Mr. Chump Goes to Tucson - Part 1

--- U of A Racetrack Industry Symposium, Tucson, AZ, December 9, 1998 ---

Like most of the rest of the Fortune 40,000,000 corporations, each year McChump Industries puts a line item into its budget called "Training and Development", and management feels real good about itself and pats itself on the back for "doing something for the development of its employees". And, like the employees of the rest of the Fortune 40,000,000 corporations, the employees of McChump Industries know that it is the thing to do to get that training and development done in the early part of the year, for management will surely cut that item right out of the budget about the middle of the year when the unrealistic sales targets for the year reveal themselves for the total dreams they were in the first place.

This year, however, the unfortunate "vapors incident" at the cloning vats back in February rendered several of the more promising McCI employees quite a bit less trainable, and in the 3rd quarter management discovered to its surprise that there were still some training and development dollars hanging around, unspent. No reason to let that good money go to waste. Thus it was that the president of McCI showed up on the doorstep of the Loews Ventana Canyon Resort in Tucson on Wednesday morning, December 9, after a high speed early morning drive down from Phoenix in the mighty red rent-a-GrandAm, and just one small gettin' lost incident which was actually the fault of the Symposium on Racing map of Tucson, flawed by the inclusion of a street which didn't really go through where the map said it did.

Loews Ventana Canyon is a beautiful desert resort set in an exclusive high bucks neighborhood right up against the foot of the mountains that form the backdrop from Rillito Park, on the northeast side of Tucson. There's an outstanding view down the hill over the golf course, lushly green with its winter coat of rye grass, to Tucson and to the higher mountains to the east, which were beginning to take on a nice shiny snow cap. Great, semi-secluded spot for a conference, but only about 20 minutes into the heart of town. The RTIP Symposium itself took up the main ballroom(s) plus the foyer outside and a couple of adjacent rooms where many vendor displays were set up, and part of the hallway down towards the lobby, where literature tables were set up, featuring free DRF's each day. Woo hoo!

Having arrived just a bit late, I quickly gathered up my conference junk, and found a seat for the first session of the day, already in progress.

[A synopsis of each session I attended follows, at least as much as I can tell from the notes I took. And note: IMHO a couple of the articles Matt Hegarty did in DRF on these sessions amount to editorializing instead of straight up reporting, so if you note some differences between what he wrote and what appears here, count on mine being the correct version. ;-) This gets quite long, and maybe not interesting to you, so just scroll down to the next ***** to bypass a session, or hey, delete the whole deal - it's not like you paid for it or anything.]

***** Wed. 8:00 am *****

"International Structure of Racing: Business, Competition and Cooperation"

Essentially this session consisted of three distinguished gentlemen from three other racing countries describing the programs in their homelands.

I'd missed Eiji Yamada describing the Japanese National Association of Racing, which is the body that deals with the local racing jurisdictions in Japan, as opposed to the JRA. In the Q&A session after, I did learn there is no simulcasting in Japan, as it is illegal.

John Alexander, Chief Executive of the New Zealand Racing Industry Board came next and described racing in his country as well as some of the problems it faces.

New Zealand, with a population of 3 million, bets $1 billion annualy on racing of all kinds - TBred, dogs and trotters. It also currently supports 71 different racetracks, running meets by 145 different race clubs, spread out from one end of the country to the other. Mr. Alexander feels that there are too many tracks, and too many meets, not to mention the fact that a lot of the tracks are out in the country close to the horses rather than close to the cities and the people.

New Zealand racing is overseen by a government Minister of Racing as well as the NZ Racing Industry Board, and that seems to help the racing industry get government attention and favorable legislation. For instance, they have managed to get racing taxed the same as casinos. However, they're pushing for even more changes, such as making racing a more commercial structure and removing any government intervention whatsoever, as well as lobbying for the the ability of all gaming participants to offer all wagering products, and to have government regulate all gaming in the same manner.

On the promotion front, the NZ racing industry has created its own TV station, and there's regular national radio coverage. They are attempting to "mainstream" racing, increasing exposure, generating news stories, and creating new wagers. Mr. Alexander also floated the idea of getting involved in a "Grand Prix" circuit of worldwide racing. Their goal is to make racing the most popular sport in New Zealand by 2005.

A brief video of some of their TV ads was shown, and they were pretty high action but traditional racing fare - jocks, thundering hooves, gates, and flying turf.

