Stronach Group Addresses Fundamental Issues

Blood-Horse

The Stronach Group remains optimistic about the future of the horse racing industry in North America and will continue to push for what it believes are fundamental structural changes needed to move the business forward.

That message was delivered Feb. 5 by Mike Rogers, president of the racing division for The Stronach Group, during the National Horsemen’s Benevolent and Protective Association winter convention in Arizona. Rogers, the keynote speaker, covered a range of issues including medication, the simulcast revenue model, and pari-mutuel takeout rates.

“Our business is your business, and our future is your future,” said Rogers, who spent time working as a groom, hot walker, and jockey valet when he was younger. “I’ve never forgotten how challenging life is on the backstretch.”

Rogers, who called The Stronach Group “the largest racetrack operator in North America,” said the company is unique because it includes Thoroughbred owners and breeders that operate racetracks, gaming facilities, an advance deposit wagering system, a television network, and a tote division. Thus, its success is dependent upon a healthy industry.

“We are committed to the industry and the future of the sport,” Rogers said. “We are constantly working to see what works best, but we always are charged with putting the horse first. I’m not going to say we haven’t made mistakes, but we have learned from them. We’re not going to walk away, because we are committed to the industry.”

On the topic of racetrack gaming—the company’s Gulfstream Park has a casino with slot machines—Rogers was rather blunt.

“We are learning racinos are not the answer for horse racing in the long run,” Rogers said. “Horse racing in North America must fix its artificial policies and broken business models, and must be able to stand on its own.”

Rogers noted the early simulcast model—still largely in place in the industry—that rewards the receiver of a racing signal more revenue than the sending track is problematic and should be reworked. The Stronach Group, through its Monarch Content Management arm, is in a lengthy dispute with the MidAtlantic Cooperative over the issue, which has lead to signal blackouts at more than 20 tracks and their related wagering outlets.

“The days of the buyer importing the signal cheap and keeping most of the revenue (from wagering) are probably coming to an end,” Rogers said. “The Stronach Group will do everything possible to deliver a maximum return on the product.”

As for takeout rates—the amount taken off the top of each wager to pay for operations, purses, taxes, and more recently rebates for certain customers—Rogers acknowledged horseplayers have become more educated about pari-mutuel taxation and will continue to be more price-sensitive. He said the challenge is to create a system that rewards the player but also maintains revenue for purses and operations.

“We’re looking for ways to do that,” Rogers said. “If you lower takeout, the idea is that it will increase betting, but that doesn’t happen overnight. We are looking at ways to give more to the bettor, because we do believe we have to compete with other betting products (that offer lower retention rates).”

On the topic of expanded wagering options on racing, Rogers said The Stronach Group isn’t necessarily anti-exchange wagering. He said the company opposed efforts to establish it in California, where it owns and operates Santa Anita Park and Golden Gate Fields, because of issues over control. The form of betting has been pushed by Betfair, owner of TVG, a California-based ADW service and racing network.

“We don’t need a third party taking the bets,” Rogers said. “If we offer exchange wagering, it should be us (offering it)—the tracks and the horsemen. It’s important we control that, not someone else.”

Rogers said it appears there will be little growth in the domestic pari-mutuel wagering market, but there are opportunities globally. He said The Stronach Group is attempting to expand distribution of North American racing in other countries that have a strong appetite for betting horses.

“The challenge for North America is to appeal to other countries,” Rogers said. “We must overcome the bias of medication in our races. There may be no incentive for worldwide medication regulations now, but growth in our purses through (an increase) in global betting could be an incentive.

“North America has the largest racing program in the world, but only 10% (of total worldwide handle). We firmly believe we can grow and make substantial money on this sport.”