Q & A With Greg Avioli, New Interim CEO of Breeders' Cup and NTRA

Gregory C. Avioli will face some major challenges when he takes over as interim chief executive officer of the Breeders' Cup and National Thoroughbred Racing Association July 1, replacing D.G. Van Clief Jr., the longtime Breeders' Cup executive who took on the additional role of commissioner of the NTRA following Tim Smith's departure in 2004. Van Clief announced his retirement from both positions in April. The boards of the two organizations named Avioli to the position following a joint meeting in Garden City, N.Y. Thursday.

The press release did not reference a national search for a permanent replacement, but stated that during an interim period the boards would "continue their ongoing discussions concerning the structure of the relationship between the two organizations beyond 2006," when their joint operating agreement is up for renewal.

While Van Clief is an industry insider, Avioli has been involved in racing less than a decade, coming to the NTRA with Smith when the organization was formed in 1998. Prior to that, he was senior vice president of international business development with International Sports and Entertainment Strategies, an Atlanta-based firm that counted the PGA Tour among its biggest clients.

Avioli, 41, has served in various roles with the NTRA, including deputy commissioner, executive vice president, and currently chief operating officer and interim chief financial officer. Recently, his primary focus has been on legislative issues in Washington, D.C., where the horse industry has significantly broadened its presence and scored key legislative victories, including the legalization of Internet wagering through an amendment to the Interstate Horseracing Act, elimination of a 30% withholding tax on foreign wagers, and favorable tax changes for horse owners on depreciation.

Avioli was interviewed by Ray Paulick, editor in chief of The Blood-Horse.

Did the Breeders' Cup and NTRA boards present a joint vision or mission for you to follow?
The two boards are looking for management to develop a vision for both organizations which could include a joint vision, or it could include separate visions. I believe there is a consensus among the board members that, in an ideal world, there would be the most efficiency and the most benefit to the industry if the two organizations could agree upon and implement a joint strategy.

The structure of the Breeders' Cup board changed in January and a new board was elected. There have been several changes on the NTRA board, and more seem likely, given the search for new CEOs at Churchill Downs and Magna Entertainment. What challenges does that present?
If you look at these two boards, there is a tremendous amount of talent, both in terms of their understanding of the racing business and the breeding industry, but also in terms of general business strategy, marketing, international development, etc. I think the greatest challenge is finding the way to best utilize the tremendous amount of talent on these boards.

Who will you be working with to develop this vision?
I'll be working directly with the two chairmen, Craig Fravel (NTRA) and Bill Farish (Breeders' Cup), as well as D.G. Van Clief, and looking to put in place the most effective senior management team possible, so it's an ongoing process.

Did the boards give you a deadline?
I expect to come back to the board by the September board meetings with specific plans, both strategic and operational.

Do you anticipate significant personnel changes?
I think it's premature to say, but I would expect some changes within the organizations.

How has your working relationship been with D. G. Van Clief?
D.G. has been a mentor to me for the past three years. He's extremely knowledgable on virtually all aspects of domestic and international racing. I'm very excited that he's agreed to stay in the important position of chairman emeritus and look forward to working closely with him on all matters relating to the future of the two organizations.

When Tim Smith was hired as commissioner, it was strongly stated that the NTRA will be a CEO-driven operation, as opposed to board driven? Has that changed?
The distinction between 1998 and now is that, when Tim Smith was hired, there was a clear vision for the NTRA, following the development of a detailed and voluminous business plan that set forth with a great deal of specificity strategies, programs, and objectives. The concept was that -- now that the plan had been approved -- it was up to the CEO and his team to implement it. My first challenge is to present a vision to the two boards.

Is it fair to say the original plan failed?
No. There have been some clear successes. In addition to the legislative area, which gets a lot of attention, the development of the ESPN relationship is going to prove over time to be one of the successes of the first phase of the NTRA. I think we have scratched the surface of what the NTRA can accomplish with sponsorship fueled by group purchasing. Revenues have grown from zero to close to $15 million in less than a decade.

