James E. Bassett
Lexington, Kentucky
February 14, 1992
(Transcript of Lecture)
The
Galbreath Award recognizes those in the horse world who have demonstrated
entrepreneurial success, vision, and leadership. It is named for and honors the
memory of John W. Galbreath who personified these traits. The horse world lost
both a friend and a key business leader when Mr. Galbreath passed away in July
1988 at the age of 90.
The Galbreath Award winner is honored at a
luncheon involving leaders from throughout the industry. In addition, he or she
is asked to address the Equine Administration students at the University of
Louisville during the spring semester.
The 1991 winner, James E. Bassett, continued
this tradition on February 14, 1992 by addressing the students and answering
their questions about a variety of issues confronting the industry. The students
gained many valuable insights from Mr. Bassett’s remarks. In turn, the
department believes these comments should be shared with a larger audience.
We would like to express our appreciation to Mr.
Bassett and to Keeneland and the Breeders’ Cup for this and other services
they have made available to the Equine Industry Program and to our students. We
would also like to thank everyone involved in making the annual Galbreath Award
and lecture a success.
Copyright 1992, Equine
Industry Program
Equine
Industry Program
College of Business and Public Administration
University of Louisville
Louisville, KY 40292
Dr. Robert G. Lawrence, Director
Office: 502.852.7617
Fax: 502.852.7672
Robert
Lawrence:
It is a real honor for me to introduce our 1991 Galbreath Award
winner, Mr. Ted Bassett, who has been president and CEO of Keeneland since 1970.
That is only one of his jobs though. He gets in his car at noon everyday and
drives to the Breeders’ Cup office and spends the afternoon there as president
of that organization. Then he fills in his spare time as CEO of Equibase and
performing for many civic organizations in Lexington and around the industry.
He is a Lexington native, a graduate of Yale
University, spent World War II in the Marines, and went into law enforcement,
before becoming Director of the Kentucky State Police, which is an interesting
way to get into track management.
This award is not given for service but I would
be remiss if I didn’t briefly touch on Mr. Bassett’s many service
activities. He is a former president of the TRA, trustee of the American Horse
Council, president of the UK Equine Research
Foundation, and chairman of the Kentucky Horse Park Board. He is a member of The
Jockey Club, trustee of the National Museum of Racing, trustee of Transylvania
University, and a director of First Security Bank and Trust. That is not a
complete listing but merely some of the highlights.
The Galbreath Award recognizes management and
entrepreneurial expertise. Anybody that has watched the growth and development
of Keeneland over the last 20 years knows why our screening and selection
committees for this award selected Mr. Bassett. Somebody up there has been
making the right decisions and Mr. Bassett is the man that’s been making them.
He has not forgotten his roots however. He was the son of the farm manager for
John H. Whitney, so he grew up around horses and horsemen. He has never lost his
respect for the Thoroughbred and for the people that work with the animal. If
you want to catch him, the best place is the track kitchen. If you go early in
the morning you would find him visiting with trainers and employees. He is also
a tremendous supporter of education. He has said some very kind words about this
program over the years for which I am most grateful. He is here today to talk
about the horse industry and to answer some of your questions. After Mr. Bassett
presents his overview, Mike Nolan will ask questions submitted by students. Ted,
welcome to UofL and to the Equine Industry Program.
Ted
Bassett:
Thank you Dr. Lawrence. When you get an overly generous and undeserved
introduction like that, it probably is for three reasons. One your hair has
turned white and is thinning, two, you are growing long in the tooth, and three,
you have overstayed your time.
I am sure I have looked forward to this
opportunity of speaking to you this morning more than you have. I would have
breakfast once a month with Chuck Schmidt in the Keeneland kitchen and he spoke
so highly of the enthusiasm and the motivation and the dedication that you all
have for this program. I know that his loss is great at the university and the
department but he is even a greater loss to the industry. He was going to fit
the role of the bridge within the industry in the Drug Testing Quality Assurance
Program, which is so important to the future of racing and maintaining the
integrity of our game.
Chuck with his experience, as a former racing
commissioner and chairman, and his interest in the drug and medication issue is
a person that we will sorely miss. He was well respected and he had that
opportunity and ability to listen rather that preach. I’ll miss him personally
and I know that you will miss him too.
I was impressed with the quality of questions
that were submitted. You obviously have thought a lot about the industry and the
direction that it is going. I was excited thinking about trying to formulate
some sort of intelligent response. But before we get to those, I thought I might
give you a brief overview of the industry.
It is appropriate that I had this opportunity
today because yesterday we spent eight hours at Keeneland in a trustees meeting
and a staff meeting trying to determine the direction and policy of Keeneland in
the 1990s. The industry is going through the same stresses and strains
economically that the rest of the country is and we are very much concerned
about how Keeneland should cope with it. The response I gave when one of the
trustees asked me, “Where are we going to go in the next five to eight
years,” was if we could turn the clock back to the 1980s, who would believe
that the Gibraltars of the industry would have fallen—those great stud farms
that were the backbone and lifeblood at Keeneland and the sales and breeding
industry. Calumet has been on the front page of everyone’s paper. Spendthrift.
Gainesway. Bunker Hunt’s Bluegrass Farm. Warnerton. Elmendorf. Major
dispersals of those farms that we counted on year after year for the supply of
top class yearlings and breeding farms. We had the Hermitage Farm dispersal, the
Franks, the Ryehills, the Tartans, and the Newsteads. All these major Gibraltars
upon which we all depended have disappeared. Some farms have progressed but the
continuous supply of those wonderful yearlings that we were able to sell at
Keeneland in July; we wonder where they will come from in the future.
