The John W

Thomas H. Meeker
Louisville, Kentucky
1999 Galbreath Award
Tenth Anniversary Lecture

(Transcript of Lecture)

  The John W. Galbreath Award for Outstanding Entrepreneurship in the Equine Industry has been presented each year since 1990 to one individual whose success within the industry has been due to the utilization of uncommon abilities or innovative approaches to business management. Each recipient has had a positive impact on the equine industry because of his entrepreneurship, and has gained widespread respect for it.
  John W. Galbreath, in whose name the award is presented, distinguished himself internationally as both a horseman and a businessman. No one else has ever bred and raced winners of the Kentucky Derby (Chateugay and Proud Clarion) and also the Epsom Derby (Roberto). He was the owner of Darby Dan Farm (producer of over 90 stakes winners) and the Pittsburgh Pirates baseball team, as well as chairman of the board of Churchill Downs. His business interests included large-scale development projects around the world.
   Winners of the Galbreath Award have been: John A. Bell, 1990; James E. Bassett, 1991; Cothran Campbell, 1992; John R. Gaines, 1993; Ami Shinitzki, 1994; Robert Clay, 1995; B. Thomas Joy, 1996; John Lyons, 1997; D. Wayne Lukas, 1998; and Thomas H. Meeker, 1999. Recipients are invited to the UofL campus in the fall of their award year to deliver the annual Galbreath Lecture to students, faculty, and guests, usually dealing with their own experiences and their personal philosophies.
  Thomas H. Meeker, a 40-year-old attorney with no experience in the racing industry other than a period of time as general counsel to Churchill Downs, was named acting president of the century-old track in 1984. The Board, led by Chairman Warner L. Jones, Jr., hoped that Meeker, who had been decorated as a high-ranking officer in the U.S. Marine Corps, could upgrade the organization of the company during the transition to new management. Meeker not only retained his position but went on to became that industry’s most effective and farsighted executive. Anticipating vast changes in racing, he prepared Churchill Downs to take full advantage and to maintain its position as the industry leader.
   The John W. Galbreath Award is a project of the Equine Industry Program (EIP), an academic unit of the University of Louisville’s AACSB-accredited College of Business and Public Administration. Created by an act of the Kentucky State Legislature, the EIP is the only equine program in North America that offers a BS degree in business administration. Through 1999, more than 400 undergraduate students have taken EIP courses. Other EIP functions, in addition to teaching, are industry research and professional service.

Equine Industry Program
College of Business and Public Administration
University of Louisville
Louisville, KY 40292
Dr. Robert G. Lawrence, Director
Office: 502.852.7617

ROBERT G. LAWRENCE:

Welcome to the annual Galbreath Lecture.
  I would like to welcome everyone here today, our guests and our faculty, and particularly our students, for whom these lectures are primarily held. I believe we are in for an interesting afternoon. As it happens, this is the tenth anniversary of this award and as I look down the list of all the previous winners, I believe John Galbreath would be very proud to have these individuals recognized in his name. He would be particularly pleased to see that Tom Meeker had received the award because both he and his son Dan served on the Churchill Downs board and were friends of Tom’s for a long time.
  The Galbreath Award is actually a bronze trophy that we present at the American Horse Council meeting in Washington, DC. It is given there because that organization represents all breeds and all interests. The list of Galbreath Award winners makes it pretty obvious that this is an ecumenical award. We’ve honored a pioneering stallion syndicator, a magazine publisher, an innovative bloodstock agent, a breeding farm innovator, a leader in racing partnerships, the head of the world’s largest sales company, the operator of a harness track, a trainer of horse-people, and, of course, last year, D. Wayne Lukas, the most successful and most innovative Thoroughbred racehorse trainer in the country.
   I am also pleased that we have honored Tom Meeker because, not only was he a friend of the Galbreath family, he has been a friend to this program from its very inception. Right now, there are at least a dozen of our graduates plugging away at Churchill Downs, and a number of others have worked there and then gone on, as people often have to do in this industry – they grow and they move. When this program was first started, we attracted students before we had a full faculty. I asked Tom Meeker to come and lecture, and I remember very distinctly that he not lectured himself, but he had most of his senior staff come over. We practically built a course around Churchill Downs’ management.
