit in the North!
As our Chairman points out, for 2007 the TOC Board has set its sights on achieving a few key objectives, perhaps none more important than the following:
Why is it that these goals have been selected as priorities over others that some may view as equally important? In a nutshell, because the Board firmly believes that these objectives are the most critical to stabilizing the industry, long-term, and to improving the basic economics for owners. Those beliefs stem from the following facts:
1. California faces greater competition from out-of-state racing jurisdictions strengthened by laws enabling each to subsidize purses with revenues derived from alternative gaming activities such as track-operated slot machines and VLTs. To compete, California racing must either obtain similar rights to operate such devices, or receive ompensation – mitigation –from California tribes that currently enjoy the exclusive right to do so. "Mitigation" in this sense stems from the fact that, in reaching a compact with a tribe, the State may require that the adverse economic impact on existing gaming activities be mitigated by tribes entitled to conduct such gaming activities. Thus, unable to compete on an even footing with our out-of-state colleagues, California racing has no choice but to look to the tribes for help.
2. Five years of ADW activities have revealed the strengths and weaknesses of California’s advance deposit wagering laws and regulations. As intended beneficiaries of approximately half of these ADW revenues, owners have been effectively denied the ability to control the use of our race signals or to participate in decisions that impact how imported Thoroughbred race signals are used by ADW providers in the California wagering marketplace. Similarly, revenue and fee allocations made previously on inaccurate predictions can now be adjusted, based on actual data and handle history.
3. The recently concluded Fall meet at Hollywood Park proved, beyond a shadow of a doubt, that engineered racing surfaces – such as Cushion Track – are not only safer for horse and rider, they are extremely popular with race fans, and with concerned Thoroughbred owners from around the country. Establishing California as the first major American Thoroughbred racing jurisdiction to offer year round racing on such surfaces, North and South, will signal our commitment to remaining one of the premier racing jurisdictions in the United States.
4. Closure of at least one track in Northern California now appears almost certain to occur in 2008. Without a feasible plan to establish an alternative venue by 2009, one that offers improved facilities for horsemen and patrons, racing in that region could suffer a setback from which it would be difficult, if not impossible, to overcome.
5. For far too many years, industry leaders have conceded that the current simulcast business model "does not work," yet have done little or nothing to correct its deficiencies. Paralyzed by threats of retaliatory antitrust litigation, the industry continues to annually implement the failed model in the misguided hope that somehow the situation will spontaneously improve. In cooperation with concerned horsemen’s groups from around the country, TOC and these others have retained the services of one of the country’s leading antitrust law firms in an effort to legally develop a new model, one that ensures a fair and equitable share of such revenues for owners everywhere.
6. With racetracks continually putting a higher premium on carding the races with the fullest fields, they frequently do so at the expense of providing racing opportunities for all classes of horses. Repeatedly cancelling overnight stakes and/or two year-old races sends the wrong message to those owners and trainers looking to build their stables with such horses, and who otherwise invest in or breed new racehorse inventory. To build and maintain healthy racing programs, TOC believes it is imperative that racetracks offer – and run – a broad and stable menu of races, signaling a longer-term commitment to the sport and industry.
These are but a few of the reasons underlying the prioritizing of such issues. We encourage TOC members to contact directors and staff about these and other goals you believe important in 2007.
Remember, this is your organization; we need and value your support and input. Take advantage of our willingness to discuss important issues, and to share your views on the best strategies and goals for the organization to pursue.
Yes, that silence everyone has heard roaring on the Westside of Los Angeles is the barely audible sound of horses training over the new, engineered Cushion Track racing surface at Hollywood Park. It has been said by many that horses training over the surface just seem "happier," but no more so than the owners and trainers of those horses!
Congratulations and thanks are due the owner of Hollywood Park - Bay Meadows Land Company ("BMLC"). Despite some self-inflicted uncertainty, BMLC came through as the first California track owner/operator to install the kinder, gentler racing surface; one more likely to protect the long-term health of horses and riders.
With owners - for years - being the one group bearing the greatest financial and emotional burden every time a horse was injured racing or training, this development could not have come at a better time. It seems that there has been far too much acrimony, bad
news, and splintered political agendas over the past year for anyone to endure. It was time for some "good news," and Hollywood Park's new surface is certainly that!