During that time we had the major impact on the
international market. The success of the North American-breds racing all over
the world, the number of classic races that our yearlings had won in every major
racing country: five Arcs, four Epsom Derbies, three Queen Elizabeth Stakes, two
Japan Cups, Melbourne Cups, etc., across the world and Classic Grade I races.
With it came the interest of the international buyer, particularly the impact of
the Middle East, the Maktoums from Dubai. The Maktoum family spent over $350
million at Keeneland in the decade of the 1980s. Who knows how much they have
spent privately.
Today it is a growing problem for us, of them
soliciting yearlings and weanlings direct from the farm, not totally in lieu of
buying at public auction but they have been quite aggressive at buying privately
from the farm. It is a catch-22 for us at Keeneland from the standpoint of we
don’t like it. We prefer them to go through the auction market but the breeder
is going through all these perilous times and economic stresses. You can’t
blame him for getting paid up front a very reasonable and attractive price.
It’s money in his pocket six to seven months before the auction, eliminating
the risk of injury to the horse.
I can remember the excitement of the first
million dollar horse nine or ten years ago. It was something that we dreamed of
trying to achieve and accomplish. Could we ever sell a yearling for a million
dollars? It was something like hitting 60 home runs. After the excitement of
that, we then became quite blasé those 1983, ’84, ’85 years where each year
we sold 25-32 yearlings that brought over a million dollars. Now we are very
fortunate if we sell three.
Then we had the Saudi money of Prince Abdullah,
the Robert Sangsters who came in with their syndicates from England and Ireland.
The Australians came in a limited way as did the Japanese. This encouraged the
syndicate managers who historically would breed 40-50 mares but who then started
covering 60-80 mares. In the time of Alydar and Calumet, they were covering 100
mares. So everybody started getting into the breeding industry and going from a
full crop of 35,000 foals we went up in 1989 to 51,000.
Suddenly, you have overproduction affecting the
supply and demand curve, the drop off of oil money causing a lack of buying
power. More importantly, there was the Tax Reform Act of 1986, which halted the
passive participation of owners and investors. It’s affecting the real estate
market as well as our Thoroughbred and Standardbred markets.
If you do not have that active hands-on
participation in management, you can’t write off your corresponding cost and
expenses. Before the 1986 act, we were attracting new owners to come into the
game who were making money either in the stock market, Wall Street, or oil, or
real estate. This was in those escalating years of the mid-80s—’81 through
’85—where the Thoroughbred market and the value of the Thoroughbred was
escalating more rapidly than the rise of inflation. It was a very good
investment in those days with the value of Thoroughbred bloodstock increasing
annually.
But when you have overproduction, the effects of
the Tax Reform Act, and the general recessionary factors prevailing around the
world, then it became a buyer’s market instead of a seller’s market.
So what is happening now from the standpoint of
production of horses? In 1988-89 we were breeding about 92,000 mares across
North America. If you would take an average of the in-foal or live foal factor,
a 10-year average is roughly 55-56 percent of mares bred producing live foals.
We have dropped from 92,500 mares bred, to 72,200 last year, a 24 percent drop.
If you take that factor of 55 percent, we are looking at a foal crop of about
39-40,000. We are now down 10,000-11,000 foals in 1991. This could create an
adjustment, hopefully, of greater demand for horses.
But it is also going to be much more difficult for
the racetracks and the racing secretaries around the country to fill races. We
are looking at a three-year-old crop in 1993 down about 23 percent. This means
filling races—we ran about 72,664 races last year—that if we keep the same
level of racetrack operations, the same number of racing days across the
country, the rivalry to fill those races having competitive fields to create
betting interest is going to be that much more difficult. So the racetracks are
going to be looking at having a more competitive time to attract horses,
especially quality horses. It looks like we are moving through an adjustment of
overproduction and bringing it back to the level of where the market—from the
standpoint of commercial breeders—selling yearlings is going to become more
realistic. Stud fees have come down remarkably, about 48 percent. Today there
are roughly 6,790 registered stallions in the United States. Ninety-seven
percent of those stand for $10,000 or less. The other three percent of them are
responsible for 57 percent of the foals. So the stallions that are standing for
more than $10,000 comprise about 57 percent of the foals, which shows that
higher priced stallions and the mares bred to them are receiving better
veterinary care, better hygienic care, custodial care, and have better
nutritional programs. When you are spending that much more money to breed you
are spending that much more time picking your mare and making sure your mare is
in good breeding condition. So the foal conception rate is higher for those
stallions.
We go through the decline of farms, we go
through the tax reform act, we go through the overproduction, and we go through
the economic strains and recession that is affecting the entire world and say,
“Is it all doom and gloom? Where is the light at the end of the tunnel? What
can we look forward to with optimism?”
Well let’s look at that same period from
another perspective. I’m somewhat prejudice when I talk about the Breeders’
Cup but I think truly without trying to be overly enthusiastic or self-serving
about it, that the Breeders’ Cup probably is the most important marketing,
promotional, and advertising vehicle that we have today. What were the goals of
the Breeders’ Cup 10 years ago? We will be celebrating our 10th
anniversary next year. Are we achieving those goals?
Number one, we were being crowded off the sports
and media pages by those traditional and historical sporting events that all of
you grew up with: baseball, basketball, and football. These dominated the
attention of the media pages. After the Triple Crown we had no real good focus
from the media or interest that carried over into Thoroughbred racing. One of
the first prerequisites in the charter of the Breeders’ Cup was trying to get
more media attention and coverage.
Second, we had no television coverage to speak
of after the Derby, Preakness, and Belmont. Sporadically there would be a couple
of races on ESPN and maybe a race or two from California or NYRA on Wide World
of Sports.
Third, we were trying to bring new patrons into racing such
as new owners and new fan interest. Those three factors were the genesis of
starting the Breeders’ Cup.