   Later, when we introduced a Distinguished Lecturer series, I again asked Tom to take the time to lecture to our students. He said, “Sure, but I don’t think I can cover the points in only one lecture.”So, he came over and gave two distinguished lectures. So we have had a great association with Churchill Downs and Tom Meeker. But he’s not here because he’s a friend. He’s here because he has epitomized at least one definition of an entrepreneur; that is, one who sees opportunities that the rest of us tend to miss and who takes advantage of them. A true entrepreneur will put all of his effort and resources – giving up personal time, recreational time, even family time – to make sure things happen. Later they’re criticized or envied or regulated or over-taxed or called “lucky.” But Churchill Downs has not prospered over the past dozen years because of “luck.” It’s because of what Tom Meeker has done.
  Most of us know Tom’s accomplishments but, briefly, he inherited an aging facility that was living on one race a year. It was clear that he wanted to raise the stature of that entire operation to the level of the race that this industry honored. In the first one-on-one meeting I had with Tom back in 1988, he said, “I didn’t take this job just to put a new coat of paint on the building and hang out a “open” sign a couple of times a year.“ He wanted to make things happen at Churchill Downs, and he began with substantial investments in the facility. The most noticeable, perhaps, is the turf course, which enabled Churchill Downs to host the Breeders’ Cup, setting three of the four attendance records for that event.
  Then along came simulcasting. As soon as Tom recognized the significance of inter-track wagering and full-card simulcasting, he acquired Louisville Downs and changed that place into an Ohio River racebook five years before they ever put a rivet in that Caesar’s boat. He recognized that simulcasting offered the potential of greatly expanding his market – up to 10 or 12 million people – as long as the tracks and other new OTB outlets around the country were willing to take his signal. To get them to do that, it’s necessary to have to have the highest quality live racing in the country, and so he set out to accomplish that goal. It is pretty obvious that he succeeded. With purses at Churchill Downs hovering around he $500,000-a-day level, we all know where Thoroughbred racing in Louisville ranks today.
  The only hitch is that Churchill Downs races only about 80 days. So Tom’s plan was to reach out again; this time to build Hoosier Park, then to acquire Ellis Park, and then, this year, to plant a Churchill Downs flag on both the East and West Coasts when he bought Calder Race Course in Florida and Hollywood Park in southern California. Everyone is wondering, “What’s next?”
  Let me just quote from a letter from Bill Landes of Hermitage Farm, one of a few people who nominated Tom Meeker for this award. In his nominating letter, Landes wrote, “Flying in the face of a proliferation of gambling, Tom has devised a plan to take full advantage of the interstate gambling market. Given his commitment, we have not seen the end of his vision.”
   This afternoon, we are going to get a little glimpse of that vision as Tom talks about racing today and in the new millennium.

THOMAS H. MEEKER:

Thank you very much.
   First, can you hear me without the mike? Second, can I take off this jacket? Thanks. Now you guys can take off your jackets too. Third, are there any members of the press here – working press? OK. “Working press,” of course, is an oxymoron, but I will have to temper a few of my remarks today.
   I must tell you that this lecture is the highlight of my day. I have had a dentist appointment, and I also sat for three hours in a profit-planning session. You may think that this kind of thing is drudgery for me, but I can state that it is absolutely, without question, the highlight of my day.
   Incidentally, the introduction was great. Thank you, Bob. The only problem was the continued references to Tom Meeker did this or Tom Meeker did that. The only thing I take credit for at Churchill Downs and its success over the last few years is the fact that I have been able to hire some awfully bright and talented people. We have done a lot of things at Churchill Downs. But the reason we have been able to do a lot of things is because we have the brightest and best people, some of which have come from this university and this program. And that is how the company has been built into what people know today as Churchill Downs – a remarkably different operation than what it was in 1984.
   Mrs. Harriet Jones is here today, which I appreciate, because her husband, the late Warner Jones, was my mentor at Churchill Downs. John Galbreath, when he was chairman, brought me to Churchill Downs, but only as general counsel to the track. It wasn’t until Warner Jones took over as chairman of the board that I was brought into the track’s management. What Mr. Jones saw in me, I haven’t the vaguest idea. Here I was: A guy who was in the Marine Corps for umpteen years, a practicing lawyer who knew nothing about racing – and I mean absolutely nothing – and was not from Kentucky. Yet, I was given a wonderful opportunity – by “luck,” by circumstances, or by a bad day on Mr. Jones’ part – to become the president and CEO of Churchill Downs. What a great day it was for me! I mean, my head swelled. But as time went on, I began to realize what a terrific opportunity we had as Churchill Downs employees to expand not only the firm but the wonderful Thoroughbred industry we all know and love.
