In the movie Field of Dreams, the theme was “If you build it, they will come.”
Before 1968, that theme built a lot of golf courses with events to lure professional golfers. The tournaments were good for the facility owners, but not so good for the pros wanting better purses and a national schedule.
At that time, golf was a facility-centric sport, meaning the facility where the sport is played controls everything: the product, the price, distribution and marketing.
When the pros started the PGA TOUR they had a new theme: “If you agree to our terms, we will come.” Professional golf changed to talent-centric, because if a golf course did not agree to their terms, the talent played somewhere else. That is a helpless bargaining position for the facility owner.
Today, all successful sports are talent-centric. They use pooled talent rights to make television contracts, control their distribution, and enjoy central authority with uniform rules.
Thoroughbred racing is still facility-centric.
The Jockey Club
At this year’s Jockey Club Round Table, I hoped to hear the McKinsey & Company presentation say, “We discovered Thoroughbred racing is facility-centric. When you change and develop a talent-centric structure, you will have a growing, powerful sport.” That did not happen.
Although they advise the NBA, NFL and other talent-centric sports, McKinsey never mentioned the benefits of racing developing the same structure.
McKinsey warned that racing has not bottomed out. If nothing changes over the next 10 years, racehorse owners alone will see a 50% loss in revenue. For breeders, auction companies and support service companies, that news about horse ownership is devastating.
McKinsey said some things could be done. They can buy television and develop social media and games. But, as long as the sport is facility-centric, Thoroughbred racing cannot have central authority; cannot control its own distribution; nor can we implement national rules, such as medication policy.
Twenty years ago, The Jockey Club hired McKinsey & Company to advise them on how to get medication out of racing and enforce the ban.
Trainers did not like a medication ban any more then, than now. With a strategy against the track-centric structure, the trainers informally did what the PGA TOUR had done to the golf course owners: they leveraged the tracks and jurisdictions against each other to get the terms they wanted.
The trainers moved horses to tracks and jurisdictions that agreed to not ban medication. “If you agree to our terms (no ban on medication), we will come.”
The Jockey Club leadership is rooted in NYRA and that state was the last to fall. Trainers moved the talent out of New York and brought track-centric NYRA to its knees, to the point the New York governor had to step in and agree to their terms.
By picking off one state at a time, the trainers did what many say cannot be done in racing. They implemented a national medication policy.
The trainers used a talent-centric strategy to weaken racing rules, instead of our Jockey Club using that strategy to strengthen them.
As the trainers proved, you don’t have to have a national law, when you have the other side by the short hairs. The ability to move the talent to another jurisdiction is the most powerful force in this sport.
The trainers were not bad guys for doing what they felt was in their interests; they just acted in the vacuum of other leadership.
Missing Out on Television
“Build it and they will come” was the theme until the 1950’s, when television changed sports forever. With new national distribution, sports were no longer limited by location.
The other sports quickly changed to a talent-centric structure where pooled talent rights became the basis for television contracts, thus new revenue, popularity and growth for their sports.
But, racing’s leaders were conflicted. Government’s gift of legal wagering complicated their decision on television. If the races were televised, then bookies could steal some wagering revenue.
And the television networks did not want to deal with a hundred different track operators throughout the year. The tracks are not a business unit, capable of splitting revenue.
Thoroughbred racing did not embrace television, but that was not it’s greatest sin. What damned racing, from then until now, was failing to join the other sports with a modern, talent-centric structure.
Racing was at its peak then and if it had changed, television and new forms of wagering distribution would have been controlled and exploited in a good way for the benefit of the sport and thousands of owners of the talent. Instead, racing’s leaders chose to continue a dead-end structure favoring just a few track owners.
When the other sports changed structure, the sport facilities owners did not like it, but they had no choice except to move to signed contracts with the national talent-centric organizations.
Over the past 60 years, racing’s track-centric structure has exhausted, one by one, every distribution advantage government has given this sport. First it was legal wagering, then interstate off-track wagering, then account deposit wagering, then exclusive Internet wagering.
The new forms of off-track distribution have not only been squandered, but also corrupted, to where the talent now receives little of the revenue.
Each year, the percentage going into purses from handle has fallen, even as takeout increased. How? The new money is flowing to those just taking off-track bets, not to those who put on the show. In biologic terms, the parasites are sucking the life out of the host with compete disregard for its demise.
But, the real tragedy is that the track-centric structure is so flawed it has made those in the industry believe there is little hope for the sport’s future.
That is simply not true.
Today there is a new push by The Jockey Club and other organizations to ban race day medication.
Changes in racing rules are up to individual states, where track operators, trainers and some racehorse owners will speak to the governors and their appointed racing commissions.
Each track has a lot to gain by allowing medication to continue. It can mean more horses for their races and more jobs in the state for the governors who appoint those racing commissions.
