Horse Racing Needs More Vision, Fewer Monetizers

Ah, my beloved hockey. 

The "white out" is one of the best things you'll ever see at a big NHL tilt. For those who have not heard the term, it’s where upwards of 20,000 fans all come to the game dressed in home whites. It makes our TV screens look like a snowstorm. Home whites are like apple pie, an old blanket, a comfortable pillow; home whites and snowstorms for a winter sport like hockey was positive branding. Then one day that all changed. In 2003, home darks were mandated. Why? You see, the NHL saw everyone in each city buying home whites, but home darks were not sold hardly at all. By mandating this change, it made people buy more jerseys.  The white out is gone and unless the NHL rethinks this (there are petitions by fans out there), it will never return.

Most recently, we’ve seen Wall Street meet main street again in hockey. This time the NHL is moving towards advertising corporations on World Cup uniforms. The NHL, with its traditions, long history, and antifragile nature as a sports business entity has been monetized like never before. It's about squeezing a lemon, with most everything else an afterthought. 

The NHL has increased revenues the last twenty years, but it's not like the league is super-healthy. The top teams, in big cities, make the bulk of the money, while the southern US and small market teams bring in roughly a quarter of those revenues. Sports leagues are built on parity, and in the NHL that suffers.  

In the NFL it is starting to look similar, but it seems there is pushback because the league's vision is paramount. Past commissioners - Rozelle and Tagliabue - were more about growth via principle, long term vision, and catering to what the fans expect and desire. Recently, Commisioner Goodell has been leaning different. In the early part of the century, the first down line was sold to Fed Ex for international broadcasts, and ads on jerseys were broached. Goodell, according to one owner quoted in America's Game, A History of the NFL said with distaste, "he uses the terms monetize and commoditize."

It got so heated that in one league meeting, Pittsburgh Steelers owner Dan Rooney sent Goodell a mock up of an NASCAR looking NFL jersey with a note that said, "This is what we're trying to avoid." Fortunately, there are still some people concerned about long term branding over a few dollars in that sport. 

As we’ve seen the last fifteen or so years, everyone seems hell-bent on monetizing everything. Beating a $2.01 EPS has taken a front seat to long term growth. In some firms, if you can cut ten people for cost savings of $450k, but get others to do most of the work where productivity only goes down by $400k, it's a done deal. It's kind of the way things are done. 

In horse racing, another one of my beloved sports, similar seems to be happening. It’s been going on for a long time and I would argue, the sport is worse off, not better off for it. 

Last year near this time, the big news was the Kentucky Derby. Owners were upset about ticket availability, parking spaces, and seemingly everything under the sun. In early April, there was a takeout hike at the track that even a blind man could see it was about making more money for two days, and little to do with business the other 363. What we've been seeing is a corporation, needing to meet Wall Street expectations, monetizing every inch of space, and every customer, to try and do just that. It’s all about a bigger share of revenue. 

Meanwhile, racing’s other big entity, the Stronach Group is fighting with Mid-Atlantic tracks about revenue splits. It’s about “monetizing a signal” better and getting a bigger share of it. 

In California, there was the big fight regarding SB1072, the takeout hike act. A bigger share of revenue from customers and racetracks was fought for. 

Can anyone tell me how a Churchill Downs Inc EBITDA increase from an event in May grows the horse racing pie?

Can anyone tell me how Magna getting 4% more from a signal, while another racetrack gets 4% less grows a pie?

Can anyone tell me how the TOC getting a bigger slice for a purse, while tracks who put on the races and customers who supply the purse money get less, grows a pie?

Horse racing will grow a pie not by monetizing everything, but by looking at the big picture with some sort of vision. 

Slot money need not be monetized via a purse only. Have you noticed great betting races, more owners, and better racing at Aqueduct since slot cash was added? That money needs to be spent to cultivate ownership and increase wagering as its first and foremost metric. 

Betting money needs not to be monetized by getting a bigger share for an entity, but by cultivating customers to bet more money, and encouraging them to become long term customers. 

Corporations will always monetize racing, and that’s the way it is. Not a heck of a lot can be done about it, but for pete’s sake, if you are writing a slots deal with a casino company at the other end of the table, ensure checks and balances are in place that are pro-growth for horse racing. The way slot deals have been written in North America, have been completely devoid of vision. 

A lot of people look at the horse racing industry as a glass half empty. I tend to disagree. The sport has been run (as an entity) with so little vision, with so little thought to the future, that if it’s ever corrected, it can’t help but grow. The first step is changing the culture to think less about monetizing one revenue stream for today, and about how multiple revenue streams can be achieved for tomorrow.