  So, what I thought I’d do today – aiming primarily at the students – is try to give you a context in which to understand where we are today and the opportunities there are in the future. That context is centered on the history of Thoroughbred racing. All too often history is not a particularly good teacher in terms of how to do things, but it can tell you, quite frequently, how not to do things. We need to be dedicated students of history because we can learn where people have made mistakes and where they have had successes. Now, generally speaking, you can’t replicate those successes because things change. But those people who have made mistakes, you can learn a lot from them. I want to talk just a little bit about the history and the development of the sport we know as Thoroughbred racing.
   Thoroughbred racing in this country had its genesis in the late 1600s when New York Governor Nichols created the first track on the plains of Hampstead on Long Island, near where Belmont Park is located today. Nichols was an Englishman who was disgruntled about the fact that the horses in the New World were not as good as he remembered in England. And so they started racing, embarking on a project that was really aimed at improving their horses, their stamina and speed, etc. On Saturday, they would collect money, put it in a purse, hang it on a finish line, and they’d race for it.
   In truth, this is kind of the way that racing continued for a long time, kind of an agribusiness. In those pre-automobile days, the horse was an important part of society. He was transportation, he was agriculture, and, in many instances, he was a way to make money. The horse was a critical component to the overall lifestyle, if you will, of most individuals back in that time. At some point, in addition to running races solely for a full purse hung on the finish line, owners and breeders also began making wagers before the races. Over the course of time, bookmakers made it into a professional business. On Saturday, farmers brought their horses in, and near the finish line the bookmakers would congregate, taking wagers in a pool system that auctioned off each horse in the race one by one.
   By the way, does anyone know where the term “pool hall” comes from? “Pool hall” comes from what was then known as the “French auction pool” where they would auction off each horse. All proceeds were put into a pool from which the bookmaker would take 10 percent as his share with the rest going to those who had bought the winning horses. Those pools were often run and maintained where they had billiard tables, so over the course of time, rather than being known as billiard halls, these places became known as “pool halls,” since that’s where they staged racing auction pools. Anyway, as time went on, gambling became a critical part of this agribusiness we know as Thoroughbred racing.
  At some point, state governments came along and said, “Well, you know, our job is to protect the people. Since you guys are engaging in this nefarious activity called gambling, we’re going to start regulating you. And we’re also going to start taxing you.” That was a critical juncture in the history of racing. Once state governments got involved and racing became regulated, certain things began to happen that have had a marked influence on what is occurring in today’s Thoroughbred industry. To justify the tax, governments began to franchise licenses. They granted tracks a monopoly for a period of time in a certain jurisdiction. Tracks became the only legal show in town for gaming. This monopolistic system – racing controlled by government and licensed by government – persisted until about the 1970s. The result was a “franchise mentality,” a direct result of what that kind of system always creates in the business people who operate within it. And a couple of rather obvious things come to mind.
   First of all, what does knowing that you have an exclusive franchise do to the concept of marketing? Do you have to market if you’re the only show in town? What if there are no competitors? I’ll tell you, and you have to assume that I’m telling you the truth, but there is a demand for wagering. You can argue morals and everything else but the fact is that there is a pent-up demand for gaming. Given that there is demand and that each track had a monopoly franchise, it wasn’t too difficult to operate a racetrack. All you really had to do was put up an “open-for-business” sign. That was marketing, circa 1960.
  Now, a second attribute or fallout, if you will, of this monopolistic system was the fact that, while there was no marketing, there was also no concern about the customer. Racing told its customers – patrons coming through the door every day – exactly what it thought was good for them. To the extent that they didn’t like it, tracks didn’t care because they were the only gambling show in town.
  Eventually, things started to happen. The absence of marketing and the absence of a focus on customers – things that are basic to today’s business culture; skills that have to be implanted in every organization – were totally absent from our sport. Racing flourished only because the demand was there and because it was the only show in town. But the underlying problems became apparent in the 1960s. Even though the state governments were the regulators, they decided to solve their financial problems with state-operated lotteries. Terrific opportunity! Not only did they see an opportunity for a lottery tax, but they also said, “We have been regulating pari-mutuel racing operations for years. Wouldn’t it be a great idea – terrific even – if we owned and ran these lotteries ourselves?” And so we’ve seen – starting in the1960s and continuing full bore through the 1980s – a proliferation of state-operated lotteries.
