Archives for August 2018

THE JOCKEY CLUB/MCKINSEY & COMPANY 2018 RECOMMENDATIONS

The 2018 Jockey Club Roundtable featured a cogent “situation analysis” of the American horse racing industry—based on findings by the consulting firm McKinsey & Company—followed by an overview of recommendations from the firm pertaining to strategic and tactical initiatives.  McKinsey & Company has been retained by The Jockey Club over the years and periodically makes a presentation at the annual August-held Roundtable.

Having a background in consulting myself and as an emeritus university business-school professor who had a few former McKinsey & Company associates as graduate students in Executive MBA and doctoral classes, I am familiar with the kind and quality of the work the firm does.  The Jockey Club Roundtable had the feel of an MBA case-analysis presentation, commencing with a situation analysis, followed by alternatives, and concluding with recommendations.  (I’d give it an “A.”)

Without a doubt, McKinsey deserves the stellar reputation it has for management consulting.  It combines objective in-depth data analysis with realistic recommendations based firmly on what the data indicate should be done.  Individuals in the horse racing enterprise are fortunate to have some of the best minds from McKinsey working to improve the competitive position of the sport/industry and are doubly fortunate to have The Jockey Club fund the effort.

The horse racing industry is in a stronger competitive position because of McKinsey’s involvement.  While The Jockey Club cannot require racetracks to implement McKinsey suggestions, it can provide such valuable strategic insights that tracks will (and have) want to do so.

At the August 12, 2018 Jockey Club Roundtable, McKinsey offered guidance pertaining to several issues.  Here are verbatim excerpts of four recommendations:

“First of all, theme one, innovations in venues.  We think racing should invest more in improving the racetrack experience to meet fan expectations that are set by venues in other sports.

Theme two, digital content, data, and marketing.  We think racing has to invest to create more content for digital distribution, especially social networks.  Racing can use the interaction around that content to generate data on fans and then create highly targeted, personalized digital marketing to get casual fans or new fans out to the track, which is still a critical step in fan development.

At the same time, we think racing still has upside on television, building on the successes of the last seven years.  And as sports networks start to program studio shows towards new sports bettors, it’s a golden opportunity for racing because those shows need racing video every single day to round out the coverage.

Theme three was advanced analytics.  We talked about scheduling to avoid running major races within five minutes of each other, takeout optimization, new trainer metrics, and simple handicapping tools for novice bettors.

Finally the last theme, legalization of sports betting.  We think racing needs to work on cross-selling racing on digital sports books, innovating bet types and experimenting with fixed odds for Win/Place/Show bets.”

Beginning sometime in September, I’ll occasionally discuss these recommendations.

Copyright © 2018 Horse Racing Business

Click to access the 2018 Jockey Club Roundtable transcript.

WHY THE “REAL” NUMBER OF THOROUGHBREDS IN THE USA MATTERS

The American Horse Council Economic Impact Study was conducted in 2017 and published in early 2018.  Statistics from the survey research were cited at the August 12, 2018 Jockey Club Roundtable Conference.  Laura Barillaro, Jockey Club Executive Vice President, said:

“On February 28th, the American Horse Council announced the results of its 2017 Economic Impact Study, an update from the 2005 study….according to the study, the horse industry in the United States generates approximately $122 billion in total economic impact, compared with $102 billion from the 2005 study.  It also provides employment for 1.7 million people.  The current number of horses in the United States is more than 7.2 million, with Thoroughbreds accounting for approximately 1.1 million, or 16% of the total.”

The number of Thoroughbreds in the United States is manifestly vastly overestimated.  The Jockey Club website shows that in the 28-year period 1990 through 2017, the aggregate number of registered Thoroughbreds in the United States was 855,735.  (Not all Thoroughbreds born are registered.)  Life expectancy for a horse is about 25 years.

If every Thoroughbred registered in the United States between 1990 and 2017 were alive in 2017, it would take another 244,265 unregistered Thoroughbreds to total 1.1 million.  This calculation does not take into account that The Jockey Club reports that exports of Thoroughbreds from the United States typically exceed imports by a factor of three to one, so there is a net outflow.  For example, in 2017, 2,324 Thoroughbreds were exported versus 734 that were imported.  Unregistered Thoroughbreds make up some of the differential.  But, even so, it is evident from actuarial mathematics and common sense that all Thoroughbreds registered between 1990 and 2017 are not living.

There are two reasons that the American Horse Council’s inflated figures are important.

First, the 1.1 million estimate is so obviously exaggerated that it calls into question the validity of the putative $122 billion economic impact of the horse industry in the United States.

Second, animal welfare.  The Humane Society of the United States reports that over 100,000 horses are exported from the United States to foreign slaughterhouses annually.  If racehorses comprise 16% of the total U. S. horse population (using American Horse Council statistics) about 16,000 Thoroughbreds are slaughtered every year.  This figure is far too high because there cannot be anywhere close to 1.1 million Thoroughbreds alive in the United States.

Copyright © 2018 Horse Racing Business

SARATOGA MUSINGS

 

Several miscellaneous observations about horse racing at the Saratoga Race Course.

License plates from all over the United States and parts of Canada can be seen around Saratoga during the racing season, demonstrating how much horse racing fans are attracted to an event that has been held annually since 1863.  One example is a gentlemen I met in the Saratoga clubhouse, who looked to be in his early 70s.  He said he and his wife drove about 22 hours to Saratoga with several other relatives, arriving for opening day.  They rented a 3-bedroom carriage house for the meet at a cost of $15,000.  Most days the men in the group attend the races and their wives join them some days.  Occasionally, they take short trips to places to sightsee and dine.  This year, they spent three days in New York City to visit sites and attend a stage play.  Every year, I meet racing fans like these, from all walks of life, who share an affinity for the storied racetrack founded by John Morrissey only weeks after the epic battle of Gettysburg in the American Civil War.

While it is difficult to quibble with how NYRA conducts the Saratoga meet, one need for improvement was evident from the race card this past Sunday, August 12.  NYRA prudently moved the turf races, which constituted five of the ten races on the card, to the dirt over safety concerns owing to rain.  As a result, so many horses were scratched that the fields in the five scheduled turf races were very short of entries and bettors were left with not much to wager on.  Knowing that it rains in upstate New York in July and August, why does NYRA not take precautions by carding, say, no more than two turf races per day?

Late on Sunday afternoon (August 12), the Jim Dandy Bar had all of the television sets tuned to the Saratoga races except for one that was showing the final round of the PGA Championship to a small contingent of obvious golf fans.  Tiger Woods, trying to win his first major championship in a decade, was in contention and the folks in the Jim Dandy group were watching intently and cheering him on.  They weren’t alone as the television ratings soared by 69% over last year.  This is the same phenomenon that racing experiences when even casual fans tune in to watch a Zenyatta or a Justify.  The problem for racing is that most of its television stars retire as 3-year-olds.

Young trainers like Chad Brown and Joe Sharp deserve lots of credit for their accomplishments.  Yet so does D. Wayne Lukas, who is still winning some races at Saratoga.  At nearly age 83, the “Coach” is understandably not as formidable as he was in his prime.  However, it would not be surprising to see him win another big race like a Breeders’ Cup or Triple Crown.  Hope he does strike a blow for all of us old-timers.

Copyright © 2018 Horse Racing Business