Breeders' Cup Recommendations on Table
by Esther Marr
Date Posted: 7/8/2009 8:44:20 AM
Last Updated: 7/9/2009 12:03:21 PM

While Breeders’ Cup is currently operating with debt some believe will result in cuts to purses, a 20-member group has been working toward long-term solutions to bring the organization back to financial stability.

Headed by Padua Stables’ Satish Sanan, the strategic planning team has met several times over the last eight months to formulate a plan to get Breeders’ Cup back on track. Though he wouldn’t reveal specific details—the recommendations will be presented to the board July 9—Sanan outlined the basic goals.

During the July 9 meeting, there will also be an election to fill six seats on the 13-person Breeders’ Cup board of directors. There are 10 candidates contending for the seats.

According to its 2008 financial statement, Breeders’ Cup total net assets dropped to $28,221,356 last year from $40,930,573 in 2007. The organization also reported a negative cash flow of a little more than $7.5 million, which reduced its cash balance to about $1.2 million by the end of the year.

News that Breeders’ Cup is operating at a deficit this year was reported earlier this year. After a Feb. 4 board meeting, Breeders’ Cup president Greg Avioli said $5 million would be taken from about $30 million in reserves to fund the Breeders’ Cup Stakes program.

“The Breeders’ Cup board of directors is meeting on July 9 to review long-term strategic planning for the organization, among other agenda items,” Breeders’ Cup said in a statement provided to The Blood-Horse July 7. “We will be in a better position to comment on long-term financial matters after we have completed 2009 foal nominations, which we believe will be the most direct indicator of the effect the recession will have on finances in future years.

“In terms of our preparation for this year’s Championships, we are ahead of last year’s pace in ticket sales, and our sponsorship program is exceeding expectations. As previously announced in January, the boards of directors and trustees determined to operate at a substantial deficit in 2009 in order to maintain total Breeders’ Cup funded-purses at over $30 million. This action was taken to assist Breeders’ Cup nominators and owners in this difficult economy.

"Funds to cover this deficit will come from the organizations operating reserves. At this time, we expect that our 2009 results will be consistent with the budget.”

The number of foals nominated to the Breeders’ Cup program for 2008 was 14,602, down about 9% from 16,089 in 2007, according to figures released Feb. 24 by Breeders’ Cup and reported by The Blood-Horse. Revenue from 2008 foal nominations is about $7.3 million based on the $500-per-foal nomination fee. That’s also down about 9% from $8 million in 2007.

Based on projections and economic conditions, Breeders’ Cup also expects an 8% decline in revenue from stallion nominations for 2008, and anticipates a 22% decrease in 2009. The numbers aren’t unexpected given a reduction in stud fees charged by breeding farms and the retirement of several big-ticket stallions. Many farms announced the fee cuts last year in the midst of sharp declines in the auction market.

From 1984-2007, the largest decline in stallion nomination revenue was 20.6% from 1991 to 1992. Since 1993, stallion revenue generally has increased each year and hit $9.13 million in 2007, the highest figure since 1989, according to figures provided by Breeders’ Cup.

In February, the board of members and trustees agreed not to cut 2009 purses for the two-day World Championships. Avioli at the time told The Blood-Horse he’d like to give the new format a chance.

“The last thing you want to do is reduce purses (for the Championships), but whether that’s going to be entirely avoidable this year, I don’t know,” Breeders’ Cup board member John Sikura said. “The Breeders’ Cup stakes program and how that’s funded and the budgetary consequences and constraints, those are going to be really tough issues this year. I would strongly suspect from what I’ve read and heard that there are going to be some changes.

“It’s unfortunate, and in my opinion, there’s no one to blame. This is an industry-wide program where luxury goods like horses are suffering.”

Last December, Breeders’ Cup announced it would suspend funding for its $5-million stakes program, but after receiving an immediate response from many breeders who criticized the move, the organization reversed its decision and subsidized the program using money from a reserve account.

With his strategic planning committee, Sanan has been working on long-term solutions for the deficit. The committee will recommend Breeders’ Cup shift its focus to four different areas: making sure its mission is clear; creating enhanced competition leading up to the World Championships; focusing on two or three key racetracks that will commit to being strategic partners in hosting the event; and making sure the customer is at the heart of all its activities.

Over the last several months, Sanan and his team have gathered thoughts and opinions from major industry stakeholders around the country to form the recommendations, which Sanan called a “five- to 10-year strategic plan for the Breeders’ Cup.”

Since Breeders’ Cup was formed 25 years ago, Sanan said the organization has slowly lost sight of its mission and vision. His committee will reveal what it believes that mission to be and how the organization should re-grasp it. Sanan also said the Breeders’ Cup brand had become “diluted” with all its different programs and sponsored races.

“People can’t differentiate between the different series,” he said. “They overlap. Our brand name needs to be clear. We have worked hard to come up with some recommendations that would allow us to have a very simple competition across the seasons that leads up to the championship days and has a single focus and mission rather than all these different things we’ve got going.”

Sanan’s committee has come up with a plan whereby three or four key tracks that meet a certain set of criteria would agree to partner with Breeders’ Cup and host the World Championships on a long-term basis. Sanan also said Breeders’ Cup needs to better define its customer base.

“If you talk to the big gamblers that bet a half-million dollars on Breeders’ Cup day, they will tell you that we put on the show for ourselves,” Sanan said. “We don’t pay attention to our fans or the average people who show up at Belmont or Santa Anita or Churchill every day.

“(The committee) spent time defining who our customers are and where the focus should be if we want to make this successful. Our recommendation will be a comprehensive customer-focused strategy on everything we do. If the Breeders’ Cup is successful, then the rest of the industry is successful.”



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