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Sunday, April 15, 2007

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.)


Anonymous said...

You are indeed reading that correctly. When they signed on with Empire last August they insisted on, and received, veto power with respect to New York's simulcast rights...12% equity stake notwithstanding.

Empire doled out special favors to everybody to get them to sign up. MEC and CDI wanted to control NY simulcast rights, and they got it.

Another Empire "partner" that you don't hear much about these days, Scientific Games, was told that if they DIDN'T join Empire, they would not be considered for the NY tote contract if Empire won the bid. Scientific Games lost the NYRA tote contract in 2004 to United Tote.

The Governor and the Legislature would be wise to avoid Empire. They are full of conflicts, lack integrity and are in it only to get a pay day from VLTs.

Anonymous said...

Too many cooks.....

Appear to be way too many in this case. How will Empire be able to efficiently operate with all these restrictions plus state regulation?

Anonymous said...

I saw those DRF articles on the franchise. It looked like they were written by nyra PR!LOL!

Anonymous said...

I've said all along that it would be a huge mistake to hand over the NY racing jewels to a group consisting of it's main competitors, i.e., MEC and CDI, and their control over simulcasting in the Empire group. This is finally coming to light in the wake of the hearings last week? It may be wishful thinking on my part, after all I am a horseplayer, but I believe that a consensus is developing for Excelsior to be the next NY racing franchisee. All of the proposals have been well vetted now and Excelsior is still the best choice, confirming the work of the Ad Hoc Committee. So, let's get on with it!