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Leader in a turbulent time
Robert Elliston arrived at Turfway Park in northern Kentucky in 1999 from U.S. Bank, where he was the vice president of commercial lending for seven years. A native of Kentucky who lives in Florence with his wife and two daughters, Elliston, Turfway's president and CEO, had always followed horse racing and had owned several horses, so the jump into the complexities of the racing world was not as dramatic as can be imagined. Since then, he has not only gained the respect of his peers as a racing executive, but has devoted part of his time to several national initiatives, including the industry's wide-ranging efforts to address catastrophic injuries. In fact, Turfway was a pioneer in the effort, becoming the first U.S. track to install an artificial surface - a decision that returned immediate results when the track recorded a dramatic decline in ontrack fatalities in just one year, though that decline has proved unsustainable so far. In addition to being the president and chief executive of Turfway, Elliston, 44, is the chairman of the board of the National Thoroughbred Racing Association - which last year announced a program to certify tracks that comply with yet-to-be-announced safety recommendations - and the treasurer of the Kentucky Equine Education Project, a lobbying organization seeking slot machines at Kentucky tracks. Elliston spoke with Daily Racing Form reporter Matt Hegarty recently about his background, Turfway's experience with artificial surfaces, and the efforts to legalize slot machines. An edited transcript of the interview follows.
DRF: Why did you make the transition from banking to horse racing?
Elliston: It started with a love of the horse. I grew up just south of Lexington, in Richmond, Ky., and then we moved to Frankfort for my job, and I would literally go to watch Keeneland workouts in the morning and then go to work every day. I got hooked on it, and then I got involved with a few friends by owning a few small pieces of small-priced horses. I'll never forget this. The first horse I bought was for $1,500 and he won his first three races at Keeneland. After that I was hooked, and so when the opportunity came up here with Harrah's and Keeneland buying the track [in 1999], I jumped at it.
What were your initial impressions of the horse racing industry?
I would have to say that my initial impressions were far different than any job I had ever had, and that was because of the emotional connection people had to the sport, and that impression continues today. In fact, you could see it just as recently as yesterday, when we had 150 people here to talk to legislators about the problems facing Kentucky racing. People grow up generationally in this business, they come from fathers, mothers, and grandfathers and grandmothers who have been in the business for so long. It's everybody who is involved, from the most prominent people in the business, all those high-profile owners and breeders, to the people working on the backside here every morning at Turfway. Everyone is passionate, and that's not something you see in other businesses.
How have those opinions changed?
My thoughts and opinions have evolved over time, and unfortunately sometimes that passion and that interest in preserving what is ours gets in our way. We're so passionate that we sometimes create factions that can blur the messages. But in the last few years I've really seen people put their individual interests aside to work cooperatively so that we can move things forward. I've seen that especially in Kentucky, with people uniting behind our common interests, and I've seen that nationally in the way the industry has pulled together in the last year to address some of our real problems. Unfortunately, it's often crisis that puts you in that position, but I'm happy to see all the constituencies in the business at the table trying to resolve the real problems we are facing.
Overall, handle on horse racing has stagnated and is now declining. What do you think are the reasons for that decline?
Some portion of it can be attributed to the general economic conditions the whole country finds itself in. We do have growth channels, in-home wagering, Internet-based wagering, telephone wagering, but unfortunately that is too much the sovereign of [advance-deposit wagering] companies. It's a good thing to embrace those channels, but it's also necessary that those channels benefit the whole of the industry, not just the TVGs, Youbets, Twinspires.coms of the world, but the people they rely on, the people who are responsible for the physical plant and the people who care for our horseflesh. Right now we're not seeing those participants compensated well enough for putting on the show. I'm encouraged so far by the continual developments in that area, and I think the industry is focusing on the appropriate sharing of the resources that comes with our reliance on these growth channels. And also having said that, I'm not convinced that we are worse off than other sports or industries, because everyone is seeing problems because of the economy. If we can solve the pricing model, and we will solve that model, we'll be the better for it.
What is the ideal model?
It varies for the partners, the state you are in, the signal you are taking, but at the end of the day, everybody has to be rewarded for the investment they put into it. There has to be a shared benefit that flows to the companies that invest their capital and opens up those channels, the ADW companies, but the benefit also has to flow to the tracks and horsemen that are putting the content in place, that are putting on the show. We permit too many people to benefit off of our collective product that don't have as much invested in the game. It's far more costly to maintain the plant and keep these horses racing than it is to operate an ADW company. The market appears to be working itself out, if you see what has transpired in Florida, California, and with the progress being made in Las Vegas, so I think we're getting closer to that happening.
Even before the economic collapse, racing's handle had stagnated. So is it just the fact that racing is now a mature market, or are there bigger problems?