At that time, it was the height of the breeding
market when John Gaines felt breeders were experiencing such magnificent support
from the buying end of it. We were getting these enormous prices at Keeneland
and at other sales companies—Fasig-Tipton, Ocala, California, and so
forth—and he thought that the breeders should be putting something back into
the game. So they came up with the program of nominating foals at $500 a foal
and the stallion syndicate managers were to donate the equivalent of one
stallion season. They raised, in those first years, around $20 million per year
from nominations. With the declines which are going on now, that same funding
formula that we use to fund the big event day as well as fund over 150 stake
races across the United States, 50 special stakes, 100 premium stakes, at about
91 different racetracks in the U.S. and Canada is not providing sufficient
funding, and we must look to alternative sources of funding.
Now what about increased media coverage? We feel
that we are beginning to get a fair share of media, although not what we
ultimately want to come up with. We do have a four and one-half hour network
television show in the United States, a step in the right direction. At
Churchill Downs this year, we had over 850 accredited journalists from all over
the U.S., Canada, and 14 foreign countries and so we are beginning to feel we
are making some impact and a step forward.
What else has happened within the industry,
which is positive? The new American Racing Championship Series, which is a
different organization and a different project than the Breeders’ Cup. We are
having dialogue and discussions about how we can work more closely in promoting
their championship through summer, which consists of nine Grade I races across
the country, leading into the final championship of our event day.
The industry has started Thoroughbred Racing
Communications, which is a weekly newsletter to over 250 papers supplying
statistics, trivia and tidbits about owners, trainers, and horses. The TRA and
Jockey Club have started Equibase, which is a joint operation in which we are
limited partners in this business to control the statistical data and destiny of
racing.
Historically, we have been dependent on the Racing
Form—and their chart callers at over ninety racetracks—for developing
the past performances that the handicappers at the racetrack utilize as their
source of statistical information for making handicapping selections. The Racing
Form has changed hands twice in 27 months. This gave us some very strong
feelings of uneasiness. What if it is not financially beneficial or productive
to the owners? In addition, the Maxwell communication empire is beginning to
crumble, and the Racing Times closed down last week.
Because of this uncertainty, we felt that racing
itself should control and be the master of its own statistical data. So the
industry started this new company and currently has about 80 chart callers
across the country. We have about 81,000 races in the databank at The Jockey
Club in Lexington.
We started to send out data six weeks ago to
Beulah Park in Ohio, which is the first racetrack to utilize this information by
putting it into the racetrack program. You have seen it in limited degrees at
some racetracks. There will be a minimum of four performance lines, which will
show the last finishes of the four races, plus it will list the breeding and the
amount of money won. This information will be provided to the patron in the
program, instead of paying $2.85 for the Racing Form plus a program. The
program cost will go up $0.25 in order to pay for this statistical data.
Hopefully, to the new patron who might have been in awe of reading the Racing
Form and trying to decipher it, and paying the additional $2.85, this may be
a way he will be less intimidated and get more information in helping him make
his handicapping selection.
The Breeders’ Cup put in the national Pick-7
last year at Churchill Downs. This was a very interesting development. I played
a rather negative part in the beginning, much to my embarrassment, when the 1995
Committee of the TRA presented the idea to us at the TRA convention in San
Francisco. The 1995 Committee, for those who are not aware of it, is a group
that the TRA selected to look ahead for racing and examine ways all tracks could
work together toward the goal of developing fan and media interest, increasing
handle, finding new patrons and new owners.
We had conducted a Pick-7 sweepstakes for the
Breeders’ Cup using advertisements in the USA Today newspaper. The
reader was invited to pick the winners of the seven races and it was done across
the country. We are battling the lottery mentality in racing. From its
inception, we have fought the lottery and we have been beaten in every single
corner because the public wants it. They are interested in something for very
little or nothing or a big payoff. We felt it was an erosion and competition of
our patronage and the wagering dollar. We fought it in a number of states and
each time the referendum was overwhelming. We finally came to the realization
that if the public wants it, we better live with it and learn how to cope with
it.
So the national Pick-7 on the Breeders’ Cup
was a response to the lottery by having a major payoff for a racing event. I
didn’t have the foresight or the vision to understand the magnitude of this.
Now if you are going to have a national payoff
and if you are trying to generate a gigantic pool, you can’t just do it on the
grounds of Churchill Downs. You can’t expect people to mail in or call in
using telephone betting. You have to use all these betting outlets out there.
You have got to be able to bring that money into one gigantic, massive pool
where the payoff would come out and would be a response and an answer to the big
lottery pool.
To get that done you have to deal with a myriad
of racing commissions that we have across the United States, all with their own
regulatory authority, each with their own political mandates in their region,
and all with different rules about takeout, and different takeout percentages. I
had no comprehension of the difficulty and complexity of pulling this thing
together, and I still didn’t think it could be done.
With the singular exception of the Breeders’
Cup, our industry continues to be fragmented. It continues to be people
interested in protecting their own turf. The overlap of racing dates, the
competition for stake horses, the jealousies and the envy we have, and if there
is one singular issue that we have today for the survival of our game, it is
unity. This is not saccharin and it’s not a cliché that all of you have heard
from every lecture. The harsh reality is that racing will not survive if we
don’t have some standardization and uniformity of our rules of racing, not
only dealing with takeout but also medication and the other overriding issues
that affect us.
Getting back to the Pick-7, it finally
dawned on me that it could be done and we were getting for the first time, a
cooperative, unified effort. Sometimes out of critical economic times, or
personal distress, good things happen. Even with bad economic times and
pressures, we looked on this as an opportunity to bring new fans into racing and
to generate additional income at the track as well as a payoff commensurate with
the lotteries.
