Breeders’ Cup president and chief executive officer Greg Avioli was interviewed by Blood-Horse features editor Lenny Shulman after the organization rescinded its decision to suspend its Stakes program for 2009.
Question: Breeders’ Cup chairman Bill Farish said nomination dollars go toward purses, and event profits make up any shortage and represent the surplus that goes into the investment fund. Is that a fair way to look at it?
Answer: “Our 2008 numbers are going to have $12.8 million in stallion fees and $7.3 million in foal nominating fees; basically $20 million. We pay out total purses of $25.5 million on the two championship days, and $5.9 in the larger stakes program, and 90% of that money is won by Breeders’ Cup-nominated horses. So that’s $31 million in purses, and there is a $10-million shortfall from nomination fees. In 2007, it was the same deal. So straight dollar for dollar, the nominators are getting back $1.50 for every dollar in terms of the purses they’re running for.”
Q: Since you are commingling the money coming in, shouldn’t breeders have some say in how the surplus, which is in your investment fund, should be handled?
A: “The reality is that the money in the investment account, since that account was begun in 1988, has generated a 7% average return over the 20 years, and has accrued by more than $20 million. People can say, ‘It should have been managed this way or that way,’ but by the numbers, it has been well-managed. The litmus test for nominators is, ‘What about our purses?’ And the aggregate purses of $30 million this year compares with $20 million three years ago.”
Q: What do you say to the breeder who claims you tried to cancel the stakes program after he paid his money to the organization with the understanding he would be running for that purse money?
A: “I would say your nominating dollars allow the Breeders’ Cup to operate every year, and that $20 million we took in from you allowed us to fund $30 million in purses. Over the last 20 years, you can’t unscramble the omelette and break apart and determine how much of that money came from nominations as opposed to the championship events. The revenues are a combination. There is no question the nominating dollars are a substantial part of our revenue. But the other revenues have grown to the highest levels of non-nominating dollars that the organization has ever had. We’re over $20 million annually for the past three years in terms of event-related revenues, and that has never been the case before.
“A main goal is to generate new revenues going forward that will, over time, lessen the percentage of total revenues that come from nominations. We want to lower the burden on nominators.”
Q: Why not reduce championship purses instead of trying to cancel the broader stakes program?
A: “We’re coming off what many people consider to have been one of the best, if not the best, Breeders’ Cup in history, with the two-day format and 14 races. We feel it got the most national and international coverage, as well as non-traditional broad coverage on outlets such as Entertainment Tonight. It was a big success, and the organization achieved its near-term goal to jump-start the property. The stakes program, while it has many benefits—and we’ve learned how important it is to nominators—doesn’t really have the ability to generate any outside publicity for the organization or the sport. We know that because we’ve had the stakes program and a smaller championships for 20 years, and it hasn’t been able to break through.
“We operate under the core belief that the core purpose of the Breeders’ Cup is to create an event of that stature and size that it will attract new racing fans and new buyers of racehorses. We had a formula that was tremendously successful this year, and to lower the purses or reduce the races after one year, thereby creating the possibility of less horses participating, is something we want to avoid.”
Q: But you have already announced you’re slashing your marketing and television budget for 2009. Won’t that adversely affect the event?
A: “Slashing the marketing by 75% from 2008 is going to decrease our ability to market the event to the public. It was a choice of what areas to limit in this down economy. And reasonable people can differ on that. You could choose to eliminate some of the new races or reduce the purses across the board, but the core belief was that the way this organization would achieve its ultimate goals is to continue to put on the best two-day World Championships racing in the world.”
Q: Bill Farish said he could not guarantee the stakes program would be funded for 2010. What is your take on that?
A: “If the nominations revenue stays as low as we predict because of the economy and the published stallion fees, we’re budgeting $3 million less in stallion nominations in 2009 from 2008, and that’s probably optimistic that these prices right now will hold. But we heard loud and clear the importance of this stakes program to the nominators, and we’ll factor that into any plans post-2009 because we want the nominators to be happy.”
Q: Did you underestimate the breeders’ fervor on this?
A: “Yes. When we’ve asked the question through the years of the importance of nomination fees, the first and foremost thing people say is the increased value at sales, and the second is the chance to run on championship day. Participating in the (stakes program) was not a dominant reason for nominating. Outside of Kentucky, most of the breeders hadn’t won in those stakes, and to them the importance was more sales-related, according to our research. So, based on that, I did not anticipate the fervor of the response to suspending the stakes program.”
Q: Many trustees were upset at the lack of consultation from the board of directors before the decision was made to suspend the stakes program. Is this a problem?
A: “We can never communicate enough with the broader trustees. This past year, we’ve started three new committees—racing and nominations, strategic planning, and marketing. All trustees are welcome to participate in any and all of them. (The trustees) are electors. And all day-to-day management is within the 13-member board of directors. The reality, though, is that the trustees, to a person, are nominators, and in many cases major nominators. So it’s important to get their input. In retrospect, we should have gotten more input from the trustees.”