I think it is a bigger problem. We have to continue to be relevant to the consumer, and that is not a one-channel answer. It's not just making it convenient to wager in your home, or on the Internet, or on your Blackberry. I see it directly here in the ontrack experience we try to offer our fans. On Friday nights at Turfway, we have some of the best entertainment in the tri-state area, and we see those people coming to the track that are not familiar with horse racing, they might be first-time customers. We have to offer them a mix of entertainment options, and I'm focusing a good bit of my time to affect that ontrack experience because it's the primary venue or channel to get people engaged in the sport. At the same time, that's a more expensive proposition to acquiring fans, because many of us are in aging plants that are very old and need constant maintenance to be attractive to that first-time customer. I try to look at it as a unique opportunity for us in the key market of Cincinnati. People have a lot of options here, and we need to stand out, and that's very difficult in this economy.
One of the solutions being pushed by tracks in Kentucky is slot machines. KEEP has been pushing a slot-machine bill this year, even though it appears that a bill will not pass without a significant reversal among the Senate leadership. Why push the bill this year considering the legislation doesn't have wide support?
I think the legislation does have a lot of support, but I think it's right now a victim of a larger environment that is affecting whether or not the issue goes forward. We've been doing vote counts in the House and Senate, and we're at numbers far greater than we have ever had, as far as support. We have the leadership of the House and the governor supporting this bill, but there are so many other issues on the plate surrounding the budget problems in Kentucky that they have to clear the deck, so to speak. They had to get a resolution on that and it required a great deal of compromise in a bipartisan way, and now I think they're trying to address the budget crisis that is just around the corner. We've gotten through June 30 and this fiscal year, but now what do they do about the next fiscal year, which is just a few months away? So all those issues are now on the front burner, and it has to be. And I think that's where we can come in, whether it happens in this session or a special session later this year. [The legalization of slot machines at racetracks would be] a tremendous source of revenue for the state, and we're one of the few businesses that is willing to invest their own capital, we're talking about hundreds of millions of dollars and thousands of jobs, instead of relying on government and handouts through stimulus funds. If you look at it that way, I think there's a great deal of support.
Polls consistently show that the vast majority of Kentucky citizens want to vote on the issue. Is there a political price to supporting a bill this year that does not require a public referendum?
I don't think so. The most recent polling shows growth in support in not only terms of the issue itself, but also in the terms of supporting it absolutely. The electorate always trusts themselves in far greater numbers than they trust the legislature to decide for them. A Louisville television station did a recent poll that showed an excess of 60 percent of Kentuckians believed this was the right thing to do, allowing slots at racetracks. When they were asked the question of whether they wanted to vote on that, the support went to 80 percent, and I think that's because people want to vote on these issues, and you can't ignore that. But we still have wide support on the issue itself, and that's the most important thing.
If KEEP supports a bill next year, will that bill require a constitutional amendment and a public referendum?
Honestly, I don't think so. As I said earlier there is growing support within the legislature for [slot machines] at racetracks even when you do it within the Kentucky lottery instead of through a constitutional amendment. I think we have the votes to pass it as a simple majority. We may not be able to do it this year, where we have to get a constitutional majority because of the odd-even year rules in the Kentucky legislature, but we could do it next year, when we would only need that majority. In the House there are a significant amount of people who support the bill as it is and this gets us north of 50 votes, instead of what is required in this session [a three-fifths majority in both legislative houses].
Slots supporters consistently talk up the revenues that the machines provide to horsemen and racetracks. How will bettors benefit from slot-machine revenues, aside from fuller fields of horses?
In Kentucky, aside from Keeneland, which has the highest quality racing of Kentucky, and aside from parts of the Churchill Downs meet, which offers purses in the top 10 of the country, we're not that strong for the remaining portion of the circuit. We have limited days when we are in the upper 10 percent or 5 percent of racing, which is where we need to be. So if we allow this legislation to go through, and we put upwards of $150 million into the purse structure of this state each year, I have no doubt we will have the highest-quality racing year-round anywhere. If you combine that with the racing surfaces we have here, and the passion people have for racing, I think we can have four of the five tracks in Kentucky in the top 10 of handle tracks in the country - then we can really have top-quality racing.
But that doesn't address the problems of racing fans or appealing to a new generation of fans. Most casual racing fans can't tell the difference, just by watching a race, between a Grade 1 stakes and a claiming race. It's not obvious, aside from the purse. How can slot-machine revenues benefit those people?
You have to sustain the education that I was talking about earlier. You have to bring new fans to the track, and they have to begin to participate in a very small way, in show pools with their friends or with 10-cent superfectas, in ways that they can enjoy. But you have to sustain that so they keep coming to the track, so they become a casual fan, then a core fan, and then maybe they are making investments in the ownership side. The capital we would put into these facilities will create a more inviting environment, and if we have long-term stability through slot machines, we will be able to spend dollars on sustaining that, without worrying about getting an immediate financial return. The economic problems are so tough that we can't right now make investments in sustaining those racing fans and keeping them coming back. By having a healthy financial model, we can invest in that, we can put together long-term programs that can do that for us. Right now we can only think in the short-term.