So we got it done and Churchill Downs did a
marvelous job. If you can visualize bringing these individual pools—we had 590
outlets across the United States handling these pools—and taking out the
individual state takeouts, the split with the racetracks, the split with the
horsemen, commingling it into one common pool and then being able to determine
who had the winners out there. Then visualize being able to send this money back
out and pay the winners in a 48-hour period.
Get the money, make sure the accounting is
accurate, make sure the payoffs are consistent with the regulatory provisions in
those localities, and get it back to the tracks where those winners were
located. It was a monumental job, and the people at Churchill Downs, the TRA,
and the Breeders’ Cup managed to carry it off without a hitch.
In 1991, no one had won the Pick-7. That same
day in the State of Kentucky, I think the lottery was a record $38 or $40
million, which sort of overshadowed what we were trying to do. We are going to
do some things differently in the future.
I was in Hong Kong speaking in December at the
21st Asian Racing Conference. Hong Kong is the great jewel of
pari-mutuel wagering in the world. They bet on an average day over $100 million
U.S. dollars. If you took every Thoroughbred racetrack in America, not on a
weekday but on a Saturday and added it up, it would not exceed $100 million
dollars.
I was talking to General Watkins, who is the
chairman of the Royal Hong Kong Jockey Club, and I was asking him how do they
get such a big play on their Pick-6. Even though the Chinese are inveterate
gamblers, that’s an enormous amount of money bet in one day and the Pick-6
constitutes about 28-30 percent of that wagering. I asked him how do you do
that? He explained that it is very simple. They have the Quick-6.
The Hong Kong Jockey Club found that their
people are interested in the payoff and interested in getting it quickly but
they don’t want to spend all the time handicapping. After the fan makes
selections by using a birth date, an anniversary, and the colors worn by the
jock, how can they bet the Pick-6? General Watkins told me that Hong Kong’s
answer is to have a special series of windows, where the fans pays $10 Hong Kong
dollars—which is equivalent to $1.35 U.S.—and the tickets are computer
generated, that is the computer selects the numbers. This constitutes about 35
percent of the pool. They just churn them out.
I wanted to try this at Keeneland this spring
because I think the average person who isn’t a hardcore handicapper is
interested in a big payoff, having some fun and participation and may not want
to spend all that time to handicap. Plus, it would speed up our pari-mutuel
windows where the people don’t know what to pick.
Now let’s turn our attention to your
questions. May I urge you now to ask any question that you have and I will
attempt to answer it.
QUESTIONS:
Question:
What is the percentage of that $100 million at Hong Kong is bet on-track
verses off-track?
Bassett:
I know they have 2,600 telephone operators. I know they are handling somewhere
around 10,000 transactions a minute. Their attendance on a Saturday afternoon is
around 60-65,000 but the bulk of it is the money coming in over the phone. I
have to tell you that I don’t have the figure on how much of that $100 million
is off-track betting. I would say it would probably exceed 40 percent. If we had
the Quick-7, then somebody probably would have won it using the computer
generated numbers. We had Housebuster, which was the overwhelming favorite in
the sprint, which was the first race in the Breeders’ Cup. He grabbed a
quarter and finished fourth or fifth, and the long shot winner knocked out a lot
of people.
These are things that we have to learn and we
have to learn that what we have in racing in the ‘90s and the way we have been
doing business may not necessarily be what the public wants. We have to adjust
to the patron’s needs and desires.
An example is the specter of off-track betting
and what are we going to do with it. There is a bill now that was introduced
earlier this week (February 14, 1992) in the Kentucky General Assembly that has
old grayed-haired traditionalists like myself saying if we open up this
off-track betting what will it do to our on-track betting and why spend all this
money on maintenance, landscaping, and beautification if people aren’t going
to come to the track to enjoy it.
I am just back this week from Santa Anita, which
is one of the most truly beautiful racing facilities in the world. It is
certainly one of the top three in the U.S. Just a few years ago, before the
advent of (intrastate) intertrack wagering in California, Santa Anita would have
on-track attendance during the week of 16-20,000 people and on Saturdays during
their winter meeting (December to April) 30-45,000 people.
Now during the week they are having 8-11,000.
The Strub, one of the big races in America last Sunday had 26,000. In the past
they would have had 45-50,000 people there. What has happened is the political
pressures in Sacramento just like the ones in New York state in Albany. They
want more tax revenue without “raising taxes of the citizens,” the same
thing as the lottery gimmick. They have off-track betting, which is call
intertrack wagering there. They have 16 outlets in Southern California. The
traffic congestion on the freeways, the expense and time of driving in
California is a major problem we don’t have in Kentucky. You see it’s
beginning to bleed the machine that really makes it go, which is the on-track
attendance, the concessions, the programs, and the parking. You can look at the
total handle staying at the same level but remember the track is getting a
smaller portion of it. So those are some of the things that concern us.
Question:
Could you describe for us your personal views and views as chairman of the
Breeders’ Cup, the concept of restricting the use of medication in Breeders’
Cup races?
Bassett:
This is an issue that has come up very frequently in the last three years. It
was brought up at The Jockey Club Roundtable two years ago. Why doesn’t the
Breeders’ Cup restrict their seven Grade I races to being run without
medication? It’s a hard question to answer. My heart says yes. We should take
the leadership. This is our showcase. This is our Super Bowl or World Series and
we should be running it in the most ethical and proper way we possibly can.
When you get into implementing it, you then get
into the regulatory problems of the individual states that you are running in. I
would presume we could say we won’t come to Kentucky unless you waive the
medication rule and make it proper. The other side of the coin is the horsemen
themselves and whom you are dealing with. I had a very prominent horseman who
won a Breeders’ Cup race here, who told me in no uncertain terms when we were
going to Belmont that he wasn’t going to have his horses running there, nor
was he going to have his trainer running because he didn’t like the hypocrisy
of the no medication rule, which he felt butazolidin and lasix were therapeutic.
