The breeding side of our industry is in trouble only because the racing side is failing.
Racing is failing because off-track bet takers are ripping off racing content. Tracks and purses used to split 18%-20% of every dollar wagered on their races. Today they are getting less than 5%.
I know of no track that makes a profit on its own races.
Can the problem be fixed? Sure. Businesses re-invent themselves when they get in trouble. None better than Apple, which was failing until Steve Jobs returned. Today it is the most valuable company in the world.
The biography, Steve Jobs, tells how music execs went to him for advice. Napster was ripping off their music and sales were falling fast. Jobs figured out what they needed, a secure, central platform to sell their music. He called it iTunes.
The music execs knew music, but not changing technology. They thought they were in the record/cd business, because that was how they were making money at the time. Jobs changed their focus to music content.
The music execs would not do for their industry what Jobs did for them. They were competitors who didn’t know they needed a central solution. When they reluctantly agreed to iTunes, Napster disappeared.
Here’s the lesson. With iTunes handling digital sales, the focus of each music company shifted to producing and marketing music content. Now they make more profit than ever before.
The music case study applies. Racing needs the same solution as iTunes, a secure, central platform to sell racing content direct to customers and eliminate the Napster-like bet takers ripping off the sport.
Once our tracks are no longer in the off-track, bet-taking business, they will focus on packaging and marketing their own races for profit. That changes the future for tracks, the sport and finally, the breeding industry.
National wagering has fallen to about $10 billion, which should still yield over $2 billion to be split between tracks and purses. That’s enough to make this industry whole again, but the revenue isn’t coming through.
When technology allowed off-track wagering, racing chose a bad model for reasons that no longer apply. For example, when Keeneland sends its races to New Jersey bet takers, only 20% of the revenue comes back to Keeneland, while 80% stays with the bet takers in NJ.
But unlike the music companies, the track owners are not victims. They created this insane business model that is killing the whole industry. The tragedy is they will not fix it without outside intervention. That’s because some of them own Napster-like subsidiaries and those with casinos no longer need racing.
Every time racing has been threatened, powerful men and women have used their influence in Congress to protect the sport and agricultural jobs at risk.
That’s what needs to happen now. A central wagering platform will equally protect and serve customers, tracks and racehorse owners.
The vehicle for a secure, wagering platform is within the federal law that permits interstate wagering. A national wagering “trust” can be established by tapping the cash flow in wagering. No federal funds are needed. The new trust can partner with the likes of Google, or maybe Apple, to make it simple for customers.
With a central wagering platform, tracks will profit from their own races for the first time in thirty years. They will have a virtual on-track model with 18-20% of every dollar wagered. That’s enough. Their incentive to package and present races that customers desire increases by 38 states and perhaps worldwide distribution.
Congress wants to help this sport with tracks and breeding farms in most states. When they look across the table at resolute owners and breeders trying to save a sport and way of life, will they also see other people in opposition? Who will appear to say they should be allowed to continue ripping off the sport? Nobody.
Racehorse owners and breeders fund more than a hundred thousand jobs and there are very few track owners to object. A central wagering platform is a politically sound strategy.
If Congress brings in track owners, they only need to ask one question: “If a central wagering platform will give you every dollar of revenue from wagers on your races, tell us why you would not want that platform?”
What odds would you have given that Steve Jobs would take one-third of the music company’s sales, cut them off from contact with their customers and herd those cats to iTunes?
One person can make a difference. Powerful ideas do change the world.
Steve Jobs didn’t save the music industry for the music execs. He loved music and to assure a sound future for the talent who wrote and performed the music, he created iTunes. Economic satisfaction was a bonus.
Some wealthy breeders have donated millions of dollars to influence Congress on political philosophy, but not one dollar has ever been donated to incubate creative ideas for the sport. Breeders need to understand their future is the re-birth of racing.
If there is ever a good time for the silent partners in racing content to be ready to fight, this is it, because without racehorse owners taking a stand, with strong support from influential breeders, the racing side will not change and will soon fail as a national sport.
Timing is everything. iTunes would not have happened without the problem of Napster. And, the technology for a central platform like iTunes, or one for wagering, was not available years ago.
To re-invent a proud sport and industry, we need to follow the words of the late Steve Jobs — “think different.”
Racing content will have enormous value when the talent in the sport moves to protect it, not when those who take bets on it are in control. A central wagering platform gives the sport a new future. As Jobs would end… “Isn’t that cool?”
Fred Pope is president of Pope Advertising, Lexington, which specializes in the Thoroughbred industry.
Copyright © Fred A. Pope 2012. Used with permission.