If industry predictions hold true, this surface - and those scheduled to be installed at both Del Mar and Golden Gate Fields next year - should help to improve horses' soundness, and thus their ability to race injury-free more frequently. The surface can already be
credited with attracting renewed interest in California racing from out-of-state stables, and fans. In fact, several of those stables have indicated their intent to ship west in November, if not before.
Increased field size is also an anticipated benefit of the new surface, which - if it happens - will do much to improve the attractiveness of California race signals as a betting product. That too could not occur at a better time. Years of declining field sizes have taken a toll on track and purse revenues, and if not corrected - either through improved racing surfaces or fewer racing dates - would eventually doom California racing.
It's encouraging to see those realities appreciated by current California racetrack ownership, who are finally making the types of capital investment needed to reverse some of the troubling trends that have undermined this industry for nearly a decade. Equally
important is the fact that our track partners seem to have discovered better means to target more marketing dollars into their local markets, and the investment is paying off. Over the past two years, the meets at Santa Anita, Del Mar, and Fairplex have seen new and/or sustained growth in attendance, and to a lesser extent, handle. This too is "good news!"
Indications are that Hollywood Park management intends to improve its marketing in the same way, beginning with the upcoming Fall meet. If that effort in anyway resembles its efforts in introducing the first engineered racing surface to California, then more good news awaits us all.
At this time next year, I suspect that I will have the good fortune of reporting to owners that the new racing surfaces at Del Mar and Golden Gate Fields have proven to be unqualified successes, and that Santa Anita's engineered surface will be installed during the summer of '08. I am also hopeful that some time next year, TOC will announce that the industry has secured legitimate ommitments from Sacramento as to some form of tribal gaming mitigation for us all.
Let’s see:
Who is it that might want California Thoroughbred owners’ interests fragmented, rather than united and advancing owners’ causes through a single, strong, effective voice?
Could it possibly be a certain track operator and/or one ADW company, both of whom are represented by one political consultant who – while meeting in early Spring to discuss the industry’s effort to pass Instant Racing legislation – threatened that if TOC did not stop its efforts to evaluate future racing venues and opportunities, as well as a better revenue split between owners and that certain ADW company, there would be untold consequences, as they had "a plan to deal with TOC"?
Could TOC’s refusal to accept the "net deal" revenue split – which actually guaranteed nothing to purses – proposed by that track interest in its version of the Instant Racing bill have contributed to the effort to weaken TOC?
Why were only lobbyists hired by – or in business with – the principals of Bay Meadows Land Company, Bay Meadows and Hollywood Park racetracks, and Stockbridge Capital – parent company of the foregoing – active in the introduction and support of a bill to split representation of Northern and Southern Thoroughbred owners?
Why did nearly every other California racing industry interest – the CTBA, Oak Tree, Del Mar, Santa Anita, Golden Gate Fields, Fairplex, CARF, Youbet, and Xpressbet – vehemently oppose this thinly veiled effort to retaliate against TOC for its legitimate and well-intentioned efforts to work with the balance of the industry, and to protect owners’ short and long-term investment in California racing?
While no one will question the motives of certain horsemen in the North concerned about what they perceive as a lack of representation within TOC, we do ask them to objectively consider why a certain track and its president would personally ask them to sign a petition calling for a split of their representation, without any of those horsemen first contacting their local TOC Board members or TOC staff about their concerns. It’s a sad fact, but not once before the bill to split TOC was introduced did anyone associated with the petition contact TOC about any such grievance or concerns. Anyone who suggests otherwise is mistaken, or worse.
Honestly, what I personally fear is that those who were asked to sign the petition were not fully informed of the potential severe negative impacts such a split would have on horsemen in the North, and the viability of Northern California racing in general. For example, were there two organizations – and purse and program revenues derived within a zone kept within that zone – subsidized workers compensation rates in Northern California would be about two to three times higher than they are in the South, rather than half as much, as they are this year. Why? Because a substantial percentage of program funds derived in the South were used to help stabilize a more precarious situation in the North, in the hopes of helping racing throughout the State, rather than exclusively within one region.
The decision to allocate workers compensation subsidy funding in this manner was made long before any petition suggesting a lack of representation or interest in the North ever surfaced. No, it was made by TOC and CTT leadership because of their concerns for and awareness of dire conditions in the North, and from a genuine desire to see them improve.