You get into the issue, “Are they therapeutic or are they performance
enhancing drugs or depressants, etc.” That is not the issue Mike is asking
about.
Philosophically, it would be very important for
the Breeders’ Cup to step forward and say we would prefer or we recommend that
they not run with any medication. The practicality of implementing it and making
it work is more than just semantics. There are serious reservations and I think
genuine ones on the horsemen’s part and the state regulatory bodies.
I do take issue, strongly, with the pressure
that the Europeans attempt to put on the Breeders’ Cup each year concerning
the medication issue. They look at me and look at the Breeders’ Cup
organization and they want to appear holier-than-thou and as pure as the driven
snow, taking the position that they run in Europe free of medication. I say we
will do this (restrict the use of legal medications) when we develop an
international quality assurance program; when our drug testing techniques, not
only in Kentucky, California, Florida, and New York are up to snuff; that we all
have developed the techniques worldwide to catch cheaters. We will do it when
the people in Europe, instead of pointing the finger at us and accusing us of
being negligent, of not running free of drugs, when they can look America in the
face and say their testing techniques are meeting the standards of today and
they are joining in an international quality assurance program where we are
exchanging blind samples and we know that their scientific technology, as well
as ours, is on the cutting edge.
Our major problem today is that the testing, not
only in America but also around the world, is always behind the illicit
pharmacologists. They are always developing drugs and performance-enhancing
drugs or depressants that we don’t have standards for testing. It’s one
thing to be a purist and say yes we should run free of drugs or medication. None
of us in this room or racing that stands up for the principles and standards of
maintaining our great sport would want to condone use of illicit drugs that
enhance or depress. But therapeutically, there is something about the year-round
dirt racing, the proliferation of new racing states in the U.S. that make
medication a matter of concern for us.
Question:
If there is difficulty getting agreement on medication, what do you think of
the recent proposals for a racing czar or even the federal government to move in
and solve the problems?
Bassett:
Arthur Hancock made this proposal at the Arizona symposium in December. It got
widespread publicity on the front page on the Racing Times and the Racing
Form, the Blood-Horse, and the Thoroughbred Times. This is not
a new idea. They look upon professional sports such as baseball, basketball, and
football, and all have a czar. It’s a totally different business enterprise.
There you have 20 to 30 owners who are into it with major financial investments
but no state regulatory supervision of it. Theirs is a marketing promotion; the
integrity factor and the drug factor are there also.
A czar could be, it just could be, a plus and a
step forward. When you say federal czar that is a different thing. That is one
that would be appointed by the federal government while the other would be a
czar or commissioner that comes from within the industry itself without federal
regulatory overtones. I think the latter would be more appropriate.
Our big problem as I said earlier is the
fragmentation of our industry and our preoccupation or obsession with
self-interest rather than the interest of the whole. The problem of getting the
HBPA, KTA, AAEP, TRA, TOBA, the Breeders’ Alliance, American Horse Council,
American Racing Federation, Turf Writers, and ARCI together to agree on the
input of one person that they would follow. It won’t do any good to have a
figurehead that doesn’t have the authority to make this thing work. My
response is that it is certainly worth trying because where we are going now is
not being very productive.
Question:
On the subject of unity there is some disunity in Kentucky over the off-track
wagering issue. The breeders have accused the TRA of ignoring their interest.
Keeneland is in a unique position because it is clearly very close to the
breeders as well as the racing industry. How do you in your role, both at the
Breeders’ Cup and Keeneland, view ITW as it affects the breeders instead of
the racetrack?
Bassett:
Keeneland probably has a little different viewpoint of ITW than the others
because the major portion of our income at Keeneland comes from our sales. If
the breeding industry suffers then we suffer. We pay out a shade over 100
percent of our take from pari-mutuel wagering to purses at Keeneland. This has
been a source of pride through the years. I remember when we were giving 70
percent when I first came to Keeneland 25 years ago. We thought that was great.
We are now crowding 100 percent, which means we have to have ancillary income to
maintain the plant and operations. Our position as opposed to the other three
racetracks is somewhat different. In fact, it is a major difference. We at
Keeneland are opposed to any simulcasting or ITW or full-card simulcasting that
would replace live racing. We see this as a genuine problem.
Let’s take racetrack X that has a declining
attendance and a handle of less than a million dollars a day with attendance at
4-4,500 a day. They have stalls for 1,200 horses and manure removal problems,
track maintenance problems, personnel problems, and problems with the
pari-mutuel union. It’s very attractive for them to say we will close down and
leave our clubhouse and grandstand open and we’ll take NYRA’s racing, Santa
Anita’s racing, both of which are pushing their live cards to Las Vegas, Reno,
and Canterbury Downs. We see this and the HBPA, who are having a real hard time
keeping their owners, see this. There are 750 empty stalls at Belmont today.
Before you use to have to beg, borrow, and steal to get a stall at Belmont if
you weren’t an old established owner. At Keeneland this past fall we had 100
empty stalls, which we never have had in the past.
So you see this trend of easy money, of a
bottom-line oriented philosophy. Why put up with all of the problems putting on
the card that I indicated, when a track can just take the card, turn on the
switch on the monitors, have the concessions going, and have 15 or 20 mutual
clerks working? Our position is one that we want to protect the Thoroughbred
industry while we are here. Governor Jones quoted earlier this week a University
of Kentucky economic survey that there are 79,000 jobs directly related to the
Thoroughbred racing and breeding industry. That is the equivalent of 20 Toyotas.
We didn’t get one cent of incentives to bring this industry here. What we are
trying to do is to keep it here and maintain it. We have a tax structure within
the state that is totally inconsistent with the tax structure of the other
states in the nation that are trying to pull this breeding industry away from
us.
