So What Is

So What Is

`IN THE BEST INTEREST OF RACING?’

I. What is the best interest of racing?

Have you ever wondered where this phrase comes from? It is in the Rules of Horse Racing and relates to the authority of the B.C. Racing Commission under the Horse Racing Act. The authority is given by the Provincial Government which represents all the people of the province — you and I. So the term `in the best interest of racing’ means the best interest of the people of the province — all 3+ million of us.

The B.C. Racing Commission is responsible for managing horse racing in the public interest. It therefore seems appropriate that our collective best interest should be well defined.

Few in the industry would disagree that the major groups in racing — breeders, horsemen and track operator - are working more closely today than they have in the past. The Horse Race Alliance is providing an effective lobbying effort and the Thoroughbred and Standardbred groups are working together on a lot of issues. Even with these efforts the feeling is that the industry is still not getting ahead. Despite the fact the industry is working closer together it seems the organized groups are still working for different things. That is to say ‘the best interest of racing’ is different among the different groups in the industry. If you divide the industry into those that spend money to fuel the industry (owners and bettors), those that receive money from the industry (track, breeders, horsemen) and those that expect the industry to contribute to the provincial economy (the general public), the difference in the view of best interest is even greater.

Let’s start with the track operators. Fraser Downs and Sandown are operated by a private company. Hastings Park, and several of the interior tracks, are operated by non-profit societies. Given that non-profit societies are also non-loss societies the best interest of the track operators is better financial performance. This means more handle, a bigger piece of the handle and lower operating costs.

The HBPA is about the best interests of horsemen. Benevolent and protective suggest this. Workers are usually interested in more jobs, better jobs (higher wages) and better working conditions — including the quality of the racing facility. In terms of best interest this implies that the HBPA generally looks for higher purses, a broader distribution of purses, more horses to train and more money spent on the facility.

The best interest of the breeders is to sell more horses for more money. The number of live races and the value of purses (particularly restricted stakes purses) drive the quantity demanded and the price of B.C. bred yearlings.

For the industry to exist there must be owners and betting fans to support it. The best interest of the fans is better entertainment value and more competitive races. The best interest of the owners is also better entertainment value. Value infers that there is a cost for some entertainment benefit. Racehorse owners compare the effective cost of ownership (average cost of racing a horse minus the average purses won) to the entertainment benefit they receive. Value can be improved by either lowering the effective cost or increasing the entertainment benefit.

The best interest of the general public is for racing to maximize the jobs and economic activity it generates for the province.

In summary there are 6 interest groups, all with slightly different perspectives on what is in the best interest of racing.

Track	Horsemen	Breeders	Owners	Bettors	General Public
Maximize Handle	Maximize Purses	Maximize Purses	Maximize Entertainment Value (FUN)	Maximize Entertainment Value	Maximize Jobs
Bigger Share of Handle	Broader Distribution of Purses	Maximize Live Races	Minimize Net Cost	More Competitive Races	Maximize Economic Activity
Lower Operating Costs	More Horses to Train	More Restricted Stakes
	Better Working Conditions/facility

It is quite clear from the table above that the best interest of racing would likely be described differently by the different groups. The historic struggle between track operator and horsemen regarding what share of the handle goes to purses is quite evident. There is evidence of a new struggle emerging between the groups that view the quality and quantity of live racing as critical to their success and the track operator that balances the gross margin from live racing with the gross margin from betting on outside races. The horsemen, breeders, owners and general public all benefit from more lives races with higher purses. If the net margin of the track operator on simulcast races is greater than the net margin on live races the interest of the track operator is to limit live racing as well as limit the share to purses.

While the owners will always be interested in higher purses (to lower their costs) they are primarily interested in the entertainment value (fun) of owning a racehorse. This relates more to the quality of the entertainment than the cost (think about the Vancouver Canucks —do you ever hear complaints about ticket prices when they are playing well?)

Betting patrons are also interested in entertainment value — both in the quality of the gambling and the quality of the other supporting entertainment.

The people of the province are interested in more jobs and economic activity. With live races providing 4 times the jobs and 3 times the economic impact of electronic races their interest is clearly in more live racing throughout the province.

