08/22/2010 2:50PM

Round Table: Problems aplenty, but reasons to be optimistic

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SARATOGA SPRINGS, N.Y. – Despite unprecedented year-over-year declines in betting handle, auction receipts, and the size of the foal crop, the Thoroughbred racing industry has reasons to be optimistic about its future, officials of a variety of racing organizations contended on Sunday during the Jockey Club’s Round Table Conference on Matters Pertaining to Racing.

The buoyancy of the remarks contrasted sharply with the freefall of racing’s economic indicators since the beginning of the recession in late 2007, a disconnect that reflected the officials’ desire to draw attention to any proverbial silver linings within the glut of grim financial trends. Racetrack executives spoke of the ability of slot-machine subsidies to continue to prop up racetracks and horsemen, while Jockey Club officials, citing a projected 25 percent contraction in the foal crop from 2007 to 2011, focused on research suggesting that the mares and stallions being removed from the breeding shed were largely substandard performers on the racetrack whose contribution to the gene pool may not be missed.

“We may have less foals and less racing,” said James Gagliano, the chief operating officer of the Jockey Club, “but we expect to have better horses and better racing.”

Racing’s recent financial difficulties and the attempts of racing organizations to counter the declines were the featured points of discussion at this year’s Round Table, an event administered by the Jockey Club for the past 58 years. Speakers that were asked to address the declines included C. Steven Duncker, the chairman of the New York Racing Association; Nick Eaves, the chief executive officer of Woodbine Entertainment Group; Nick Nicholson, the chief executive of Keeneland Association; and Dennis Robinson, the chief executive of the New Jersey Sports and Exposition Authority.

Duncker drew attention to the recent approval of a casino operator at NYRA’s Aqueduct racetrack as a reason for the entire racing industry to breathe a sigh of relief, citing the importance of NYRA’s racing product to the health and popularity of the sport. The casino, which is expected to open in late-spring of 2011, will provide NYRA and its horsemen with approximately $65 million in annual subsidies to prop up purses and fund capital improvements at NYRA’s three tracks, while also providing NYRA with millions of dollars in cash each year to cover its operating expenses.

“I’ve been chairman of NYRA for seven years now,” Duncker said, “and I’ve never been more optimistic than I am right now.”

Still, Duncker pointed to structural problems that continue to plague racing in New York, including the recent bankruptcy of New York City Off-Track Betting Corporation, the largest bet-taker in the U.S.

New York City OTB owes NYRA more than $20 million, and a reorganization of the company will almost certainly require a solution that brings together a variety of racing, business, and political interests that are cash-starved, territorial, and have failed to see eye-to-eye for years.

“This is a lot more tangled than you might think,” Duncker said, referring to ongoing discussions between New York City OTB and the myriad parties involved in its reorganization. “This is going to take a lot of cooperation and intelligence.”

Eaves focused his presentation on Woodbine’s strategy to “reposition racing” as a means to reverse declines in betting handle in the late 1990s. That effort coincided with the legalization of slot machines at Canadian racetracks, a measure that provided Woodbine, a not-for-profit organization, with tens of millions of dollars in subsidies for purses and capital improvements.

Eaves made little note of the windfall from the machines as he outlined how Woodbine decided to re-invest a large portion of the subsidies directly into the racing product, from the establishment of posh off-track betting parlors in Toronto to the company’s decision to embrace internet wagering and television distribution early in the decade. Eaves closed his presentation with a short video describing the track’s partnership with the Cordish Cos., a real-estate development company, to create an outdoor retail and entertainment space adjacent to the track. The project has been stalled by a variety of factors, but Eaves said that the track hoped to break ground on the development soon while offering the partnership up as a way for racing to diversify during bleak economic times.

“We’ve got to be exploring every available opportunity,” Eaves said.

Robinson, the head of a state-owned company that operates the Meadowlands and Monmouth Park, outlined the New Jersey racing industry’s effort to build support for an experiment this year that eliminated live Thoroughbred racing at the Meadowlands in favor of 71 total days of racing at Monmouth, including a 50-day meet in which the track has planned to distribute $50 million in purses.

Critical to the effort, Robinson said, was building a coalition of support for the experiment from the state’s constituents, a measure that will likely prove equally important to New Jersey racing in the coming months, considering that a recent commission studying the state’s gambling industries recommended that New Jersey cease to accept losses at its racing properties and close the Meadowlands. In addition, Atlantic City casinos are not obligated after this year to provide a $17 million subsidy to Thoroughbred racing, and the casinos have indicated that they have no intention of providing the subsidy in the future. As a result, the future of racing in New Jersey remains an open question, though Robinson maintained that gaudy increases in handle and attendance at the Monmouth meet this year proved “that positive experiments like this are worth the risk.”
Keeneland’s Nicholson said that racetracks must continue to focus on the needs of horseplayers while delivering a high-quality entertainment experience to their customers, and he cited the track’s decision to invest in high-definition broadcasting capabilities and other technologies to position racing alongside other major sports.

Nicholson’s presentation omitted any discussion of the powerful economic forces that have buffeted Keeneland over the past two years, including a sharp decline in the value of bloodstock that has cut sharply into the association’s auction revenues, its primary source of income. Since 2007, North American auction receipts have been cut in half, and with the foal crop continuing to contract as credit remains tight, a recovery in the bloodstock market is not expected any time soon.

“Let’s not downplay our problems,” Nicholson said, “but at the same time let us not lose sight of what is great about our sport.”

The speakers gave little indication of how racing can improve its fortunes, although Duncker said that racing must embrace national efforts to market its product and devise a meaningful schedule of stakes races and racing dates. Duncker also said that racing needs to lower its takeout rates to effectively compete with less-expensive casino games, a measure that will be hard, if not impossible, for many racetracks to implement unless racing’s financial outlook improves significantly.

The second half of the Round Table focused on the efforts of various racing groups to push for the adoption of uniform rules or policies designed to improve the health and safety of horses and riders. Most notably, Dr. Rick Arthur, the equine medical director of the California Horse Racing Board and a participant in a wide range of medication-related task forces and committees, called on the racing industry to support a recent recommendation by the Racing Medication and Testing Consortium to lower the legal threshold for phenylbutazone, a painkiller that is widely used in racing and training but illegal to administer on raceday.

Earlier this year, the consortium said that veterinarians conducting pre-race exams had contended that the use of phenylbutazone was complicating their ability to detect soreness in horses, and the consortium responded by issuing the recommendation to lower the allowable level in post-race tests to 2 micrograms per milliliter of blood plasma, from the current recommendation of 5 micrograms. Some horsemen, however, have aggressively opposed the recommendation, citing the ability of the drug to help horses withstand the rigors of training.

Arthur contended that the opposition was being led by a small group of horsemen, and he said that the racing industry must unite to support the adoption of the recommendation in the next month by the Association of Racing Commissioners International, an umbrella group for regulators whose policies are typically taken up by most state racing commissions.

“The hysteria over this modest reduction is ridiculously overblown,” Arthur said.