  By their very nature, lotteries were competitors to other forms of gaming, and they were especially hard on the racing monopolies that had been created earlier. But here’s the point! Not only were these states now racing’s biggest competitor, they also were still in the position of regulating racing. They competed with racing and they got to regulate their competition. They also created an economic structure that was a lot more profitable than that of racing. In pari-mutuel racing, about 80 percent of every dollar wagered is returned to the bettors, and most tracks operate on a margin of five to 10 percent, depending on location and the nature of their operations. Lotteries, on the other hand, take 50 percent of every dollar wagered. This is money that is removed from circulation. Their argument was, “Listen, racing runs 10 races a day and things go quickly. The lottery only operates – oh, say – once a month.”
  And so, since the velocity of money was much slower – at least as articulated originally – than what was involved with racing, the lotteries argued that they must take a greater amount of take-out – meaning the cost of the bet – the money not returned to the bettor. They collected 35 percent in general tax revenues and devoted the remaining 15 percent for operations. Now get this, the volume of wagering – even in the early days, when it truly was a once-a-month thing – was three to five times greater than the pari-mutuel racing industry. And the amount of money the state used for administrative overhead provided marketing dollars that dwarfed anything ever done in racing. Racing suddenly had a huge competitor – the state – with gobs of money in its pockets, throwing it at advertising and the media.
  Needless to say, racing began to suffer. I think the losses were about 15 percent of gross handle in those early years. Some now argue that handle has begun to creep back up but in my view, the introduction of lotteries simply stopped or flattened the growth trend of racing. Things were moving along nicely. Even at Churchill Downs, we had had about 14 meets in a row where we were up and all of a sudden, as soon as the Kentucky lottery came along, we just flattened out that growth trend.
  Remember now, while the lotteries were becoming a real competitive force, racing had almost no skills in marketing. We hadn’t been looking at the customer the way we should have, but for the first time we were in a competitive market. What did racing do? Well, first we all went back to our governments and said, “In order for us to become more competitive, we need our pari-mutuel taxes reduced.” And, by and large, the request made sense to legislators and was heeded by most jurisdictions. There was a dramatic reduction in the pari-mutuel tax, somewhere from about six percent all the way down to about two percent of gross handle. And, no doubt, that change has significantly helped the industry.
  But another thing also began to happen. When was the last time you heard any professor suggest that a firm whose business has gone south, whose losing market share, or whose sales are dwindling, ought to raise the price of its product? Does that make sense? “We can’t sell these widgets for a dollar so what we ought to do is charge $5.” You have a bad product and you make it worse by raising its price. Now, what is the price of the racing product? The takeout. As I stated, the average cost has been about 20 percent, meaning that about 80 percent is returned to bettors. In the harness industry, when there was nothing left for the state to give them, they decided in some cases to increase the price of their bets. They figured the bettors wouldn’t know the difference. They began ratcheting it up until you saw some harness tracks with a takeout as high as 35 or 40 percent…nearly approaching the lotteries.
  All these things convinced people in racing that we had better start marketing. And marketing must mean more than just putting out that open-for-business sign. Unfortunately, none of us who were involved in the game had had any experience at marketing racing. We didn’t know anything about it. So what we did was redefine marketing as promotion. What does that get you? Well, if you happened to be a fan, it could get you an umbrella. “Come to see the track and we’ll give a free umbrella.” Terrific notion! And I’m not trying to suggest that those types of promotions never work and shouldn’t be tried, but that’s all there was to our marketing. What was the market response? Well, let’s say we give away two-dollar umbrellas and it costs only one dollar to get in. You go in, get a two-dollar umbrella, and say, “I believe I’ll go outside again, pay another dollar, and get another two-dollar umbrella.” If you do it again, you will then have three Churchill Downs’ umbrellas for three dollars. On Sunday, you can go to a flea market and sell those neat umbrellas for at least four bucks each. With those kinds of promotions, we created what we call “spinners.” We saw attendance climbing alright but our pari-mutuel handle remained flat.