II. Resolving the Different Best Interests in the Horseracing Industry.

While horse racing is not unique in having many interest groups with different views, it is quite unique in the way it tries to meld the different interests.

The role and mandate of the B.C. Racing Commission is similar to other government agencies and commissions that oversee various aspects of the economy; transportation, utilities, securities, financial institutions, gaming and others. They are there to ensure the best interest of the general public — to minimize potential abuse by special interest groups and maximize economic benefit to the province. In the case of horse racing the maximum economic benefit to the province comes from maximizing the number of live horse races (as compared to electronic races) throughout the province.

How has the Racing Commission met their mandate to minimize special interest abuse and maximize economic benefit to the province?

The general approach of the commission since it’s inception in 1972 has been to respond to issues as they arise — with no formal definition of the best interest of racing. More recently the Commission has encouraged the three organized industry groups, track operators, horsemen and breeders to resolve issues among themselves and come forward with a common position. While this appears to be a cooperative and positive approach, it is problematic given the structure of the racing industry and the mandate of the commission. By handing the responsibility of managing racing back to the industry groups, with no clear direction, the commission opens the door to the same special interest abuse the commission was set up to overcome.

Special interest abuse occurs in the racing industry because:

The 3 organized groups (tracks, horsemen, breeders) only represent the groups that receive money from the industry. They do not include a pure owners group or patrons groups and without strong direction from the Commission they do not include the general public interest.
The best interests of the 3 organized groups are different, and different from the public interest, so without some intervention it is unlikely they will reach the best decision for the industry as a whole.
The resources and leverage of the 3 groups are different — HBPA and Breeders are volunteers while the Track has paid employees. The Track has a large degree of leverage over horsemen and horsemen a moderate degree of leverage over breeders. The breeders have no leverage at all over the other groups.
Representatives of the 3 groups are not normally given the authority to bargain — only to fight for their position. They are typically chosen to attend these meetings because of their ability to extract benefits for their group.
There is no formal group representing the bettor’s interest or the pure horse owner’s interest.

Consequently the result of the consultation process is that the group with the most resources and the most leverage wins and the two groups that provide resources to the industry (owners and fans) are not represented — precisely the situation the Racing Commission is mandated to overcome. Clearly the responsibility of managing the racing industry in the best interest of the general public lies with the Racing Commission and clearly they have not been meeting that responsibility well!

III. Managing Horse Racing for Future Growth — A Time for Action.

Section I and II explain what most in the industry already know — the management of horse racing in B.C. is not working effectively. What could the Racing Commission do to better meet it’s responsibility to operate racing in the best interest of the people of the province. A starting point would be:

to clearly establish what the best interest of racing means for the general public,
to establish a mechanism for all interest groups ( including pure owners and patrons) to formally provide input to, but not dominate, the Commission and any of it’s decision making processes, and
to take a leadership role in encouraging the growth and development of the industry on a province wide basis.

Despite the industry’s expressed need for more money (from slots or from the ‘take’) managing the industry for the future does not itself require more money, it requires the Racing Commission to step up and take responsibility for industry growth.

What action could the Commission take in the short run? The following are possible actions that support future growth and development in racing.

Establish a Director of Growth and Development that reports directly to the Commission. The Commission’s mandate is to prevent abuse and encourage growth. There is currently a Director with the primary role of preventing legal abuse, there needs to be a Director with the primary role of encouraging growth and development.
Establish a formal owner advisory group and a patrons advisory group and use them in the policy making process
Take a leadership role in facilitating a session for all six interest groups to work together to define what is the collective best interest of horse racing.
Use the new definition of the best interest of racing to direct and drive all decisions in the industry.

Yes the racing industry is made up of diverse interests groups and yes these groups are made up of fiercely independent and opinionated people. This is not, however, an excuse for no action. Other industries have these characteristics and are able to work together for the broad interests of the industry - a good example is the fishing industry.

In the absence of strong direction from the Racing Commission the industry is being managed by the strongest, best organized, special interest groups. To move forward horse racing needs the Racing Commission to accept it’s responsibility, to lead the industry and to act on it. It is time for action!

Mark Robbin

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