12/23/2001 12:00AM

Solid industry in uncertain times

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John Harris is chairman and chief executive of Harris Farms, which with both Thoroughbreds and beef cattle is one of California's largest livestock operations. He is a member of the California Horse Racing Board, a director and past president of the California Thoroughbred Breeders Association, and served as chairman of Bay Meadows. Harris recently spoke with Chuck Dybdal of Daily Racing Form about the challenges facing the Thoroughbred industry in California.

Daily Racing Form: What is the state of the California breeding industry today?

John Harris: I think it's pretty good. California has four or five of the nation's top 75 [stallions], which is an improvement over recent years. We are proud of it, and now a California-bred, Tiznow, has won the Breeders' Cup Classic twice, and we have some tough horses in all categories. I think we've been able to retain stallions in California now better than we have some times in the past - horses like Bertrando, General Meeting, In Excess, and Cee's Tizzy. In fact, I don't think California has lost a significant stallion in several years to other states. Mare owners are now keeping better mares in California.

Has the current economic downturn affected the California breeding industry?

Fortunately not. No one's gone out of business or anything like that. Breeding horses is a long-term deal. It's not the sort of business for people to be successful at that they get in and out of based on short-term problems.

How have the Cal-bred incentives helped the industry?

That's been a long-term project we've had in the Cal-bred industry. It's always been a good program, but I think it's better understood and provides more benefits [now] than any time in history. It's starting to pay real dividends. The Cal-bred Incentive Fund, administered by CTBA, pays about 15 percent to the breeder of a Cal-bred on earnings of any one-two-three placings on racing in California. Some people say this encourages mediocrity, but I think it has encouraged people to breed better horses knowing that successful products can pay a nice dividend back to the breeders. There is also a 30 percent bonus on open allowance races in addition to the posted purse for Cal-breds, so if a Cal-bred wins a $50,000 race, it's like winning a $65,000 race.

As a member of the CHRB, what are the positives you see in the industry heading into the new year?

The big thing we're all looking forward to, have worked hard to achieve, and now hope can be successful is advance deposit wagering [phone account betting]. It can greatly expand interest in this sport and racing's fan base, depending upon how it's produced, and how the fans adapt to it. That's one of the big positives. It's also encouraging that some of the attendance and handle numbers have shown a little bit of an increase. I know Cal Cup in 2001 had its best attendance and total handle in several years. I think there are people out there who like to go to the races. The industry just needs to figure ways to get them there more often and make it a special experience.

What are your concerns as you look ahead?

One of the concerns about ADW is that there's a risk it will just cannibalize existing handle. We want to see it add incremental handle, not just move around existing handle. An all-out effort to develop new customers for racing is critical.

Another concern is costs. The cost structure of owning horses is going up. We had substantial license-fee relief from Senator Ken Maddy's bill back in 1998 that helped purses significantly. I don't see any more purse monies coming from a future change in license fees, so purses now must come from more handle. The cost of training horses keeps going up, and if purses can't keep pace, the overall financial health of the basic business is in trouble. Thus new revenue from things like ADW is key for survival.

Can advance deposit wagering be successful in California with competing companies requiring separate betting accounts for different tracks?

Competition is good. I think it's good that there's not just one approach to the whole thing. But it would be good if Television Games Network and Magna could get together and cooperate more than appears to be happening. The key will be to get in millions of California homes with a product that can be legally wagered on and teach people the joy of handicapping. Having to have two accounts is perhaps okay, but the key is to have all tracks in California have good access to the home television market.

As a member of the CHRB Dates Committee, is it too early to try to assess the impact of the eight-day break around Christmas?

