06/23/2011 1:03PM

Q&A: Greg Avioli

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On June 30, the racing and gambling assets of MI Developments will be transferred to a private company being formed by Frank Stronach. The company, which is being called the Stronach Group, will be headed by Greg Avioli, the former chief executive officer of Breeders’ Cup. After the transfer, Avioli, 46, will take charge of Santa Anita, Gulfstream Park, Laurel Park, Pimlico Racecourse, the account-wagering company XpressBet, the bet-processing company AmTote, and a half-share in the racing broadcaster HRTV. DRF spoke recently with Avioli about the plans for the new company and its tracks.

You went from the top position at a relatively stable company to the top position of a new company that is taking on assets with a troubled history. Why make the change? There’s really a tremendous opportunity right now working with Frank and [Stronach’s daughter] Belinda Stronach to significantly improve the racing industry. And, from the Breeders’ Cup’s standpoint, it was a good time to move on, for both me and the organization. We had accomplished a great deal over the last five years, and with [Breeders’ Cup chairman] Bill Farish going off the board, and my most recent contract ending at the beginning of last year, it was just a good time for a change for everybody.

Obviously, the racing industry has been going through a protracted decline over the last three years, and these assets haven’t turned an overall profit in years. What needs to be done to reverse those declines? It has to begin with quality on the racing side. It’s not going to get healthy and you’re not going to attract more fans if we are not putting out full fields of quality horses. So we need to look at what Gulfstream is doing right now and the reason it was one of the few race meets to get better in the last year, and that’s because of the quality of the facility, the quality of the horses, and the betting product. And you’re also going to have to improve this product by placing it in our customers’ hands through better technology. It’s got to get easier for our consumers by providing them with information in ways that they choose to consume these days. So if you look at the technology assets we have, the TV assets we have, you’re going to need those to be competitive in the future.

What advantages are there to having the assets free of MI Developments? The biggest one is that we’ll be a lot more entrepreneurial. We’re not going to have the bureaucracy that comes with a public company. Particularly relevant to MID, we’re not going to have the contentiousness that was the hallmark of that company over the last few years, where you had some very vocal minority shareholders who were aggressively opposed to pretty much anything that the racing company was doing. So we’re no longer going to have that distraction, in terms of both manpower and money. We’re going to be able to focus our efforts on these properties. And perhaps most importantly, at the helm of all this, is Mr. Frank Stronach. He’s going to be much more comfortable investing in these properties because he’s going to own them, without the dynamics of a new and contentious public company.

Under the asset-transfer deal, MI Developments can’t offer the new company any help. What happens if the new company needs money fast? I can’t comment on any future financing needs that we may or may not have. Right now the assets are well-financed with more than enough working capital, and I’m very confident that the cash flow from operations will be more than enough to meet our needs. If we do need additional capital, I’m fully confident for good reasons that we will be able to get that capital from the Stronach Group.

Let’s move on to some specific strategies. Stronach has indicated that he wants more race dates – specifically, at Santa Anita and Gulfstream. It’s generally believed the industry has too many race days to support a horse population that continues to dwindle. How do you get more days without weakening the product further? I think it’s a mischaracterization to say that Frank is after more days for the sake of more days. What he has long championed, which I believe most people in the industry have come around to agreeing with, is that the racetracks themselves need much more leeway in determining the number of days they are going to run, as opposed to the days being allocated by the state or particular racing commissions. To the extent that racetracks are provided more autonomy in determining what dates they will or will not run, that will allow for more profitable business operations. So in some states that may mean running more dates. In some states that might mean running less days.

In Maryland there have been some acute problems going back a decade. How do you address those? We need to figure out how the overall structure of Maryland racing can be improved so that you’re improving the financial performance, so you’re improving the quality of racing, so that you’re putting out a better product for the fans, in a way that the horsemen can support. We’ve been able to find that happy balance down in Florida, and we have to find out what version of that is going to work out in Maryland.
Everyone you talk to in Maryland right now . . . agrees that the model in Maryland is broken, and that it’s going to require a substantial fix. The racing assets collectively lose money every year, the quality of racing is not anywhere where anyone wants it to be, the facilities are not what anyone thinks are optimum, so Maryland is going to require an entirely new blueprint. There’s no easy answer here. It’s going to require a lot of thought, a lot of effort, and it’s not going to be easy.

In California, MI Developments, along with the rest of California’s racetracks, supported a takeout increase that went into effect earlier this year to pay for higher purse awards. Yet field size continues to drop, along with handle. Was the takeout increase a mistake? I don’t think it helps to give my opinion on whether the takeout increase was a mistake or not. What I can tell you is that the numbers in California have declined significantly from previous years, and the previous year itself. So California is definitely not sound right now. There’s not the right balance between the quality of the product and the cost of the product.

What we have to do is listen to the bettor. You can’t ignore the concerns of the bettor in this industry, because they are the lifeforce, they are the ones that provide the vast majority of the revenues. So going forward we want to spend more time with the players’ groups out in California to understand what their concerns are, and we also want to understand from a bettor’s perspective why is it that we’ve seen such a decrease in the California handle over the last four years. What can we do to increase field size, but in addition to that, what else can we do to make this product more attractive?