  Today, at Churchill Downs we have a terrific marketing team led by people who have an understanding of what marketing is all about. I can assure you that, to some degree or another, most other racetracks have also started doing marketing in a different perspective. Marketing is an eclectic, multi-disciplinary process, where you take everything at your disposal and focus on the customer. To know the needs and demands of your customers, the things that move them, you have to do the research. Gradually, we started doing a lot of basic things. Think about where you spend your money. At a place that’s dirty? Where you have to crawl through layers and layers of old Racing Forms? Where the food is horrible? Do you spend money at a place you never see your peers? Of course not! And so we started putting a great deal of money into facilities. All of us have been through McDonald’s and their various fast-food competitors. What’s the one common thing about them? They’re clean and their service is good, even with all the young people there. By the way, have you noticed all the gray-hairs working in McDonald’s these days? When I retire, I think I am going be a McDonald’s waiter. That’s my goal. I think it’s a neat thing.
  Anyway, what racing needed was a nice, clean and inviting product that we could sell. And we would aim it at young people and at families. We would try to change the experience people have at the track, even the environment itself. And it worked – very, very significantly at Churchill Downs, and to one degree or another, throughout the racing industry. It sort of became the watchword.
  But then, just as we were getting a little smarter about marketing, another significant change came about in the marketplace, the introduction of casinos. Again, understand the dynamics, you had this huge pent-up demand for wagering and you had state governments needing revenue. All of a sudden, you see the birth of casinos – riverboat casinos and also land-based casinos. The movement was launched with the casinos on the reservations of Native American, which are like sovereign nations. As soon as the Indians started doing it, the state governments said, “Oh, here’s another chance to collect revenue. Why don’t we grant franchises to casinos?” And that’s why we see proliferation of casinos.
  Needless to say, the impact on horse racing has been significant. And that brings us up to today. The fact of the matter is that racing is compelled to be operated as a business. You can’t run this sport like a club, being driven solely by one segment of the industry – the horsemen. Horsemen usually want more purses, more days and more races, but you have to think about racing within the context of the highly competitive business environment that exists today. You have to think about it in business terms. I believe that, as an industry, we are becoming better. We are becoming increasingly business-oriented, and as we move into the future, that is one of the trends that I think you will see continuing.
   For you young people who will soon be making career decisions, I’m convinced that there is a great need for young talent with lots of energy and good crisp business skills, who are able to be solution finders, not problem finders. If I blow the whistle and ask for problem finders in our company, the line would run all the way from the track to this campus. But if I blow the whistle and ask for solution finders, the line is a whole lot shorter. The characteristics of those solution finders are that they are young, energetic, unafraid, and have good business skills. They are the types of individuals who are going to make or break this industry as we move forward. There are many great opportunities in racing.
  I might add parenthetically, if you work hard and are involved in this curriculum here, you’re going to learn things that you can apply not only in racing, but also in other segments of sports. An absence of business skills in the other professional sports is as apparent to me as it is in racing. As the appetite for sports and the competition have grown, both within our sport and in most others, the need for new energy and blood, with good crisp business skills, has become acute. You are needed.
  Now, I could bore you all day with numbers. But let me give you a couple that are critical in understanding what we at Churchill Downs are doing in terms of planning for the future, and what you are going to have to face as a solution finder as you enter our business.
  The number of Thoroughbred foals is down, from a high in 1985 at 51,000 to about 36,000 this year. That represents about a 32 percent decrease over those years in the number of registered foals – horses that would be eligible to race on a racetrack. At the same time, the number of pari-mutuel races in 1998 – and that’s the last data we have – is also down about 20 percent. So we’re facing a 32 percent decrease in horses produced and a 20 percent decrease in the number of races. What’s the logical consequence of that?
  Yes, not enough horses to fill races, meaning shorter fields. What if I also told you that training regimens of trainers today are significantly different than they were 20 years ago? What if I told you that today’s runners make an average of 7.4 starts a year, compared to the 1960s when they made an average of 11.4 starts? What does that suggest? Not only is the foal population decreasing faster than the number of races, but those horses in that pipeline that are eligible to race are running fewer times. Shorter fields are the consequence, no doubt about it. So, how should we respond?
