Category Archives: Industry News

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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Election 2012: Horse Racing Fan’s Guide

Kentucky's signature industry is threatened by apathetic and even hostile politicians.

I rarely step into the political realm on this blog, but with the presidential race already in full-swing, I feel like I must discuss what it means for horse racing – a sport, industry and passion. You may not realize it, but horse racing is inextricably tied to the politics of America.

I don’t have to tell even casual fans that horse racing is a fragmented industry that lacks a central governing body and the uniformity that provides. But why is it (dis)organized in this way?

Because horse racing is a mode for gambling, states decide whether to allow it and how to regulate it. Each state manages its own business its own way –  and that’s where the problems lie.

Racing commissions that create the rules and oversee the participants are created by legislative acts. Racing commission members are either elected or are appointed by governors. Laws that expand gaming, such as to allow slot machines, poker rooms, instant racing, or even exchange wagering, are all enacted by legislatures or voted on by the public.

How many of the people in those state governments are racing fans? How many even realized that horse racing was part of their job duties?

I can imagine the conversation when a horse racing group wants to make a change to a racing law, while at the same time, another group is lobbying for education reform. Which group do you think will get the short end of the stick in this situation?

For example, in Louisiana, a rule change that lowered the testing threshold for Bute, a common anti-inflammatory therapeutic drug, was delayed by the state’s commerce committee. The change was part of new rules developed by the Association of Racing Commissioners International (ARCI), which is the industry group who creates model rules for racing. These, in turn, are adopted by state racing commissions*. The rule change had been fast-tracked so that the state’s graded stakes would not face downgrading by the American Graded Stakes Committee.  The state Horsemen’s Benevolent and Protective Association (HBPA) objected to the fast-tracking and protested the change. The squabble then reached the commerce committee – a group made up of lawyers, real estate developers, and salesmen. How could these folks decide when and how to enforce a rule change that would lower a drug test threshold from 5 mg to 2mg? Would they even know what Bute is? It would sure help if one of those elected officials had some knowledge of horse racing when faced with decisions like this.

So I ask that everyone who is a racing fan, owner, breeder, trainer, bettor or even groom to do your homework. Don’t just vote for a politician who says the “right thing” on TV about abortion or gay marriage. Neither of those issues has any bearing on the sport we love. Make sure that candidate has a record of supporting the issues important to racing in your state.

Still not convinced? In Kentucky, the Horse Capital of the World, anti-racing interests have slowly taken over that state’s legislature. With the downturn in the economy and historic declines in pari-mutuel handle, the signature sport has taken a massive hit. The introduction of casinos in neighboring states has attracted gambling dollars, and horse owners followed to where purses are higher. Allowing casino games at Kentucky race tracks would would boost purses, bolster state breeding programs and even the playing field, securing thousands of jobs. Despite the overwhelming public support for casino gaming in Kentucky, the legislature voted down a measure to allow Kentuckians to vote to allow them. One of the most outspoken opponents of casino gaming in Kentucky is Alice Forgy Kerr, who represents the legislative district encompassing the very heart of horse country – Lexington. How does a person with no regard for her state’s signature product get elected?

Kerr isn’t the only one, and disregard for the racing industry isn’t confined to one party. Please, racing fans, do your homework before you go to the polls this year. Be sure the person you vote for will do what’s right for racing in your state – it is the only way to make meaningful change.

*The Model Rules are used as a template for state racing commissions and may be adopted in full or modified to fit the individual state’s needs. For more info, see ARCI Model Rules.

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