Why a major league of Thoroughbred racing died with the NTA, but is still possible with the NTRA

Over the past three years, whenever I attend a Thoroughbred industry function, someone inevitably asks me, "What happened to the NTA?"

They may be asking the question for any number of reasons, but the majority are looking for an answer about the NTA relative to the NTRA. While the NTRA does sound like-and look like-the NTA, any similarity ends there.

I created the National Thoroughbred Association for one reason: to provide a major league for Thoroughbred racing. Nothing more, nothing less. The National Thoroughbred Racing Association is an industry inclusive trade association. It is not a major league.

Still no major league

Every successful sport has a major league, which presents a different product to the public. People want to see the highest level of a sport and that is what each major league delivers.

Major leagues operate with a separate structure, separate brand name, separate governance, and, most importantly, they present their product separate from the rest of the sport.

In major leagues, the participants make up less than 10% of the sport. That means 90% are left out in a given year. One reason major leagues are accepted by those left out is because they produce extraordinary benefits for the sport as a whole.

That doesn't mean the other 90% wanted the major leagues formed in the first place. The founders of major leagues were often threatened and ostracized, but in the end they prevailed. Until 1997, no attempt by the participants in any sport to form a major league had ever failed.

Three years ago, 104 people put up $50,000 each and signed onto the NTA plan to establish a major league for Thoroughbred racing.

The NTA plan followed the major league model and would change the racing product by presenting the highest quality races on the weekends. The NTA projected that approximately 6,000 of the 60,000 horses in training would participate and fill the major league races. Membership in the NTA would be limited to the owners of those 6,000 horses. The ability of the racehorse, not the racehorse owner, was to determine eligibility to the NTA.

While only 10% of the horses might participate in the NTA in a given year, over the course of racehorse owners' involvement in the sport, perhaps 50% or 60% would at some time have horses that participated in the major league. I would like to revisit the NTA plan and consider how Thoroughbred racing can benefit from a major league, one that can operate within the NTRA.

Let's do that by looking at the four elements in the marketing of any product or service: Product, distribution, price, and marketing communications.

The product

The NTA was modeled after the major league in golf, the PGA (Professional Golfers' Association) Tour. The golf product that is presented by the PGA Tour is a different product than the golf most people see. It is the highest quality in the sport. Like other major league products, the PGA Tour golf product is presented separately, not mixed in with other golf.

Thoroughbred racing can follow the major league model and present the highest quality separate from all other horse racing. This should be done under a brand name the public will know stands for the best in our sport.

Most Americans have jobs. If racing wants to attract young people, doesn't it make sense to provide your best product on the weekends when they are not working? Last year, over 250 stakes races, 99 of them graded, were presented during the work week.

A product's brand has to mean something to the public. The NTRA as a brand now represents the Thoroughbred industry. It even includes other breeds of racehorses, greyhounds, and pari-mutuel sports. This is good for pari-mutuel industry unity, but it presents a confusing brand for the public.

Again using the golf analogy, the NTRA most resembles the USGA (United States Golf Association), which represents everyone in the golf industry, including its major league, the PGA Tour.

Thoroughbred racing, operating a major league, can have a modern sports product and be represented by a trade association like the NTRA.

Distribution and price

Simulcasting is racing's largest method of distribution. It now accounts for more than 80% of all Thoroughbred handle.

But simulcasting is a buyer's market. Currently, the live racing product receives about 3%-1.5% for the purse account and 1.5% for the track-from a simulcast wager. (The 1.5% for purses is the shameful amount bookmakers in England pay into purses.) The buyer, the simulcast outlet, may keep 15% or more of the wager.

The buyer's market is maintained by the threat that a simulcast outlet will not buy a track's signal if it is priced above 3%. The outlets leverage the tracks against each other.

All products have distribution costs. No product has distribution costs as high as racing.

This pricing is rationalized on the basis that when the live racing track is operating as a simulcast outlet, everything gets evened out. But the reality is many outlets do not have live racing, such as Las Vegas, Connecticut OTB (off-track betting), Birmingham, New York OTB, offshore operations, etc. Those outlets pay 3% to Thoroughbred racing, which means purses receive 1.5%, the same as bookmakers pay into purses. This practice allows rebates and offshore operations to flourish. Eliminate the buyer's market and eliminate the problem. The buyer's market makes New York OTB very desirable right now. If the buyer's market goes away, it will probably be a lot less attractive.

The Breeders' Cup operates a seller's market. It prices its product to the simulcast outlet at 50% of the outlet's net revenue. That could mean 8% to 10% share instead of 3%.

The NTA plan called for centralizing the simulcast sales of the major league and pricing it at the same rate as the Breeders' Cup, in order to eliminate the current situation of allowing the simulcast outlet the lion's share of the money.

