Sunday, June 21, 2009

The Horseshow From Hell

Late July, 1990. Arco Arena, Sacramento, California.

Every year a merry band of brigands—judges, stewards, jump crews, trainers, riders, vets & farriers embark on the Grand Prix circuit – a quasi-carnival of sorts that tromps around the western United States in search of glory, money, free beer, a shot at the Olympics – maybe just next week’s rent. A lot of this activity is simply designed to make a good horse a little better. It’s called mileage.

This particular show was added to the summer circuit. Think the promoter called it The Sacramento Grand Prix. Hardly mattered. Seems the promoter was already on parole for a previous promotion that went…well, south.

A lot of folks might think that ‘horse show people’ are snobby, uptight, ego-centric types that can’t take a joke. Actually that’s true, but they can pull together when it counts.

The promoter had rented the Arco Arena, promising a truly spectacular, audience- centered horse show, including a rare event in American show jumping: the Puissance Wall, an eight-foot something tall monstrosity designed to clarify the meaning of ‘jumper.’ That was a 5K class with a 25K Grand Prix to follow. The smooth talking gentlemen had also pre-sold about 5000 tickets to the public. Shortly thereafter, he was spotted on I-5 heading south – literally and figuratively.

Well, after a little discussion it was decided that the show would go on. The officials, the crews, the volunteers – even the exhibitors – all banded together and put on the show. The audience had paid for just that. Nobody got paid, nobody got their ribbons or year-end standings and the winner of the $25,000 Grand Prix of Sacramento got a round of applause. Not much else.

We nicknamed it “The Horseshow from Hell,” but in the end it was a lesson about doing the right thing at your own peril. I think they call that integrity. Hope some of the folks in this picture wander by again.

Saturday, May 2, 2009

Never Look A...Mechanical Engineer in the Mouth

(Photo-Garry Jones, AP)

One of the bright spots in pre-Derby week was an article by TD Thorton in the Boston Globe about one Michael (Mick) Peterson Jr. (pictured at left), an unassuming sort of fellow that holds advanced degrees in both theoretical and applied mechanics – two subjects that hold interest for me (from a horseshoeing angle – pun intended) and also drive me marginally insane when ‘absolutes’ and ‘horse’ end up in the same sentence. More on that in a minute. Peterson is also a fan of racing. Definitely a bonus.

What the Globe article drove home is that answers begin with questions and great ideas often come zinging in from left field on a day when you can really use the lift. As Peterson stated, it all started with a “na├»ve question – what kind of standards do we have to meet?” Hmm. The focus had always been on real or potential problems and not on what might be ideal because that parameter had never really been established. No data existed to support the good news unless it was subtracted from the bad – that information buried in what the science bizz calls ‘undefined variables.’ Or something to that effect. And of course the horse, the biggest variable of the bunch. Peterson’s point: You can’t seek an ideal without identifying it first, a deductive process. That requires data and more importantly, an unbiased mind.

What does it have to with horseshoeing? Simple. Overturning tradition with either new information or in Peterson’s case, a better question. I started shoeing in the early ‘70’s – shortly before the union busting years at the tracks. I was licensed under some pretty questionable circumstances, but it hardly mattered since it sort of qualified under the ‘rules of racing.’ Yeah, they were pretty vague. I plated for a couple of years, but found the track superstitious, traditionalist and really, moribund. The last thing anybody wanted was an idea. Switched to jumpers. More creativity, but a lot of the same mindset as the track – a great deal of it invented by the veterinary community. They wanted to run our affairs primarily because they had no idea what we really did. They were the self- anointed chiefs’ of the mystics. As such, every time an article appeared in the Journal of Veterinary Medicine, a new fetish showed up in the barn. For a few years, it was wedge pads. Everybody was enamored with the angles of a horse’s hoof – an ideal. Nobody ever bothered to ask what the horse did for a living. We were plagued with soft tissue injuries. Pulled suspensories, check ligaments ad nauseam. We were shoeing to aesthetics, not athletics.