Though TOC is not a perfect organization – as no such organization exists – we are extremely responsive to our members’ inquiries and needs, and employ a small staff that makes itself available nearly 24 hours a day, seven days a week. We are constantly soliciting member input and suggestions as to how the organization can better serve owners, and take quite seriously the comments and concerns our members share with us. TOC is, after all, a representative service organization dedicated to Thoroughbred
owners’ interests. The organization was created as an owners’ organization, and California state law mandates that it serve as such.If any owner feels that the organization must be improved, then all we ask is that you work from within to help us to make the changes necessary. California Thoroughbred owners’ representation will not be strengthened by two organizations, only weakened. Weakening TOC is the avowed goal of certain other competing racing interests, and should not be such for any group of concerned owners.
There are some very mean-spirited people in this industry who would much rather spend their time, energy, and money attacking those who are honestly trying to improvethe business, than to try to work together, for the good of all.
Thankfully, I have not personally suffered the experience of being on a sinking ship. Though, like most of us, I have watched Hollywood film portrayals of what it must be like in those last – undoubtedly – terrifying moments. Desperate to survive, passengers and crew fight for the few remaining life preservers. Lost in the consuming fear is any regard for long-revered and noble notions of "saving the women and children first!" We see human nature at its very worst, yet find ourselves fixated – in horrified recognition – on the consequences of their "me first" and "the hell with others" attitude. In the end, they all die…
Uh, excuse me, but has anyone else recognized that the ship we’re on is – metaphorically speaking – sinking!
That’s right, just about everyone involved in racing has figured this out, yet so many within the industry are seemingly content to fight for life-jackets, and to beat down anyone advocating order and calm in the face of such danger. For them, it’s not about saving the boat, nor the women and children. No, it’s about protecting their own self-interests, be it for profit or convenience.
Occasionally, there are moments in which I am embarrassed to admit that I am part of this industry. I am ashamed to watch good people – and organizations – be slandered and wrongfully accused of improper deeds and objectives. They are made targets, not for any actions they have taken or failed to take, but because those who choose to attack find it personally far easier to assail others than to look critically at and honestly assess their own actions and motivations.
It’s an old ploy by those who choose not to deal with issues on their merits, but elect instead to attack others whose views differ from their own. Such tactics are more than intellectually dishonest; they are terribly harmful to this industry’s viability here in the State.
In recent months, certain members of TOC’s Board and staff have been the targets of an effort to cast their actions as something other than in the best interests of owners, and the industry in general. At the heart of the effort is a thinly veiled desire to curtail TOC’s efforts to identify and evaluate the most appropriate future racing venues in the State, from the owners’ perspective.
Much is at stake for owners, and for track operators not truly committed to continued California Thoroughbred racing. You see, for them, its about self-interest and profit. For us, it’s about principle, duty, and candor. After all, TOC Directors and staff can stand before all California Thoroughbred owners and truthfully say:
Not one of us will personally profit by the decisions we make! Not one of us has a financial stake in any decisions relating to the location of future California racing venues!While others are fighting – by any and all means possible – to secure that metaphorical "lifejacket," I am quite proud to report that owners will find TOC Board members and staff directing our energies toward saving the boat, including the "women and children" onboard, as well as even those unscrupulously fighting against us.
TOC members can be assured:
This ship will not sink on our watch!Okay, honestly now, how many of us foresaw the imminent sale of Hollywood Park in January of 2005?
I, for one, did not. Nor did most of my colleagues in California Thoroughbred racing. Shame on us! But, I’ve always found that the ability to learn from one’s past experiences – and mistakes – is a valued, if not essential, personal skill; one we all admire and aspire to.
What is it TOC learned from our experiences this the past year? We learned two very important lessons… again. First, to always expect the unexpected. Why? Because doing so improves our analytical and strategic thinking skills, and better prepares the organization to plan for and respond to the challenges that face California racing today.
Second, we learned that the pace of change and the presentation of industry challenges are accelerating far faster than anyone candidly expected.
Those realizations have not been lost on this organization. In fact, they have increased – if that was possible – the motivation of its directors to implement a strategic plan for the improvement of California Thoroughbred racing. No longer does this Board intend for owners to have to choose between options others have identified and/or foisted upon us. Instead, it is moving – with increasing speed – ahead toward a future that could look significantly different than it does now.
At the top of the list of strategic priorities established by the TOC board is identifying and assessing which racing venues will offer California Thoroughbred owners their best opportunity to compete for the highest average daily purses offered by any racing jurisdiction in the United States, as we do today. Determining this issue requires more than simply agreeing upon which track is currently located in the most desirable market, but upon such additional concerns as the ability to couple our racing product with other entertainment and gaming options.
