Thoroughbred Industry's Bright Future

By Alex Waldrop, President and CEO of the NTRA  

This week, it was my pleasure to speak to a very passionate, engaging (and some might say courageous) group of young men and women who make their living in the Thoroughbred industry.  The next generation of leaders in our industry is already meeting monthly with the goal of devising a long term plan for racing and breeding through the year 2020.  As you might imagine, they are wisely looking beyond the current economic crisis to find ways to make sure Thoroughbred horse racing and breeding thrive and prosper well into the future.  In that context, they asked former NTRA/Breeders' Cup CEO, D.G. Van Clief and me to each address the following question:    Do you think the Thoroughbred industry would be better off with a Central Office and a commissioner?   Here is a synopsis of what I said.

As I see it, the league/commissioner idea is a great concept, grounded in the notion that racing is first and foremost a sport and should be governed as a sport.  Unfortunately, I am not optimistic about its chances for full implementation. 

For a true league to work and for a commissioner to have real power, there must be a willingness and an ability of all participants (tracks, owners, trainers and jockeys) to (a) pool significant media and other intellectual property rights (TV,  trademarks, merchandizing, etc.)  and submit private commercial interests (race dates, race times, simulcast sales and pricing decisions, ADW revenues, etc.) to a collective league structure (a la the NFL) and then (b) submit all decisions related to these commercial matters to the will of the whole and allow such decisions to be carried out by the league's commissioner.  Due to the regulatory restraints inherent in our sport that I will discuss below and the varied economic interests of racing's participants (not to mention some potentially insurmountable anti-trust limitations), I don't think it is realistic to expect horseracing to be governed in this manner at this time. 

As I stressed with the group, by offering this view I am not defending the status quo nor am I trying to protect my status or the status of the NTRA.  It is simply an observation that from a pure economics perspective, tracks and horsemen don't "need" each other the way team sports need each other. 

Tracks can and do conduct their separate businesses pursuant to a very valuable state granted monopoly to conduct pari-mutuel wagering in a designated market.  Likewise, horsemen should and will always control when and where their horses run (think Jess Jackson and Rachel Alexandra).  And jockeys are not likely to become full time employees and give up the winner-takes-all economic model that the top jocks now enjoy.  I make it a point to "never say never," but the preeminence of pari-mutuel wagering to racing's economic structure - and racing's lack of substantial television rights fees which by and large are the glue that hold major sports leagues together - mean the league/commissioner model is unlikely to be in racing's immediate or perhaps even long term future.    

Nonetheless, I do see great promise in a more business-like central governance structure.   The NTRA, in cooperation with tracks, horsemen and regulators, is in the process of establishing a central governance apparatus through the NTRA Safety & Integrity Alliance and ultimately through the creation of an Interstate Compact which hopefully will be adopted in all major racing jurisdictions sometime in the not-too-distant future.   This is where the progress is being made on a daily basis and I spent a fair amount of time helping the group understand the need for and importance of these efforts. 

As I told them, given our industry's reliance upon pari-mutuel wagering as our principle source of revenue, the horse industry will never escape state regulation.  States simply are not going to allow wagering to occur within their borders without significant regulation to assure consumer protection.  Since the federal government has so far declined to intervene and a private regulatory authority such as the British Horseracing Authority runs afoul of U.S. laws against delegating regulatory powers, we are left with no alternative but to deal creatively with our circumstances.  That is precisely why the NTRA chose to proceed with the creation of Alliance.  Indeed, through the efforts of the Alliance accreditation process and the cooperation of tracks and horsemen in most major racing jurisdictions, we have already made great strides by working more cooperatively with states to achieve much of the same uniformity that other businesses and sports enjoy.  

Finally, I stressed to the audience that the NTRA's consumer feedback tells us that horseplayers may not care about the formation of a league office with a commissioner.  What they appear to want is greater integrity and uniformity (and they want lower takeout and fuller fields but that is for another blog).  For them, how we get there is not their principal concern - we just need to get there.   That's why the NTRA launched the Safety & Integrity Alliance one year ago this month - it was the quickest, most reliable way to implement change of the kind our customers want.  Rather than bemoan  our inability to accomplish what some might think is the perfect solution - a league - the NTRA is moving forward through the Alliance to effect meaningful change today.

Where will the Thoroughbred industry be in 2020 from a governance perspective?  I can't say for sure but I am growing more confident every day that by that date the Alliance will mature into a fully functioning self regulating authority setting the highest industry standards for safety and integrity and working hand-in-glove with state governments through a nationwide interstate compact. 

And based upon my observations at the meeting, the industry will undoubtedly be in the hands of a new generation extremely well equipped to deal with future challenges.

How about you?  Where do you stand on the issue of industry structure and governance?  What am I missing?

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