By the early ‘80’s, performance horses began to circulate around the country more. We got a chance to look at more horses from back east and reluctantly exchange some ideas or simply extrapolate a theory on the available evidence. Horseshoers were still not to the communication phase when it came to the competition. Two shoers back east, notably Brady and Fitzgerald seemed to be on a different wavelength, though they weren’t talking. However, their work had a lot to say if you really took a look at the subtleties. One thing you didn’t find were gimmicks, including wedge pads. The shoeing was focused on the job description of the animal, how that animal was constructed and really, with a certain amount of humility. These were the best horses in the world at their job – Olympic level grand prix horses. The idea was to not mess with something that’s not broken. Focus on the task at hand.

Around the same time, some research veterinarians, notably Dr. Hillary Clayton, at that time working out of the University of Saskatchewan in Canada were studying biomechanics with extremely high-speed video filming. I knew Dr. Clayton pretty well, (having traveled with her in China, looking at alternative medicine options) but admittedly we didn’t always agree on conclusions. Taking research from the lab to the real world is a difficult transition and is often based on a preconceived assumption, and when dealing with horses, a host of variables. There is also the inherent agenda that exists when academic medicine gets married to outside funding. However, we still get to keep the information.

During this period I also met up with a theoretical mechanics guy that worked in the aerospace business at Boeing. He also didn’t know much about horses, but was sort of fascinated by what I did – more accurately, how I decided what to do. We talked a lot about things like angles, weight distribution, psi, ground impact (something he didn’t like to think about with aircraft) and spent time with the films. He was particularly focused on how the fetlock of the horse seeks the ground when landing off a fence. Quite similar to a racehorse when the animal’s body passes over the front leg at the end of the extension process of a stride. He wrote some things down for me. I said, “I don’t do math.”

He said, “It’s like this. Ever see a woman sprain her ankle in a pair of high heels?”

Well, I hadn’t personally, but let him go on. “If the angle of the hoof is too high, then the horse will fall off his foot. A lower angle would seem better as the horse would be more on his leg and not so much teetering on his foot. Of course, you’ll need a bigger shoe since reducing the heel will create more posterior length to the hoof. Your ‘tip’ point will be greatly reduced.”


Well, I took a lot of this heart and changed my thinking, which is really difficult if you happen to be a horseshoer. I also took a lot of flak, particularly from veterinarians up in the grandstands or other shoers. Partly because it wasn’t their idea and partly because it began to cut into their day money. Tendon and ligament problems dropped precipitously. The overall hoof was greatly improved. And the talent level went up. Jumping horses have a distinct need to feel confident about their landing gear. Over the ensuing years I was very fortunate to work on some very talented horses, including many of the members of six national teams at the international level. It was kind of humbling in a way, though that too is difficult for a horseshoer. But I did learn that answers sometimes show up disguised as a Boeing engineer. And when you have a talented horse to work on, then focus on doing the least, not the most, because it is really about his talent and his job, not yours.
So thank you Mick for taking a look at our bizz and asking that very important question. That’s the first step toward an answer.

Saturday, April 18, 2009

A Little Accountability Would Be Nice

Ray Paulick (The Paulick thought it might be a good idea to at least try to invest some of our time in good news. Hence ‘Good News Fridays.’ It seemed to be a chance to lessen our focus on accountability by folks who never really grasped the concept anyway. Accountability, responsibility, integrity – these are learnable traits, though admittedly, some painful instruction is included in the curriculum. If you can’t pull at least a ‘C’ well – one more disinterested, self-centered sociopath hardly matters does it?

Granted, there seems to be a lot wrong at the moment. In my neighborhood, we have Mt. Bay Meadows. It is this huge, concentric, rat infested monument that the San Mateo City Council evidently created as an abject lesson on the dangers of littering. Or was it loitering? Or maybe a case of litter, loitering. It’s hard to tell since the Council was so cash-struck on the idea of another thousand tax parcels that they forgot to see if the developer owned a dump truck. – or even a shovel. The Bay Meadows Land Company’s response? The economy went south. The City Council’s response. “Well, gee, uh, well, Bob was supposed to take care of that. Bob? Oh, Bob?” The real problem? The ink they use to print money. Causes the DNA to mutate into something resembling an infected molar.

Ray’s idea did cause me to pause and take a good look at the traffic flow. Greed seemed to be about the same. Avarice about par. Murders and robbery up, but hell, it’s a recession. Scams way up, but then scams are what they are and not wrapped around silly posturing like, “I’m going to save racing.” Even robbery has a certain honesty to it: “Gimme your money!” Not, “Sure, you can afford this house.” Pens, guns or Ford starter motors, all things seem about the same. And that’s what bothered me.

