National Thoroughbred Racing Association

views updated

National Thoroughbred Racing Association

444 Madison Avenue, Suite 503
New York, New York 10022
U.S.A.
Telephone: (212) 907-9280
Fax: (212) 907-9281
Web site: http://www.ntra.com

Association
Founded: 1997
Employees: 6
Sales: $66.1 million (2002)
NAIC: 813990 Membership Organizations

The National Thoroughbred Racing Association (NTRA) is a New York City-based, tax-exempt membership organization that serves as the organizing body for thoroughbred horse racing in the United States. Membership is broad based, including race track owners, horse owners, trainers, breeders, and jockeys. In conjunction with its partner, Breeder’s Cup Limited, NTRA provides a national structure for thoroughbred racing-setting rules, organizing races, and promoting the sport after years of dwindling interest.

Horse Racing Boasts an Ancient Tradition

Ever since the horse was domesticated sometime around 4500 B.C., humans have been riding and racing them, either with a driver in a pulled conveyance like a chariot, which evolved into today’s harness racing, or with a rider, resulting in flat racing. Organized national racing dates back to England and the reign of Charles II (1660–85), who as patron of the sport created the King’s Plates races. The thoroughbred breed of horse also dates to the early 17th century and is purportedly traceable to three stallions, which were bred by mixing Arab, Turk, and Barb horses with native English stock. These so-called foundation sires were the Darley Arabian, owned by Thomas Darley; the Godolphin Barb, owned by Lord Godolphin; and the Byerly Turk, owned by Captain Robert Byerly. It is estimated that four out of five contemporary thoroughbreds trace their lineage to the Darley Arabian through his great-great-grandson, Eclipse.

The sport in America also has deep roots because English settlers brought with them horses and the love of racing. It is believe that the first racetrack in the New World was laid out on Long Island as early as 1665, when New York’s colonial governor awarded the first racing trophy, a silver cup. In the years following the Civil War, organized racing in America took hold, fueled in large part by a predilection for gambling on racehorses. There were more than 300 tracks in operation by 1890, but because there was no organizing body to govern the sport many of the tracks suffered from corruption. In 1894, the American Jockey Club was organized along the lines of Britain’s Jockey Club, founded in 1750. The organization was able to clean up many of the problems, but it never gained complete control over American racing and was unable to prevent anti-gambling proponents from persuading many states to ban bookmaking. As a result, the number of racetracks dropped to just 25 by 1908. The Kentucky Derby introduced pari-mutuel betting—according to which wagers are pooled together and winning bets are paid out after a percentage is taken off the top by the operators of the race. State legislatures soon realized that this organized form of betting could be monitored and taxed. Governance of thoroughbred racing was now provided by state commissions, although the tracks were owned and operated privately. During the Golden Age of Sports in the 1920s, horse racing soared in popularity and prospered for the next 25 years. Interest in the sport fell off somewhat in the 1950s and 1960s but rebounded in the 1970s when the public’s imagination was captured by a string of great horses—Secretariat, Seattle Slew, and Affirmed—each of whom won racing’s Triple Crown—The Kentucky Derby, The Preakness, and The Belmont Stakes—in 1973, 1977, and 1978, respectively.

In the estimation of some, Affirmed’s 1978 Triple Crown win marked the last great year in thoroughbred racing. Furthermore, changes in the gaming industry were underway which would soon have an adverse effect on the sport. In 1971, New York City launched its Off-Track Betting Corporation; state after state introduced lotteries; and casino gambling was legalized in Atlantic City, on riverboats, and in casinos operated by Native Americans. Later, thoroughbred racing would be challenged by gaming that relied on new technologies, such as the Internet and interactive television. Moreover, the sport was hurt by the 1986 Tax Reform Act, which eliminated popular tax shelters on real estate and horse ownership, leading to a crash in the price of horses and a large number of breeders going out of business.

Aside from matters beyond their control, people involved in the sport failed to take steps to answer these mounting challenges. A venture called Trade Association of Race Tracks attempted to bring a national structure to the sport, but it was ineffective and short lived. While other sports used television as a way to grow their businesses, track owners saw television as a threat to the gate. Although thoroughbred racing may have been promoted locally, generally on a race-by-race basis, there was no coordinated effort to market the product. As a result, attendance declined steadily and the average age of racing fans rose, skewed disproportionately towards men aged 45 to 64 years old. The industry attempted to strike back with simulcasting, allowing fans to watch and bet on a number of races across the country. Although this step improved revenues, in some ways the success of simulcasting simply papered over the reality of declining wagering at the track. In 1985, nationwide attendance at thoroughbred racetracks totaled 73 million; in 1990 that number fell to 57 million; and in 1993, in the wake of simulcasting, attendance dipped to 45.3 million.

