Today, after watching the Fountain of Youth Stakes yesterday and scanning online national and local news, I verified my perception regarding the dysfunctional nature of the organizations responsible for horse racing.
Only 10 months after American Pharoah’s Triple Crown, which all agreed was the biggest thing to happen to racing over the last four decades, three undefeated 3 year olds raced against each other in yesterday’s Fountain of Youth Stakes. After Mohaymen won, looking every bit the part of another top Triple Crown contender with 4 straight solid wins, I thought it was news. How wrong I was.
Not only was it borderline impossible to find HD coverage of the event, though I did finally find it on our obscure channel 635 because I have Direct TV and multiple subscriptions, but today only the massively inbred racing related news agencies even mentioned it.
The people who run racing, and are supposedly responsible for improving racing in this country, will say there was no coverage because “that’s just the way it is.” I say it’s because less than capable politicians do not understand how to “generate” coverage, develop marketing campaigns, create interest through advertising or understand that their target market isn’t those who already like racing, but indeed those who don’t!
With the Derby just over 2 months away, the combined power of these racing organizations have run innovation contests with no concept of “profitable revenue generation or product cannibalization”, started entirely useless “inbred” town hall meetings where consumers are not even represented, built stupid and redundant online racing games, had hundreds of meetings focused on administrative minutia, coordinated boondoggle conferences, decided that microchips are more important than stimulating racing growth after decades of decline, and publicly proclaimed that their efforts have improved things because their techies count social media views and followers. (I fired techies for less than that because they should be counting “revenue based” consumer engagement and product adoption.)
To demonstrate the delusional nature of the folks in charge, let’s analyze an exact quote from the key media progress report during the last Jockey Club Round Table meeting.
“As you may recall, Dan Singer and Michael Lamb (McKinsey) presented a bleak future for Thoroughbred racing unless we made some changes. Based on their research, the key indicators for the sport were set to continue their decline with handle projected to drop by as much as 25% by 2020. The decline in handle has slowed considerably since then. While McKinsey forecasted 2014 handle to be $10.1 billion last year, the sport was able to generate $10.6 billion.”
This statement would be hilarious if it wasn’t so painful to those of us who understand business double talk. “The decline has slowed”, means declines continue but they aren’t quite as bad as predicted. Why you might ask? What slowed the decline was a special cause occurrence of having the first Triple Crown winner in 38 years, and guess what? That “amazing” occurrence improved handle “marginally” by less than 5%!
Worse than this first statement, the follow up statement was amazing.
“Yesterday we announced the projected foal crop for 2016 to be 22,500. In comparison, McKinsey projected the foal crop to be 25,100 for 2016. Any reduction in foal crop adversely affects the number of starters. Data from Equibase indicates there are 20% fewer starters in 2014 than in 2010, and that trend will continue as larger, older foal crops are replaced by the smaller crops. In turn, we can expect the lower number of starters to reduce handle.
So Mckinsey was “optimistic” and underestimated the decline in the foal crop by a double digit margin percentage of over 10%? So let’s get this right. These folks were patting themselves on the back for “simply existing” at a time when a Triple Crown winner happened to race ,while the predicted massive decline in foals is considerably “worse than expected”! They even acknowledged that this foal crop issue will reduce handle! Oh My! As always I am amazed as politicians create the illusion of progress instead of making progress, and so many people don’t even recognize the difference.
Was I just being the critical skeptic or was my disgust justified? I decided to find out and stopped by one of our local coffee shops in Hastings Minnesota early this morning. I sat at a table near the entrance and asked everyone I saw if they knew who Mohaymen was. I even wrote his name on a napkin with a marker. So there I was in the middle of Minnesota horse country, a short walk from the local feed store. After saying hello to the first 63 people I saw, and a few that I knew, I realized I could sit there all day knowing that the best new Triple Crown contender revealed himself yesterday, and I was likely the only person in our town who knew it.
And we wonder why a “slowed decline” seems like success in racing.