Finally, Cahir O'Sullivan, Keeper of the Match Book for The Irish Turf Club and member of the International Federation of Horseracing Authorities (there it is again!), described the racing industry in Ireland.

5000 racing horses in Ireland compete in 272 fixtures throughout the course of the year, at 27 different courses. The 4-5 million inhabitants of Ireland bet about $1 billion annually, primarily through the bookmakers, which limits the amount of money that racing takes in from the betting, making for a purse structure of about $35M (1999), of which 23% is contributed by sponsors. The gov't has recently taken steps to increase purses to that projected $35M. The industry employs about 25,000 people and produces 7,000 foals per year which are sold to owners all over the world. No performance drugs are allowed at all, and all racing is totally open - no "restricted" events.

Mr. O'Sullivan made the point that racing used to be just about the only thing available as Saturday afternnon entertainment, but that all changed about 1962 when television became widespread, so Irish racing had to change to keep fans. Some of the changes were increasing the number of meets and fixtures, adding bars and restaurants and family enclosures and entertainment at the tracks, promoting different kinds of horse ownership, getting sponsors and corporate clients, improving the facilities, and introducing festival meetings, where a 3 or 4 day race meet is integrated into a larger festival in the community such as the Galway festival. The alternative ownership structure of "clubs", where clubs of up to several thousand people get together and buy some horses that they then regularly follow around like they would a soccer team, has become quite popular and also quite a business builder, as the clubs will come out en masse to cheer on a club horse.

In addition, fixtures are planned in conjunction with other sports so as to avoid conflicts with other big events, the tracks reach out to the clubs, organizations, and communities to build involvement, and the courses make themselves available to the community for other uses on non-racing days.

Mr. O'Sullivan was quite pleased with the recent purse increases, and was generally upbeat about the future for his program.

So anyhow, not too much earth shattering out of this particular session, but some interesting information nonetheless.

***** Wed. 10:15 am *****

"Racing from a Government's Perspective"

Moderator Lonny Powell of Turf Paradise cautioned us to take note of the title of the session, and to listen and learn from the politicians how government saw racing, instead of thinking about the usual "government from racing's perspective". My impression after the fact was that no one really took that admonition to heart.

Outgoing governor Jim Edgar of Illinois spoke first, and basically said that politicians are busy people who do not have the time and do not want to get in the middle of industry fights. Get your act together and come to government with a unified front, said he, or government will simply do the easy thing and do nothing. It is very easy to kill any proposed bill. Basically any faction that is not on board can shoot down proposed legislation. Getting a bill passed is much tougher.

Build up lots of grassroots support, with both the big tracks and the little, horsemen, breeders, and the public. Co-opt the agricultural sector, because the ag sector has a great deal of pull with politicians. Present racing as a sport, emphasize its traditions and its impact on jobs and agriculture, instead of simply appearing before government as another gambling interest. Do a better job of educating government officials about the jobs the industry generates, as well as about the competition that has come in the form of the government's own lottery and the casinos. Reach out to the public in general, blue collars as well as bluebloods, and get them on board as well, and get them contacting their legislators. Get more exposure on TV and in movies, books, and articles to raise the general profile of racing as something people are interested in and that politicians should care about and know about. Differentiate racing from gambling.

Mr. Edgar also mentioned that now that Brereton Jones was out of office from KY, he (Edgar) had no one to talk to at the Governor's conferences about racing, although maybe the new gov. of NJ held some promise.

In Q&A, he also mentioned that his staff back in Illinois had reported some progress - more willingness for give and take - in some of the ongoing discussions in Illinois. Finally, Dick D. had presented him with a reserved box at AP, presumably for future use.

Senator John Kyl of AZ came next, and the crowd seemed definitely hostile. Sen. Kyl came right to the point and said that racing should look inward and emphasize the sport and entertainment aspect of racing, instead of relying in Internet gambling as its future. "Your industry's days are numbered if Internet gambling is allowed" he stated, backing that up with astronomical growth figures, projecting a $10B offshore market in "virtual" Internet gambling by the yr. 2000 if it isn't nipped in the bud, and stating that these "virtual" operations with no fixed costs like racing's could simply outcompete racing. His concern is primarily the expansion of gambling in general, and all the societal problems that entails, and Internet expansion definitely expands gambling, even into states that don't want it. In fact, said he, it was the state attorneys general who originally came to his committee and asked for a bill such as the one he introduced. However, he was also quite adamant that he did not want to restrict racing from doing anything it was currently doing under the law.

