Friday’s Pan-Am Conference Report

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Gatewood Bell | 2017 Pan American Conference/Max Krupka

By T. D. Thornton

OUTSIDE DOPING EXPERTS GIVE INSIDER PERSPECTIVES ON CHEATING

Since the introduction of federal legislation two years ago that would put drug testing and medication oversight in United States Thoroughbred racing under the control of an independent testing entity, debate has been intense about whether or not “outsiders” would effectively be able to regulate without understanding the nuances of the sport. But two invited speakers at Friday’s Pan American Conference–both of whom admitted they had very limited knowledge of horse racing–put a serious dent in the argument against handing over drug regulation to an outside agency. They did it in separate presentations by giving succinct, blow-by-blow analyses of the cultures of doping in other sports, and hearing their descriptions of the common traits of cheaters in other forms of athletics was the verbal equivalent of having a mirror held up to the drug-related problems that plague U.S. racing.

“The effectiveness of procedural safeguards go hand in hand with the attitude [within] the sport,” said Richard McLaren, an internationally recognized expert in sports law who has spent his career working at the highest levels to protect the integrity of sports. “And where the culture of doping occurs, the safeguards simply don’t work.”

McLaren shared his experiences as a member of the World Anti-Doping Agency’s (WADA) Independent Commission. In 2016 he spearheaded investigations into systemic doping, corruption, and sample tampering in Russian athletics at the 2014 Winter Olympics.

Acceptance of doping–even tacit acceptance that exists because honest participants believe the system is broken– “becomes cancerous. It gnaws away and eats at the system,” McLaren said.

When McLaren gave the example of doping systems operating on multiple levels, it was easy to envision his words pertaining to Thoroughbred racing, where no sphere of the industry–trainers, owners, breeders, veterinarians, track operators, and even regulators–seems to be free from suspicions involving doping or the inability to punish cheaters properly. McLaren said that because of the nature of this sort of multi-level pervasiveness, and even with safeguards in place, “it’s easy for corruption to creep in and override the safeguards.”

Even if you view a spor–any sport–in the rosiest way possible and think doping exists within it only in isolated pockets, McLaren said that’s still unacceptable because “as that culture keeps growing and growing and changing it becomes more pervasive, and there are spillover effects not only to the athletes but also to all the others that are involved, [and it becomes] a culture of chaos.”

Learned behavior and institutional bias are hallmarks of a broken system, McLaren said, and they manifest themselves in a how-things-should-be-done versus a how-things-actually-get- done mindset.

“Every institution has these biases, and that is why it is very important to bring in independent persons” as regulators and investigators, McLaren said.

“The more the brand is tarnished, the more difficult the reformation,” McLaren said. “And getting a reputation back is a lot harder that destroying the reputation in the first place.”

McLaren gave the example of his Russian doping investigation, in which he learned some regulators were aware of allegations of cheating without knowing the full picture. Other officials had been informed outright by whistle blowers that wrongdoing was going on, but the officials had never been trained on how to properly act on such information.

“You can change the rules, but that doesn’t change the underlying behavior,” McLaren said. The culture must change with the rules, he added.

So how do you stop a sport from being destroyed by doping in the first place? That’s where the expertise of Dr. Larry Bowers was enlightening. He’s a chemist with nearly five decades of experience who retired last year from the United States Anti-Doping Agency (USADA) after serving as its chief science officer for nearly a decade. He spoke as the lone non-racing panelist on the “Ensuring the Integrity of Racing” roundtable.

“Anti-doping is really not about catching people. It’s really about deterring people from doing that behavior in the first place,” Bowers said.

Yet, he added, you do have to catch some cheaters just to provide fuel for deterring others.

Bowers urged delegates to consider doping as a process where a cheater’s values get subjected to rational choice, and they then do a risk-versus-reward calculation to figure out if the risk of getting caught and penalized outweighs the benefits of doing so. This process involves the perceived certainty of being detected, the severity of the sanction, and the perceived timeliness of how those sanctions would be handed down.

“So if the sanction isn’t significant compared to what the benefits are, you get no deterrence,” Bowers said. “If it takes forever to get a sanction put in place and the person benefits from their [ill-gotten] winnings, then again you lose deterrence.”

Sound familiar?

To stay several steps ahead of cheaters, testers need to constantly change the number and types of tests. For drugs that have a relatively short window of detection, Bowers said, you must test far more frequently, which of course raises cost issues for testers.

There also needs to be variation in what is tested: Blood, urine, hair, skin, and now even exhaled air from a participant’s lungs should all be considered fair game.

Testing, particularly the out-of-competition form, also needs to be combined with intelligence gathering to be effective.

And if your testing is only good enough to catch the most egregious offenders, Bowers said, that’s not providing a good enough deterrent.

“If you have a particular group of people who seem to be outside of the rules, that undermines the entire program,” Bowers said.