After getting requests for more information and easier navigation, I've redesigned our website. You will now find information on our stallion Stormy Business, as well as information on racing, handicapping and owning horses. You will also see an article which delineates the benefits of breeding in Minnesota, which are now substantial, on the breeding page. I hope you enjoy the new site and find it useful.
Many thanks to Rick and Joyce Osborne for delivering another nice Stormy Business/Demiparfait colt to us at 5 AM this morning. The first of many youngsters they will be seeing into the world this season.
All stakes winners in this family. (I'm talking about the Osbornes, not the horses silly.)
Yesterday I received a call from a new thoroughbred mare owner in Minnesota. She is trying to decide whether to breed her new mare or just train her as a riding horse. Unfortunately, she couldn’t find any consolidated information related to why she should breed here in Minnesota. After telling her all I knew, I searched online sites and literature. To my surprise, she was right!
Recent changes, and some predicted breeding advancements, should make thoroughbred breeding in 2016 great and I thought others might benefit from an old horseman’s real time consolidated view of Minnesota thoroughbred breeding benefits. Of course, the thrill and excitement of seeing your breeding decisions come to fruition on the racetrack is a primary motivation for many horse people however, the Minnesota economics have also shifted making breeding very rewarding in many other ways.
Breeding economic value is realized when you either sell or race your foals. If you sell, you not only get the sale price but you will also receive “Bonuses” if bred foals earn purses in Minnesota. If you do not sell your foals and keep them for racing, you will earn those same bonuses, plus the race purse earnings. Subsequently, your breeding revenue boils down to three simple things; racing purses, bonuses, and sale prices. Each one of these items has either improved dramatically or should be predicted to improve in my view.
Racing Purses have increased since the advent of a 2012 Mystic Lake marketing agreement. In fact, no other state in the union has seen anything near the 117.9% Minnesota increase in purses since 2011. Minnesota bred maidens will run for a $32,000 purse in 2016, versus the $18,500 they ran for in 2011. Our Minnesota state bred stakes, like the Oaks, Derby, Futurity and Debutante, are now each at $85,000 purse levels! The MTA Stallion Auction Stakes race is now up to $55,000 and an entirely new $40,000 race was added to the book in 2016 for MTA sale graduates to be run on the same day as the Minnesota Derby in July.
Bonuses have also jumped up dramatically, and there are ongoing serious efforts to find other added sources of breeder bonus revenue. In 2015, mare owners received a Minnesota Breeder’s Fund check in December. That check equaled 8.9% of the eligible purses earned by their bred horses. If you keep your foals and don’t sell them, you basically get this 8.9% bonus for eligible purses on top of your standard race purse earnings. If you sell your foal, this is like an annuity for breeders because the checks just keep coming in without doing anything!
The Minnesota Thoroughbred Association has also just announced that the breeder of each MN-bred yearling, consigned to the MTA 2016 Yearling Sale that sells to a new owner during the auction, will receive a Yearling Sale Graduate Breeder's Bonus when the MTA Sales Grad breaks its maiden in a Maiden Special Weight or Allowance race. The bonus will be paid to the breeder within 30 days of the horse breaking its maiden at Canterbury Park. Minnesota “CONCEIVED AND FOALED” MTA Sale Grads will receive a $2,000 bonus. Minnesota-bred MTA Sale Grads will receive a $1,000 bonus.
Sale Prices should also see a rise in 2016. Not only is the sale moving to the very professional and new state of the art Canterbury Park expo center, with all the technology and amenities that thoroughbred buyers expect in a professional sales environment, but marketing leverage associated with Canterbury’s exceptional average race day attendance should benefit selling breeders in an exceptional fashion. With the previously mentioned added races and purses, smart buyers will infer additional economic future value of their foal purchases, which should naturally be reflected in increased prices.
Considering the “factual” changes that have taken place, and the “future” changes knowledgeable horse people project will occur, the Minnesota thoroughbred breeding environment has never been better as all three key elements of value "factually" increase. And then, there's the thrill which for some of us is priceless. (Sounds like a credit card comment, right? Oh well, it's the truth!)
