Pan Am Conference Opens in New York

T.D. Thornton reports on the first day of the 2015 Pan American Racing Conference in New York.

The 2015 Pan American Racing Conference is all about how the Thoroughbred industry can achieve harmonization through globalization. But before challenges and opportunities can be tackled at a worldwide level, panelists and moderators who kicked off Thursday morning's opening sessions emphasized that the bigger picture still starts with individual horses.
To set the backdrop for how the sport might prosper in the future, Alex Waldrop, the chief operating officer and president of the National Thoroughbred Racing Association, didn't mince words in his opening remarks about how the declining global foal crop and the sharp reduction in betting handle are the major obstacles to growth.

Between 2006 and 2013, Waldrop said, the annual Thoroughbred foal crop plummeted from roughly 122,000 to 92,000. Within that time frame, he said, the United States foal crop alone dipped 40%.
“Clearly stabilizing and growing the foal crop is critical to the success of the Americas,” Waldrop said.
More troubling, even though there has been a sharp drop in the foal crop, the number of races worldwide has remained constant at roughly 150,000 annually, a phenomenon Waldrop characterized as “a vicious downward cycle that racing must do all it can to avoid.”
The Americas–North and South combined–account for 44% of all races run, Waldrop said. Yet the Americas distribute only 33% of all prize money worldwide.
And when factoring in betting handle, Waldrop noted that the Americas have fallen far off the pace behind Asia and Europe.
“The Americas were a distant third at 11% of all betting totally,” he said.

Waldrop said part of the reason behind the decline in betting handle in the U.S. has to do with the evolution of casino and racino subsidies. The U.S., unlike most other global regions, is no longer as reliant on betting turnover as a source for prize money.
“The inescapable conclusion of this global overview is strength of Asia relative to [the Americas and Europe],” Waldrop said. “Asia is gaining momentum, and what they are doing deserves consideration.”

Within the U.S., Waldrop cited competition from casino and sports gambling and the decentralized, state-by-state system of regulation as being “at the heart” of the sport's challenges.
“In this regard, the United States of America may either be a shining example to the rest of the world of successful collaboration, or a horrible warning of the pitfalls that await fractured industry,” Waldrop said.

Apart from the internal difficulties within the U.S., Waldrop said a significant upside exists in working across international borders, particularly on a north-south axis between the Americas.
International simulcasting between North and South America is particularly ripe for growth, Waldrop said. Within that sector, he explained how language barriers, differences in technology, the lack of harmonization in takeout structures, and currency fluctuations are the main hindrances to growth.

Waldrop did unveil one specific initiative that the NTRA will undertake later this year to try and bridge the international gap. In the second half of 2015, the NTRA will, for the first time, expand its schedule of qualifying tournaments for the National Handicapping Championship to include several venues in South America.

South American Industry Expands
Although the prestige and purse structure of major races in South America still favors longer Classic distances and stamina-attuned pedigrees, commercial breeders on that continent are following the money when it comes to incorporating the speed and precocity of American stock into their operations.
Industry stakeholders from both North and South America detailed the ever-evolving approaches to importing and exporting bloodstock among the regions and throughout the world in a Thursday morning panel discussion at the Pan American Racing Conference.

Chauncey Morris, the executive director of the Kentucky Thoroughbred Association and Kentucky Thoroughbred Owners & Breeders, said that South American involvement in United States racing, bloodstock, and the acquisition of equine-related real estate is not as new as many people might think, and that South America's “less parochial” attitude toward branching out to other parts of the racing world sets it apart from other global regions.

“It's part of a trend that has always been there,” Morris said. “That exchange being a bit less territorial… It's a trend that is the best way to sell one's industry.”
Although the shuttling of stallions between the Americas has received a lot of emphasis over the past several decades, Keeneland Association's associate director of sales, Tom Thornbury, said activity in bloodstock and racing prospect auctions has quietly been on the upswing.