  Okay. First, we could further decrease the number of races. Good idea! And what else? We could always tell Mrs. Jones to produce more horses – get those foal numbers back up. But our telling her isn’t enough. What will increase the number of foals? Purses! Right. And total purses are growing significantly yearly – up almost 8 percent up this past year. That’s an important stimulus. Right now it seems as though we’re a little out of balance. We have fewer horses being foaled, and the number of starts being made by each of the available horses coming down. In the mid-1980s, the problem was horses being worth more as breeding stock. In those days, it seemed as if any well-bred 3-year-old that achieved black type or even finished in the money went right off to the breeding shed. That was a different problem.
  Today, the fundamental problem is too few foals exacerbated by these new training regimens that are a function of a lot of things. One factor may be the technology that is available to the veterinarians today. A horse can’t talk, but through technology he can say, “I’m not really interested in running today. I prefer to stay in my stall, just have a little hay and chill out. Maybe next week.” We’re getting a little of that, since technology can now tell us more about when a horse may not want to run. And the other thing is that the high level of purses has begun to alter training patterns. Right now, we are giving away about $13,000 a race. Can you imagine the purse in every race in the United States averaging $13,000? With that level of purse available, trainers are treating their horses differently than in the past. In the days of low purses, a horse really had to grind out the revenue. Today, a trainer can afford to manage his horses in a different way. But the bottom line is that the number of starters per race is going down.
  Now, let me give you one other number. That is 78 percent of the total pari-mutuel revenue base today is derived from simulcasting. By that, I mean videoing a live racing operation at one racetrack, putting it up on a satellite, and then bringing that signal down to some remote site – whether racetrack, casino, OTB, or whatever – anywhere in the United States. Seventy-eight percent of all the pari-mutuel revenue from horse racing today is coming from that process. A phenomenal number!
  Now, in a competitive market, every track that is running live races is going to put its signal up there and make it available. But what drives the remote wagering? Will it be that five-horse field from beautiful old Churchill Downs that is going to get the play, or will it be that ten-horse field from some little-known track? Well, clearly, customers are going to bet the full field. This is because the more wagering permutations, the better. Racing fans want full fields and competitive racing. Now, I think they want quality too. I’m not suggesting that every eight-horse field of $5,000 claimers is better than every seven-horse stakes race. But the fact is, bettors prefer full fields and our statistical data prove that.
  So, we have this problem. I’m good at identifying problems; in fact, I’m the only one at Churchill Downs who is allowed to chart the problems, and I do a good job at it. It’s the easiest job in the whole world. The solution thing though is more difficult, but our team at Churchill has come up with the solution. And it’s in the context of the history that I told you about before – a lack of marketing, a lack of ability to focus on the needs of customers, the issue of competing, the fact that we’re dealing with short fields, and the fact that 78 percent of our revenue stream is tied up in interstate simulcasting. Now again, I identified the problem and turned it over to all the bright lights at Churchill Downs and it became clear.
  What we have to do, and what some others in the industry are also trying to do through consolidation, is to gain a greater market share of the interstate simulcast market. Today, that market is estimated, more or less, to be about $15 billion a year. Let’s say $13 billion a year. Churchill Downs needs to increase its share of that $13-billion market. If we do it right, not only will we be able to position our company in such a way that we will have a greater market share in the domestic U.S. market of $13 billion, but we will also be in a terrific position – once we move into this new technological environment – to take advantage of the much larger, $100 billion international simulcasting market. That is the amount of money wagered on horse racing internationally. The United States, without question, has the best racing in the world. Yet, we wager only about 15 percent of the total wagered on racing everywhere.
  What our team has come up with is a concept aimed at capturing a greater market share of simulcasting. Now, how do you do that? Has everyone been to an OTB? Know what’s it like? Don’t be embarrassed – we’re among friends now. An OTB used to feature television sets with signals from, maybe, three or four tracks. In some instances there were seats arranged like this auditorium and you sat there and waited for things to happen. Today, you go into an OTB and there may be as many as 10 signals coming in. It’s like going to a supermarket and trying to buy a bag of Fritos. There are so many different brands and flavors of chips that it’s mind-boggling – all I want is Fritos but I got all these choices.
