Magna: More Tracks, Profit-Sharing Plan for Racing

Look for more of the same from Magna Entertainment, which has built itself into the largest operator of Thoroughbred racetracks in the country, in the next two years. In addition, company chairman Frank Stronach has proposed a plan to split profits from racing.

During a stockholders' meeting April 18 at Magna-owned Santa Anita Park, Stronach proposed what he called "MEC's Racing Charter of Rights." He said he'd like to be joined by other "key stakeholders" in racing to guarantee how profits should be divided in the future.

"There's a big concern if one company controls so much of an industry," Stronach said of MEC's position in the racing business.

Stronach pledged MEC to the following formula for breaking out net takeout: 45% to the racetrack operator, 45% to horse owners, 5% to a backstretch fund, and 5% to a breeders' fund.

Stronach said Magna's policy is to reward its work force. "I'm not very happy with the way things are on the backstretch," he said. "It's pathetic."

Jim McAlpine, the company's president and chief executive officer, told about 300 stockholders gathered for the meeting that the company expects to add three to five more tracks to its current stable of 11 racing operations (including nine Thoroughbred tracks) in the next 12 to 24 months.

MEC, which announced revenues from racetrack operations of $459.4 million in 2001, also plans to continue to press its off-track wagering options by doubling or perhaps tripling its off-track facilities from its current 26 sites, and bring 200,000 customers to its XpressBet account wagering business over the same time period, McAlpine said.

"Today, we're the number one racetrack owner in America," he said. "Tomorrow, we want to be the world's leading electronic media wagering and entertainment company."

McAlpine estimated the expansion in the off-track and home wagering market would result in $2.25 billion in annual revenue.

McAlpine and Stronach painted a picture of an aggressive company that is committed to live horse racing, disciplined growth, and a balance between expansion and immediate profits.

"It does take some time," Stronach said of MEC's strategy. "People who stick with me always make the money. It'll be two, three, four years before we really see the changes. We're laying the foundation for what will be down the road a fantastic business. This is a business I know. But we won't see (it) for a few years.

"We are not flippers. I could have turned around and sold Santa Anita for three times what I paid for it. We're not a real estate business."

Stronach promised to continue his quest to make racetracks shopping and entertainment destinations, and to push ahead on company plans to create a television racing network as well as find a way to distribute it.

"People nowadays have a lot of choices for entertainment and we need to be more innovative," Stronach said.

Racing should be bigger than the lottery, Stronach said. "I don't think watching those balls bounce around is all that exciting." But he noted that the popularity of the lottery and slot machines over racing is due to their simplicity. "We need to simplify racing," he said. "It's too complicated for most people."

One innovation to look for, Stronach said, is a new type of betting machine that do the handicapping for people, a sort of "Jimmy the Greek" selection that a person can bet on and enjoy the experience of racing without having to do the work.

"We can outdo the lotteries," he said. "We can outdo the stock exchange. People from all over the world can bet on races at Santa Anita. The technology is there."

However, in response to a stockholder's question after his address, Stronach said his racetracks would accept on-track slot machines if made available to attract more people to the track, but "primarily, we're into live horseracing."

Stronach said plans to redo Gulfstream Park are in progress. Land for a training center north of the South Florida track has been purchased, and the facility could be at least partially completed by next winter.

In response to a reporter's question, McAlpine called the current problems at Gulfstream "an aberration." The current meeting is down in handle by 10%, and patrons have complained about short fields and other changes at the track.

McAlpine said the new training facility would help offset the shortage of horses that occurred with the closing of Hialeah Park, and that air travel and tourism, which suffered this year in the aftermath of the Sept. 11, 2001, terrorist attacks, should return to normal.

"This is one area where we really depend on the snowbirds from the north," McAlpine said of Gulfstream.

On the future of Northern California racing, Stronach was confusing. He said he hoped to keep Bay Meadows open for the immediate future, but also planned to push ahead with plans for a new track, Dixon Downs, near Sacramento.