“The [South American] level of purchase was sort of just dipping your toe in the water at first, just to find what bloodstock we had and to take a sample,” Thornbury said. “But over the past 10 or 15 years, that investment has gone up and up.”

Morris concurred, “When we were really starting to promote that as an industry in the U.S., there was a misconception in South America that we were really just creating a market for our culls. But based on performance, that hasn't been the case.”

“They're not buying American culls, they're buying quality, quality prospects, and of late, the breeding prospects that have been purchased have been sensational [with] a lot of business being done back and forth,” Thornbury added.

Adrian Mansergh-Wallace, who has worked for Coolmore Stud since 2001 and has been employed at Coolmore's Ashford Stud in Kentucky for the majority of that time, said that eight of the top 10 sires in Argentina are either shuttle stallions or transplanted U.S. sires.

“If you look at the leading sires in Argentina, Chile, Uruguay and Brazil, you see the huge influence from American sires,” Mansergh-Wallace said. “The proof is in the pudding. If you look at those lists, those numbers don't lie. The quality of horses going to South America these days is gradually increasing.”

Mansergh-Wallace said 20 years ago, the thought of a quality of horse like Giant's Causeway shuttling between North and South America would have been unheard of.
“Things have changed,” he said.

Julio Menditeguy, a partner in Haras Abolengo, one of the leading stud farms in Argentina, said South American breeders face the dual challenge of seeking Classic stamina qualities while trying to incorporate speed and precocity into bloodlines.

“That's sort of characteristic of the American breed, that speed aspect,” said Thornbury. “The emphasis is on speed and short distances, and now you're looking for more stamina and more soundness. The same thing can be said of America. The best races are always the Classic distances. That's where the money is.”

Mansergh-Wallace said that over the years, he has been particularly impressed by the scope of equine operations in South America.

“The South American breeders, they know how to raise a horse.” Mansergh-Wallace said. “The land is second to none. I've never seen farms of that size, that depth of soil. The quality of horsemanship is something that is really second to none. The South American farm workers are very professional. They are at one with horses, they grew up around horses. Their veterinary care is on a world level.”

Thornbury agreed, “Any farm that you go to in South America, generally is operated and managed by veterinarians.”

When to Say When on Graded Races
How much is too much when it comes to group, graded or “pattern system” races? With 459 top-ranked black-type races worldwide, is it possible to maintain stakes-ranking standards that are meaningful across international borders? And with so many races being labeled “elite,” is there a diluting effect in terms of how the general public perceives what is considered the “best of the best” in the sport?

Those questions were batted around by the pattern-system panelists Thursday morning at the Pan American Racing Conference in New York City. The meat of the discussion began after overviews of the criteria that global racing jurisdictions use to rank races when Bill Nader, the executive director of the Hong Kong Jockey Club, suggested that “getting the toothpaste out of the tube is one thing, getting it back in is another” when it comes to re-examining what the racing community considers its top-level stakes.

“If we're going to look internationally and really embrace international movement and adopt the principles that other sports enjoy, then maybe we should really look at whatever we call them, super Group 1s or elite Group 1s,” Nader said. “Because there are 459 Group 1s, and when you look at them, you know they're not equal. Everybody in the room knows they're not equal. We call them the same thing…but there are certain races that are the best in the sport.”

Nader acknowledged that the obvious difficulty in paring back Grade or Group 1 races from a quality control standpoint lies in “trying to communicate that back [to racetracks], when different countries have different interests, more than racing, but also breeding and commercial interests.” He said that once a racing association has been awarded and worked hard to maintain a coveted black-type ranking, “they feel a sense of entitlement that their races have achieved a status, and who are we to take it away?”

But Nader stressed that pattern-system authorities must remain true to their core mission, which he said “is really good governance and quality control.” He also said that the grading methodology is “really about the integrity of the processes and the integrity of the information. If we say it's a Group 1 race in one country, it should be equivalent to what's a Group 1 race in another country. That will be a very difficult process to get it right.”

