Woodbine Entertainment GroupNick Eaves - President & CEO
James L. Gagliano: We will start with Nick Eaves of Woodbine. Nick was named successor to longtime Woodbine CEO David Willmot this past June. We look forward to hearing from Nick. Nick, thanks for being with us today …
Nick Eaves: Thank you very much, Jim, and thank you and Mr. Phipps for inviting me here today to give the Woodbine perspective on the changes we’re experiencing in our market and how we’re attempting to adapt to that ever-changing market.
I’d like to start with one of the pictures of success from this July 4, 2010, when we hosted the 151 st running of the Queen’s Plate Stakes. We were honored with the presence of Her Majesty Queen Elizabeth II and His Royal Highness the Duke of Edinburgh. By every measure, that day was a remarkable success. We set a modern-day attendance record, the largest since the Breeders’ Cup at Woodbine in 1996; we set a single-day wagering record; and we tripled the viewership on our major Canadian television networks. So it was one of those days that reminded all of us who love racing what racing can be, what we’re committed to it being in the future, and it really inspired many of us at Woodbine to make sure as often as possible we’re replicating the magic of what that day was.
Unfortunately, as you can see from the chart behind me, that Queen’s Plate Day was more the exception rather than the rule. If you look at the nine years between 1990 and 1998, we experienced in our home market area — Toronto — successive declines amounting to approximately 20% over those years.
And naturally those trends told us things weren’t working — and change was required.
We set about to adapt to that change by trying to develop a set of strategies that were going to allow us to reverse that trend and really become leaders in this business.
We identified six key areas that we felt we needed to make significant progress.
Our first decision was to consolidate most of our live racing at Woodbine Racetrack. We sold Fort Erie Racetrack, which is across the border from Buffalo, New York. We sold Greenwood Racetrack in downtown Toronto. Then we consolidated those Thoroughbred and Standardbred race dates at Woodbine and built a new 1 ½-mile E.P. Taylor Turf Course, which is considered to be the best in North America. We built a 7/8ths-mile harness track as our inner track, allowing us to race year-round. Our strategy there was to consolidate our effort, consolidate our investment and focus all of our energy on the asset that we felt had the best potential to allow us to take the business forward.
We were an early adopter of account wagering. In the late 1990s we launched our ADW system called HorsePlayer Interactive...which serves as the national account wagering service. We developed it, invested in it and currently operate it not just in our own market but in every other market across Canada — and that provides for product continuity, and it provides for consistency in brand. Certainly what started as a home-based system has evolved into an Internet system. More recently, it has launched on a mobile application and that really is an area of considerable growth for us and the other markets in which we operate the service for in Canada are naturally experiencing many of the same things.
In 2010, we forecast wagering in excess of $300 million through our HorsePlayer Interactive system. We have an accompanying television system that goes with it — HPI TV. It’s a 24-hour racing channel available on satellite and digital cable. That really has been one of the strengths in our model.
We decided early, too, that racing needed a presence, not just on the 24-hour system, but we needed a network television presence. We partnered with one of the major sports networks in Canada and just this past spring, we actually evolved our network television model to be less about what we’d been doing previously, which is sort of a form of enhanced simulcast, and we turned it on its head and made it all about the betting product.
As you might imagine, there was some negative reaction from our core participants who didn’t want to see that but we felt that we needed to take that platform and showcase our racing product in a way that we can have those new customers finding a compelling reason to bet on it. As you can see from the hosts, we’re targeting a bit of a different demographic; we’ve got an online cash contest that we run alongside it; the branding speaks loudly to what it is; and, importantly, we’ve seen 20% growth in viewership numbers on that programming since we changed the format.
It really goes to driving our account wagering system signup and in the few weeks since we launched the new service, we’ve signed up in excess of 600 new horseplayer accounts and that really is one of the key models for us.
Like every other jurisdiction in North America, a key to our success has been partnering with our provincial government in their gaming strategy. In the early 2000s, we were able, with the province of Ontario, to install 2,000 slot machines at Woodbine. Of course, that’s allowed us to invest in different ways. It’s had a profound impact on our purse account — a near doubling of our purse account — since that program was implemented. That’s been one of the foundation elements of the growth of our business and it was important to us to implement that program in a way that made this new product offering a part of racing — we’ve got a common entrance, we’ve themed the gaming floor in a racing theme and the hundred thousand customers who attend Woodbine each week, not because there’s racing there but because of slots, are exposed to racing in a way that we think is pretty compelling. So we haven’t moved the needle, so to speak, in terms of converting enough of those gaming customers to racing, but we’re on our way.
We’ve invested significantly. Woodbine was built in 1956 and little reinvestment had occurred until the 1990s. Since then, we’ve spent in excess of $300 million trying to convert that facility into a modern-day entertainment destination — both front side for the customer and back side for the horse people.
Important to us also was, in addition to finding better ways to distribute and finding new ways to showcase the product, we really needed to instill in people in our market the beauty of racing and the compelling nature of racing in a way that they can relate. And I’ve chosen two examples to show you this morning.
The first is a facility called Turf Lounge, which we opened three or four years ago in downtown Toronto. We’ve got an off-track network not unlike many of the off-track networks across the United States, and it works well in terms of a form of distribution. But what it doesn’t do is attract new customers to racing.
So we launched Turf Lounge in the financial district of Toronto. We designed it in a way that we felt would be very compelling for that downtown person who’s a broker, a trader or a lawyer — they’re wagering for a living and we felt that they needed to see racing in a manner that they could relate to. Certainly Turf Lounge — in its high-end lounge format — has done that and it’s turned into a $10 million per year wagering operation importantly, but it is showcasing racing in a way that a demographic that had never been exposed to us before is finding compelling.
On the other side, the strategy was the same. We’ve got a concept called WEGZ Stadium Bar, which is a super-sized sports bar that we built in the suburbs of Toronto, and the strategy there was to put horseracing alongside the other key sports in the Toronto market — hockey, baseball, football, basketball — and have that younger demographic who is going out to that environment in the middle of horseracing while they are enjoying their other sports. And those are two examples of ways that we’ve been able to showcase racing to a demographic that had shown no interest in coming out to our racetrack in a way that they’re beginning to find compelling.
So what has it all meant?
Certainly, as the slide will show you, the decline in wagering was stopped. That’s a good thing. We saw a little bit of growth through the early part of the new millennium. We were pleased about that. As you can clearly see, there’s been a bit of a straight-lining since that point. That’s not a trend that we accept; I think that’s a reality that everybody in this room is coming to an understanding over, but it’s telling us that we’ve got to keep looking at new ways to distribute our product; new ways to showcase racing in a manner that can be compelling to new customers; new bet types, whether it’s betting exchanges and things along those lines. We’ve got to be exploring all available opportunities to keep advancing our business and showing our significant market what it is we have to offer.
One area of focus that I’m going to show you on a video clip: we have the great advantage of owning the land that Woodine sits on. We’ve got 350 acres which are surplus to the business and we’ve developed a strategy to really turn Woodbine into a regional entertainment destination. There are other options in the Toronto market of course, but what doesn’t exist is a single facility in the sort of location that we have with the assets, the access, the infrastructure that we enjoy. So in partnership with the Cordish Company, which many of you may be familiar with, we’ve developed a plan called Woodbine Live!, which we’re at the end of the approval phase on and we’re hoping to begin construction on over the next several months. Certainly what it will do for us is transform our business, transform our facility, and make it the destination in the city of Toronto.
Thank you very much.Ogden Mills Phipps: Nick, we thank you. That was a wonderful presentation. We appreciate you coming here.