Horse racing fans often lament its undeniable decline in popularity.  It is commonplace to hear or read that the sport is moribund and that its fans are old and dying out.  Some people decry the sparse coverage in the newspapers and on television. 

My many years consulting for and researching troubled companies have taught me that virtually every such business thinks that the situation facing it is unusual if not unique.   This is normally not the case at all and horse racing is no exception.  Many old-line businesses and industries are coping with change. 

The fact is, the United States has become a compartmentalized society aligned around specific and sometimes very narrow interests and this presents opportunities and challenges.  The television networks have had their audiences carved up by cable channels and the Internet.  The major newspapers are fighting for their lives in the face of the Internet.  Major retailers have been eviscerated by specialty shops and online vendors and huge shopping malls often look deserted, not unlike Aqueduct on a cold Winter day.  Even baseball, the reputed American national pastime,  has valid concerns over the sport’s diminishing appeal to boys. 

Like a multitude of mass-market enterprises, horse racing will never be what it once was.  Executives in the horse racing industry must get over the past–it’s not coming back–and continue to take the steps necessary to survive and even prosper as a niche sport. 

Horse racing is not an isolated case of a venerable institution fighting for a better future.  Consider the state of NASCAR, golf, outdoor sports in general, newspapers, and sports writers, as discusssed below.

1. NASCAR is sometimes cited as a sport that horse racing should emulate. To be sure, the car racing that originated with drivers hauling bootleg whiskey in the South has grown into a blockbuster enterprise with the most television viewers among all sports except football. But the growth trend is faltering.  Forbes magazine (March 2, 2009) ran an article titled “Pileup,” in which it said: “The sport is suffering declines in sponsorship, attendance, and financial stability, and the roots go a lot deeper than the lousy economy.”  Consider the following facts and statistics from the Forbes article:

  • Between 1998 and 2005, NASCAR’s national television ratings outpaced every professional sport, growing by 180%. The National Football League’s TV ratings actually declined in the same time frame by 10%. From 2005 through 2008, NASCAR’s national television ratings decreased by 21%, whereas the National Football League ratings fell by 10%.
  • Advertising revenues have taken a hit-for example, by 16% in 2008 for NASCAR’s Sprint Cup circuit.
  • Track attendance declined in 2008 for the third year in a row from an average of 130,000 per race to 118,000. International Speedway Corporation cut admission prices for some of its seats by as much as 40% for the Daytona 500.
  • Sponsorship deals are increasingly hard to get. Major sponsors have quit the sport-for instance, Coors Light, Tide, Domino’s Pizza, and Eastman Kodak.
  • The way that NASCAR is structured, team owners are treated like third-class citizens, getting what is left after NASCAR and the drivers take their hefty cuts. Consequently, more and more racing teams are closing up shop or selling out, including NASCAR icon Richard Petty.
  • Finally, indications are that fans are increasingly bored with the action and are resisting the ticket prices.

This is a case-in-point that every product or service has a life cycle. While NASCAR is still producing attendance numbers and television ratings that are sensational, the sport is likely to be in the early phase of a downward trajectory, comparable perhaps to horse racing at the dawn of the television age in the early 1950s. Like horse racing, NASCAR will need to find ways to attract new fans and improve its core product in an era of tremendous competition for the entertainment dollar.

2.  Another sport that has been experiencing a significant downturn in the United States is golf.  More golf courses have been closing than opening in recent years.  According to the New York Times, the sport has lost four million players (from 30 million to 26 million) since 2000.  The percentage of avid golfers, who play at least 25 times a year, fell by a third.  About one million golfers quit the game every year and fewer than that take it up. One of the main reasons offered is the cost of playing and the other is that  people increasingly don’t have the time to spend on a golf course, and in particular married men with children.   As a result, golf industry insiders have been experimenting with attracting high schoolers, families, and women.  Golf is part of a general decline in participatory outdoor sports like tennis and snow skiing.

3.  The Wall Street Journal (April 7, 2009) headline read:  “Baseball Writers Brace for the End.”  The article began with this verbiage:  “Baseball’s independent press corps, once the most powerful in American sports, is fading.  As newspapers cut budgets and payrolls, the press boxes at major league ballparks are becoming lonely places, signaling a future when some games may be chronicled only by wire services, house organs, and Web writers watching the games on television…It is not clear how many newpaper beat writers and columnists will vanish.”