NTRA Formed in 1997

In the mid-1990s, a number of thoroughbred organizations came together and after two years of study devised a plan for a “league office” in the vein of other major sports associations such as the National Football League, The National Basketball Association, and Major League Baseball. In December 1997, NTRA was formed, sponsored by five founding member organizations: Breeders’ Cup Ltd., The Jockey Club, Keeneland Association, the National Thoroughbred Association, and Oak Tree Racing Association. Each contributed $1 million to fund NTRA’s start up. The initial business plan called for the new organization to provide a national structure for thoroughbred racing, formulate a national TV strategy, develop a marketing plan to promote the sport, and devise ways to enhance revenues and cut costs for the industry as a whole. NTRA became operational in April 1998, with offices in Lexington, Kentucky—responsible for corporate and business matters, legal and governmental affairs, and membership services and development—and in New York, where television, sponsorships, advertising, finances, and communications operations were located. Selected to serve as the first commissioner and CEO was Tim Smith. A lawyer by training, he held a number of posts in the Carter administration before turning his attention to sports marketing. He worked with the Association of Tennis Professionals tour, the Professional Golfers’ Association tour, and was involved in creating the marketing plan for the 1996 Olympic Games.

NTRA’s initial effort was a $10 million national ad campaign, launched in April 1998. Television commercials featured actress Lori Petty as a hyperactive race fan urging home her horse with shouts of “Go, baby, go.” The “Go Baby Go” tagline was used in radio and print advertisements. A betting guide aimed at potential track patrons was also printed in an issue of Sports Illustrated. Although the campaign received some criticism from within the racing community, it appeared to be well received by the target audience, in particular women. Furthermore, in the first year NTRA made progress in branding the NTRA name and increasing television coverage of the sport.

In April 1999, NTRA brought television production in house when subsidiary NTRA Investments LLC acquired Winner Communications, which produced all of the horse racing programming for ESPN and ESPN2. In addition, the $27.5 million purchase of Winner brought with it 20 years worth of racing footage. For the NTRA, it was a way to control the manner in which racing was presented on television, serving a similar purpose as NFL films with football and PGA Tour Productions with golf. In 1999 NTRA, was able to double the amount of television exposure racing received over 1997. It also established a strategic alliance with the TVG Network, a new racing and wagering cable.

Everyone in the thoroughbred racing community was eager to see the NTRA succeed, but a little more than a year after it became operational the organization faced severe opposition. At issue was a “voluntary” 1 percent tax NTRA wanted to impose on the purchase price of horses at auction sales. If buyers did not intend to honor the tax, they would be required to state this fact in writing, a provision which many found objectionable. Even though the funds were earmarked to support advertising campaigns, expanded television coverage, and other efforts to promote the sport, many in the racing community were adamantly opposed to the idea. The sport needed new buyers, and such a surcharge, according to some, would only serve to drive away these investors. In addition, a vast majority, perhaps as high as 95 percent, of all horse owners lost money on racing, and only about half of the horses bought at auction were likely to ever race. One of the leading critics to emerge from this flap was Frank Stronach, an Austrian-born Canadian who made a fortune from auto parts. He was new to the sport, but having recently purchased the Santa Anita and Gulf stream Park race tracks, and looking to acquire more operations, he voiced an opinion backed by the kind of money that commanded respect. Stronach indicated that unless the NTRA made some changes and better defined its role in the sport, he would withdraw his tracks from the organization after his contract with the NTRA expired in April 2000. Caving into the pressure, NTRA soon announced that it would appoint a task force to review the tax. A few weeks later, the 1 percent tax was dropped, replaced by a fee that amounted to 0.1 percent.

Company Perspectives

In a sense, the NTRA is both league office for a big sport and trade association for a big industry, including related businesses like breeding.

After two years in existence, the results were mixed for the NTRA. According to an ESPN Chilton Sports Poll, interest in the sport was up by 3.1 percent, a higher percentage than that enjoyed by the other 14 major sports surveyed. Nevertheless, racing still ranked 12th overall. Moreover, the NTRA was not as financially stable as was projected. The organization was supposed to be $1.5 million in the black by this stage of its five-year plan. Instead, the organization was saddled with an accumulated deficit of more than $4 million and was thus far from achieving the goal of becoming self-funded by the fifth year. NTRA had hoped to attract corporate sponsorships, but many companies proved to be wary of becoming associated with horse racing because of the gambling aspect. In addition, the alliance with TVG was slow to bear fruit. Due to political and legal complications, the network was only available in three states: Oregon, Maryland, and Kentucky. Revenues from merchandising and interactive wagering, as a result, were negligible. The NTRA also anticipated generating $4.7 million from the 1 percent tax on auction sales but instead received just $1.4 million from the compromise fee. Moreover, the organization had also strained relations with many of its supporters over the tax. Some insiders were beginning to suggest that the best course of action for NTRA was to integrate its operations with the Breeders’ Cup organization, which conducted thoroughbred racing’s one-day, season-ending “Superbowl” of eight championship races. The Breeders’ Cup had a considerable amount of money in the bank, some $40 million, and a guaranteed annual income of around $30 million. It was an important factor in the industry’s ability to attract corporate sponsors, but it needed the NTRA’s help in promoting the sport in general, as well as producing a larger fan base and greater television ratings. Already the two parties had struck a strategic alliance, cooperating on marketing efforts. Some in the racing community, however, expressed fears that the two organizations were already too heavily influenced by a Kentucky old boy’s network and that a merger would only serve to solidify Lexington’s dominance in the sport.