I believe the real problem is that the flow of information is exceeding the speed limit of our brains. It also makes it damn hard to keep a secret or weed out superfluous details. Twittering is specifically designed to not get to the point – ever. And it has been at least two years since someone said to me, “Let me think about that and get back to you.” Get back to me? Are you bloody insane?!

So let’s look. Mouth syringe in the security barn? Stupid, but not new. 'Milkshakes', pasta loading, packed red blood cells -- dried bat wings? Neglected, underfed (or abused, but one needs to be careful with that term) horses? Common as dirt if you really look around. That seems to upset a lot of folks and rightly so, but how does it compare to 100,000 children facing starvation in the Sudan? Can someone from PETA or the steward's box point out Sudan on the map? Racing is a lot about perceived advantage, not too different from any other competitive venue with one major difference. The horse is out of the loop in most, if not all decisions concerning its own well-being. A lot like a child. Due diligence needs to be conducted from the comfort of your own brain – that’s where accountability originates. Sure, we publicly chastise bad guys a lot quicker, but we’ve done little to reduce the overall supply of bad behavior because we embrace the very source of the illness.

Yeah, racing has some really serious difficulties. Most of the industry though is still above ground, as they say. Especially Bay Meadows. All of it is above ground. That in itself is both sad and irrelevant. A dead man’s testimonial to his own murder. Other cities might want to view the crime scene for themselves. Integrity is about making the right choice at our own peril. If we practiced that a little more, we might get two 'good Fridays' a week instead of one.

Saturday, March 7, 2009

Why All This Ink?

Well, I’d been away from racing for about 20 years, though I don’t believe that you’re ever really away. Life shifts you here and there, but as long as you are above ground, you’re not truly away. Here in California a lot of ink had been printed on the impending closure of Bay Meadows. I remembered a similar obituary for a place called Longacres up in Seattle. Beautiful track in a nice city. Of course, that wasn’t enough in itself to save it. Never is.

The plight of Bay Meadows naturally piqued my interest on how racing had progressed in my absence. So I googled. I discovered the term “Racino.” Thought it was some kind of reality TV show, maybe hosted by Robert DeNiro, or maybe a new Bond movie. Had that cheap allure to it. Then came ADW’s, which I immediately confused with WMD’s. I don’t know about you, but that sent me on an acronym hunt for at least an hour. I thought maybe it was “Almost a Weapon of Mass Destruction,” or “Already Mass Destroyed.” You know how things get messed up when you go from Arabic to English in a hurry, especially if you’re fooling around with something like a bomb. Plus, it’s doubly difficult for me since I’m dyslexic. That’s why when I learned that Magna Entertainment had lost $600 million, I figured it was no big deal. The federal government had just given away $3 trillion and seemed pretty happy about it. When you have dyslexia, all those little zeros just look like happy rabbits jumping down a hole.

Next I looked into Betting Exchanges. My first thought was that it might be a place where you could say, trade two 5-2 shots for maybe a 20-1 that was due to figure out how his legs worked. That was of course, incorrect. But you could place a bet on something that wouldn’t happen. Now that interested me. I hadn’t picked a winner in 22 years so this had real possibilities. I started doing the math…then I remembered I don’t do math because of the ‘d’ thing. However, I could probably make a buck or two by just resorting to something like random physics or chaos theory. Maryland is settling the slots issue in the same fashion. Kentucky gave them the idea. If you don’t do anything, nothing happens and if you’re in England, you win money! Who said you couldn’t save racing? Sorry, that was a Stronachian slip.

In spite of the fact that the world seems to be collapsing at our feet, people in this business still seem to find time to laugh, argue, debate the pros – condemn the cons, search, seek and try to make sense of things they can’t hope to control. They say a racing man or woman, can never die while he or she has a good two-year old prospect in the barn. That’s the optimist in us. God, we have to be. We stake our livelihood on an 1100lb animal that sometimes behaves like something out of the cat family.

When they tore Longacres down I felt that thing in my gut like a dozen lug nuts rolling around. Kind of anger and powerlessness wrapped up in some intense form of sadness that goes beyond the destruction of bricks and glass, into some deeper place in you that’s rarely visited on purpose. It was personal. It’s why ghosts haunt old buildings. It wasn’t our time to leave.