The reason why it’s here is because it is God
given—the climate, water, soil, and the fertility that happens to grow the
horses. There hasn’t been the vision, the initiative, and the creativity of
the legislature or the powers that be in Frankfort to want to keep it here and
to maintain it. Hopefully, Governor Jones, the first horseman, if we don’t get
something done with him, I would say that the future would be rather blue.
Question:
So you like or don’t like the ITW?
Bassett: We like it if it is not in lieu of live racing. In other words, we would like to take the Derby, Belmont, or Preakness. We are taking the Oaklawn Handicap at Keeneland right after the Bluegrass Stakes this year. Single major races of public interest, yes I think it is essential but not at the exclusion of live racing.
Question:
Currently you are taking bets for Ellis Park and Turfway but not for
Churchill Downs. Do you foresee any agreement with Jefferson County where you
can play the Keeneland races here?
Bassett:
What is your view of that?
Question:
I feel that you should be able to bet on Keeneland races here in
Jefferson County. It seems as a resident of Jefferson County that I have to pay
a premium to go to Keeneland. I have been going to Keeneland since I was
10-years old. I have a problem going up there. There is no place to sit. I’d
like to know how a general patron can get into the clubhouse? I play the races
there and I’d like to make a legal wager on it. I would rather do it here. I
feel intimidated in some ways at Keeneland on a busy day. The lines are long.
The only place a general patron can go is the grandstand area and you get shut
out. I look over on the other side of the fence and there are 300 people
occupying 3,000 seats in the clubhouse. I would just as soon go to ITW.
Bassett:
How about 1,000 people occupying 700 seats. But getting back to your real
question. How can we say we’ll take Turfway and not Churchill Downs? We would
like to take Churchill. Both of us are in the early days of ITW, with the
Louisville Downs problem that Churchill had, and our problem with the Red Mile,
we’re concerned about simulcasts between Lexington and Louisville. Churchill
has protected itself on one day; they would not simulcast the Derby. We would
love to take the Derby because we would have 8-12,000 people at Keeneland,
probably a $2 million handle. I think it will come. I think that the public will
demand that we interchange between the two communities. It was sort of a safety
position that we both took. We are both guilty of trying to protect our markets.
We nearly made a very foolish blunder when ITW
first came. Being traditional at Keeneland and being intimidating, we did not
like the idea of opening up as a gambling emporium. We thought Keeneland should
be a showcase. We found we were wrong. It’s not what the public wanted. In the
early days of ITW wagering, we wondered who would come to Keeneland in the
middle of winter at night to bet on the Turfway races. We said nobody would
drive five miles out here and bet. So we went to the Red Mile and said how about
co-venturing this? We will let you have it—the Thoroughbred track has the veto
on Thoroughbred racing in this community as the Red Mile has a veto on harness
ITW. How about joining together and you take the signal from Turfway? Here is
the Red Mile located in the middle of Lexington enclosed with lights because of
night racing. We will split 50-50. They thought about it and said it was a bad
idea. We still didn’t want to do it at Keeneland. Bill Greely went back to
them and told them we would split the red ink if you want to. Meaning if there
was a loss, Keeneland would underwrite half of the loss. They turned that down.
Then we said to hell with it. We will go ahead
and do it. We spent half a million dollars winterizing the grandstand area, the
backside with putting heat into it, additional lavatory facilities, and so on.
It has turned out to be a bonanza. What we make off intertrack wagering helps
overcome the loss that we have during the racing. In other words, with the high
purse structure that we are giving, which is about $250-260,000 a day away, the
intertrack puts us in the black. If we didn’t have ITW we might have to reduce
purses and we were that close to giving it away. It’s there. It is good for
the horsemen. The purse structure is much more competitive than it has ever
been. The only thing that worries us is the viewpoint of taking those full
simulcasting cards in lieu of live racing. We will not do that at Keeneland but
you can look at other racetracks around us. I’m not talking about here in
Louisville. But for some states, would it be more economically advantageous to
shut down and take the big races from New York and California?
Question:
What about Governor Jones’ proposal of tying at least four races, run
at racetracks here in Kentucky, into lottery payoffs? What are your thoughts on
that?
Bassett:
I explained to you our opposition to the lottery in the beginning. It is exactly
the sort of head in the sand approach that New York racing had to off-track
betting. It is here, it is a factor, the public wants it, and we better wake up
and join. So we now have a meeting scheduled next week on February 18, 1992 with
Mr. Hosker, who is the chairman of the Kentucky Lottery Commission, to see how
racing and the lottery can join together instead of the finger pointing that has
gone on. I have been personally guilty of this. We will look at how we can move
together the gigantic number of dollars on promotion and advertising and joining
with racing’s effort to market itself.
There are some administrative problems of tying
the lottery to racing—such as how do you handle the scratches. If you are
going to have somebody go in and pick out numbers three or four days before the
race is run, there is no way that we in racing can guarantee that number of
horses will be in the race. Minor things like that.
We are open-minded about it. I cannot help but
think though, with the Churchill Downs management as aggressive as they are on
marketing, and as bottom line oriented as they are, and having the most
charismatic and well known race in the world at a time of the year where there
is absolutely no competition from the standpoint of baseball playoffs, Super
Bowl, etc., that ultimately there will be some major marketing effort to team
with Lotto America. It would seem feasible to try it on the Kentucky Derby first
and see if it could work, before trying it with other racing events.
Question:
Could you talk about the international aspects of the Breeders’ Cup? What
have you done to promote the Breeders’ Cup to overseas horsemen and overseas
fans?
Bassett:
We have been very fortunate in being able to attract a strong, quality
international field to participate. In 1991, for the first time we had a foreign
entry or connection in every single one of our seven championship races. What is
happening is two things: one is the purse, of course and the other is the
Europeans are learning that they can compete on the dirt.
