MAKING SENSE OF KENTUCKY SCORPIONS

In last week’s article titled “The Smoking Gun in the Slaying of Kentucky’s Signature Industry,” I wrote: “In my research, I can find no other case of where a state government worked against the economic interests of its signature industry” (in Kentucky, by blocking the legalization of video lottery terminals at racetracks). This raises the question of why a “logically thinking” governor or legislator would willfully weaken a legal industry like horse racing and breeding that provides lots of employment, plenty of tax revenues, a steady stream of tourist dollars, entertainment, and international visibility for the Commonwealth on the Kentucky Derby telecast. The economic benefits would seem to far outweigh the objections, especially in a time when states have high unemployment rates and the money to fund programs is hard to come by.

Politics is, of course, an inherently divisive business. Even George Washington was vilified by some critics while he was commanding general of the colonial army and as the nation’s first president. A certain amount of nastiness goes hand and glove with politics. A definition of a friend in Washington, D. C. public life is “Someone who stabs you in the chest.”

In my years of teaching sales negotiation and engaging in it myself in private dealings, I have found that most business people involved in transactions focus on facts and possible solutions, and on trying to find common ground. If someone like this is on the other side of the negotiating table and has an opinion or a position different from mine, I respect them even though I see things differently. This kind of negotiator does not use inflammatory ad hominem rhetoric and can often be appealed to with hard evidence and on commonsense grounds. On the other hand, there are occasionally destructive types who usually cannot be reasoned with no matter the proof; they are apt to irrationally torpedo a negotiation that would benefit both parties, for reasons known only to themselves. They might even offer a red herring as a rationale for blowing up the negotiations. The old-line Soviet Union leaders were partial to this tack.

A vintage fable about a turtle (or frog) and a scorpion conveys that in business–or any other endeavor–you should not take it for granted that someone will always act rationally and logically in his or her best interests, or in the best interests of the people or organization being represented.

A potentially lethal bark scorpion needs to cross a river but scorpions cannot swim, so he asks a turtle for a ride, even offering to pay him. The turtle is very wary: “If you sting me while I am swimming across, you will kill me.” The scorpion replies: “I won’t do that because I can’t swim and I would drown if I murder you.” The turtle, persuaded by the scorpion’s seemingly iron-clad reasoning, agrees to the task. Half way across the river, the venomous scorpion stings the turtle and they both begin to sink to their deaths. The perplexed and mortally poisoned turtle says: “Why did you do that, now you will die too?” The scorpion matter-of-factly comments, “It isn’t about logic, it is just my nature.”

In trying to make sense of those elected officials in Kentucky working to eviscerate the state’s signature industry, remember that some of them are sincere in their reasons for being against racetrack slots and are willing to articulate their honest objections. Respect them and agree to disagree. But also remember that a few folks working against slots are scorpions. With them it has nothing to do with logic and reason, it is just their character.

Copyright © 2010 Horse Racing Business

HARRAH’S ENTERTAINMENT ACQUIRES THISTLEDOWN RACE TRACK

CLEVELAND, OHIO – July 28, 2010 – Harrah’s Entertainment, Inc. today announced that it has completed the acquisition of Thistledown race track in Cleveland, Ohio.

“With this acquisition, Harrah’s Entertainment looks forward to enhancing the guest experience at Thistledown–through continuing the long history of thoroughbred racing and providing our support for the Ohio Lottery’s efforts to bring video lottery terminals to the track,” said Peter E. Murphy, president of strategy and development, Harrah’s Entertainment.  “Harrah’s has a long history of maintaining high standards in the gaming industry.  We look forward to continuing our commitment to our guests, employees and the community in this new Cleveland operation.”

 About Harrah’s Entertainment

Harrah’s Entertainment, Inc. is the world’s largest provider of branded casino entertainment. Since its beginning in Reno, Nevada, more than 70 years ago, Harrah’s has grown through development of new properties, expansions and acquisitions, and now operates casinos on four continents. The company’s properties operate primarily under the Harrah’s®, Caesars® and Horseshoe® brand names; Harrah’s also owns the World Series of Poker® and a majority interest in the London Clubs International family of casinos. Harrah’s Entertainment is focused on building loyalty and value with its customers through a unique combination of great service, excellent products, unsurpassed distribution, operational excellence and technology leadership. Harrah’s is committed to environmental sustainability and energy conservation and recognizes the importance of being a responsible steward of the environment. For more information, please visit www.harrahs.com.

This release includes “forward-looking statements” intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. You can identify these statements by the fact that they do not relate strictly to historical or current facts. These statements contain words such as “may,” “will,” “project,” “might,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “estimate,” “continue” or “pursue,” or the negative or other variations thereof or comparable terminology. In particular, they include statements relating to, among other things, future actions, new projects, strategies, future performance, the outcomes of contingencies and future financial results of Harrah’s. These forward-looking statements are based on current expectations and projections about future events.