It still isn’t.

I have a love of history. It’s kind of what I do, though I really don’t know why. More often it is kind of a forensic examination of human motivations under various forms of stress and absurdity. I merely connected the dots between 1910, 1975 and now. Each period seemed to hold a wake for the industry, but could never quite get the body in the ground. That indicates resilience that perhaps we’ve lost touch with lately. Maybe if we tossed out the shovels and worked our pencils a little harder, one solution could be found for our 38 common problems. Oh, I’m sticking with Dunkirk. If ever there was a hunch bet for just such circumstances, this is it.
And yes, I am dyslexic.

Sunday, March 1, 2009

"Will the Horses Stop Running...Again"

Part III
Catching the Horizon Before it Gets Here

Has the Fat Lady Sung, or Just Fallen Off the Stage?

In the years between 1985 and the present, a number of scenarios have played out. As attendance dropped in the decade following the Pugh-Roberts Report, racetracks experimented with a number of options. The first was expanding the racing calendar, or actual days in a typical meet. This was outlined in the Report as a highly flawed strategy. As expected, this action resulted in the take-out being derived from a reduced handle – there were simply not enough fans to fill those expanded dates. Yet the lights were still on, the employees on the payroll and the plant not earning enough money to repaint the bathrooms. Tracks within the same region began to experience overlapping racing dates, this further exasperating the need of racing secretaries (the folks that write races) to find quality horses to fill the program. This led to unnecessary competition between tracks and in some cases a temporary inflation of purses (that the tracks naturally couldn’t afford) in order to have a full card. Gamblers do not like a short field because it diminishes their potential return. On top of this, were the physical limits of the horse itself. Trainers were caught between owners losing money and racing secretaries screaming for horseflesh. Economics were forcing trainers to make highly questionable decisions, and in this kind of atmosphere, both horses and jockeys were placed directly in harm’s way.

Racetracks initiated a virtual plethora of promotional stunts aimed at getting people through the front gate. Everything from free beer to petting zoos – some opening up the infield with low-cost admission and alternative activities. They even had ‘dog days’ at some tracks, though that folly quickly ended when loose dogs held up the races for hours. Some of these promotions actually did prove successful, particularly on weekends, but overall, they did little to help the track. Two issues proved difficult to address; one the fact that the majority of racing took place during working hours – weekday afternoons. Secondly, the folks that took advantage of these promotions wagered substantially less than regular patrons. Serious punters felt they were being marginalized in the process and the tracks began to experience the aura of a bad afternoon at Chuck E Cheeses, actually inflating attendance at nearby OTB parlors where the focus still happened to be horse racing.

Nothing Worse than an Untrained Elephant

The untrained elephant that follows racing around is of course, gambling. The preferred word is ‘gaming,’ but that always sounds like something that involves guns, the Endangered Species Act and Land Rovers bouncing across the Rift Valley of Kenya. Gambling is the core activity involved here, and while a certain degree of moral indignation might be involved in any discussion of the subject, what filters down at the end is the usual suspect: Money. And more importantly, ‘the who gets what part.’

IOTB was inevitable, and more importantly, useful to the business of racing. The Pugh-Roberts Report was pretty clear on this topic. However, they were just as adamant on how it needed to be structured. They weren’t interested in “My Old Kentucky Home,” or the long dead Secretariats and Ruffians that caught the attention of non-fans across the country. They were a bunch of pragmatists lecturing a moribund industry about the dead rabbit tossed on their front porch: The industry was out of players –period.

What Pugh-Roberts couldn’t anticipate was the rapid evolution of the communication industry. These were ‘the make it happen’ people that basically changed the way we do business, entertain ourselves – even how we process information, how we basically think. In racing, six panels in 1:08 and change is fast. But it is nothing compared to the speed of light. Even now, the world of Internet wagering is creating another hurdle for racing, another division of another slice of an already diminishing return. And how will racing respond?

Three primary issues seem to be competing for space on racing’s less than ample lap: Advance Deposit Wagering (ADW), “Racinos,” and Betting Exchanges. All are elephants and all want to consummate a marriage with racing. Trouble is, the pre-nuptials keep changing and the minister isn’t getting any younger. And racing still has that old case of natural indecision and competing priorities.

