04/02/2007 11:00PM

Racing advised to get with the times

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TUCSON, Ariz. - Two experts in their fields who know horse racing and have enjoyed it for years, but are the harshest critics of its business model practices, told 200 racing executives at the recent joint meeting of the Thoroughbred Racing Associations and Harness Tracks of America that the industry still is trying to sell buggy whips in the age of computers and the Internet.

Bill Shanklin is a professor at the University of Akron's College of Business in Ohio. He has written penetrating articles on racing for years, for a number of trade publications of all breeds.

Eugene Christiansen heads one of the word's most highly regarded consulting firms on gaming and racing.

The two have joined forces in recent years to deliver messages that racing needs to hear. They make a formidable entry.

At the TRA-HTA meeting, they sounded a warning once again that if racing does not change its business focus on approaching its problems, those problems might very well be its death knell.

The title of their presentation was "The Internet and Disruptive Technology," and Shanklin - who has served as a turnaround specialist for a number of major companies - started his talk with a recitation of major blunders that were among the most costly in history and business:

* Robert E. Lee's decision that led to Pickett's disastrous charge at Gettysburg

* The Maginot Line in France in World War II

* Eastman Kodak's failure to act on the knowledge that the days of film were drawing to a close

* The resistance of vacuum tube manufacturers to adapt to the arrival of the transistor

Shanklin said racing is heading down the same path, repeating what he calls "the sins of the generals," making major errors in resisting and ignoring change.

Shanklin believes racing needs to change its corporate culture, stop talking about the good old days and how they used to do things. Racing's problems, Shanklin believes, stem from its outdated business models, not from the product. If he were a private racing company, Shanklin said, he would form an advisory board of outsiders - "a potpourri of people from various backgrounds, various skills outside the racing industry," with differing views and approaches, who would attack the incumbent management that is bent on saving the old model. He would bring in contemporary young thinking and change the corporate culture, as General Electric did to save its day. If you don't do it, he says, the innovators in the world will do it for you.

Shanklin says racing needs an Internet model rather than a get-people-to-the-track model.

Gene Christiansen, following up on Shanklin's theories, cited the record-label companies, which had a perfect business model in a perfect world for 75 years, with gross operating margins in the 90 percent range, selling first LP's and then CD's. That industry, he said, took a look at file sharing when it arrived and decided that it was illegal, that they could go to court and enforce the law, and put the file-sharing people out of business. He noted that recorded music sales now are in their seventh consecutive year of declines, and that Apple Computer, which grabbed the file-sharing business, could not be happier.

Christiansen says racing is married to its old business model, trying to make new fans with parimutuel machines, which at the end of the day means racing is product-oriented, not consumer-oriented. He thinks the industry is fixated on horses and races, and that if the track surface is good and the racing is high-quality, God's in his heaven and all's right with the world. If customers don't come to the track and bet, something's wrong with them, not with racing companies. Get slot machines, he said mockingly, so purses can keep rising.

Racing, Christiansen believes, is managed like an art institution, with a management mind-set that seems to say, "I like racing, and if the public doesn't, the hell with them."

Not enough people care about high-quality racing, Gene Christiansen believes, and if that isn't addressed and racing does not as an industry find out what the recorded music folks found out, if we do not find a new business model that can create fans, create an interest in racing, nothing else is going to save the industry. He does not think slot machines will do this because they are a different product entirely.

After that came lunch, with appetites dulled and a few strong belts to counteract the reality check.