Sen. Kyl was quite adamant in his belief that if unfettered Internet gambling was to be allowed, racing would be swamped and swallowed up. He asked for the industry's support, and reiterated the ways in which his bill protected the current interests of racing, even writing them into law, and asking for a hand for his defense of racing in the Senate debate over his bill, when it was attacked for "expanding" gambling by including the racing specific language. He characterized his bill as simply an update to the existing Wire Act which prohibits the use of telephones to place bets on sporting events.

Unfortunately, he said, someone (and it seemed he meant someone in the room) had succeeded in adding 4 loopholes to the act in the House which effectively killed it as far as he was concerned. These involved amending the Wire Act to allow parimutuel betting or pooling over the Internet, placing lottery or sports bets over the Internet from out of state, allowing bets at out-of-state Indian casinos over the Internet, and one other which wasn't quite clear. No loopholes, and no special interest exceptions under the law were acceptable as far as he was concerned. One loophole gives it to everyone. He also stated that he fully expects the Federal Commission on Gambling to come out in opposition to Internet gambling, but also that if this bill or a similar one isn't passed in 1999, it will be too late.

Mr. Kyl was an effective and dynamic speaker, and the case he made for unfettered Internet gambling being the death knell for racing was quite chilling, especially when one has watched how live casinos can devastate a racing state.

Jay Hickey of the American Horse Council spoke last on this panel, and noted that right now racing, Indian tribes, and offshore operations are the only ones in Washington interested in home wagering, and that the AHC has tried to differentiate between licensed and unlicensed operators. He said, however, that there will probably not be much sympathy for the case from the Gambling Commission, and that no congressperson is willing to support home wagering.

He did say, however, that part of the AHC's concern with the Kyl bill was not closing the door on future activities. Racing would like to keep open the possibilities of transmitting data in any fashion, common pool wagering in any fashion, and interstate/intrastate/international transactions in any fashion.

He also mentioned that current Wire Act prohibitions are unclear. For instance, pretty much everyone agrees that interstate phone betting is illegal if both states do not have phone account wagering laws, but to date no actions have been brought against operators who are currently engaging in it. No one knows exactly what is legal, and exceptions to the Wire Act that were introduced in the interstate horseracing act muddied the waters. The bill that was introduced in the House simply tried to clarify some of these issues, and one of the "loopholes" simply tried to legalize interstate Internet betting between states where account wagering was legal in both, on the premise that parimutuel betting was different from casino betting, as recognized already by the gov't in the horseracing act.

Mr. Hickey was a confusing and somewhat unorganized speaker, and a lot of this speech was difficult to follow, as he seemed to try to tread a fine line between defending what the AHC had agreed to in the Kyl bill, and what many of the participants at the Symposium apparently wanted.

Finally, he mentioned that the AHC is also addressing responsible wagering, and has prepared a guide, and the industry really needs to address these problems (presumably because of the Commission?).

Finally, in Q&A, it was quite clear that many members of the racing industry did not buy Sen. Kyl's point of view, presumably preferring to go head-to-head with virtual casinos, or - IMHO - hoping to get special treatment under the law to offer Internet betting while other gaming entities cannot. Several people clapped as Stanley Bergstein of the harness racing organization got up and asked why government was trying to limit the possibilities of the Internet to racing while all other businesses were allowed to proceed without restraint. Unfortunately he preceded his real question with a harangue about past failures to legislate morality, which seemed to confuse the good senator, so a proper answer was never forthcoming.