Slots in Every Stall

According to horsemen in some states, racing is content to go from the show to just a side show. In the eastern United States, where competition in market areas first became an issue, some horsemen are all “a blush’ over the addition of slot machines at racetracks. In some cases, Pennsylvania being an example, this has had a benefit of returning about 12% of slot revenues to purses. (As an aside, revenues from slots have outrun those from racing in a mere two years.) Maryland boasts a projected $140 million annually from slots going to purses, causing a projected rise of 45% by 2013. They also project an infusion of $40 million back into capital improvements on the facilities (‘facilities’ aren’t clearly defined) in the same time frame. Fifteen of the top 20 tracks in the country may follow suit. Ohio voters turned down gambling in their state three times and their track revenues dropped 23.8% in 2008. Next door in Indiana, where slots are legal, Ohio trainers are going after the higher purses Indiana has to offer. Even Kentucky has opted for video gambling at their tracks, “in order to keep Kentucky as the horse capital of the world.” Seems the $5.00 Mint Juleps couldn’t quite balance the books.

Who owns racing now? The new term is Racino, whereas a casino is built around, on top of, or inside a racetrack. Actually, the racetrack is more of an accessory, since it only operates on racing days, those normally appointed by the state racing commission. Some tracks actually look about the same, while others are a completely new experiment. The key issue though is the introduction of casino style gambling, primarily slots and video venues that were previously illegal in those states for reasons that everybody seems to have forgotten.

The key to the development of the new Racinos was of course the law. The scenario unfolded over time, but the basic theme was that revenues from racing had been nose-diving for a number of years, the states’ share dwindling with it. However, a state’s ability to spend never decreases in either scope or desire. Gaming, always seeking new inroads basically had an opportunity to polish their image: “We’ll save racing in your state and increase revenues. We just need a few slots to round out the deal.” They would also prop up the breeders programs with incentives (that makes two votes), throw some money into education (3) and promise a few bucks to paint those bathrooms at the track – making an even four. California passed a lottery proposition in 1985 on the ‘money for education’ bandwagon and currently ranks 47th in the country in academic achievement. Gambling with a social conscience seems popular of late, particularly with the extinction of balanced budgets, but what happens in ten years? Gambling revenues are up and so is racing’s inherent overhead – employees, facilities and purses. Gambling has the law and racing has too many bills. Since the state government is now addicted to a higher grade of heroin and unwilling to consider rehab, then where does logic proceed?

Advance Deposit Wagering (ADW) is merely the next step in Interstate Off-Track Betting (IOTB) designed to take advantage of the possibilities inherent in on-line gambling. Patrons set up an account, similar to a pre-paid credit card and are allowed to place bets (to the limit of that card) on races simulcast from various tracks to the comfort of their own hard drive. The ADW extracts a fee for their services, similar to any OTB parlor and negotiates a separate contract ( known as a ‘source market agreement’) with the horsemen’s group representing a particular track or meet, defined for these purposes as a Class 1 Racing Association. Naturally, this is all quite illegal under the Federal Wire Act but nobody seems to care. The fly in this system is that horsemen felt that they should receive about 1/3 of the revenue from ADW wagering while the on-line industry found 6.75% more comfortable – that figure a left-over from the one-sided negotiations on OTB splits in 1975. Horsemen did have leverage – they could choose to turn off the signal. Of course that decision would result in receiving 1/3 of nothing, along with the unbridled wrath of horseplayers all across the country who had been denied access to those races. Perhaps the greatest irony found here is that ADW platforms may have done to IOTB parlors what they first did to racing.

ADW also required each track and each meet to negotiate these contracts separately. This is a cumbersome process for folks that know more about the quality of Timothy hay or the health of a horse’s knee than the sometimes abstract math involved in the ‘who gets what’ department. And horsemen don’t necessarily agree on the need for ADW contracts at all. The issue had literally split many horsemen’s associations at tracks, resulting in no contract to simulcast and consequently, the reality of lower daily purses. Arizona horsemen went so far as to lobby for a law to ban ADW’s in agreement with the federal law so that the ADW’s themselves would sue the state. Their reasoning assumed the ADW’s would win the suit, thereby giving the horsemen a negotiating position they didn’t have before. Absurd? Not really.

