Activities of The Jockey Club
Laura Barillaro
Laura Barillaro, Executive Vice President and Chief Financial Officer, The Jockey Club

Laura Barillaro: Good morning, everyone. During this report we normally provide an update of our activities over the past year, inclusive of our commercial businesses, our charities, and our industry-related initiatives. The majority of that information is available in the brochure at your seat.

At last year's Round Table Conference, Chairman Janney presented a list of initiatives The Jockey Club was going to pursue based on recommendations from the 2018 McKinsey analysis of the Thoroughbred industry. So, rather than provide the traditional activities report, this morning I will share with you our progress on some of those recommendations.

Let's begin with marketing and the expansion of America's Best Racing into a full-fledged digital services company. Working with industry partners, ABR encourages potential customers to visit racetracks, which McKinsey said was likely the best way to create new fans. With that goal in mind, ABR produced a series of short-form videos distributed across its digital and social channels as well as and

In 2019 ABR retained digital and social media agency Social Tribe, to provide key strategic counsel in concert with a paid media promotion plan, a coordinated influencing marketing program designed to amplify engagement, reach, and awareness and provide enhanced social support across the ABR channels.

To date, the results have been successful. Comparing June 2019 against June 2018 ABR grew its followers 6.3 percent, fan engagement increased 69 percent, the URL click-through rate to was up 257 percent, and digital reach was up 83 percent. Moreover, ABR's unique page views were up 44 percent this May compared to May 2018, while unique visitors during May were up more than 21 percent year over year. All despite not having the top three Derby horses competing in the 2019 Preakness and having to confront the increase in negative mainstream coverage of the sport.

ABR also partnered with The Stronach Group to engage nine influencers to attend the Preakness as ABR's guests. Those nine influencers reached just shy of five million followers.

ABR's also partnering with to create the America's Best Racing Fan Choice Awards., through its Vox Populi award, annually recognizes the horse whose popularity and racing excellence best resonate with the general public. This November the Vox Populi will be one of 12 award categories fans can vote on through the America's Best Racing Fan Choice Awards.

Additionally, every fan that submits a ballot will be entered into a sweepstakes to win a VIP trip to the Breeders' Cup at Keeneland in 2020 and the opportunity to place a $10,000 win bet on the Breeders' Cup Classic.

Through the America's Best Racing brand The Jockey Club has continued to be a strong supporter with racing on television. In its seminal 2011 report on the sustainability of the industry, McKinsey recognized that the sportís investment in television was woefully inadequate. At that time McKinsey noted that there were just 43 hours of national programming. Fast forward to 2019 and the combined hours of long-time industry supporters NBC Sports and FOX Sports now exceed 590 hours. In both cases America's Best Racing is the primary sponsor and supporter.

In tandem with the television recommendation McKinsey noted that less than half of rural racetracks broadcast their signals in high definition. In response McKinsey proposed that The Jockey Club develop a capital improvement grant fund to support the conversion to high definition at racetracks, primarily to improve the quality of the content supplied to TVG, the sport's daily broadcast partner.

The Jockey Club HD grant fund provided qualifying racetracks with up to $150,000 to purchase or lease high definition equipment. Hawthorne Race Course was the first racetrack to make use of the grant and it broadcast all of its races in high definition during its 2019 spring meet.

Other tracks to use the fund include Delaware Park, Finger Lakes, and Colonial Downs, with another 10 racetracks expressing interest.

Kip Levin of TVG reported to us last week that the impact of this grant fund has been substantial. TVG now hopes to have close to 100 percent high definition in 2020, compared to just 48 percent in 2018. And they noted that The Jockey Club's initiative contributed to about 25 percent of this growth.

The next recommendation concerned funding a permanent office of race-day scheduling to mitigate the overlapping of races. When races overlap it can negatively affect a fan's attitude towards racing, and losing fan attention can detract from handle at host racetracks. McKinsey looked at roughly 4,000 races where the purse size was greater than $50,000 and found that approximately half of those races did not dominate their time slots and were competing with lower quality races. McKinsey estimated that if racing could better schedule its races to minimize conflict it could generate $400 million in incremental handle each year.

Through Equibase, an office of race-day scheduling was created. Since mid-July Equibase is operating what we call the scheduling hub. The scheduling hub enables racetracks to compare off times through an optimization tool developed by McKinsey. The racetracks communicate with Equibase and one another during race days to help clear conflicts, which is definitely more efficient than searching simulcast signals for conflicts. Participating race tracks include Arlington, Del Mar, Monmouth, Saratoga and Laurel. And we anticipate other racetracks will participate once their meets open.

The next few recommendations focused on betting, which as you know, is the lifeblood of this sport. Here McKinsey recommended that the sport experiment with lower takeout rates, introduce new methods of wagering, including fixed-odds and single pool and finally, develop a simplified betting process to aid with onboarding new fans.

Let's start with takeout, a long-standing topic of debate in the industry. We were heartened to see options such as the Pick-5 wagers from Colonial Downs and the New York Racing Association and The Stronach Group include reduced takeout rates from 12 to 15 percent. If horse racing is going to compete with, or better yet, complement sports betting, takeout rates need to be more in line with what sports bettors expect. The Jockey Club hopes to see these experiments turn into permanent reductions.

Since sports betting was made legal in New Jersey in 2018 other states have begun and even passed legislation to legalize it. According to as of August 1, 10 states now have full-scale sports betting and eight others have passed bills.

As McKinsey said in its report, it is essential that horse racing promote itself alongside sports betting. As most of you know, wagering in Thoroughbred racing is traditionally pari-mutuel where the odds fluctuate until the horses leave the starting gate. Fixed-odds wagering enables a bettor to keep the odds received when the bet was placed. Adding a fixed-odd wagering option, which is used for most sports betting, is one way for horse racing to gain the interest of sports bettors.

On Saturday, July 20th, DraftKings offered fixed-odds wagering on five races at Monmouth Park. Bill Knauf, vice president of business operations at Monmouth Park, will speak to you today about sports betting and Monmouth's strategies for marketing both pari-mutuel and fixed-odds wagering.

Later in the program you will also hear from John Messara of New South Wales, Australia where fixed odds is one of the fast growing segments of race wagering and how it has enabled racing to better compete with sports betting.

At the 2011 Round Table McKinsey noted that single-pool wagering could provide decimal odds, increase liquidity, and facilitate new bet types. The Jockey Club continues to work with tote companies and racetrack companies towards a pilot project.

Finally, recognizing that advertising and marketing alone won't make for new committed fans, McKinsey also recommended that The Jockey Club pursue a simplified betting application. As McKinsey reported in 2018, 33 percent of all fans rank simpler betting as one of the three most important issues in racing. And 20 percent of potential bettors said the main reason for not betting was complexity. Equibase is currently developing a simplified betting tool which will enable users to choose risk level based on an expected reward. This tool will also assist with handicapping and wagering on a race based on preferences rather than just providing odds or identifying which horse is the favorite. Expect to see the tool, which will be free with no sign-in required on later this year.

The last recommendation to report on is The Jockey Club's interest in track ownership; in partnership or independently. This is similar in nature to the path that The British Jockey Club took a number of years ago, and its ownership now includes 12 racetracks, bringing stability and investment to UK racing. This is an objective that remains high among our priorities, but to date we really have no particular news to report.

Thank you for your attention and your continued support. And I hope that you enjoy the rest of today's program.

Stuart S. Janney III: Thank you, Laura.

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