Turfway Park was the first U.S. racetrack to install an artificial surface, and the decision was initially a success, though recently breakdowns have increased, compared to the first numbers. Are you still happy with that decision?
Without question. In fact, it is the best decision we ever made in the 10 years that I've been here. The reason is that our racing surface is so much better than the winter racing surface that we ran on prior to September 2005. The consistency of the surface, our ability to maintain it, there's no question that we are better off, and that our horses and horsemen are better off. If you look at that time horizon, from September 2005 to now, even with some setbacks, and you see the ratio of breakdowns relative to the previous ratios on the conventional surface, there's just no question and no doubt about it. Do we have periods when we have to do more aggressive maintenance and respond to the elements more pro-actively? Yes, but we're better off by the length of the stretch. It has exceeded our expectations since when we first did it, and honestly, our initial experience may have created some unfair expectations about artificial racing surfaces at other tracks. But over 3 1/2 years, over 50,000-plus starts, a 50 percent reduction in catastrophic breakdowns equates to a great decision.
It seems that artificial surfaces have gone through their honeymoon period and are now experiencing some growing pains. What are you learning about the surfaces now?
What we've learned is that they are not maintenance free, which was something that was advertised. We didn't know that at first. They can be impacted by weather. The properties of the surface respond to the elements, and we need to do a better job of anticipating it, when those elements are going to be problematic, of understanding it from a scientific standpoint, so we can get ahead and plan for the maintenance to address what is coming. Honestly, that understanding is bringing a new mind-set to the business. It's extending those same strategies to all surfaces. You're finding people in all parts of the business bringing fact-based measurement to all surfaces, at least to the extent that we can, rather than treating it as an art. Too often we were relying on very valuable heavy machinery and very hard-working guys who moved material and worked with material based on temperature and precipitation, but we weren't applying the science to it. What we are doing now, bringing science into it, is going to be a benefit to the entire industry, regardless of what surface you are racing on.
What can we expect to see from the NTRA's safety certification program this year?
We're approaching a pretty significant time frame. That is, in about 10 weeks we're going to be one year from the Eight Belles incident. It's a defining moment for us. It's incumbent on all of us in racing to look back over that time frame, to remember what we've done, and we need to remain focused on that heightened approach to racing-safety issues that we've maintained since then. I really believe that we've made huge progress, in terms of getting the alphabet soups of organizations involved in the sport to come together to make meaningful progress. Just look at what we've done. Steroids are banned in every major racing jurisdiction, we are collecting data from all tracks through a uniform injury database, we're determining what's happening on these surfaces, we've banned the toe grabs that were correlated with catastrophic injuries, we've increased our attention to prerace exams and we're creating standards there, we've moved forward on the evaluation of racing surfaces in a scientific way, and there are efforts under way led by The Jockey Club to create a nonprofit surface-testing laboratory that anyone can utilize. Racetracks will be able to send their materials to the lab so that the lab can evaluate it to see if it has the characteristics of safe racing surfaces. And we're doing more state-of-the-art drug testing, and we're funding those efforts. If we look back at the progress we've made in one year, it's actually tremendous. We should be proud of that. But we're going to need to have an accountable measurement of tracks to demonstrate who's doing what is needed to be done, and that's where the NTRA will come in. We will need an organization to publicize which tracks are doing the right things, and let the public make their decisions based on that.
Most horsemen and racing officials - anyone, actually, with a familiarity with horse physiology - will say that there is no way to reduce horse casualties to zero. Is there a target rate or number, and will racing be able to address its problems with public perception at that number?
We've talked long and hard about that, because the point you raise is dead-on. Because of the physical makeup of the horse, you simply can't eliminate all catastrophic breakdowns. They are going to be with us forever. So it was extremely difficult for us to set our sights on some number, because it's arbitrary. More importantly, we're looking at an effort quotient. Are we doing the things we need to do reduce that number? How broadly are we looking at the multi-factorial reasons behind breakdowns? . . . It's going to have to be measured by the cumulative effort that we all put forward, and the accountability measurement that will let folks make their own minds up about whether we are addressing these issues aggressively enough, within the recommendations that we know will work to reduce those numbers. I don't think we're going to be right in saying the target is a 25 percent reduction, or 50 percent reduction. And part of that is that we don't yet know what's possible. We will find that out. We'll do more studies, we'll identify the risks, we'll put in place the programs we know will work. And then we'll have the accountability index, to determine who's doing what and who isn't doing enough. . . . The more time we spend examining safety issues, the more items will come to the top. We will be able to find that this factor has a causal relationship, we'll do the things we need to do to reduce that risk factor. We will have continual attention to this, and have accountability. It's the only way. Our horses deserve it.