One positive did emerge from this anarchistic system of splitting the loot: The formation of the Thoroughbred Horsemen’s Group, the closest thing to a national bargaining system that the industry had yet conceived. They offered their services across state lines and became the chief negotiator for horsemen in their contracts with the ADW industry. They operated on the premise of serving the needs of their clients and managed to bring a great deal of continuity and clarity to the contract process. More importantly, they were able to temper the emotions that were undermining any form of collective bargaining on the part of horsemen. For once, a common voice seemed to be emerging, albeit an act of possible desperation.

Betting Exchanges are a direct off-shoot of the power and creativity of the Internet. They have enough detractors and fans around the world to start a rather unconventional war. They operate in a similar fashion to a stock exchange in that it is peer to peer gambling, or many to few, as the wager may evolve. It relies on technology and speed, so that all bets are matched almost instantaneously – with no limit, as long as another bettor, or multiple counterparts match the bet. The exchange receives a commission of 2-5% for handling the action. Most bets are conducted via the Internet by the use of debit or credit cards. The largest betting exchange, Betfair, based in England, witnessed a 57% rise in its customer base in one year. One unique feature to betting exchanges is that they offer the opportunity to ‘lay,’ i.e., wager on something that will not occur, the normal position of the bookmaker. Detractors view this issue as a serious threat to the integrity of the sport as it is far easier to ‘arrange’ a horse to lose a race than to win one. Other negatives are familiar – exchanges don’t give enough back to racing, that 57% increase in customers co-mingling with a 13.4% decrease in prize money (purses) in Great Britain alone. Australia broke it down a different way: For every billion (Aust$)) wagered, racing receives Aust$14 million from betting shops, $7 million from ADWs and $1 million from exchanges. (These figures are of course skewed, since the whole country has not jumped on the bandwagon.) And it’s estimated that Betfair, the world’s largest Betting Exchange, processes more than six times the number of trades daily as the London Stock Exchange.

The third issue found troubling with exchanges is the anonymity afforded punters that lay off races. Betting Exchanges have been required to enter into agreements with the regulatory agencies, including the English Jockey Club for full disclosure if requested by such agencies. This is a prerequisite for licensing, and to date it has generated mixed results. The exchanges cooperate fully, but racing’s primary concern is integrity before the fact, not after.

Quite a few countries (including Australia, South Africa, France, Japan and New Zealand) view betting exchanges as a serious threat to their racing industries. The state of Tasmania in Australia breaking with the rest of country, apparently choosing to follow the American example of anti-federalism. The United States appears to have no view, though at present it is prohibited under the Federal Wire statute. Caliifornia signed a ‘letter of agreement’ with an exchange under the guise of promoting California racing abroad, while really seeking the ‘required approval’ to license a betting exchange. This latter proclamation by California goes directly to the issue other states have adopted concerning OTB issues – that being the validity of the Federal Wire Act. The courts have enforced a double standard by ignoring it internally while applying it externally. That is exactly why the World Trade Organization ruled it an ‘illegal embargo.’

What’s a Fella To Do?

Racing truly is a three-ring circus. In one ring stand the horsemen (owners, trainers and breeders), in the second, the racetracks and out in the stands, the myriad of punters that make the whole system complete. The guy in the top hat with the bullhorn represents the government and while he makes the most noise, he contributes little to the entertainment of the crowd.

The Pugh-Roberts Report lamented racing’s loss of a fan base as a primary reason for its overall decline, a trend that continued well into the 1990’s. They found racing’s leadership non-responsive, a little lethargic and perhaps even old-fashioned. The issue of OTB was both threatening and promising, depending upon how this new concept was structured and more importantly how it was nurtured in the marketplace. A tremendous potential existed for this tool if greed and territoriality could be censured in favor mutual benefit. All would give up a little and the industry could get back a lot. That requires courage and unfortunately it was missing when the issue first hit the table. Perhaps it is still lacking.