Nader said that in the interest of making elite-level races more clear to the general public, grading authorities should consider ranking top races in a format similar to the National Collegiate Athletic Association's “Final Four” basketball tournament, where 64 eligible teams are winnowed down to a single champion through a single-elimination playoff.

“I think if we do something like that with horse racing, and really identify which of those 459 races are the elite Group 1s, it would help get the mass population, not just the racing insider crowd, focused and make it easier for them to understand,” Nader said.

When moderator Brian Kavanaugh, the chief executive of Horse Racing Ireland, replied to Nader's idea by suggesting that stakes-graders need to remain true to the standards set forth in the Blue Book (a publication of The Jockey Club, with rules overseen and approved by the International Cataloguing Standards Committee), Nader reminded Kavanaugh that “marketing” was one of those core concepts outlined in the 1981 edition of the Blue Book. Nader said that aspect seems to have been forgotten over the years.

Tom Thornbury, Keeneland Association's associate director of sales, said that quality control in graded and group rankings is also important in the sales end of the industry.

“The standards must be objective and not subjective,” Thornbury said. “In our relationship through sales, cataloguing standards are directly tied to the quality of the stock and the races that stock has run in.

“In the end process, you're talking about money,” Thornbury summed up, “And money is a pretty strict grading system itself.”
Simulcasting North and South
Simulcasting between North and South American racing entities goes beyond simply brokering available signals. In a Thursday afternoon Pan American Racing Conference panel titled “Delivering International Racing and Content to Bettors & Fans,” Mike Rogers, the president of The Stronach Group's (TSG) Racing and Gaming Division, detailed what goes into the decisions behind which international racing signals his company imports and exports.

Rogers said that for TSG, the checklist of desirable qualities on both the buying and selling side are similar.
The first factor is timing.

“The Latin American product comes in at a good time of the day for the U.S. It comes in usually toward the end of our racing day. People are up and they are betting. They are looking for product; it's a good fit,” Rogers said.

The availability of past-performance data and the amount of runners per race is also an important criterion.

“Field size is important in international signals as it is in domestic. The bigger the fields, the more people are going to bet on them,” Rogers said. “Pool size is relevant if we commingle. The primary reason we don't with Latin America is because the takeout rate is pretty high, sometimes in the high 20s to 30% takeout. Our experience is that the U.S. betting customer does not find that attractive.”

But Rogers underscored that reciprocity is the chief factor in deciding which signals to take, whether in Latin America or in other international racing markets.

“Reciprocity is important in deciding which business deals we want to cut,” Rogers said. “If two products are equal on all other factors, we're going to choose to import that signal [whose provider] will reciprocate and take our U.S. signal into its market. It's just good business sense.”

Of all the global signals TSG imports, Rogers said Australia and Latin America are one-two in generating the biggest amount of fan interest and betting business.
Latin American signals, Rogers added, do particularly well in Florida and California.

“Obviously, these states have very large Latin populations,” Rogers said. “So we have found there is a natural tendency for those players to migrate to Latin product. They know it, and they like it.”
When TSG creates separate pools on Latin American races, Rogers said the firm likes to employ the “piggyback” method of adding, for example, seven foreign races onto the tail end of a 10-race Gulfstream Park or Laurel Park program. The primary reason for this, he explained, is that the past performance data automatically gets included in the track program as one package, so bettors don't have to seek out a second set of wagering data–they already have the Latin American past performances in hand.

Rogers said when TSG exports signals, it recognizes that Latin American bettors have an affinity for jockeys who have relocated to the U.S. from their South American home countries, and that stallion shuttling has contributed to Latin bettors being more familiar with North American sires.

Challenges and hindrances to exporting U.S. products, Rogers said, include technology barriers, the potential pirating of exported television signals by unauthorized foreign betting entities, and the fact that some South American countries have blanket policies that do not permit the importing of foreign signals.

“They sell their product to the rest of the world, but they say, 'Oh no, we can't buy it. Our regulations don't allow it,'” Rogers said. “The problem with that of course is, if every jurisdiction took that approach, there would be no international simulcasting.

