Keeneland’s Nicholson on horse industry’s future

April 3, 2010

As the spring racing meet was about to begin, Keeneland President Nick Nicholson briskly walked the grounds to make sure everything was ready.

At the track’s last turn, he inspected the yellow forsythia hedge and tall magnolia trees. (He knows there are exactly 73 of them.) He pointed out new bushes in the infield that look as if they have always been there, and a maple tree in the paddock that won’t thrive no matter what the groundskeepers do.

Nicholson drove a visitor to the back of the racecourse’s 1,200 acres, to a nursery where trimmed shrubs stand ready should any part of the green hedges that spell “Keeneland” in the infield suddenly turn brown.

“You’re looking at the next generation of the parking lot there,” he said, pointing to a row of tall trees in the nursery. They are gradually being moved out to the parking lot to replace the giant pin oaks as they succumb to age and insects.

What does this obsession with landscaping have to do with horse racing and Kentucky’s Thoroughbred industry? Everything, Nicholson believes.

That’s because the future of the horse industry that is so vital to Kentucky’s image and economy depends on developing a larger, younger and more loyal fan base. Nicholson thinks the years-long battle over expanded gambling has distracted the industry from that fundamental issue.

“Expanded gaming has taken on more of a role than I think it should have; I would love to think of a way to get it behind us,” he said. “It will never be a long-term fix or a total solution. It would just provide some capital at a time when the industry needs capital. It’s a means to an end. It’s not the end.”

Horse racing once flourished, in part, because it was the only way many people could gamble legally. Now there are plenty of quicker and cheaper ways, including lotteries, slot machines, Internet betting and casinos. Everyone wants in on the action, including politicians eager to avoid raising taxes.

“I often feel like a ping-pong ball in other people’s ping-pong games,” Nicholson said.

Unlike corporate racetracks, whose ultimate goal is to provide shareholders with a maximum return on investment, Keeneland is a non-profit association. Since its founding in 1936, the mission has been to support Kentucky’s Thoroughbred breeding industry through racing and sales to an increasingly international market.

“It’s the marketplace where the farmers bring their crop to market,” he said. “The reason we race is to determine which horses to breed to which horses.”

The income and jobs the horse industry provides Kentucky — from breeders and blacksmiths to restaurant waiters and equine artists — ultimately depend on the popularity of horses and racing, Nicholson said. That’s why he spends much of his time on efforts to improve racing’s credibility, from the integrity of the betting system to improved safety for horses and riders.

“For the new fan base we’ll build the sport on, safety is a threshold issue,” he said. “You can’t say (frequent death and injury) is part of the sport anymore. You’ve got to be doing everything you can do to prevent it.”

That means cracking down on horse doping and investing in such things as artificial track surfaces that are easier on horses’ legs and high-tech padding in the starting gate.

Growing horse racing’s fan base means providing a total entertainment experience — everything from exciting sport to good food, comfortable seats, beautiful landscaping, easy parking and friendly customer service.

During an orientation last Wednesday for some of the hundreds of green-jacketed retirees who work customer-service jobs at each racing meet, Nicholson told them: “You’re the secret ingredient in the recipe for what makes Keeneland special.”

To appeal to potential young fans, horse racing must market itself more creatively and embrace technology. Keeneland now has new season and annual passes, live online race video, race replays for cell phones and updates for both experienced and novice fans via SMS text, Twitter and Facebook.

Discreet remote-control television cameras have been installed in the paddock, and there’s a new TV camera platform behind the winner’s circle. “We want to create more of a Game Day atmosphere,” Nicholson said. “We’d like each meet to be like an international festival.”

The TVG network will have daily coverage from Keeneland this month. Churchill Downs in Louisville has partnered with NBC Sports for “Road to the Kentucky Derby” telecasts that will include Keeneland’s Bluegrass Stakes on April 10.

The future of the Thoroughbred industry, Nicholson believes, depends on attracting more fans who become passionate about horses, not just about gambling. It’s about the pageantry and excitement of the sport, the intellectual challenge of handicapping, the thrill of betting a winner and the pleasure of an afternoon with friends in a beautiful place that looks as if it has always been there.

“More days of cheap racing won’t do it,” he said. “We must work with like-minded tracks to create an appealing product. We can’t compete with a casino, nor should we want to.”

Keeneland President Nick Nicholson shows a visitor the nursery hidden among the association's 1,200 acres where mature trees and shrubs are grown for the racetrack's well-groomed grounds. Photo by Tom Eblen

Keeneland President Nick Nicholson shows a visitor the nursery where trees and shrubs are grown for the track's manicured landscape. Photo by Tom Eblen

Even ‘signature’ industries must support themselves

November 18, 2009

I’m worried about the financial state of journalism.

Digital technology has given news papers more readers than ever. Ironically, though, that technology means newspapers no longer are the dominant force in advertising, from where the money to support journalism has always come.

To make matters worse, most newspapers are owned by big corporations that went into debt to get bigger. They thought profits from advertising would make the debt affordable. They were wrong.