NTRA and Breeder’s Cup Merge in 2000

NTRA pursued a number of initiatives in 2000. It launched a $750,000 promotion campaign to encourage new blood to become involved in horse ownership. The organization also stepped up it lobbying efforts, in particular an Internet Gambling Prohibition Bill that provided an exemption for pari-mutuel betting. To better support its legislative plans, NTRA began to establish political action committees to finance candidates supportive of their issues. On the promotional side, NTRA contracted e-mail marketing services provider e-Dialog to do Internet marketing in order to further efforts to bring new fans to thoroughbred racing. In August 2000, NTRA and the Breeders’ Cup announced that they had agreed to what both sides called a hybrid merger. The Breeders’ Cup would retain control of its signature racing event but revenue realized from the sale of Breeders’ Cup broadcasting, sponsorship, wagering, admissions, and merchandising would become part of a consolidated budget. As part of the agreement, NTRA controlled licensing of the Breeders’ Cup for a ten-year term; all business, marketing, and administrative functions would be merged; and NTRA would receive enough cash to make up for its accumulated operating deficit.

Another part of the merger called for the NTRA board to be increased by four seats and the Breeders’ Cup by two, in order to allow representation from small and medium-size tracks. This concession did little to satisfy those in the thoroughbred racing industry, such as Stronach, who were opposed to the arrangement. In October 2000, 22 racetracks announced their intention not to renew their membership in the NTRA. They were headed by Stronach’s Magna Entertainment, which owned seven tracks. The group also included 12 tracks in the mid-Atlantic regions. Stronach expressed his opinion of the NTRA and Breeders’ Cup organizations in a speech he gave to the Kentucky Thoroughbred Farm Managers Club: “Who gives them the godly right to be custodians of this industry.” He wanted the NTRA to institute a way to democratically elect board members and to clarify the organization’s mandate. If his tracks dropped out of the NTRA they would not be able to host future Breeders’ Cup championships, but he appeared unconcerned, telling the press, “We’re large enough to do our own thing.” NTRA assumed a diplomatic posture about Stronach’s rumblings. Spokesperson Chip Tuttle maintained, “We agree with about 90 percent of what Mr. Stronach is talking about. Some of what he said is music to our ears.” Stronach and NTRA officials sat down in January 2001 to discuss their difference and soon reached an accommodation that prevented a major rupture in the industry. Both the NTRA and Breeders’ Cup agreed to adopt a democratic procedure that would result in more regional balance on both boards.

NTRA continued to make headway in revitalizing thoroughbred racing. In June 2002, it announced a strategic alliance with prominent European race tracks, Ascot in London and Longchamp in Paris. A part of the deal called for winners of certain British races to be awarded a new “Ambassador’s Cup” if they then won at the Breeders’ Cup at the end of the season. To promote the award, new weekly international rankings were introduced. NTRA suffered something of a public relations setback during the 2002 Breeders Cup due to a betting scandal after three men were able to take advantage of a computerized offtrack betting organization to place a winning Pick-6 bet after the results were in. NTRA responded by instituting a review of electronic betting systems across the country, hiring former New York Mayor Rudolph Giuliani and his firm to manage and oversee the review.

Key Dates

1997:: National Thoroughbred Racing Association (NTRA) is formed.
1998:: NTRA begins operations.
2000:: NTRA and Breeders’ Cup agree to hybrid merger.
2002:: Breeders’ Cup marred by betting scandal.

In 2003, by contrast, NTRA received a wealth of favorable publicity. A horse named Funny Cide captured the public imagination and came close to winning the triple crown, a feat not accomplished for 25 years. More importantly, a Hollywood film, Seabiscuit, based on a bestselling book, premiered in the summer. Smith told the press, “The film is a gift from the marketing gods.” Across the country tracks sought to create tie-in events with the movie, which presented a view of horse racing that only jockeys and their mounts had ever experienced. The hope was that people who had not been to the track in years, or those who had never been to the track in their lives, would now be motivated to see thoroughbred horse racing in person. It was clearly a shot in the arm for both the sport and NTRA. Whether an upsurge in racing’s popularity would prove long term, however, remained an unanswered question.