Jockey Club Outlines Growth Strategies at Round Table

Jockey Club chairman Stuart Janney III showed up at the The Jockey Club's Round Table Conference on Matters Pertaining to Racing with rolled-up sleeves.

While Janney most assuredly looked as sharp as ever in a gray suit, dark blue tie, and lighter blue shirt at the Round Table Aug. 12 at the Gideon Putnam Hotel in Saratoga Springs, N.Y.—where about 300 Jockey Club members and industry leaders gathered—rolled-up sleeves captured the spirit of the morning. 

In a sport that in recent years has ended handle declines but failed to see growth, Janney outlined an initiative that The Jockey Club plans to support to put horse racing on the upswing by bringing in new fans, improving racing's wagering product, and increasing ownership participation. 

In perhaps the most attention-grabbing initiative, Janney said for tracks where it may be needed, The Jockey Club would be willing to come in as a racetrack owner, partner, or lessor. That initiative followed a presentation by Simon Bazalgette, group chief executive of The Jockey Club (U.K.), who noted the marketing advantages it has enjoyed in purchasing tracks.

"In the 1960s, racing was in a bit of trouble. A number of racecourses closed and were due to close. There was quite a lot of concern," Bazalgette said. "So some of the Jockey Club (U.K.) members got together and started rescuing racecourses, starting with Cheltenham. Over the years we created a racecourse holdings trust that has now become Jockey Club Racecourses, which is the biggest racecourse group in the U.K."

Bazalgette said those tracks today enjoy turnover of more than $250 million, a figure that has doubled in the past 10 years, allowing Jockey Club Racecourses to put more back into improving its facilities and race purses.

Bazalgette noted that owning the tracks has allowed The Jockey Club (U.K.) to control racing's branding. He said the aim is for consistency in branding and marketing.

"We don't make money for the sake of making money. We don't make money to give back to shareholders," Bazalgette said. "It's all about reinvesting in the sport, for the good of the sport. Our mission and vision is all about the long-term sustainability and success of horse racing."

Other initiatives outlined by Janney included plans to:

• Develop a capital improvement grant fund for high definition conversion at tracks still sending out standard-definition signals;
• Expand America's Best Racing into a full-fledged digital media services company;
• Further invest in live racing on national television, especially of top races.
• Fund a permanent office of race-day scheduling to ensure the sport is making the most of current races.
• Advocate for tracks to experiment with decreased win, place, and show takeout rates;
• Partner to fund a U.S. pilot program of merged-pool wagering, which allows for improved liquidity;
• Promote cross-marketing of sports betting and betting on horse racing;
• Lobby for a fixed-odds betting pilot.

"For a long time, we have consistently and comprehensively engaged on issues whenever the industry was at need," Janney said. "Whether the startup of Equibase or the NTRA corrective actions in the wake of a totalizator breach, providing funds for critical research and out-of-competition testing, and new fan and owner development programs, to name a few, The Jockey Club has—and will—be there for the industry."

The initiatives follow recommendations from Dan Singer and Mike Salvaris of McKinsey and Co., who provided follow-up analysis after its sweeping 2011 study "Driving Sustainable Growth for Thoroughbred Racing and Breeding." 

On Sunday, Singer and Salvaris outlined areas for the industry to focus on. In order to encourage growth, those areas including improved, fan-friendly tracks; capitalization on the legalization of sports wagering; improved digital initiatives to improve fan engagement and attract new fans; continued growth of racing on television; and increased use of advanced analytics to improve race scheduling, takeout, wagering information, and information for owners.

The Jockey Club's willingness to buy or partner with racetracks follows McKinsey's presentation that outlined how 11 tracks have closed since 2011. Beyond that, in terms of fan amenities, track venues are not competing with other sporting and gambling venues. Singer noted, while 26 Major League Baseball venues have ratings of 4.5 or higher on TripAdvisor, only five tracks located in the metro area of the 35 largest cities had ratings of 4.5 or higher. 

McKinsey outlined racing venues falling behind in terms of amenities—food and beverage, cleanliness, unique atmosphere, and non-racing events—compared with other sporting and gambling venues that are raising the bar in these areas, and Singer said racing is making a bad first impression.

All of this is important, as McKinsey showed that, of new racing fans surveyed, 64% said they were introduced to the sport by attending races with family or friends. Many of the tracks in metropolitan areas rated by TripAdvisor scored 3.5 or lower.

"3.5 is not a good rating," Singer said, noting if people see that rating for a venue, they're highly unlikely to visit.

For racing especially, amenities include high-definition signals as the vast majority of the betting public is located off track. McKinsey reports that, in 2018, only 24 of 74 tracks provide an HD signal to TVG.

The Jockey Club plans follow McKinsey's listing of growth initiatives, which include new opportunities thanks to the expansion of sports wagering. Singer and Salvaris said they don't expect much cannibalization of race betting as states add sports wagering, because many horseplayers already are wagering on sports. They noted, even though sports betting offers lower takeout than horse racing, that setup also is common in other countries that allow sports betting and have vibrant wagering on horses.

They recommended racing take advantage of opportunities to cross-promote race wagering in the emerging sports-wagering market. The changing landscape also should provide opportunities for racing to offer fixed-odds wagering, which regulators likely are in the mood to allow. At this year's Association of Racing Commissioners International convention, ARCI president Ed Martin called on regulators to be more open to innovation as racing tries to compete.

Fixed-odds wagering could help with customer concerns about late odds changes that have become common in pari-mutuel wagering. As McKinsey reports, computer-assisted wagering syndicates have doubled their handle in the past seven years to about 15% or 20% of total handle. Janney noted, as bettors become used to the fixed odds in sports wagering, they will expect the same in racing.

The experts from McKinsey also outlined how advanced analytics were used to address industry questions on takeout, race scheduling, wagering information, and owner information on trainers.

In terms of takeout, the McKinsey study found most tracks have overpriced their win, place, and show wagers. The study found the optimal takeout for win, place, and show wagering is 15.8%, but the average WPS takeout for the 63 tracks examined was 17.3%. 

In terms of top races overlapping and competing for customer attention on given race days, McKinsey noted improvement but added more work needs to be done. Looking at races in April 2017 and 2018, McKinsey said such conflicts were reduced from 53% to 50%, but noted the 50% rate is still too high and costing the sport revenue.

Janney also continued to push for federal legislation that would provide the United States Anti-Doping Agency oversight of medication and drug testing in horse racing. Janney said lack of uniformity in these areas has hurt horse racing's ability to attract new fans and retain current fans. According to a McKinsey survey of avid fans, 42% believe medication and drug issues are hindering the sport.

McKinsey found that, since 2011, perception of horse racing has improved, but still only 22% of people have a positive impression of the sport. That figure is up from 19% in 2011.