Investors are cautioned that forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that cannot be predicted or quantified and, consequently, the actual performance of Harrah’s may differ materially from those expressed or implied by such forward-looking statements. Such risks and uncertainties include, but are not limited to, the following factors, as well as other factors described from time to time in our reports filed with the Securities and Exchange Commission (including the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained therein):

  • the impact of the company’s significant indebtedness; 
  • the effects of local and national economic, credit and capital market conditions on the economy in general, and on the gaming and hotel industries in particular;
  • construction factors, including delays, increased costs for labor and materials, availability of labor and materials, zoning issues, environmental restrictions, soil and water conditions, weather and other hazards, site access matters and building permit issues;
  • the effects of environmental and structural building conditions relating to our properties; access to available and reasonable financing on a timely basis;
  • the ability to timely and cost-effectively integrate acquisitions into our operations;
  • changes in laws, including increased tax rates, smoking bans, regulations or accounting standards, third-party relations and approvals, and decisions of courts, regulators and governmental bodies;
  • litigation outcomes and judicial actions, including gaming legislative action, referenda and taxation;
  • the ability of our customer-tracking, customer loyalty and yield-management programs to continue to increase customer loyalty and same store sales or hotel sales;
  • our ability to recoup costs of capital investments through higher revenues;
  • acts of war or terrorist incidents, severe weather conditions or natural disasters;
  • abnormal gaming holds; and
  • the effects of competition, including locations of competitors and operating and market competition.

Any forward-looking statements are made pursuant to the Private Securities Litigation Reform Act of 1995 and, as such, speak only as of the date made. Harrah’s disclaims any obligation to update the forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date stated, or if no date is stated, as of the date of this press release.

Contact:  Jacqueline Peterson
702 494 4829
japeterson@harrahs.com

 

THE SMOKING GUN IN THE SLAYING OF KENTUCKY’S SIGNATURE INDUSTRY

During the ongoing controversy in Kentucky over the legalization of slot machines (aka video lottery terminals), people inside and outside of the horse racing and breeding businesses have pondered how a responsible state government could stand by while its flagship industry is left to deteriorate—and cause the loss of thousands of jobs, tax revenues, and tourist dollars. It certainly is a modern example of Nero fiddling while Rome is burning.

One does not have to look very far to find the explanation. The hard evidence is contained  in a recent document titled “America’s Top States for Business 2010—A CNBC Special Report.” Following is CNBC’s methodology:

“We scored all 50 states—using publicly available data—on 40 different measures of competitiveness. States received points based on their rankings in each metric. Then, we separated those metrics into the ten broad categories, with input from business groups including the National Association of Manufacturers. We weighted the categories based on how frequently each is cited in state economic development marketing materials.

Here are the ten categories ranked in our study: cost of doing business; workforce; quality of life; economy; transportation & infrastructure; technology & innovation; education; business friendliness; access to capital; cost of living.”

Overall, in 2010, Kentucky ranked 40 out of 50 states, making it one of the most inhospitable jurisdictions to do business. Moreover, the Commonwealth is getting worse rather than improving: it ranked 34th in 2009. While Kentucky did very well on three criteria (cost of doing business, transportation & infrastructure, and cost of living), it ranked mediocre to poorly in the other seven categories.

According to CNBC, Kentucky has an unemployment rate of 10.4 percent, a projected 2011 budget deficit of $780 million, and ranks 37th in education. Kentucky’s elected leaders’ answer to this predicament is apparently to become even more anti-business: On CNBC’s criterion of “business friendliness,” the Commonwealth ranked 39th of 50 states, down from 31st in 2009. The CNBC study defined business friendliness as “the perceived ‘friendliness’ of [a state’s] legal and regulatory frameworks to business.”

It is of little solace to people in the Kentucky horse racing and breeding industry to know that they are not alone in the way state government has treated them—the state’s elected officials, as a group, are hostile to business per se. They are largely inhibitors and destroyers of economic activity, job killers rather than job creators. Reminds me of Green Bay Packers’ right tackle Henry Jordan’s quip about legendary Coach Vince Lombardi: “He’s fair, he treats us all the same–like dogs.”

Senate President David Williams has been getting too much credit/blame for his antipathy toward racing. Although Williams is culpable, he evidently has plenty of vocal and silent co-conspirators in Kentucky government from both political parties. He did not make Kentucky so anti-business by himself and this kind of negative climate has been generations in the making. Kentucky should have had racetrack slots many years ago, so there is a lot of blame to go around to current and former elected officials in Frankfort. In my research, I can find no other case of where a state government worked against the economic interests of its signature industry.

No doubt the spin out of Frankfort will be that the CNBC report is flawed.  Judge for yourself the next time you see that a Kentucky racetrack has cut purses, or read of a trainer moving his or her stable to a racino venue, or see that a stallion is being relocated from Lexington to another state with better incentives.

By the way, two other historically prominent but currently troubled racing states–New York and California—rank 45th and 49th, respectively, on “business friendliness.”

Copyright © 2010 Horse Racing Business

Click here to see “America’s Top States for Business 2010—A CNBC Special Report”