Franchise Notes

- Jerry Bailey apparently has a more significant role at Excelsior than I thought he did. He's not a shareholder, or at least not at a threshold that warrants it being reported; his role is that of a consultant. But Paul Post wrote in the Thoroughbred Times the other day that Bailey already has recruited a management team to run New York’s racetracks if Excelsior Racing Associates secures the state’s Thoroughbred franchise.

“I’ve been all over the country for 25 years,” Bailey said. “I know who runs racetracks the best and the worst. I know who to pick and not to pick. That’s why they brought me on board, so that I could give them a true sense of what the problem was historically and what I viewed the solution was.

“They’re going to help me solve it.”

Bailey declined to reveal names, but said he already has selected a director of racing, race secretary, and chief operating officer to run Excelsior’s racetrack component.

That seems like a lot of responsibility for a consultant, but I suppose it shows good judgment to let a racing guy make those decisions. On the other hand, as bright of a guy that Bailey is, he has no experience in assembling management teams that I know of.

Steve Crist, writing in the paid DRF Plus section of the Daily Racing Form, says that Bailey emerged as Excelsior's racing guru and seemed to dazzle starstruck legislators. But he also mocks his, and Steve Wynn's assertions that marketing the jockeys as personalities would be an effective marketing tool.

Maybe the panelists listening to these presentations, a collection of legislators and bureaucrats with little expertise or experience in the industry, actually believe that people go to the track because of their interest in the personalities of jockeys rather than to watch and bet on horse races. That would be a reasonable conclusion, given the panel's seeming complete lack of interest in issues pertaining to actual racing and wagering, including Empire's and Capital Play's outrageous yet unchallenged plans to jack up the mutuel takeout on customers. [DRF]

On the other hand, the Ad Hoc Committee was keenly attuned to the takeout issue, writing perhaps a bit sardonically in their final report that they "appreciated the honesty of Empire in its detailing of a takeout increase." Perhaps that was due at least in part because they paid attention to Crist when he addressed them about this issue at a public hearing.

- An anonymous reader writes in the comments section:

[Rep. Gary] Pretlow is also likely concerned with Empire's plan to turn the domestic simulcasting over to TrackNet Media, a consortium of Churchill and Magna. This entity would have the control over 2/3 of the United States' racing handle. It's in the Empire addendum, it was mentioned by Mr. Perlee ... yet no media has written about it.

I would imagine the U.S. Department of Justice would likewise be interested ...

Some press reports I read did mention that Pretlow questioned Perlee about possible anti-trust concerns. But Perlee's reported response of the party line of how Magna and Churchill only own 12% seems completely and totally beside the point. Either the newspaper reports are incomplete, or the committee didn't follow up on an obvious evasion of the question. I don't see where the percentage of the two companies' stakes relates to the question of whether a single entity controlling such as high percentage of simulcast signals would attract the attention of the Justice Department.

Indeed, TrackNet Media is prominently mentioned in Empire's addendum. Perhaps more telling is the section that precedes it, regarding a rights management company to handle an Empire franchise's simulcast signal that TrackNet Media would act as agent for.

We have partnered with Churchill and Magna to create a rights management company whose purpose will be (i) to license and distribute the Racing Franchise's signals to all domestic and international distribution channels; and (ii) to acquire signals from third parties for distribution to [NYRA tracks].

This new venture will feature mutually agreed upon policies and procedures that will govern the rights management company and the licensing and acquisition of signals for Empire. These policies and procedures will (i) require the Racing Franchise signals be sold at negotiated rates in the market with respect to the relevant distribution channel; (ii) establish certain restrictions with respect to off-shore distribution channels; and (iii) be revisited and updated by mutual agreement between Empire, Churchill, and Magna on an annual basis.

If I'm reading that correctly, Churchill and Magna would have to agree to any decision relating to the New York tracks' simulcast signals. That seems like a lot of power for a couple of out-of-state partners with "only 12%" ownership. Especially public companies with disparate interests that have shareholders to answer to and, in Magna's case, a company which is beholden to a real estate company that owns most of its shares, and whose own financials question its ability to continue as a viable concern.

(And by the way, Magna and Churchill's combined ownership is actually much closer to 13%, according to a footnote in the Ad Hoc Committee's report regarding the change in percentage ownerships after Jared Abbruzzese's shares were repurchased.)