Pegasus World Cup: Big Idea in a Shrinking Industry

Thirty years ago, John Gaines had a crazy idea, he talked a couple of fellow racing VIPs into giving it a try, and now we’ve got the Breeders’ Cup.

The horse racing industry was very different in the 1980s. But that crazy idea and “let’s put on a show” attitude is alive and well in 2016. Gaines’ heir in the innovation department is Frank Stronach, whose big ideas have brought us the Sunshine Millions, the Rainbow 6, Miss Racing Queen, Gulfstream Park West, and now what could be the biggest, craziest idea of them all – the Pegasus World Cup.

As pitched, the Pegasus World Cup would bring the top 12 older horses together in January at Gulfstream Park for a shot at a $12 Million purse – the largest in the world, the largest money pot in the history of horse racing. This race would be financed by competitive owners who put up $1M each to be a part of the action. The buy-in would include a portion of whatever TV rights and sponsorship dollars the track can pull together, plus the traditional purse distribution (that’d be $7 M to the winner).

Because this is horse racing, the more outrageous the idea, the louder the criticism – and a $12M race is fertile ground. What owner would put up $1M? Nobody will want to do that… The Dubai World Cup is $10M and they pay all expenses, why would I want to stay in FL and pay my own money? What horses are going to be ready for that kind of race? How are they going to get TV rights when the sport has to pay to have non-Triple Crown races broadcast? Is anyone going to bet this thing?

The bigger news about the Pegasus Cup came only a week after it was announced: all 12 entry spots had already SOLD OUT!

So this is happening.

It’s already a success. If they can get 12 horses in the gate, that’s icing.

It is an interesting experiment that could signal a change in how the biggest races are managed and promoted.

The biggest races will be run like major league sports. Groups of owners buy-in and share revenues from the race. The way the Pegasus Cup entries are done is less like an “entry” than a “share” – owners do not have to declare a specific horse for the race at this point, and they can sell or lease their entry to anyone. Coolmore was one of the buyers. They have a stable of horses in the US and Europe to choose from, but if none fit when entry day actually comes around, they can always sell to someone with a hot horse who didn’t have the funds or foresight today. This model is more about sponsorship deals than handle – it involves high-dollar promotions, licensing, and appearance fees. With betting handle on horse races at historic lows, this will be the way the top level of racing is financed. It won’t matter how much is bet – all shareholders have already made money.

Consolidation of the industry helps force this along. The major tracks will get by with 1-2 big days that cover the rest of their (shorter) meets. I could see the Kentucky Derby selling the 20 entries to interested parties for $1M each – and then the Derby would be the richest race in the world (as many in the US already assume). Dodge, FedEx, Humana – corporate sponsors would buy a Derby entry and sell the spot to horses on the trail – or there would be a frenzy to snare the top points earners as the Derby trail pushed forward each year. Can you see it – the “Gillette Starter” or the “Amazon Starter”? It seems weird to us today, but I can totally see this – soon.

What about the bread and butter – maiden, allowance, claiming races? If something is not done to boost handle, and therefore purses, the minor leagues of horse racing will be running for ribbons. There are a myriad of ideas about how to do that (lower takeout, expanded wagering options like exchange, fixed odds, etc, etc,etc) – but it will take effort from the horsemen, tracks, and state racing commissions to get that done. It will be hard, tedious work that no one likes to talk about.

But we must. Or the Pegasus will be the last flight of the sport instead of it rising to new heights.



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Filed under Controversy, Industry News, Pegasus World Cup