McLaren had another piece of advice for the Pan Am delegates that he gleaned from his Russian doping investigation.

“It’s very important to protect whistleblowers and focus on the big picture,” McLaren said. “Deal with the message. Don’t deal with the messenger.”

Syndicates: Way of Future, But Not Without Perils

As far as racehorse ownership is concerned, syndicates and partnerships are the way of the future.

They’re also one of the most effective tools Thoroughbred racing has to hook newcomers and grow them into long-term fans of the sport.

Those messages were the dual takeaways from the “Ownership, Syndicates and International Racing” panel that led the second day of the Pan American Conference in Washington, D.C., on Friday.

Whether it’s by purchasing a horse at auction on spec and rounding up a few friends by word of mouth to chip in for expenses or organizing highly structured, well-advertised partnerships that aim to sign up hundreds of subscribers, syndicates should be embraced and facilitated by all sectors of the sport if the industry wants to infuse its ownership ranks with new blood.

“We need to in America, because the ‘sporting’ owner/breeder of old is just about dead,” said Gatewood Bell, the president of Cromwell Bloodstock in Lexington, Kentucky, and the founder of several syndicates that are on the smaller side.

Yet this growing segment of by-committee racehorse ownership is not without its difficulties and perils: Keeping partners constantly updated and making sure they get the behind-the-scenes perks they are promised can be a challenge. Multi-jurisdictional licensing can be a headache. And syndicate managers in the U.S. must make sure they are in compliance with securities laws, because horse shares can be subject to complicated and costly federal rules.

“There’s no question there are challenges. There are a lot of complexities here,” said Rick Nunnelley, a Lexington-based attorney with Stoll Keenon Ogden who both advises clients on syndicates and has been a member of one, too.

“There are 38 racing jurisdictions in the United States, and every state has different laws. So for licensing it can be very complicated,” Nunnelley said. “And that becomes problematic, particularly for foreign individuals, because they’re not coming to the United States [to get fingerprinted and photographed].”

Nunnelley gave contrasting examples of California, where only the managing owner has to be licensed to race, and New York, where pretty much every minority partner has to go through the licensing process. He added that if your partnership races in multiple states, the individual licensing fees can quickly escalate.

“So it can be burdensome, particularly for members of smaller outfits, but it’s manageable,” Nunnelley said.

Nunnelley also raised the issue of compliance with U.S. securities laws.

“You have to always be worried about the securities laws that apply,” Nunnelley said. “There are various structures that you can use to try to make sure that the syndicate is not a security, and in that case you don’t have to comply.”

But in cases where you do have to comply, Nunnelley added, “it’s an expensive compliance mechanism.” And another spin is that if you do go the non-comply route, there are restrictions on advertising your syndicate.

Elaine Lawlor, the director of Goffs Bloodstock Sales and an organizer of the international It’s All About the Girls Syndicate, said that in Australia, you are allowed to structure an initial racing syndicate without going through extensive compliance paperwork. But if you open a second syndicate or want to make a business out of it, there are registration requirements.

Lawlor was full of brainstorming ideas for the panel to ponder: What about syndicates for certain groups of business professionals, like chefs or dentists? How about really affordable syndicates aimed at college students? Or a series of races that are open only to syndicate owners to foster interest and competition?

“Just new ideas to keep this wonderful game alive,” Lawlor said. “I don’t know how we get racing from the back page to the front page.”

Nunnelley underscored that however you do it, make sure the business plan and prospectus is in writing, and that every detail is vetted. Something that might seem like “a nice problem to have” could turn into a major headache later if it’s not properly spelled out ahead of time–like who out of a 100-person syndicate would get the expensive trophy from a major stakes win.

Even though the partnerships that Bell and Lawlor have organized mostly rely on word of mouth to recruit investors, getting the “right” people in can be an effective marketing tool in and of itself. For example, Bell got professional football player Wes Welker into an ownership syndicate several years ago, and Welker’s presence at major racing events and his enthusiasm for the game have rubbed off on others.

“There are numerous professional athletes that are just starting to get in, and that draws attention to [racing], and that’s a good thing,” said Nunnelley. “They’re competitive. A lot of them have careers that are not going to last forever. So when they get involved, it draws a spotlight.”

The star power of celebrities aside, grass-roots level recruitment is still the backbone of syndicate-building. And partnership organizers are finding out that just letting newcomers get a peek behind the scenes at breeding farms and on the backstretch is a powerful marketing tool.

“If you engage them, they want in,” said Bell.

Yet the panelists agreed that syndicate managers need to make sure members have realistic expectations about making money off their buy-ins. And organizers of partnerships also have to be wary about promising more than they can deliver in terms of paddock access and seating on big race days.

“As much as you want to accommodate for everybody, you can’t,” said Lawlor.

“You get those 100-member syndicates–that’s too much for me,” agreed Bell.

