Horse racing presentation—June 8, 2004 -- John Harris

I am John Harris. I have a farm in Fresno County where we raise and train thoroughbreds that race throughout California. I am the current Chairman of the California Horse Racing Board, and over the years have been involved in about all of the thoroughbred horse organizations including the California Thoroughbred Breeders Association, the Thoroughbred Owners or California, and The Jockey Club. I was also the Chairman of Bay Meadows Racetrack several years ago.

I want to make it clear that anything I say today reflects only my opinion and not any policies or opinions of any associations I may have.

Racing is having the best of times and the worst of times.

Saturday at Belmont Park as Smarty Jones attempted to become the first horse to win the Triple Crown since Affirmed in 1978, the largest crowd to ever turn out for a sporting event in New York—over 120,000 fans showed up. Total commingled handle for the Belmont races that day was over $110 million, easily a record for a New York track. Smarty Jones was covered by about every media outlet in the country, the first horse on the cover of Sports Illustrated in years. For one shining moment racing was on the front page rather than hidden in the back somewhere like an unwelcome relative. That was a welcome sign of hope for a troubled industry.

Like some aging star, racing can rally for the occasional big day, but on a normal day to day basis has serious problems. On track attendance is lucky to reach 2000 people during the week at the northern tracks and maybe 5000 in the South today, whereas years ago much bigger crowds showed up. The horse industry is the most expensive way to provide people an opportunity to wager. We did well in California for a long time as racing had a monopoly on gaming. But now we compete head on with the lottery and much illegal wagering on sports, and Native American Gaming featuring the allure of slots, a mindless game that has become the king of California gaming.

There are almost 40,000 foals born each year, with about 10% of them or 4000 a year being bred right here in the Golden State. Breeders and owners need to invest at least $20,000 in raising and training a horse before it even makes his first start and often times much more than that. It costs $2-3000 a month just to keep a horse in training. And all of this expense is dependent on somehow getting enough income coming back to the owners to pay all these expenses, and that is not happening.

This is a serious problem not just for people like me that love horses and horse racing, but also for the state as it would be great loss for California to not allow racing to flourish as it provides so many jobs and generates so much economic activity, and has been such an exciting sport in our state’s history. It also provides vast amounts of environmentally friendly open space.

A slot machine can be manufactured offshore for relatively nothing compared to the vast amounts of capital it takes to make racing work. Yet even one slot machine nets more money back in a year than a top stakes horse.

So how do we improve racing? Some of the immediate fixes would be to allow slots into racetracks as many other states are doing. As you know, there is an initiative on the ballot in November to accomplish this.

But regardless if we get slots and the revenue enhancement that will provide, we still need to do everything possible to maximize interest in our sport and get more fans interested in making racing something they value and view as a fun and stimulating activity. To do this I think we need to reinvent ourselves in several areas.

Racing is often viewed as a too complicated, or too intimidating to the average person. How do we address this?

Part of the issue is that much of our wagering occurs not by a fan on track like the old days, but by a variety of ways from wagers all over the country. Bettors at California tracks bet last year in California only 18% where the live races were being run. Another 41% was bet in California at other outlets, with the remaining 41% being bet at out of state locations. Currently about 8% of wagers are made via the Account Wagering system that was legislated a few years ago. I do strongly feel that Account Wagering has a good future if we can reestablish racing in general.

I think we need to attract both on track interest and also get our product maximum exposure anywhere else we can.
But I think getting fans into the live track experience is key in developing long-term fans, who also will transition to satellites and account wagering.

We need to look at every aspect of what a new fan or returning fan encounters when he makes the effort to come to a track. Parking and admission prices are not high when compared to premier sporting events, but are high compared to other gambling venues such as Indian gaming and playing the lottery. We need to revitalize the experience when fans do arrive. We need a more open atmosphere from the admission gates to the betting windows, with less barriers once one gets into the track, and a stronger emphasis on customer relations.

We need to figure out a way to make horse racing something people really want to follow. Smarty Jones sure helped. I had more people want to talk about racing the last few weeks than has happened in a long time. I sure hope he stays around for his 4-year-old year. Big days such as he provided and other big events like the Breeders Cup, California Cup, Gold Rush Day and the Sunshine Millions need maximum exposure as they keep our sport in the public eye. But we also need some reason to get a decent crowd to Hollywood Park or Bay Meadows or the Fairs on a weekday when there are no major name horses on the program. The attraction is to have a fun time in a friendly atmosphere and win or lose to feel the day was worthwhile. Somehow we have lost that magic.

We didn’t lose our appeal overnight and we won’t get it back overnight either, but in the interim we need some sort of survival strategy. I am fearful that Native American gaming is allowed to grow at the expense of racing and racing cannot utilize things like slots to be competitive, then racing is going to have a tough time surviving. But even if tracks do get slots, and I hope they do, it is critical that we reestablish interest in our great sport and not make racing a sideshow to another form of gambling.

So where is the light at the end of the tunnel and what do I suggest happen?

Desperate times call for desperate moves, and I am recommending some. Keep in mind that some of these are “out of the box” thinking and may not be practical or popular, and only represent my thoughts at the moment, but it is a start to trying to figure out what to do with a critically ill industry.

• Racing should institute a free parking, free admission policy to all tracks for a year and heavily promote it as a condition of a racing association getting a license. This will get us on a level playing field with other forms of gambling in California with free gates.
• Get greeters at all the tracks and the Fairs--- could be paid for by both horse owners and tracks out of the $6 million a year promotional fund. Have them well trained and equipped to let people know the various options on where to watch a race, where to bet, where to see the horses, what food and refreshment facilities are available, etc.
• Do everything possible to demonstrate to the public the high integrity of California racing. Educate people to the fact the California has the highest drug testing standards in the world. Get the stewards more involved with the public in explaining how they monitor every race and have them give a detailed description of any inquiry.
• Get closure on the rebate issue by disallowing rebates that are in excess of what a Californian can get betting right here. Currently big bettors in the Caribbean and elsewhere are getting a distinct advantage over the average customer right here in California due to the major rebates most off shore customers receive. This is not fair. The industry is so addicted to this incremental handle that it looks the other way and the domestic fan base is being damaged.
• Better utilize jockeys, owners and trainers in outreach programs to the public and the media. Get a top-notch publicist to work with all these people on positive media placements.
• Work with Native American tribes, particularly those without gaming income at this time to develop some sort of compact that would allow them to put slots into racetracks and Fairs and share the income with the horse industry. As part of the deal, insure that these operations meet the same standards in employment and environmental law as the tracks now meet.

Thank you for the opportunity to be here today and I would be pleased to answer any questions.