One thing I neglected to say about the
Breeders’ Cup earlier, it was designed to develop a championship day. Have we
accomplished that? Yes, not only from the media attention but we are averaging
over five Eclipse Awards on each individual major event day. This year we have
seven. So it has achieved championship status.
Now the Europeans are finding out, with the
establishment of these all weather training tracks—the Equitrack, the track
Sheik Hamdan built at Newmarket, the sand gallops at Chantilly—where they can
train, and even though they have never run on dirt, can come over here and
compete. Remember Dayjur, the two-year old sprinter at the Breeders’ Cup that
jumped the shadow? He had never been around two turns, never had run on dirt,
and ran a fantastic race. If he hadn’t jumped at the finish line, he would
have beat Safely Kept. We see the Europeans beginning more and more to adapt
their horses’ training methods to run on these dirt tracks as well as the turf
races.
The second part of the question was what are we
doing to promote the Breeders’ Cup internationally? We do a lot of traveling.
We are trying hard to develop a connection with the Japanese Racing Association
and I have had a series of meetings with the Royal Hong Kong Jockey Club to try
and simulcast the Breeders’ Cup to these great racing centers where there is
an enormous wagering potential.
We are looking at the shrinking pool that we
have on the foal nominations, which generates money for our purses. We are
trying to make the day pay for itself—the $10 million Breeders’ Cup day.
Three or four years ago we were at about 60 percent and we are now about 91-92
percent at making the day pay for itself; primarily from the entries and the
simulcasting revenues from 590 outlets, and the host track’s revenue, ticket
sales, handle, etc.
I wanted to try to work out a proposal or
proposition to Japan and to Hong Kong to take the races and simulcast them. If
they are betting this amount of money on the quality of racing that they have,
what would they do if they had real championship horses that we could start
sending whole past performance sheets and advertising and promotional material
to the Hong Kong and Tokyo papers to familiarize them with the horses. The JRA
people said, “Very interesting Mr. Bassett.” We talked about the 12 to 14
hour time difference. How are we going to overcome that? I said, advanced
wagering. This is an exciting concept that we have. We had advanced wagering for
the Pick-7 and it worked quite successfully.
Everything was moving along all right until we
got to the question about sharing revenue and then the Asian mask came down like
this. We are not giving up. We have videos that we are sending abroad. The 850
accredited turf columnists that covered the Breeders’ Cup this year at
Churchill came from 21 different countries. Our satellite signal goes to at
least 20 countries. We are trying to reach out and as soon as we can get a Hong
Kong, Japanese, or Australian horse we may be able to open up Europe to
simulcasting. However, the bookmakers in England are our big stumbling block.
It will be interesting to see what happens when
the Common Market opens up and all the walls and restrictions come down. Then we
might have an opportunity to get into that European market with 300 million
people.
Question:
Looking very far down the road into your crystal ball, is the Breeders’ Cup
likely to be run outside the United States?
Bassett:
We will be meeting in May this year with Canada who has demonstrated a very
strong interest. We have had a number of talks with Bud Baker, who is the
chairman of the Ontario Jockey Club. He called me Saturday after the Breeders’
Cup, a week later in November and I was sort of sleeping at my desk on a
Saturday. He said, Ted, what are you doing today? I said I was trying to do some
work. He said he wanted me to come up here this afternoon for the races and
he’d send his plane down for me. I said that is awful nice of you but I
can’t really get away, but what race is it? He said it wasn’t the race,
it’s 71 degrees up here today and none of you hardboots will ever believe it
unless you come up here and see it.
I told Bud if he really wants it, take a page
from Florida’s book. Look what Florida did to get the Cup. They went to
Tallahassee and had legislation passed, tax incentives, incentives for the track
to host it, incentives for the Breeders’ Cup to come to it. Go to your
provincial government and come up with a package we can’t turn down. As far as
Europe and Asia, I would say that if Hong Kong, with all their money, if they
want to charter about six 747s and bring all those horses over, pay the
owners’ fares like the Japan Cup does, and race at a great facility, why not?
Question:
What about sponsorships? The Breeders’ Cup has been involved with getting
sponsorships for various races and Keeneland recently announced a new
sponsorship agreement. Can you tell us about the methodology involved in getting
those sponsors and why they like to be involved with racing?
Bassett:
Generally what has happened when you have the sponsorships, not only of racing
but these other events, there are a lot of things involved to it other than the
race; the hospitality opportunities that they bring. What we do at Keeneland
now, for example, the Ashland Stakes, which was our first venture into
sponsorship. At first our board of directors didn’t want to do it because they
didn’t want the commercialization of the stakes with a product name like the
Eveready Epsom Derby. We went to Ashland Oil because Ashland was a stake and I
thought it was a simple thing that we could sell.
The big thing that they want is something to
entertain their clients in a very first class manner. Ashland Oil on Ashland Day
brings about 800 of their top customers from throughout the Midwest and the
South and takes over two floors of our restaurant—Lexington, Kentucky, and
Keeneland rooms—and we have them participate in the trophy presentation and
come down to the director’s room with a few selected, intimidated people.
Let’s talk briefly about the Breeders’ Cup.
As you are well aware of today, CBS took a beating in the television ratings for
the Olympics and they took a beating on the World Series. The entire television
ad market is at a crisis. The rights fees that we are getting are absolutely
minimal. What we try to do to keep NBC interested in renewing our contract,
which will come up in 1994, is that we take a package to them. Let’s say that
there are 15, 30-second spots over four and one-half hours. We try to come in
60-90 days before the telecast and have pre-sold a majority of those spots. So
we would say to Budweiser, Mobil, or Delta if you want to be a sponsor, it will
cost money to help underwrite a portion of the purse and we also need you to
underwrite four 30-second spots, and the same for Mobil, Toyota, Budweiser, and
so on.