While this may seem confusing and limited to Florida, watch out. If one state can segregate the horse racing product seperately from their other gaming products, others may look to do the same, and then guess what happens? All the loss leading products like racing, that are subsidized by the profitable products like slot machines, will be minimized or disappear "IF" they are run by pure business people concerned with profitability.
This is the way of the world when your business is subsidized and cannot stand on it's own profitably. Other states are watching this closely and politicians who care nothing about racing will see this as an opportunity to reclaim casino profits and tax dollars I'm afraid.
This is all the more reason racing should be spending all of it's time "discovering" how to change it's product to make it profitable without subsidy. This "discovery" process, in any business or industry, is consumers based. In other words our question should be, how do we redesign the entertainment/racing product to make it "profitably" attractive to consumers?
If horse folk would have been doing this for the last couple of decades, instead of begging for subsidies, the current state of affairs would be vastly different so I ask you, what should we horse folk be doing today so we aren't asking similar questions in 5 or 10 years?
Don't dismiss this as an irrelevant Florida event Minnesota.
Today something historic took place in the Minnesota Thoroughbred Breeding community. The Minnesota Thoroughbred Association has become the first organization in the state to officially recognize the importance of “actually” breeding thoroughbred racehorses in Minnesota!
Yes I know this will sound nonsensical to many of the followers of this blog and social media page that do not live in Minnesota but historically, our state breeder's fund has defined any horse “Foaled” in Minnesota as “Bred”. Consequently, mare owners could breed anywhere in the country, come visit Minnesota with their mare for a couple weeks to “foal out”, and then leave the state while maintaining the definition of “Minnesota Bred”. In other words, our “breeder’s fund” has really been a “birthing fund” which allowed mare owners full access to our Minnesota breeder's fund by barely participating in the Minnesota agricultural thoroughbred economy.
While the “Minnesota Bred” definition has not changed, the MTA announced today that the 2016 MTA yearling sale will offer selling consignors a new bonus. The breeder of each MN-bred yearling, consigned to the MTA Yearling Sale that sells to a new owner during the auction, will receive a Yearling Sale Graduate Breeder's Bonus when the MTA Sales Grad breaks its maiden in a Maiden Special Weight or Allowance race. The bonus will be paid to the breeder within 30 days of the horse breaking its maiden at Canterbury Park, and Minnesota “CONCEIVED AND FOALED” MTA Sale Grads will receive a $2,000 bonus. Minnesota-bred MTA Sale Grads will receive a $1,000 bonus. These are meaningful bonus amounts!
Additionally, the MTA Sales Graduate Stakes race will offer eligible 2016 two year olds the opportunity to run in a new, 5 furlong, $40,000 stakes race in July. Yearlings consigned to the 2015 sale are eligible for this race. Consignors who sold a yearling can, in turn, nominate an additional MN-bred to the MTA Sales Graduate Stakes.
The MTA also announced that the venue for the August 22, 2016 yearling auction will be Canterbury Park and their new state of the art Expo Center.
All of these changes come at a good time. Even though racing in Minnesota is going great with Minnesota seeing the highest percentage increase in racing purse levels of any state in the union since 2011, and the 2015 race season was outstanding with Canterbury Park realizing a pari-mutuel handle rise of 11.3% and a record purse distribution, yearling prices, breeding volumes and breeding quality have lagged behind expectations with the state’s standing stallion population dropping to the lowest point in history.
As a long time Minnesota breeder it’s very nice to see all of these changes, and the MTA recognizing the long term importance that a true breeding distinction can have the Minnesota Thoroughbred Breeding economy. It’s a great time to breed in Minnesota so be sure to contact your favorite Minnesota stallion farm today. The breeding season is upon us.
Dave Astar is a race horse owner, stallion owner, breeder, 40 year business executive, and 50 year handicapper.