Both Lawlor and Bell said they try to cap their syndicates at 20 or so partners, and that they’re fine with letting the more commercially focused syndicates handle the deals that involve larger numbers of subscribers.

Big Events and ‘Less is More’ Can Co-Exist to Grow Fans

In racing’s never-ending quest for attracting new fans, racecourse marketers worldwide are increasingly focusing on “big events,” catering better to families, and learning lessons from pro sports teams. But in some cases, a “less is more” approach is also effective, particularly if the scaling back involves increasing on-track comforts that will result in better retention of existing customers.

The attracting “New Fans: A Marketing Perspective” panel at Friday’s Pan American Conference yielded an interesting cross-section of “how to grow the fan base” viewpoints from track executives in North and South America as well as the United Kingdom.

“While today is about finding new customers, I would urge all of those in the room to also focus equally on retaining customers to make sure that they come back,” said Juliet Slot, the commercial director for Ascot Racecourse in England. “Because we were told that our customers were coming once and they weren’t coming back, so we wanted to find out why.”

The chief reason, according to Ascot’s customer research?

“We actually weren’t delivering to them the experience that they expected at Royal Ascot,” Slot said. “We had a lot of people coming, but not many staying [for future meets] So every year we had to work incredibly hard to find new customers.”

Slot said Ascot has since made significant investments in staffing, and explained that it was a challenge to give a largely temporary workforce of 5,500–the majority of whom are only going to be employed for that one Royal Ascot week–reason to take pride in Ascot’s “brand experience.”

That was accomplished by underscoring to the employees how important their roles are in keeping 300,000 customers happy over a five-day meet, Slot said. “We have three key points: How to be elegant, how to be uplifting, and how to be original. And we call that ‘the Ascot way.'”

Beyond the staffing upgrades, Slot said Ascot focused on the satisfaction of guests across all price points.

New dining facilities will cater to customers who want more exclusive food service, and even the way that meals are served will get subtle upgrades. Gone are the “airplane” style food trays in some restaurant areas. They will be replaced with finer dinnerware, Slot said, because that presentation did not align with what customers expected in such a formal setting.

And next month, the first new enclosure to open at the Royal Meeting in more than 100 years will debut: Taking a page from the infield experience at America’s first two legs of the Triple Crown races (but obviously not as casual), Ascot will debut the Village Enclosure on the Thursday, Friday and Saturday of the meet, featuring more contemporary boutique dining experiences, innovative bars, and live music throughout the day and into the evening. It will provide a new perspective on the spectacle of Royal Ascot, located on the inside of the track looking back towards the final furlong with Ascot’s iconic Grandstand as a backdrop.

Ascot has also been gradually reducing attendance capacities within its enclosures over last five years, similar to the way other global events like the Breeders’ Cup have started capping attendances with the goal of creating a better guest experience by not overcrowding customers.

“I think the two can live very much side by side,” Slot said when asked if the tradition and pageantry of Royal Ascot can co-exist with new technologies and ways of running the meet. She said that Ascot aims to accomplish this by wrapping the time-honored expectations of the meet in special perks, courtesies, and niceties that will pleasantly surprise customers.

Jim Lawson, chief executive officer of Woodbine Entertainment Group, said his Toronto-area track and gaming facility tries to be cognizant of the FOMO (“Fear Of Missing Out”) factor when trying to attract a younger demographic. Millennials, he said, consistently indicate when surveyed that they’d rather spend money on experiences than goods.

“The one thing we’ve done right collectively [as an industry] is we’ve moved, in terms of attracting a new generation of fans, to ‘big events’,” Lawson said. “They come for the food, they come for the fashion, they come for the music. And the industry as a whole is doing a great job. We’ve seen the racetracks and the industry morph into [creating] great events. It brings in fans, and that’s important to us.”

Lawson said Woodbine’s marketers also learn from and share strategies with Toronto’s major-league pro sports teams.

“When people to go the Toronto Raptors basketball game, the don’t go for the basketball. They go for the experience,” Lawson said. “And really, we’ve learned a lot from how successful the teams are in the Toronto market and why they’re successful. We do our best to work with them. We know them well.”

The downtime between races can make it challenging to engage fans, Lawson said, adding that he would like to see racing take cues from pro basketball games, where no timeout or halftime is without constant entertainment.

In South America, filling the downtime between races on a major event like G1 Chilean Derby Day can be a particular challenge because the Valparaiso Sporting Club usually cards 28 races for its marathon showcase day of racing.

Carlo Rossi, the president of the Latin American Organization for the Promotion of Thoroughbreds and president of Valparaiso Sporting Club, said his aim is to make Derby Day more of an all-ages event for people that want to picnic outdoors and celebrate the day like a festival. It routinely draws 80,000 attendees.

“We work to capture the family interest,” Rossi said. “That is our main objective.”

 

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