  We are going to have to position ourselves in our market just like the Frito-Lay guy is positioning himself in a supermarket. Shelf space becomes important. By the way, we just hired a fellow who was formerly in charge of marketing Oreo cookies. I don’t mind telling you that our board of directors was pretty skeptical about hiring a new senior vice president for marketing that far removed from racing, but if you think about it, our challenge is nothing different than marketing Oreos. Shelf space – we want to be right in the center of that OTB. When you’re in an OTB and there are 10 signals and only one has audio – the rest of them are shut down and you can’t hear – we want to be the one with the audio. And, by the way, perhaps if we can give OTB’s a product that they can put on their shelves all year round, instead of just that 70 days at Churchill Downs, that will also help us market our simulcasting product.
  And so for the past several years, our company has become the lead consolidator in the industry. What we’re doing is buying content. A few years ago, we looked at what was going on in our industry and we could see that simulcasting provided the only real growth component for our industry. Yet, we saw that we only had 70 days of product to sell. We decided that rather than trying to build distribution platforms, we were going to become a content provider. That’s why we have bought all the tracks that we’ve bought, and why we’re involved in six or eight tracks across the country in different time zones. We expect to get more, and we’re going to unveil in 2000 the Churchill Downs simulcast network. We aim to provide an OTB operator, casino operator, or other race track, a product that spans the calendar, a product that has good marketing behind it, and a product that the ultimate customer as its main focus, not just the OTB operator who buys the product. We want to get to a position where if you go to an OTB and you don’t see our signals, you’ll go to the operator and say “We want to see the Churchill Downs simulcast network.”
  That’s the direction we are going very aggressively, and we’re going to continue to be aggressive. Right now, we are involved in a huge digestion process. It is easy to acquire other tracks but digesting all these operations is really tough. Trying to create an entirely new simulcasting product, and, at the same time, to integrate the Churchill Downs culture in all of the operating units, is challenging indeed.
  There are a couple of other things going on in the industry that are significant in terms of providing a good medium for the growth of racing. The first is the National Thoroughbred Racing Association. The NTRA is the first – and only – successful coalition of all the various constituent groups in the industry, and I believe it was something that had to happen. We made some frail attempts in the 1980s to get this unifying body together. The Thoroughbred Racing Associations, the trade group for tracks, hired a commissioner but he only lasted about a year because he couldn’t put it together. But things were different. At that time, people continued to ask, “Why don’t we have an NBA, or NFL, or Major League Baseball? They act together and they do national marketing and sell trinkets and logos.” I’ve always liked that idea. In fact, I can see a day when we’re international and the Dalai Lama will want a Churchill Downs sweatshirt.
  But anyway, the NTRA is going to provide us a platform for national marketing of racing. Perhaps some of you saw Lori Petti’s “go-baby-go” commercials? How many liked them? They had a real sense of energy, and she is young and vibrant. I’m on the NTRA board and I remember when that agency came sweeping in with all this stuff for the first time in front of all these gray-haired old fuddy-duddies. No one was excited but I finally said, “You know, I kind of like it because I don’t like it.” And the truth is, we wanted to target young people. We didn’t spend a WHOLE lot of money getting those things out, but “Pay the Lady” and “Go Baby Go” caught on just that quick. It was exciting.
  The NTRA has got people around the table and for the first time they’re talking about where this industry is going, and they are working in a cooperative way. This is because, for the first time, horse racing has something that all the other sports organizations have always relied on – interdependence. It’s a result of simulcasting. Think about it. Until we had simulcasting, there was no need for us to care about a track in Kansas, or a track in New York. Why should we? In fact, let’s crush them and get them off the map. But now we’re interdependent. That track in Kansas, or that track in New York, is a distribution outlet for our signal. So we have to be careful to make sure that all the boats ride.
  Having said that, there is opportunity. There are three major consolidators in the industry today. There is our organization, Churchill Downs; there is Frank Stronach, with an firm called Magna, which has bought Gulfstream Park and Santa Anita, and just announced a couple other acquisitions in Oklahoma and Ohio; and there is Penn National. All three firms are on somewhat different courses in terms of their strategies, but each one has a plan that requires the acquisition of racing facilities. The common goal is to leverage these facilities in such a way as to compete in this new environment, and to do things proactively in terms of changing the industry in a positive direction.
  That’s where the racing industry is today, and I hope that many of you here will be able to be a part of it, and to help it, and us, to reach full potential.
   Thank you very much.

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Equine Industry Program
College of Business and Public Administration
University of Louisville
Louisville, KY 40292
Phone: 502.852.4859
Fax: 502.852.7672