Horse racing commentators and fans often bemoan the fact that racetrack beat writers and columnists are on the verge of extinction.  That is true, but the ranks of sports beat writers per se are being thinned because of the winds of change that are taking their toll on print newspapers.

4. Any bricks-and-mortar business whose goods and services can be delivered over the Internet is in danger of being decimated if not completely destroyed. Take newspapers. Almost all major newspapers have announced staff cuts.  The New York Times is $1.1 billion in debt and is trying to sell its stake in New England Sports Ventures (which owns the Boston Red Sox), as well as its corporate jet, to make it through 2009.  It may also shutter its money-losing subsidiary the Boston Globe.  Well-known newspapers have closed (the Rocky Mountain Daily News), some have gone strictly online (Seattle Post-Intelligencer), others have limited home delivery (the Detroit Free Press and the Detroit News) and a number have filed for bankruptcy (the Tribune Company-publisher of the Chicago Tribune, Los Angeles Times, and the Baltimore Sun). Similarly, Borders Group (book, music, and movie stores) and Blockbuster Inc. (movies and music) are hemorrhaging losses as online companies like Amazon and Netflix seize the market.

Like a wide variety of traditional bricks-and-mortar businesses in the early 21st century, racetracks’ future is online. Game, set, match, the Internet business model has prevailed. If the racing industry is going to grow handle, it will be largely through advance deposit wagering. That is the state of affairs and nothing can be done about it except to adapt.

In this regard, racetracks have a much better future than newspapers. The Internet is a made-to-order distribution channel for pari-mutuel wagering, whereas newspapers will have a difficult time making money from commodity-like online publications. Advance deposit wagering firms provide a convenient proprietary service that customers are willing to pay for through (reasonable) takeout, whereas newspapers supply information, most of which is readily available for free. However, a special-interest newspaper like the Daily Racing Form should do very well online because of the proprietary information it provides to handicappers.

5.  On an unrelated topic, Horse Racing Business ran an article on March 7, 2009, titled “Halsey Minor for Racing’s Jobs.” It proposed that high-technology entrepreneur and longtime avid racing fan Halsey Minor would be good for the sport as a racetrack owner. An excerpt reads:

“If Minor joined up with some of the bright young minds in the industry to operate a racetrack, in the right location and under the right circumstances, the results might be highly desirable. With the bankruptcy filing at Magna Entertainment this week, a few prospects come to mind.”

Minor made an attempt to acquire a large stake in MEC in October of 2008 and has renewed his effort in the past several weeks. Now that MEC has filed Chapter 11 bankruptcy and major creditors are dissatisfied with the company’s reorganization plan, Minor’s chances have improved.

Minor is a technology innovator, has deep pockets, and is clearly a proponent of Thoroughbred horse racing. I repeat here what I said in the March 7th article: “The racing fraternity should embrace Minor with open arms, as a force for change and experimentation-a straw that stirs the drink.”

Copyright © 2009 Horse Racing Business


Racing needs Jobs…Steve Jobs, that is.  The staid industry could benefit from a creative genius.  Most of the people in charge of racetracks and other industry organizations are buttoned-down analytical types.  The sport could use a heavy injection of intuitive thinking, some right-brained ideas.

Steve Jobs co-founded Apple in 1976 when he was 21-years-old.  The company’s first product was a pioneering personal computer.  In 1985, Jobs and his board of directors had a falling out and he resigned to launch NeXT, a computer platform development company that was acquired by Apple in 1997.  In 1986, Jobs bought the computer graphics division of Lucasfilm Ltd., which became Pixar Animation Studios and was purchased in 2006 by Walt Disney Company.  Pixar has won 20 Academy Awards and its films have grossed more than $4 billion.  Since Jobs’ return to Apple 12 years ago, the company has had a remarkable record of blockbuster products.  iPod turned the music industry upset down by allowing 200 million iPod customers to download six billion songs from Apple’s iTunes online store.  iPhone has been a sensational hit.

Gil Amelio, a highly respected Silicon Valley executive, was unsuccessfully attempting to return Apple to its former glory days when Jobs came back to the company in 1997.  Once the Apple board lost confidence in Amelio and let him go, they installed Jobs as the interim CEO to get Apple back on the path to innovation, revenue growth, and profitability-which he did.  Jobs’ value as a technical and marketing guru is so great that Apple’s stock waxes and wanes depending on the actual or rumored state of his health.  Jobs developed and evidently overcame pancreatic cancer.  Currently, he is on a medical sabbatical for a vaguely described condition that left him listless and gaunt.

