JC / Railbird

Stronach Group

Why Not?

Steven Crist on extending the Pegasus World Cup concept:

The central idea of the Pegasus is to raise purse money from owners rather than through an extraction from the parimutuel handle. Horseplayers have been told for generations that they must pay an exorbitant 20 percent takeout on their wagers because of the need to pay purses as well as to staff and maintain a racetrack. Now, however, we have a rare case where the purse has already been funded.

So, why not eliminate the takeout on the race entirely, or at least slash it to a low, player-friendly rate such as 10 percent? That would make this a revolutionary race for the customers as well as the owners.

(I think I hear someone muttering, “to hell with the bettors.”)

The other Steve of the turf trade press proposes a Pegasus reality show.

Stars Aligning

The Pegasus World Cup is coming to Gulfstream on January 28, 2017, and to get a spot in the 12-horse starting gate, owners will have to buy an entry for $1 million, which will go into the purse, making the $12 million Pegasus the world’s richest Thoroughbred race. (Somewhere, Sheikh Mohammed’s gritting his teeth at this trumping.) The money doesn’t only guarantee entry, though:

All entrants will not only be competing for the world’s largest purse, but they will also share equally in 100% of the net income from pari-mutuel handle, media rights, and sponsorships from the Pegasus World Cup, according to The Stronach Group announcement.

Aspects of the Pegasus plan, which allows owners buying an entry to also lease a starter or sell their place in their gate, immediately reminded me of Fred Pope’s star vision from 2011. You might remember this idea:

Maybe, just maybe, the system we have been using for compensating our talent in racing has become a problem, a big problem. This year, if things go well, Uncle Mo’s races could have total wagering handle of more than $200 million. With average takeout of twenty percent, the wagering revenue generated by Uncle Mo’s races, $40 million, will go somewhere else.

Of that $40 million, about $10 million (5% of the $200 million wagered) will go to the host tracks where the races are held and be split between track operators and future purses. The remaining $30 million (15% of the total wagered) will go to those simply taking bets on Uncle Mo’s races. Why?

Why can’t the top finishers in Uncle Mo’s races receive the $20 million in purses due from wagering on their races? Our stars need to be compensated for the revenue they generate. That’s how the real world works.

Racing’s welfare system is not working for those putting on the show, thus it is not working for Uncle Mo, and the other brands in the sport. Racing needs the same distribution model as the Apple brand, where Apple sells customers direct, through bricks and mortar outlets and through on-line vendors.

The Pegasus World Cup is selling direct. Even if it doesn’t upend the current economic structure of racing, it’s a step in that direction.

5/19/16 Addendum: I missed this Tom LaMarra story in January, which quotes Frank Stronach addressing the business model experiment angle:

“The basic idea is how can racing compete with other great sports?” Stronach said. “We’ve got to make things exciting, things the press will write about. We want to tell people that love horse racing that we say, ‘Look. We want to establish a new business.’ We would lease Gulfstream for one day and call it a new business.”

He was cagier about it when asked by T.D. Thornton last week:

TDN: If the profit-sharing concept works with a race of this magnitude, could the concept be scalable? By that I mean could you see profit-sharing trickling down as a way of funding other types of races or even entire racing programs or race meets?

FS: That’s possible. But smaller races are less interesting, right?

Suffolk Dates on MGC Agenda

The Massachusetts Gaming Commission takes up Suffolk Downs’ application for three days of living racing this year once again on Thursday — a vote on the three-day plan and a discussion of the 2016 racing season are on the agenda for the MGC meeting that begins at 10:30 AM. The track is amending its requested dates to September 5, October 3, and October 31.

Lynne Snierson reports for the Blood-Horse that there will be no lease deal with the Stronach Group to run a full meet at Suffolk Downs — the scenario sketched by trainer Billy Lagorio at the Commission’s meeting two weeks ago, prompting a delay on the application then:

“I can say definitively that we will not have an arrangement whereby The Stronach Group will lease or operate racing here,” Suffolk Downs chief operating officer Chip Tuttle told the Blood-Horse Aug. 5.

Tim Ritvo, chief operating officer of The Stronach Group and a Boston native who began his career as a jockey at the once-thriving New England tracks, did not respond to repeated requests for comment.

Tuttle and Ritvo talked on July 29 about any potential Stronach Group interest in running racing in East Boston. They had no further discussion. Ritvo did speak with the Boston Globe for a July 30 article, politely shutting down the idea of a Stronach-managed meet in the near future. “Boston is a very lucrative market and we’re interested,” he told reporter Sean Murphy. “We’re open to anything, but it seems like a stretch to get it done immediately.”

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