Racing does have a tremendous fan base. It has merely shifted to cyberspace. Visit any chat room that horseplayers haunt and they are there by the millions. And they have valid opinions on the game. They also have wants. Take-out needs to be reduced from the sometimes high of 20% to parity with most table stakes – 5%. They are of sick of cheap fields and short fields. They get very unhappy when horsemen and tracks can’t settle their differences and block simulcast signals. They say the product is stale, the wagering levels are stale, and that corporate mentality has infested the tracks to such a degree that the owners don’t understand their own product. They are also fed up with medicated horses and in some cases, artificial surfaces, which they blame for inconsistency in performances. That’s an awful lot of ‘theys’ for one paragraph, but they have been paying for this product for some time and the quality is not there. Deliver a quality product and fight for its value.

What’s really gone missing is the gate. Putting its face on a milk carton won’t
help – it’s going to stay missing. Gambling is what fuels racing and those folks don’t plan to drive 30 miles to a track for the ‘experience.’ Technology has eliminated the middleman, and it’s the guy that charges $5.00 for parking. Racetracks need to downsize and refocus on what might work for local patrons, while keeping their races competitive for the wider gaming audience. This led to the hybridization effect in developing these so-called Racinos, but these enterprises cannot and should not represent racing. Their priority stake is not racing and their actions in the past are a good indicator of the future. Even as this is written, casino gambling and horse racing interests have been linked in the current impeachment proceedings against Illinois governor Rod Blagojevich. Guilt or innocence isn’t the issue, it is simply a matter of linkage in the public eye.

The gate and the reduced take-out are issues that can only be resolved by the state re-appropriating its part of the pie. Pugh-Roberts initially suggested 0.5% to the tracks for the purpose of improving the product. That’s barely enough to scrape the mold off. The states are the lame-duck element of this enterprise and they need to step up and start earning rather than just skimming. They too can do the math: 1/3 of 0 = 0. Trouble is, in this current climate of government induced fiscal suicide, the average legislator would probably view zero as a positive. Accountability might be a better place to begin.

Some tracks need to close. That’s a sad fact of life in any business. Ask General Motors. Racing is not a sport that thrives on mediocrity. The emergence of Racinos in many parts of the country actually degraded horse racing by making it a secondary enterprise in a casino environment. Casinos are about money -- other people’s money, and the fastest way to empty pockets is at the slots or on the tables. Racing will be turned into little more than the expensive slob that always tags along for the ride. But maybe that’s okay. When an industry spends most of its time infighting instead of working together against a common threat, somebody needs to question the motivation, or at least ascertain if one exists. The issue between Ohio and Indiana is tantamount to showing up for a duel with a howitzer – evidence of how the issue of gambling and its revenue base can pervert mutually beneficial relationships into a bad day in the Balkans. Horsemen in these states would rather resort to cannibalism than try to be good neighbors because one state has effectively marginalized the other. This isn’t healthy competition, it’s a legislated mugging, a war of attrition being waged by the gaming interests and proxied by racing. This kind of competition only has one winner and isn’t it the guy holding the horse. The northeast is rather infamous for factional infighting, and now they’ve managed to export it to the corn belt.

Horsemen need to understand the changing dynamics of racetrack ownership. A great many tracks are now owned by multi-interest corporations that are counting all the beans, not just the ones with the starting gate parked out back. The newspaper business experienced this phenomena two decades ago when news organizations were bought up by manufacturing, financial or entertainment interests, adding another tier of management to an already top heavy business. The ‘news’ ceased to be the product. And like racing, indifferent upper management, portfolio values and the Internet have driven newspapers into the ground. A good example is Magna Entertainment, which owns Pimlico, Santa Anita and six other tracks, including Golden Gate Fields in San Francisco. They are also responsible for the corpse known as Bay Meadows. Magna also boasts four other bodies in the trunk, most of which were operating under the Racino format. Granted, one victim was a Greyhound track but it still made the coroner’s report. Two other properties were sold, one to a casino interest and the other to a Pennsylvania racing group that just inherited 5000 or so slot machines.

Magna’s interests also include a racing television network, AmTote International, XpressBet (an ADW) and until recently, real estate management and holdings under a separate corporate title. They are bleeding a lot of red ink and selling off Golden Gate Fields seems to be part of the fix. The land value exceeds any potential for a racing venue under California law, and the city of Albany (home to the track) would rather have latte parlors and open space instead. California is drowning in open spaces and they are a negative revenue producer. Track management claims profitability, but it is based on extended racing dates inherited from Bay Meadows. Percentages are actually down for 2008, mirroring the Pugh-Roberts negative appraisal of extended racing dates as any sort of solution on the bottom line. What this probably means is a complete cessation of racing in northern California. And in the south, sits Santa Anita, another ailing Magna property along with Hollywood Park, the latter subject to a great deal of speculation on its own ability to survive.