The pricing of simulcast products defies all logic and business acumen. When we brought in outside business people as consultants to the NTA, they had a hard time focusing on simulcasting issues because they couldn't stop laughing at how ridiculously it is set up.

Step one in marketing is to control your distribution and pricing. Currently, the tail is wagging the dog.

The NTRA, as a trade association, maintains the status quo. It allows each track to make its own simulcast deals. If we want purse accounts to grow dramatically, we need a major league to control distribution and pricing of racing's best product.

Marketing communications

Like every major league, the NTA would only have promoted its brand of Thoroughbred racing. It would not have tried to promote all of the sport. In every other sport, when the major league is successful with its promotion, it benefits the sport as a whole. People are watching and playing golf because of the PGA Tour, not because of the USGA.

If through research the NTA had found that specific attitudes about Thoroughbred racing were hurting the sport, the NTA would have set about to correct any problems with the weekend product, then worked to change people's attitudes.

That's what the Japan Racing Association (JRA) did prior to introducing its brand into Japan. It found the image of racing was so bad regarding trustworthiness that it spent two years cleaning up the problems in its major league segment. The 90% of racing in Japan being operated by a minor league was not addressed. While the JRA was cleaning up the 10% at the top, it started running advertising about the agricultural base of the sport. For example, the JRA commercials showed a father cleaning out stalls with his daughter on their farm. While the problems associated with trustworthiness were being resolved, the JRA was well on its way to having a public, particularly young women, who thought the image of Thoroughbreds was wonderful. When the JRA opened its doors to this new generation, in walked a lot of young men with the targeted young women.

The image problems of gambling are universal. In Japan, the JRA deals with a public that does not want new gambling facilities in their neighborhoods. The JRA anticipated this need for new distribution when it used the "soft" advertising, which showed the agricultural base and pageantry of Thoroughbred breeding and racing.

To the surprise of our industry, California Governor Gray Davis recently vetoed phone betting. Politicians are very attuned to the public. If the majority of California residents liked Thoroughbred breeding and racing, the result might have gone differently.

Every time the JRA is mentioned to American racetrack executives, they roll their eyes and say Japan is different. The only real difference is the JRA more than doubled its on-track attendance in the midst of the worst recession in the country's history while American on-track attendance has continued to drop in a record economic boom.

This turnaround in Japan was performed by government employees in the Agriculture Department who head up the JRA. They just followed the American major league model for success.

Advertising for Thoroughbred racing that has appeared in America these past few years has not, in my opinion, used an emotional appeal to sell an emotion-based product.

Hard sell isn't hard tell. You cannot leapfrog the basic steps in advertising any more than you can leapfrog the conditioning a horse needs before racing. You can injure your image, just as you can injure your horse, when you use shortcuts.

You need one body that sees the need and has the ability to take action. The JRA in Japan did just that. In America, no single body has the ability to present and deliver a new product, and control its price and distribution as well as a major league.

Who should do it?

Escape from freedom

The United States is the only major racing country where the federal government or Jockey Club doesn't control the sport.

Only in America do racehorse owners have the freedom to form and operate their own major league.

In July 1992, through a series of articles, I asked the question, "Whose Game Is It?" The answer-racehorse owners-included both the title and the responsibility.

Borrowing from the title of Erich Fromm's book Escape from Freedom, the people who own racehorses must take responsibility for the opportunity presented to them or escape into the shelter of the status quo.

In the early days of the NTA, when personal visits were necessary to obtain commitments to the major league, part of my pitch to the owners of the largest racing stables included this phrase: "No attempt by the participants in any sport to form a major league has ever failed."

Perhaps it could be said that the NTA didn't fail, it just escaped from freedom.

Governance

Like the PGA Tour, the NTA board of directors was to be democratically elected from the membership. If outside expertise was needed, independent board members could be added.

When the NTA board was approached in March 1997 by representatives of the Jockey Club to establish an alliance, a new board of directors was proposed. The new arrangement was for ten seats, with five seats for the NTA, three seats for racetracks, and one seat each for the Jockey Club and the Breeders' Cup. The Jockey Club brought the idea of Television Games Network to the table.

Once the NTA board entered into the alliance and stopped its efforts, the new board of directors' seats went up for grabs. By the time the alliance evolved into the NTRA, the makeup of the ten-member board was five seats for the racetracks, one seat each for the two horsemen's associations, and one seat each for the Thoroughbred Owners of California, Jockey Club, and Thoroughbred Owners and Breeders Association (TOBA). When the idea of a major league was abandoned, there was no need of a seat for the NTA.

