CHANGING THE FOCUS AND POWER IN RACING BY FRED A. POPE

Last week, Bill Oppenheim said he was resigning from the Thoroughbred Owners and Breeders Association because it backed off of prohibiting medication in 2YO Graded Stakes. Bill is a serious analyst who believes drugs in racing here is why international buyers shun our racing prospects.

Last August, Stuart Janney told The Jockey Club Round Table attendees we do not need a federal solution to solve racing’s drug problem. That led Bill and others to believe it would finally happen. It was a bluff.

I don’t feel Bill and the others should resign from TOBA. It seems more appropriate they demand those responsible for the failed strategy resign.

TOBA blames inaction by state regulators. Regulatory actions reflect the power in the jurisdiction. Are the leaders of TOBA and The Jockey Club so out of touch they don’t know who controls racing today?

The horsemen who want drugs are not concerned about international buyers and Graded stakes. The vast majority is just concerned about making a living and staying in the game.

Horsemen’s groups are empowered by the Interstate Horseracing Act, IHA, to approve off-track wagering deals. Mix that power with the tracks’ ability to leverage stalls and fill races required by the regulators and you have an evil cauldron.

This underbelly of racing is growing every day as 20,000-30,000 horses, with fleeting attachments to owners, are in service to fill races increasingly fueled by artificial means.

Slots are not the only artificial way purses are funded. Bet-taking on other tracks’ races also artificially funds races that are now written for all the wrong reasons.

Over the thirty-year evolution of off-track wagering, our sport has transitioned from an economic model that rewards quality races with integrity, to an artificial model that now prohibits them.

So, how do we return to a model that values quality racing? Do we try to bluff, with no real plan to change the focus of racing? Or, is there a simple way to change both the focus and power within the sport?

Last week, I advocated a central wagering platform like iTunes (Steve jobs and Thoroughbred Racing), without mentioning an important result of direct distribution to the customer.

The IHA requirement of approval, that empowers host event horsemen, would no longer be necessary with a central wagering platform. There would no off-track deals to approve. At first glance, that’s going to scare horsemen, but it shouldn’t.

How can we assure horsemen at the host event are protected and funded to continue benevolent activity and programs?

As part of the national wagering platform, say 1% of every wager is retained at the host event for welfare and benevolent programs. The Horsemen’s Protective & Benevolent Association, or the group representing horsemen at the host event, could administer the funds. That could mean three to four times the amount the groups currently receive to address racing and backstretch problems. Those extra funds are needed.

How can we better assure racing integrity issues, such as pre-race inspection and drug testing, are adequately funded at the host event?

Every state racing commission seems under-funded. The national wagering Trust can allocate say 1% of every wager to the state racing commissions in the host state. With the central platform assuring the integrity of the wager, the regulators can focus on the integrity of the sport in their jurisdiction. The amount of activity at the host event would reflect the funding.

With average takeout of 20%, we can direct 2% to welfare and integrity and perhaps up to 3% for platform operations and marketing expenses. That still delivers about 15% to the host event, where it would be equally split with purses.

With a central wagering platform, the host event will make money on wagering when they package and market races of value. There is no guarantee every track will prosper, however, most tracks will net more revenue than they currently receive.

Track management will for the first time in twenty years say to their racing secretary, “start writing races that will win against the competition in the off-track market, otherwise we don’t make any money”. That’s the incentive the sport needs.

What happens when the economic focus changes and non-competitive, infirm horses are no longer used when tracks improve their races? Those horses will move to jurisdictions that have alternative gambling. Thus jurisdictions with lower level racing will likely have less restrictive rules than higher-level jurisdictions. Regulatory actions reflect the power in the jurisdiction. Every sport has separate levels.

The Horseplayers Association of North America says more than 74% of its horseplayers favor a ban on drugs. That research provides the path to revenue. For example, if the host event writes conditions without medication and that race competes against seven other races at the same time, the race without medication has a huge advantage. That race becomes a “brand name” in a generic market.

It will not take long for racing secretaries to figure out what sells and what doesn’t in the off-track market. It will be a positive, free market solution for both partners in the sport, but the big winners will be our current and new customers.

With a central wagering platform, each track will work with regulators to set their own takeout rates. Those horseplayers who value low takeout can choose the tracks they want to play.

It takes a special person to take charge and move others to action. By every measure: handle, attendance, media ratings, etc., racing is failing. How do we motivate action?

Up until now, racing hasn’t been failing fast enough to use fear as a motivator. Breeders have taken a 50% haircut, but most are still in the game. Racehorse owners expect to lose money, so the falling knife hasn’t scared them enough.

We have a lot of emotional issues, from medication to retirement, that stir the soul, but it’s hard to find anyone who wants to fight about the business model of racing. Ironically, the business model is the cold, unemotional first step.

At this time, I feel the only way we can change the focus of racing to an economic model that favors racing content, is for Congress to do for racing what they did for the milk industry and the major leagues. A national wagering Trust can avoid anti-trust issues and value quality racing once again.

Copyright © Fred A. Pope 2012

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