There are areas that clearly have not performed as expected in the original NTRA business plan. One that jumps out is the development of a national account wagering hub that was going to have the dual benefits of providing funding for the NTRA, which was originally projected to be $10 million a year, and more importantly to allow the industry to maximize the potential of account wagering.

Imagine if we had something like "I-Horse" in the same vein as the popular I-Tunes music download Web site, where every racetrack would send its content and the tracks would compete for the customer dollar based on the quality of their races. There are many issues, as far as simulcast contracts and whose customer is whose, but if you look at it from the consumer standpoint, wouldn't that be a wonderful product? Imagine if every member of this industry would invest part of their advertising dollars -- where it is legal -- to urge the fans to go online to a central site to bet their favorite horses or their favorite tracks.

Why did that fail?
There are so many competitive barriers, given the current setup of the industry, including the revenue variances, depending on whether a customer is betting at your facility, or another track or an account wagering provider. Candidly, the industry is not set up economically right now for tracks to compete solely on the basis of the quality of their racing product.

A second thing that hasn't worked is the marketing of a centralized national brand with a national, uniformly-seamed ad campaign. The single biggest reason is the industry has changed dramatically from when that concept was put in place, with the growth and development of the Magna brand, the CDI, or Churchill Downs brand, the TVG brand, the Youbet brand. There is just not the support throughout the country for an industry-wide brand. Even if there were support, I think given the changes in media that, if you looked at this question right now, you might determine that a national media ad campaign on television or in print may not be the best use of the industry's limited funds, particularly given the fact that the leading growth area for this sport is Internet wagering. That ties back into my comments on the importance of trying to have a nationally branded Internet wagering product.

Is a nationally branded Internet product possible, given the barriers you mentioned with Magna, Churchill, etc?
Clearly you have some brands developing already. First and foremost in my mind is the relationship with the NTRA's long-term sponsor, TVG (which pays the NTRA one-half of 1% on wagers through its system). But, as we know, TVG is not able to offer all of the product for the industry that the fans want to see.

We are the only form of Internet betting that's legal in the United States, and we have to continue to explore ways to better leverage our industry's No. 1 strategic advantage, to the benefit of the customer.

Congress continues to explore ways to tighten the ban on Internet wagering, though the most recent House of Representatives bill acknowledges horse racing's legal standing because of the amended Interstate Horseracing Act. Are you confident the industry will continue to be able to offer Internet betting?
I am confident that legality will continue, but it will also continue to come under fire in some corners.

Do you intend to propose a televised racing series?
Yes, the development and implementation of a racing series linking the Breeders' Cup World Championships to the top stakes races throughout the year will be a critical part of the strategy for both organizations moving forward. Importantly, this is a concept that is fully embraced by our new partners at ESPN, and with their broad array of media platforms, along with the newly designed NTRA.com Web site, we think we have for the first time the right set of tools to effectively market and promote a racing series.

Will this be a revenue source for the NTRA and Breeders' Cup?
Overall, you look in creating a new product to add value to both our championship day and the races within the series, and ultimately to the bloodstock market. It remains to be seen whether the revenues generated will be in the form of additional sponsorship dollars, those funds spent by marketing partners on third-party advertising, or the increased revenues from live and simulcast wagering.

Will you continue to focus your efforts on legislative activities in Washington, D.C.?
I will be, but I am ably assisted in that task by Peggy Hendershot, vice president of legislative and corporate planning, who has done a fantastic job in managing the industry's political action committee, Horse PAC, and has been taking on significant additional responsibilities in the lobbying efforts in Washington. In addition, our lobbying firm, the Alpine Group, recently added a tremendous resource by hiring Bob Brooks, former chief of staff with Jim McCrery (who is expected to be the next chairman of the House Ways and Means Committee). McCrery was the sponsor of the bill to eliminate the 30% withholding tax on international wagers.