When those of us that go out and call on the
CEOs of the Fortune 500 companies and try to get them interested and involved in
supporting and sponsoring Thoroughbred racing, there is a tremendous number of
those CEOs who are either Baptist or Methodist or have an inherent objection to
being associated with pari-mutuel wagering or gambling. So the important thing
about the Breeders’ Cup getting Delta and Keeneland getting Delta as a sponsor
was like putting the Good Housekeeping Seal of Approval on racing because here
is one of the Fortune 500 companies in the heart of the Bible-belt saying they
embrace and support racing.
This we felt was a major breakthrough. It
is a difficult and continuous effort but it is the ancillary opportunities of
entertaining in a first class way at a major event for your pre-eminent
customers that attracts sponsors.
Question:
Let me ask you another two-part question. Dr. Lawrence described your
background as quite varied before you came to Keeneland. What kinds of talents
and background do you look for in people who come to work with you? The second
part of the question is that given this is a business school oriented toward
placing people in the horse industry, what would be your prognosis of the career
prospects for our graduates over the next few years?
Bassett:
Let’s answer the second question first. I would think as a former CEO of a
racetrack that one of you coming in would have a great priority. First of all,
you are telling me that you have an interest in the industry and you have a
background of knowledge.
I’ll digress for a second. A young man that we
are very interested in hiring came in about two years ago. His family had been
involved in racing and he was thinking about being a bloodstock agent. He asked
me for an evaluation. I told him, I don’t want to offend you but today there
are 150 bloodstock agents out there doing nothing. I said what we have in racing
is, we have too many lawyers, too many accountants, too many marketing
professionals and experts that are running things. What we don’t have is
someone who has a true and genuine understanding of the game and an appreciation
for what goes on the backside, which is the motor that drives us.
If you want to get into racing, you ought to
learn it from the bottom up so that you bring something to the table. What most
of the people walking into my office asking for jobs don’t have: An
understanding and appreciation of what this game is about.
To finish the story, this young man worked on a
farm for six months, he worked for a trainer for six months, we sent him to
Newmarket to work for Tattersalls for six months, he went back to work for
Lloyds of London for three months and now he is walking hots and wrapping
bandages for Ron McAnally at Santa Anita.
Not many people can afford to take that time on
building blocks but when you come to management, you are bringing something that
the average person doesn’t. You are bringing an awareness and understanding.
All of us, wherever we go, if you are interviewing someone else for a job, you
are asking that person what are you bringing to the table that management does
not have. What can you do better? When you start selling and presenting
yourself, you don’t want to say, I want to be in PR, I like racing, the trees,
the color. You want to say you have been focusing on this area at UofL and I
understand the marketing problems or the administrative side. Come in focused.
What really impresses me is someone who comes in with enthusiasm. Show
enthusiasm to your potential employer.
I had an artist come to see me yesterday
morning. She came in with a beautiful picture of the Keeneland paddock. I
listened to her and told her we have an art budget. She said she was just in the
area and saw how beautiful Keeneland was and she never had a chance to meet me,
so she dropped by. That’s nice. I appreciate her coming in. If she had said, I
have wanted to paint this paddock for 10 years and I have had five paintings
that never came up to snuff but this one I had to show you because I felt
Keeneland ought to have it. In other words, come in with a plan; be focused on
what you are going to do and how to sell it. I would say your opportunities are
good. I would have some definitive area to focus on. We are going through the
same stresses that you are going to hear in any job but sell yourself with
enthusiasm and with background in the sport. We would like to talk to you. I
would not be discouraged by the economic conditions. This too will pass.
Question:
Do you think racing does enough to encourage fans and make them feel
comfortable and give them a sense of understanding of what a day at the races
means?
Bassett:
No I don’t. We are very vulnerable and sensitive to the criticism by the
other young man about where to sit at Keeneland and so on. The Equibase approach
is one of trying to make the fans more comfortable and provide the knowledge
without paying the premium for the Racing Form. Trying to simplify the
statistics. Building new racing plants. I think many of them are archaic. Did
you go to the Breeders’ Cup this year? It was cold, raw, and miserable and we
were disappointed with the crowd of 66,000. But gosh, it was a miserable day and
there aren’t many creature comforts at a racetrack. Not many of them are
enclosed. We must be more aware of creature comforts and patron needs.
We are doing seminars with the TOBA. We are
doing handicapping seminars, we are advertising in other arenas than the trade
publications—running ads in Barron’s, Forbes, and the Wall
Street Journal—trying to recruit owners and new people coming in.
One thing that I didn’t touch on is that
the Breeders’ Cup is co-sponsoring over 150 stake races, which we help
co-advertise with spots on TV trying to bring people into the track. We have
been negligent in the past and a major drawback is that we don’t have that
inherent, innate fan base that the rest of America grows up with such as Little
League baseball, midget football, and basketball—the loyalties and the
allegiance. Nor do we have the regional competitiveness of Pittsburgh verses
Cincinnati, L.A. verses San Francisco, and so forth. It’s not an easy problem
to solve but those tracks which develop innovative and creative programs, that
have a continued awareness of the patron’s needs and comforts, and have a
commitment to ensure the integrity and credibility of our industry will survive
and will flourish.
Thank you for the opportunity to share these
thoughts and ideas with you. Thank you even more for your courtesy of listening.
Copyright 1991, Department of Equine Business, CBPA, University of Louisville, Louisville, Kentucky.
Equine
Industry Program
College of Business and Public Administration
University of Louisville
Louisville, KY 40292
Phone: 502.852.4859
Fax: 502.852.7672