After this presentation came lunch hour, and it quickly became obvious that the Loews Ventana Canyon is not a cheap resort. Crummy box lunch: $10.50. Outdoor bbq buffet that basically got one a burger: $11.95. Sitdown restaurants too jammed to even attempt. Fuggedaboutit. This was a good opportunity to wander around and see who was in attendance, however, and there were many many familiar names and faces of all sorts of people in the racing industry - track owners and turf club presidents, national and state level breeder and horsemen organization leaders, all manner of racing press, prominent owners, management level help from tracks all over the country, racing regulators, prominent handicappers, on air personalities, and even jocks - Chris McCarron was on hand for most of the first two days at least, and Pat Day came in at least one morning. We had a real big contingent in from Illinois - handicapper Scott McMannis (for Horseplayer Magazine), track announcer Kevin Goemmer, IRB chairman Gene Lamb, Spt GM Eddie Arroyo, a couple of trainers, ITHA president Joe Kasperski, and supposedly both Sr. and Jr. Mr. Careys, Mr. Duchossois, Chas. Bidwell III, and several other track execs I could recognize by sight but not name. However, I never did see any of the track owners, so hopefully they managed to spend most of their time locked up in a private room somewhere working out some sort of resolution to their differences so we can get back to concentrating on racing in IL. Or perhaps they were watching the proceedings on closed circuit TV in the President's Room. ;-)

***** Wed. 1:30 pm *****

[Incidentally, during both of the morning sessions, I had noticed attendees madly scribbling notes and passing them back and forth with their neighbors, and I could only imagine the high powered business being done on those small scribble pads. Well, as I took my seat for this session, I noted that one of the high powered notes had been folded up and left behind from earlier. Was my bubble ever burst. It read: "Christine Miller Gabriel is sitting with the Arlington contingent!"]

"Turf Publicists of America Mark Kaufman Workshop"

This was basically five guys sitting around talking marketing strategies: Bill Nader, our moderator, from NYRA, the NTRA's Tim Smith, Jeff Cogen from the Dallas Stars of the NHL, Brett Yormark from NASCAR, and Ray Artigue from the Phoenix Suns and many other Phoenix sports operations. Might sound boring, but it really wasn't - Tim Smith can really hold his own with a bunch of marketing wonks, and Mr. Yormark from NASCAR was quite an impressive individual.

This session started out with a brief NASCAR promo tape designed to sign on additional sponsors. It basically stated that growth is critical, the key is top competition, NASCAR is always promoting different components such as the track, dirver, and racing team, they're going after the big entertainment bucks, not just car racing, and that NASCAR's unique integration allows you, the big corporate client, to get involved and become identified with the sport through one stop shopping and letting NASCAR do the work of running with the sponsorship.

The NASCAR model was obviously the envy of everyone else up on the stage, as the "league" pretty much controls all the deals and operates as a benevolent dictator, although Mr. Yormark did make it clear that everyone else involved knew they had to make it a success, too, including all the top drivers and teams, who know they have to show up at all the events to provide top competition. The different structure of the NHL (franchises, and team ownership of spnsorship rights) and the NTRA (national programs, but opt in, opt out rights a la the PGA model) were discussed at length. The guy from the Phoenix Suns hardly ever said anything.

Mr. Cogen showed some Stars promo videos from past seasons, built much around the violence of hockey, and then some newer ones, quite a bit on the lighter side. The question came up about violence in sports, and whether that is what sells, and whether it constitutes a problem. Then Mr. Yormark was asked about how NASCAR deals with the violence, to which he replied it wasn't a problem - NASCAR fans like to see crashes. [note to NTRA: Not nearly enough violence in horse racing.]

Lots of technical discussion about different marketing strategies, NASCAR became ultra-popular because of ESPN, overall hockey TV numbers aren't impressive but local numbers will be impressive if there is an allegiance to a local live franchise, businesses should try to leverage their partners to help with the promotions, say if Pepsi becomes the "official" soft drink it must also promote the NHL and blah de blah - nothing of any real substance as far bold new ideas as far I was concerned but an interesting couple of hours just listening to all the marketing lingo. Hopefully the primary beneficiary of that workshop will be Tim Smith who I hope learned a great deal from it.

This ran concurrent with the session on International Classification of racehorses, so I missed that.

And then it was the end of the day, and no visit to the resort could have been complete without a visit to the hotel bar, where all the powerful folks were having an end-of-the day cocktail. The price of giant beers wasn't tested, but the mixed drinks were a tad on the expensive side, like about $6 apiece. Finally time to head out to find the Doubletree down on Speedway which would become McChump HQ for the duration, on the recommendation of McChump #2. His recommendations aren't always what we'd call reliable, but as it turned out he was right on the mark this time, and this was quite a nice quiet place for a very reasonable price. No minibar, though. So next time you're in Tucson, possibly for the big Car vs. Quarterhorse and mule race day at Rillito Park, and you can do without a minibar, you might want to consider this one.

Continue on to Part 2.


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