The NTRA board seats seem to have been established for political purposes, not expertise. To my knowledge, there is not a member with experience from a major consumer goods company on it. The majority are track executives and horsemens' association representatives. One of the great strengths of racehorse owners is their experience with major businesses.

Although it can be argued that the NTRA governance today is dominated by racetracks, the NTRA is much more than the Thoroughbred Racing Associations. The makeup of the NTRA board closely resembles the NTA's plan for an Industry Council, which would advise the NTA. With a major league and the NTRA, that relationship could become a reality.

Can't we just fake it?

Right now we hear words like "league office"as a way of acting as if we, too, have a major league. We don't.

A little history. In August 1993, I first presented the NTA plan for a major league to a closed door meeting of the TOBA board. Some people in the meeting were also on the board of the TRA, which met the following morning and announced it had just come up with its own initiative to start a "central office" and hire a commissioner. For industry unity, everyone pledged support for the new commissioner and the NTA plan for a major league was shelved. The TRA commissioner's office failed. It didn't have a chance because it lacked the basic structure of a major league. With each track maintaining its autonomy, it did not even centralize media rights.

Now, we are once again poised with a well-meaning but inadequate structure for Thoroughbred racing to advance as a modern sport.

For the NTRA, it would be impossible to leverage the racetracks when they hold half of the NTRA board seats.

What if the tracks tried to set up the major league?

That sounds great if you own a racetrack facility, but not so great if you own Thoroughbred racehorses.

The strength of major leagues is their ability to leverage their product in negotiations with facilities, local governments, and television networks. That's why no major leagues are facility-based. They do not want to own facilities. They prefer that you and I pay for their facilities through our local taxes. The only leverage a racetrack-based major league would have is over racehorse owners, trainers, and jockeys.

The difference a day makes

On March 26, 1997, everyone seemed to think the NTA plan for a major league was a great idea. The next day, March 27, it was a bad idea. The major league lost its support on the NTA board of directors. The majority of the founding members of the NTA were not part of that decision.

I sent a letter to all 104 founding members of the NTA advocating that the major league go forward. Some responded firmly in favor, but the NTA board of directors abandoned the major league plan and embraced the alliance, which became the NTRA. As a housekeeping matter, the NTA was absorbed into TOBA. Prior to raising funds, it was necessary for the NTA board to acquire and license my work. Every founding member who provided $50,000 to the NTA signed a disclosure agreement that spelled out the license fee I would receive if the NTA went forward and was successful.

The license agreement was very specific because I anticipated efforts to change it. The NTA could only use the license to operate a major league racehorse owners' association.

When the move to join the alliance was made, I was told my choices were to accept a buyout or the NTA board would fold the tent. If it was a bluff, then I blinked.

Consolidation of tracks

When the NTA was abandoned, a strong signal went out that the owners of racetracks were going to drive the sport. That is when racetrack consolidation began.

If you see consolidation of racetracks as a threat, then a major league is the best opportunity to protect racing's best product.

If you see consolidation of racetracks as a positive factor, then a major league is the best opportunity for partnership with joint benefits.

Off-site wagering (home and mobile) provides a great opportunity for Thoroughbred racing to maximize the dollars to live racing and eliminate all the convoluted problems of distribution.

With direct distribution, all wagered funds are delivered straight to the sending track, where the purse account can receive a minimum of 50% of the revenue. No middlemen, no rebates. How can you argue against it if you are involved in racing horses?

The power of leverage

Major leagues have the power to leverage their product. That means the PGA Tour may leverage a golf course facility in one state against a facility in another state to get terms that are best for its members. An NFL team may leverage a community to construct a new stadium. The NBA may leverage the TV networks against each other to get more money. It happens in every sport but Thoroughbred racing.

Conclusion

The NTA plan for a major league made people believe you could have a national structure. But, in a rush for unity, the very reason that a national structure would work-the major league-was left behind.

There is still an opportunity to have the benefits of a major league and the NTRA trade association.

There is a perfect analogy in golf, where the PGA Tour is the major league, the USGA is the trade association, and the U.S. Open is the Breeders' Cup. But, don't expect the idea of a major league to appeal right now to the NTRA, particularly its officers and board. A lot of other people are going to feel left out, too, but this has to be done or you are going to maintain the status quo.

This isn't for the fainthearted, but if you race Thoroughbreds, you are already conditioned.

Thoroughbred owners is too general a term for structure. The interests of commercial breeders are not always the same as the interest of racehorse owners.

If you decide to pursue a major league, limit your membership to racehorse owners by putting that in the charter. And never waiver from that concept. But, remember, with the horses you hold the one indispensable element in racing, so the history of major leagues is in your favor.

As racehorse owners, with a major league, you will not only have control over your own destiny, but you will control the destiny of the sport.

Go for it!