It's a good experiment, and we had big fields [before the break]. We need to see if those big fields provided a net gain. I'd like to see more gaps, maybe have some four-day weeks. Most fans say there's too much racing. Maybe it's going to change with account wagering. It's kind of good to see how different schedules may work. We can sit down and see how the numbers come out. I think anyone would stipulate that you'd have bigger fields by running fewer days, but we need to see if that's enough of a help to justify it. Plus, labor is concerned about losing days if it impacts employment on the front side. I think one of the issues, too, is we just don't have the fans if the field sizes get ridiculously low. Northern California had very low field sizes in the fall of 2000, but I was encouraged that they increased this year. It's not like there's a lot more horses, it's just that an extra 10 horses a day racing can make a big difference.

Perhaps the biggest change in the racing calendar next year is the elimination of six-day weeks. How important is that?

One of the things that racing did buy into was that when there is a Monday holiday, of which there are many, instead of coming back Wednesday, start again on Thursday, and you have a five-day week. I think five-day weeks are good. With account wagering, people who want to bet will still be able to wager on those other days at other tracks. I think with the horse population we have now it's tough to support a six-day week. When you throw a few of those into the schedule, it really hurts.

Despite the general consensus that there is too much racing, you encountered great opposition even to minor cutbacks. What, realistically, can be done with the racing calendar?

All the industry was particularly negative about cuts. The unions were negative about them, as were the tracks. One of the issues for owners and trainers is that they spend money every day. They can't stop training expenses. The tracks seem to have a mindset that any given day lost is a net loss, and there is no revenue picked up on other days due to generating larger field sizes, or giving fans a break. The TOC did suggest a Christmas break again, but Hollywood Park felt these were dates that the fans like to come out on. Bob Tourtelot and I were the two members of the Dates Committee, and our recommendation for modest reductions in 2002 had only our votes. All the other commissioners were against it. I respect my fellow commissioners' opinions, but going forward we need to continually evaluate the best schedule.

There have been questions about the future of the fairs in northern California and at Fairplex. Do you foresee any changes in fair racing in the near future?

I like the fairs and feel they attract new fans and provide opportunities for some horsemen that don't race at the major tracks. I think the whole thing is that fairs have to put on a first-class operation. They've got demonstrate they're willing to step up to the plate to put on a show. If they can do that, they deserve those dates. If they can't do the job, they need to decide to do something else. I can see there may be a way to run a few days of Fairplex at Hollywood Park to get on the grass as some sort of a grass prelim to the Breeders' Cup. I'd hate to see Fairplex go away completely unless there were some sort of compelling reason to race more days at Hollywood. I question if the Hollywood attendance would be as good as the Fairplex attendance.

Although there have been good-sized fields in northern California, do you still have a concern about the horse population throughout the state?

It is a big concern because there are a lot of other tracks around the country that offer pretty good purses for claiming races. I think we're going to be largely dependent on California-owned and -bred horses to fill most of the races here. It's pretty expensive to keep a horse in training. Training costs have gone up dramatically. Costs have gone up faster than purses have gone up. Foal crops haven't gone up. They're not going down, but I still think we're going to have a long-term problem with the horse population.

After the terrorist attacks of Sept. 11, you were outspoken about your feelings that racing should go on as scheduled even though most major sports decided to postpone events. Do you still feel the same way?

My point was that we, obviously on the West Coast, weren't as close to it. We saw it on television and were obviously very shocked and dismayed by it. It was an attack on the United States. It wasn't an accident. We'll be mourning this for years, forever. It's like Pearl Harbor. It's not something we can take a day off and come back and everything's fine. I felt the terrorists' intent was to disrupt American business and the American way of life, and if we were to change what we're doing, that really meant we were letting them win. We've got to stand up to terrorism and not change what we're doing. We can still be mourning the terrible losses and still be very sympathetic and trying to help any way we can. I think a lot of the other sports pretty well had to cancel because of the air transportation. If that's what somebody wants to do, that's fine. In my opinion, racing, as with any other form of business, like movie theaters, restaurants or bowling alleys needed to keep going. You have backstretch workers and frontside workers who are dependent on a job. We need to maintain those jobs. If any one person said, "I'm so upset today I can't work," they should be able to take the day off. But just suspending operations of California racing wouldn't have accomplished anything.