Will the racing commissions fall in line with The Jockey Club and the other organizations to ban race day medication? Or, will they decide what is best for jobs and revenue in their state?
Who is going to control the movable talent in this chess game now? Will it be trainers as in the past, or will like-minded racehorse owners, who want a medication ban, get involved?
Will banning Salix in graded stakes result in an artificial major and minor league in racing? Will we have one league in states with a drug ban and one in states without a drug ban?
And who exactly will control graded stakes? Will the tracks that own the graded stakes continue to allow a committee of TOBA to judge them, thus control them, in the future? Or will that too become a battle? A bad structure creates problems, but a good structure prevents and solves them.
No national medication rules, lack of central authority and lack of control over distribution, are all symptoms of the current track-centric structure that divides and cripples this sport for no good reason.
Until we change from that structure, the sport will continue with fiefdoms, and be separated and drift aimlessly, with no solutions for as long as it last.
In successful sports the talent-centric structure is a major league, which contains only the highest level of talent. That is the only portion of a sport the public will pay to see. The only portion television networks will pay to televise and the only portion advertisers will pay to sponsor.
Less than 10% of each sport is under the authority of a commissioner. The NBA Commissioner has no authority over those who play basketball outside the NBA. His drug rules and testing do not apply to YMCA basketball players.
So, when people say racing needs a commissioner like the other sports, the reality is the other sports do not have commissioners over their entire sport either.
But, the public face of each sport is their major league, where the owners of the highest level of talent take responsibility and vest full authority over national drug policy, television sales and all distribution in the office of a Commissioner.
Some will say racing is different and a talent-centric structure will not work in this sport. But it already is working.
“If you agree to our terms, we will come” has been used successfully by The Breeders’ Cup since it started. Using talent-centric tools, they leverage tracks and cities to gain favorable terms for their event.
Years ago, when Santa Anita said “no” to The Breeders’ Cup demand for their best seats, the event was awarded to Belmont. When Santa Anita had a change of heart, the event was welcomed to Los Angeles.
At its origins, The Breeders’ Cup was a “thank you” from breeders to racehorse owners, with its purses funded primarily by stallion and foal nominations. Now, wagering revenues fund most of the purses.
Today, The Breeders’ Cup is structurally more like an event promoter. Since breeders have no original talent rights, expanding their role is problematic.
Leverage and exploitation are good words when they allow an enterprise to overcome a buyers’ market or business disadvantage. Our federal anti-trust laws favor the talent-centric structures that benefit each sport. That’s another incentive for change from a current structure that is plagued by anti-trust concerns.
How can Thoroughbred racing develop a new talent-centric structure within the sport?
Past Time for Quid
In the early 1990s, I created a major league within racing. The members were the leading racehorse owners in North America and Europe. It was a talent-centric structure, based upon the owners’ pooled talent rights and we had the horses needed to package the highest level of racing on the weekends.
It was called the National Thoroughbred Association (NTA). The NTA was a very benevolent plan for a major league. It had a commissioner with authority over its members; however, it did not interfere with the rest of racing in North America. It was very much like the major leagues in other sports
Some leaders in The Jockey Club used influence to stop the talent-centric NTA.
In its place they substituted a track-centric NTRA, and gave half of the board seats to track operators.
The NTRA gutted all of the major league components of the NTA: the packaging of high-level races, the pooling of talent rights and control of distribution.
To add insult to injury, through fees and deductions from purses, the NTRA took hundreds of millions of dollars from breeders and racehorse owners, while rebating fees to the track operators. By stopping the NTA plan to receive fair revenue from off-track distribution, billions of dollars have flowed to bet takers instead of host events.
The same breeders and racehorse owners losing all that money are the same ones funding The Jockey Club through breed registry and their purchase of data information services. It is past time for quid pro quo between the breeders and owners and The Jockey Club.
The Jockey Club leadership is rooted in NYRA, but its national role and membership have more in common with the owners of the talent, than with the owners of the tracks. There is nothing wrong with The Jockey Club partnering with track operators on services, however, there needs to be balance in it alliances.
Today a plan for a talent-centric major league structure would probably be different from the NTA plan I wrote then, however, the need is still the same.
It is painful to contemplate how the major league brand would have developed and grown these past 15 years and how different the talent-centric structure could have changed our sport today. Simply turning the off-track distribution model right side up would have kept billions of dollars in the sport, with the many benefits of reinvestment.
This is the only country in the world where racehorse owners, who own the talent, have the freedom to join in a major league. Think about that for a minute. No other racing country can have a modern, talent-centric structure like the other sports.
With the leading international owners as members, the NTA could have enjoyed a similar role in international racing as the talent-centric NBA enjoys today as the focus of international basketball.