“It goes back to that reciprocity principle,” Rogers concluded. “It's important to know you commit money both on the buy side and the sell side.”

Rust on BHA Steroid Policy
Three months after the enactment of the British Horse Racing Authority's new zero-tolerance steroid policy, Nick Rust, the BHA chief executive, reiterated his organization's commitment to anti-doping, even to the point that it excludes steroids for “therapeutic” use.

Rust's remarks came on Thursday's opening-day session of the Pan American Racing Conference, which will continue with four separate presentations on anti-doping on Friday.
The BHA guidelines, which went into effect Mar. 2, mandate that “a horse must not be administered an anabolic steroid at any point in its life” under penalty of being ineligible to start in Britain for 14 months.

“We had to act,” said Rust. “Our own policy says that there should be no use of steroids from the point of registration through to the point of retirement.”

Rust underscored that although he knows the policy has concerned some international breeders, owners and trainers, it is not the BHA's intent to police the world on the topic of steroids.
“Our job is to regulate British racing,” Rust said. “To reiterate, we're not trying to stand rules to other jurisdictions. Our policy exceeds the minimum [International Federation of Horseracing Authorities] standards…We want to try and learn from our own issues, and lead and influence international policy.”

“We want to achieve a level playing field and we want to safeguard the welfare of the horse,” Rust continued. “No one knows yet the impact of steroids on horses, even in therapeutic use. The British public is concerned about that. We are investigating that, together with our international partners, but we're taking the view that as with humans, [steroids] have no place in sport.”
Because anabolic steroids mimic the male hormone testosterone, they have a long history of abuse as a performance-enhancing substance. Under the BHA policy, “responsible persons” associated with a breach of the BHA doping rules are “likely to receive a penalty of within one to 10 years' disqualification, dependent on the circumstances of the case.”

Although the relatively new (and more technologically sensitive) process of hair testing was announced as the backbone of the new BHA policy earlier this year, Rust said hair testing still has to be backed up by the more traditional blood testing.

“At the time of sampling we take a blood test and a hair test,” Rust said. “If we haven't made it clear, then I want to make it clear here today that the use of hair samples alone for the purpose of prosecutions under the anti-doping policy–we're not taking that route. We don't have enough confidence yet in hair testing alone and the vagaries of it to pin down prosecution on that alone.

“However,” Rust concluded, “as science improves, we would expect to introduce that at a point in the future. At the moment, we're relying on the blood samples.”

Liberman Calls for Unity
Guillermo Liberman, a chief executive officer in charge of the port development in the Panama Canal, a cable television operation, several hotels, and various Thoroughbred racing endeavors, stressed the need for his continent's racing entities to rise above localism and to come together regionally before South America can flourish as a major player globally.
Liberman spoke about the need to think about regional cohesion as a stepping stone to globalization while delivering Thursday's concluding keynote address at the Pan American Conference in New York.

“Let's work on starting a regional calendar, with attractive incentives, with rich purses, with travel allowances,” Liberman said. “It will take a lot of work. It will take some time. But I believe it can be done and we have to do it. Let's have our horses compete regionally and not just on the local level.”

Liberman discussed the Catch-22 in which, compared to Europe, Australia and the United States, not very many individual South American horses manage to succeed at the elite global level. But those few horses that are good enough to have a chance often have to leave South America before fans in their native countries can appreciate them and watch them race on their home turf.
This, in turn, not only deprives the fans, but hurts the international ratings of South American stakes races, Liberman said.

“A starting point would be to have more competition among ourselves. Increased competition among the countries in the region would mean an improvement in the horse racing index,” Liberman said.

Liberman did not shy away from the challenges involved in bringing his vision to fruition.

“Moving a horse from one country to race in another country in South America is not easy,” Liberman said. “Shipping is very expensive. Health-related requirements and other red tape complicate matters further. We can list the reasons that are in the way of the South American racing circuit, but what we need is to focus. We need to find a way to work with breeders, with owners and with the racing authorities in South America. But it's also important to work closely with government officials.”