- Is it better to renovate an existing facility and push for growth in a mature racing market or to try to partner with California Native American interests in developing a state of-the-art, 21st century racing venue where racing is combined with gaming activities?
- Three years from now, assuming renovation of an existing racing facility leads to increased purse revenues of, say, 25% or even 50%, where will that place California’s average daily purses relative to states such as New York, Florida, Pennsylvania, and Louisiana; all being racing jurisdictions having or about to have slots or video lottery terminals? Fifth?
These are just two of many complicated questions the TOC Board is trying to identify and answer. Due diligence requires that it thoroughly examine each and every option, before reaching any conclusions. Consequently, these questions go, as of yet, unanswered.
Another top strategic priority is expanding the distribution of California racing signals through existing and new advanced deposit wagering vehicles including, possibly, a non-profit ADW provider controlled by owners/horsemen. Why? Because this Board feels that conveying owners’ rights to third-party ADW providers – as have some of our track partners – is not in our long-term best interests, and has only served to unnecessarily embolden these providers, and to have limited the distribution of signals and the revenues returned to tracks and horsemen.
It’s been three and a half years since advance deposit wagering ("ADW") was authorized in the state, yet numerous key questions about its impact remain unanswered. For example:
• Has ADW been successful in attracting new fans to the sport?
• Has it cannibalized handle previously derived at locations from which the industry received a higher return/percentage?
• To what extent has the shift in wagering handle from satellite facilities to ADW companies reduced funding for stabling and vanning, marketing, customer services, capital improvements, etc.?
• Have the ADW companies followed through on their promises to expand the distribution of CA race signals into out-of-state markets?
• Has their insistence on the proliferation of exclusive broadcast/wagering agreements led to greater revenues for and distribution of California race signals?
• Is it time to substantially revise the distribution of revenues derived from ADW such that purse and track commissions receive a far greater share?
I have found that when they are asked such questions our friends at the ADW companies typically avoid answering directly, but choose to point to the convenience of the bettor and the growth in overall handle as the most significant justifications for continuing the ADW status quo. While we agree that accessibility and convenience for the betting public objective we all share, TOC nonetheless believes that the actual value – and shortcomings – of ADW can only be assessed when all of the relevant benefits and costs are identified, considered, and weighed.
This exercise becomes even more difficult when compounded by the needs of these publicly traded companies to reconcile their revenues with market forecasts and expectations. Sound familiar? It should. In dealing with "our ADW partners" we encounter some of the same problems we do with publicly-traded racetrack operators; their primary corporate objective is not the promotion and advancement of the California Thoroughbred racing and breeding industry, it is the maximization of shareholders’ investment, pure and simple.
At TOC, we’re realists.We recognize that our partners in this business need and deserve a reasonable return on their investment. Yet, we also recognize that there may come a point at which our definition of "reasonable" may differ – and differ substantially – from theirs.
In no uncertain terms, the California ADW market is the most significant of all for our three ADW partners. It ranges from approximately 40% to 66% of total handle for these companies. Likewise, since ADW first became authorized in the State – 2002 – these companies have seen their growth in their business between 370% and over 930%.
No doubt, that growth is impressive! But, sadly, it has not translated into comparable growth in the California racing industry’s corresponding handle and revenue numbers. In fact, it has translated into very little growth in California handle – less than 3%; yet when adjusted for inflation – in accord with the CPI – it actually becomes a
decline of -3.6%. In terms of purse revenues, while total purse commissions from commingled-pool wagering, including out-of-state wagers, have increased +0.8% between 2001 and 2004, again when adjusted for inflation, purse revenues have similarly decreased by 5.5%.Further, there is ample evidence to suggest what is asserted to be "growth" in California ADW handle on live California races corresponds to the loss in handle on those races at California satellite wagering facilities. In other words, the majority of California ADW handle growth represents nothing more than a shift in handle from these sites to the ADW companies.
Consequently, the promise of developing new fans and markets seems to us to be a long way from being fulfilled. Therefore, unless the industry begins to experience more "true" growth and less cannibalization, our friends should expect a radical revision of the revenue distribution model: one weighted much more heavily in favor of those with the greatest on-going investment in the industry – California Thoroughbred owners.