The Role of The North
American Jockey Club
In October, our Jockey Club will participate in the International Federation of Horseracing Authorities (IFHA) conference. They are the only members of the IFHA without authority over racing.
To gain parity with the other countries, our Jockey Club could make a choice. They can continue to support a dead-end, track-centric structure that effectively yields all power to the trainers in North America. (There is a word for doing the same thing again and again and expecting a different result.)
Or, our Jockey Club could embrace a plan to create a modern, talent-centric structure in North America, one that empowers like-minded racehorse owners. Such a plan could have the ability to overcome the legal constraints that impede protecting the breed and the sport in North America.
Some people think because racing has legal wagering, it is no longer a true sport, but only about gambling. That can be true very shortly if we continue with the track-centric structure, however, I don’t think that is what The Jockey Club, its members and a lot of like-minded owners and breeders want.
Our Jockey Club, like the Jockey Clubs and governmental bodies that oversee Thoroughbred racing and breeding around the world, has a higher mission. That mission is comprehensive of both racing and breeding. I’m going to suggest it goes like this:1) Protect the Breed.
2) Nourish the Breed.
3) Prove the Breed.
How can we protect, nourish and prove the breed when our 2-year-old races, up through our Classic races, are masked by Salix and other medication? The rest of the world is asking us to stop weakening the breed, because we all know the breed has no international borders.
We must decide if our sport in North America is going forward based upon the lowest common denominator of all those participating in the sport, or will it be based upon the highest? Are we going to protect, nourish and prove the breed, or allow the sport to be weakened in the name of giving an equal voice to every participant at every talent level?
When the PGA TOUR was being started, if there had been a popular vote among all 3,500 professional golfers, their major league would have never gotten off the first tee, because less than 300 of them would be playing on the TOUR. But, those at the highest level did not ask permission, they did not take a popular vote, instead they led their sport out of obscurity.
Talent is not equal in any sport. The public knows it and makes it clear what they will pay to see, what they will watch and what they will participate in as sport — they want only the highest level of talent and they want it organized with them in mind.
Our current track-centric structure delivers just the opposite; the tracks package a homogenous race card, with the lowest levels of racing packaged right next to the highest level. No other sport makes that mistake in how it packages and presents its product. But every track in North America makes that mistake every day.
The current structure, where each track competes against the others, prohibits national scheduling and rewards trainers and owners who avoid competition. This results in small fields, small attendance, small handle and a tragically small sport.
A talent-centric structure can package races that reward racehorse owners with a coordinated, national schedule that produces big fields, big purses, big handle and something we haven’t seen for a while, a big sport with growing attendance.
It is Jockey
Just before this year’s Jockey Club Round Table began, a friend looked around the room and said, “You know, the individuals in this room could accomplish about anything, if they just knew what needs to be done”.
Perhaps the reason we have never had unity in modern times is because The Jockey Club leadership has not allowed the owners of the talent to assume their role in the sport. The talent is the one indispensable element in every sport.
“Build it and they will come” died 60 years ago, but it is still killing this sport today. The only thing that kept racing from dying was the gift of expanded distribution from government.
The best opportunity now is for The Jockey Club here to marshal all the influence it can bring to bear on its members to form a talent-centric structure in the sport.
They need to trust their members and instead of clipping their wings, let them soar. We will all enjoy the ride.
The members of The Jockey Club may not own the top talent this year. But, their names and influence matters. It matters to the state racing commissions and members of Congress who might be asked to tweak racing legislation to fix problems.
To say we do not need government involved in racing begs credibility. This sport has asked for and received every advantage, from every level of government, based upon agricultural jobs. The breeding industry has enabled this sport to receive most favored status.
The reputation of Thoroughbred racing is integral to continuing those advantages from government. Right now we are testing their patience and goodwill.
The public face of each sport is their major league. The public face of racing needs to be a clean, healthy, agricultural sport. That public face of racing can be re-established through a major league.
Jockey Club members who are racehorse owners, own the talent rights to their horses. But, they are not formally organized to pool those talent rights. They will need to hire the management necessary to do the things for our sport that other sports enjoy.
McKinsey & Company is a top management-consulting firm, but right now they do not have anything in racing to manage. They know how talent-centric sports work and they can help get one up and running.
What is missing in North America for racehorse owners?1) No Ability to Prove the Breed.
Today out 2-year-old and Classic results are masked by medication.2) No Classic Races for their Fillies.
Debate and negotiate the races, then declare the races.
3) Few Clean Stallion Prospects.
Even if your colt races without drugs, having one horse in the race that is aided by drugs alters the results.4) No Solid Future for their Sport
. The current structure cannot succeed. The answer is to start a new structure in Thoroughbred racing that has never failed in the history of modern sports.
For North America to transition out of racing medication will be painful, but for our racing program to start proving the breed, we can start by eliminating race day medication from 2-year-olds, then the next year extend the ban in the races leading up to our Classics.