A friend of mine, who is a “turnaround” executive–or a person who tries to right sinking companies–was part of a group of advisors to Amelio. They were helping him craft a plan to save Apple.  Upon Amelio’s ouster, Jobs promptly fired them all.  Later, Jobs brought back my turnaround friend as a consultant, which shows that Jobs seeks talent regardless of the source.

Jobs is variously described as being brilliant, idiosyncratic, mercurial, indispensable, petulant, profane, boorish, scary, unconventional, impatient, a vegetarian, a Buddhist, etc.  His clothing is far removed from the standard corporate attire, as he is partial to black long-sleeve mock turtlenecks, blue jeans, and sneakers.  Jobs has been known to engage in a public war of words with such tech-business icons as Michael Dell.  He even banned all books at Apple from a company that published an unauthorized biography of him.  Once, at a shareholder forum,  an individual inquired of Jobs why stockholders should buy into the plan that Jobs had formulated for saving Apple.  Jobs answered “Because I am the only f—— hope you’ve got.”  Outspoken, truthful, blunt, and confident.

Racing cannot get Steve Jobs,  but a Jobs-like person is available, Halsey Minor.  He is a well-known high-tech entrepreneur and an aficionado of Thoroughbred horse racing.

I don’t know Halsey Minor personally, but I know this about him:  Even though his upbringing of privilege in the Thomas Jefferson country of Virginia is drastically different from how Jobs was raised, the two Silicon Valley technology entrepreneurs have a lot in common.  Minor is the co-founder of the technological-news company CNET, which he sold to CBS for close to $2 billion. (Minor’s first employee at CNET was Shelby Bonnie, who is the son of prominent Louisville, Kentucky attorney and horseman, Edward S. “Ned” Bonnie.  The elder Bonnie serves on the board of the Kentucky Horse Racing Commission.)  Since then, he has been both an angel capitalist for funding start-up enterprises and an entrepreneur, under the banner of Minor Ventures in San Francisco.

Minor is eminently successful at what he does and, like Steve Jobs, can be  combative. On the latter point, for instance, he has recently been in litigation with Sotheby’s over a painting and with Hialeah, Florida, and the owner of Hialeah Park racetrack.

A feature on Minor in Conde Nast titled “The Baddest Boy in Silicon Valley” began by asking “…why do so many of his former tech-world colleagues revile him?”  The article said:

Even those who bad-mouth him chalk up his successes to much more than good luck.  ‘He’s very bright,’ says a former CNET executive who no longer speaks to Minor, for reasons he wouldn’t discuss.  ‘There’s no better guy in front of the whiteboard, in terms of being really smart and quick on his feet and being able to see what others don’t.’  Another tech executive who worked closely with Minor for several years but now no longer wants his name associated with him adds, ‘He’s easy to demonize.  He’s kind of arrogant; he has an edge.  But there’s no question that when he wants to, he gets things done.’

The portfolio, in brief:  A person who has high bandwidth, is capable of keen insight and hell bent on getting things done, and prone to rocking the boat irrespective of personal relationships.  This modus operandi might not be compatible with strong companies in growing  industries, but horse racing is not in this category. 

Minor is a racehorse owner, having spent millions on bloodstock, purchased Carter’s Grove plantation from the Colonial Williamsburg Foundation in 2007 for Thoroughbred breeding, and reportedly wants to be in the retail end of racing by starting or purchasing a track.

Horse racing is an elegant old sport with roots in this country since colonial days.  In order for it to continue on in the 21st century, updating the product and new approaches are essential, particularly from the standpoint of using technology to communicate with and attract the younger generations.  Who knows whether Halsey Minor could succeed where others have failed, but it is worth a shot.  The fellow is said, even by his enemies, to be concept-driven, Internet-savvy, capable of seeing the big picture, and a go-getter.  Here’s hoping he gets a chance very soon to bring fresh Jobs-like, no Minor-like, thinking and energy to a sport that needs it in the worse way.

If Minor joined up with some of the bright young minds in the industry to operate a racetrack, in the right location and under the right circumstances, the results might be highly desirable.  With the bankruptcy filing at Magna Entertainment this week, a few prospects come to mind.

The racing fraternity should embrace Minor with open arms, as a force for change and experimentation–a straw that stirs the drink.   He could be the person to take on some of the industry’s toughest jobs…like Jobs did at Apple.

Copyright © 2009 Horse Racing Business