So here is a company that once flaunted its desire to ‘save racing,’ evidently from itself. Magna currently holds title to nine tracks, the majority of which were acquired between 1999-01. Approximately six others were closed or sold, most in the Racino format. Of the nine remaining, at least half are in serious trouble and the other half have embraced conventional gambling venues opened up by evolving changes in state laws. 2008 losses up to Sept. 30th run at $116.1 million, of which $29.2 million were attributed to Racino operations. The company has had to resort to a reverse stock split to avoid a de-listing by NASDAQ, and is about to get the same lecture again. Bankruptcy lawyers have been seen prowling the hallways of the Ontario (Canada) based corporation, no doubt on a bone hunt for whatever is left. If Maryland voters hadn’t approved the addition of slots to racetracks for 2009, the Triple Crown might have lost a member. Without them, the track was set to demolish ‘08’s downturn of 22.5%. Racing and gambling certainly have mutual interests, but they also have opposing needs. Muddy up that distinction and somebody is going to leave the party on a stretcher.

[Since this was written, most of the rats have fallen out of the sack. The lesson here for racing is the same one the newspaper business received: Your job security needs to be about writing good stories -- not the number of lightbulbs (or spark plugs, maybe) sold in Minnesota last year.]

Why is this important? Because it is imperative for horsemen to know who they might be negotiating with and just how outgunned they might be. This is where an organization similar to the Thoroughbred Horsemen’s Group has value. This might not be the right group or the perfect model, but it can be viewed as a step in the right direction—or maybe any direction. Simulcasting and Internet gambling are the present and probable future of racing. Accepting that notion is the first step. The second is to be able to sit down as equals and work a deal that will insure that racing receives the right price for its product. This will never happen until the racing states sit down and agree that the whole is more important than the parts.

Maintaining racing’s fan base may not be as difficult as it might seem. In the world of the Internet, it is much cheaper to build an ADW platform than it is to build a racetrack. Given that, the quality of the available product needs to improve. Part of that improvement will be a result of the inevitable contraction of the industry, both as a result of available entertainment dollars, and the competition for those dollars. Fans, for the most part are going to stay home. The overall public trend is to embrace technology, which dictates that racing needs to accept that model and exploit it, not argue about it. Somewhere between 6.75% and 33% lies a figure that racing and ADW’s can agree on. But this figure can’t be argued arbitrarily across state lines, subject to political whims or malfeasance, or like Chief Joseph’s dilemma, having your neighbor decide for you.

Betting Exchanges are coming to the United States. The fans of racing have already decided. They offer an alternative to what many punters describe as a ‘stale product.’
The largest of the bunch, Betfair is an aggressive, malignant and cash heavy monster. Their entrance into American markets is simply a matter of when, not if. It is absolutely imperative that racing gets on the same page with this issue. Forget the nostalgia and the mint Juleps, these folks are sharks. Work on this issue needs to begin yesterday and the first order of business is a cohesive plan on how to confront this new benefactor in racing’s future. Yes, it too can be a positive. However, racing needs to initiate action on the repeal or possible amendment of the Federal Wire Act. Simply changing the Interstate Horseracing Act is insufficient because the courts will not rule when statutes either conflict or appear ambiguous. The stakes are this: The issue has been before the World Trade Organization and that body has ruled in favor of the plaintiff: Antigua. Not much trade involved there. What if England follows suit? Or Australia? Neither is likely since in diplomatic circles that would be considered ‘bad manners,’ but given the global impact of recent economic events, a pro-active stance is not only prudent, but imperative. If not, this will be a repeat of the Massachusetts debacle, but on a massive scale. Racing needs to come to a consensus now – and act on it. Virtually every state in the Union is practicing a new form of economic alchemy. The legal impasse created by the selective enforcement of the Wire Act, combined with the federal government’s inability to reign in the rather jingoistic behavior of the states will once again hand racing the conditional terms of its own surrender.
Develop the product, fight for it, and show up at the table with one agenda and some sharp teeth.

NEXT POST: Why all this ink?