The question is not whether the talent in racing will be used to leverage the tracks and jurisdictions. The question is whether the talent will continue to be hijacked to weaken the sport, or will be organized by the rightful owners of the talent.
Here’s what makes it harder for racehorse owners, than for the owners of the talent in any other sport. No racehorse owner has all high-level horses. In fact, quite the opposite, the majority owned are lower-level horses.
When I referred previously to trainers moving horses around to advantage, the truth is many racehorse owners support what the trainers are doing and want to keep their horses running as long as possible, even by artificial means. They are not trying to cheat; they just want to keep things going.
When I went to see the late John Franks and asked him to join the NTA, he had over 1,000 horses in training. He and I both knew that very few of his horses were going to run in the high-level NTA races. But Mr. Franks was both a sportsman and a businessman, who knew we needed a major league structure in the sport.
He signed immediately.
What we face now is nothing less than a battle for the soul of Thoroughbred racing in North America. It is going to require leadership that is blind to personal interests, individual horses’ needs, jobs and what is best for individual states.
Every business has to consider restructuring from time to time. This one isn’t any different. We should have done it in the 1950s along with the other sports. We should have done it with the major league NTA in the 1990s, but as my friend said about the individuals in the room at The Jockey Club Roundtable, now that they know what needs to be done, let’s get on with it.
There is no substitute for hard work and no denying a change in structure will be a major effort. However what is easier, watching the sport continue to fall, or rebuilding it?
Is it easier to watch our breeding centers and support services industries lose jobs and fail, or stabilize them with a real future of the sport?
Restructuring is going to be a huge step for some individuals. Moving from a track-centric mindset changes everything. The result in North America will be the closest thing our Jockey Club can have to a racing program similar in rules and status to the other Jockey Clubs around the world.
Last year I wrote a white paper titled “International Racing is Waiting on North America.” I urge you to read it.
Today, I would add a couple words to the end of that title and say, “International Racing is Waiting on the North American Jockey Club."
Thoroughbred racing has been looked at by some of the best minds in business and entertainment. Everyone decries the lack of authority over the sport and its dysfunctional operations, but nobody has addressed the problem in terms of changing from a facility-centric to a talent-centric sport’s structure.
All sports used to be facility-centric meaning the facility where the sport was played controlled everything, the product, the price, distribution and marketing.
Television, with both sight and sound, expanded the distribution of the sport beyond the physical location of the event. The talent in the sport, the players, owned the rights to their image and to use that image commercially, media had to license those rights. The team sports, quickly declared ownership of their players rights and embraced television and all of the many benefits the new talent-centric structure provided, such as central authority, uniform rules, control of distribution and national scheduling.
Thoroughbred racing did not change to the talent-centric, major league structure like the other sports, and thus missed out on all the same benefits. Through the gifts from government of expanded wagering distribution, the sport survived, but starting the downward fall that predictably comes from a failed structure. Racing is tied to facilities, thus as a sport it has no central authority, no control of its distribution, no national rules or scheduling of events.
The current track-centric structure, while prohibiting all the benefits to the sport, also makes it vulnerable to those who prey on its dysfunction, by playing the various track and state jurisdictions against each other. This has allowed racing rules to be weakened and revenue drained.
The North American Jockey Club leadership has been rooted in NYRA, and in my opinion, they have supported continuing the track-centric structure. But the organization’s role in the sport and membership are more centered in breeders and racehorse owners, the talent side of the industry.
For our Jockey Club to protect, nourish and prove the breed, it would seem the best way to assure these shared international goals are achieved for the first time is to assist its members and racehorse owners in developing a new, talent-centric structure in the sport. It is the one structure all other sports have proven will work in North America.
It is ironic, with the many organizations in the Thoroughbred industry, the racehorse owners who own the talent, are the only ones that do not have their own national body. Many organizations claim to represent racehorse owners’ interests, but all fail under a track-centric structure.
No national racing medication rules, no central authority and no control of distribution are all symptoms of a dysfunctional structure that covers the entire sport of racing. The major leagues in other sports only control the highest level of talent with central authority, but that is the public face of the sport.
Racehorse owners, who all have few horses at the highest level and many at the lower levels, must decide whether the sport goes forward with a new public face driven by a desire to protect, nourish and prove the breed, or one that continues the same system that is failing.
Each time our leaders have had the opportunity to restructure the sport with a talent-centric structure they have rejected it in favor of the status quo. Now is the time for real leadership, whether it comes from The Jockey Club, or from like-minded racehorse owners determined to not let this sport die because it lacks a structure that is available. This is the only country in the world where racehorse owners are free to form and operate their own talent-centric major league.
The soul of Thoroughbred racing in North America is on the line.© Fred A. Pope 2011