As a result, newspapers and newsrooms are dwindling in size. Radio and television newsrooms have been hit hard, too; they just don’t talk about it. But I worry most about newspapers, and not just because I work for one.

Newspapers have always done most of journalism’s heavy lifting, from investigations to public affairs reporting.

The Herald-Leader has gotten a lot of attention lately for exposing wasteful spending in some of Kentucky’s quasi- government agencies. But that kind of work is nothing new: Newspapers of all sizes have a long record of giving Kentucky’s powerful people and institutions some much-needed oversight.

Newspapers also play a big role in community-building. They do everything from covering neighborhood zoning disputes to printing wedding announcements.

You could call newspapers one of Kentucky’s “signature” industries. There’s at least one in each of Kentucky’s 120 counties, and almost all of them are struggling.

But I have an idea: What if newspapers could persuade the General Assembly to give them another way to replace the advertising revenue they used to have?

What if newspapers were allowed to put slot machines in some of that empty space where reporters and editors used to work? Big newspapers might even have room for full-blown casinos.

People who went to their local newspapers to gamble wouldn’t go out of state so much, so more of their money would stay in Kentucky.

Truthfully, though, much of that money would have stayed in Kentucky anyway. It just would have been spent on other things. So other than helping newspapers and the people associated with them, gambling revenue wouldn’t do a lot for Kentucky’s economy.

There would be other complications, too. For example, critics of slot machines and casinos say they attract crime and create other social costs.

There’s big money in addictive businesses like gambling, especially when they’re part of a government-sponsored monopoly.

Others would surely complain that it’s not fair for such a monopoly to benefit only one industry, like newspapers. At the least, TV and radio also would want a piece of the action. And it wouldn’t be long before politicians decided that government needed a bigger share of the take. After all, they created the monopoly, and they could just as easily take it away.

Even if newspapers could hang onto most of their new gambling revenue, I’m not sure it would be good for journalism in the long run.

Some media companies would use their cash infusion to invest in journalism — for a while. But corporate executives have a duty to maximize return for investors. If media companies could make big profits with slot machines and casinos, why would they want to subsidize journalism?

Even “signature” industries aren’t exempt from the laws of economics, no matter how special they think they are.

My guess is that journalism must find a way to adapt by attracting more loyal customers, doing a better job of marketing and selling its products, creating new business models and proving its value. It no longer can be totally dependent on something else, even advertising.

So maybe my newsroom gambling idea isn’t so good after all.

Besides, it’s not an original idea.

Another “signature” industry has tried this strategy in other states for years, with little evidence that slot machines and casinos are anything but a short-term fix for deeper economic issues.

Of course, that industry would have us think it’s a horse of a different color.

I wouldn’t bet on it.

Would slots at tracks be long-term cure or poison?

June 25, 2009

I’ve had several seriously ill friends and relatives suffer through chemotherapy. They do it because it is a short-term poison that often results in a long-term cure.

With the General Assembly now meeting in special session, I can’t help but wonder if the proposal to allow slot machines at horse-racing tracks doesn’t amount to chemotherapy in reverse: a short-term cure that could turn out to be long-term poison.

It’s easy to dismiss some of the arguments for slot machines, such as balancing the state budget and funding new school buildings. Expanded gambling won’t pay for state government and education in the long run any more than it has in other states.

The proper way to do that is a modern tax system that raises enough money so Kentucky can invest in creating a successful 21st century economy and society. The only way to create that modern tax system is for citizens and politicians to be honest with themselves and one another, and make some tough choices.

The problem I have with gambling as a substitute for honest taxation is that it’s based on the myth of easy money.

Sure, slot machines at racetracks would prompt some Kentucky gamblers to lose their money here rather than in other states. It also might attract some out-of-state gamblers.

But a lot of that money would go into the pockets of gambling interests, soak up discretionary income now spent elsewhere in Kentucky’s economy and create more social costs. If slot machines at racetracks were a panacea, the states that now have them wouldn’t be struggling with many of the same problems Kentucky faces.

The only reason to even consider slot machines, in my view, is to preserve Kentucky’s horse industry. It is one of Kentucky’s claims to fame and a vital piece of an agricultural economy that protects irreplaceable rural land from development.

As the Herald-Leader’s John Cheves reported last Sunday and Monday, the horse industry’s arguments for slot machines may be overstated, but the problems are real. Kentucky’s race purses and breeder incentives are no longer competitive with other states. No business can survive if it’s not competitive.

While the horse industry’s public face may be the wealthy owners of Central Kentucky’s showplace farms, its heart and soul are the small breeders and owners, merchants, farriers, veterinarians and others who make their living in the industry. They will follow the money, and who can blame them?

For Kentucky’s horse industry to be healthy, racing and breeding must be economically competitive. Other states have become more competitive with money generated by expanded gambling. That might be a quick cure for Kentucky’s horse industry, but could it be a long-term poison?

The danger, as Cheves’ articles pointed out, is that slot machines at racetracks can go from subsidizing horse racing to crowding it out. Kentucky’s long-term economic interests aren’t tied to the owners of racetracks so much as to the horse breeders, owners and workers who depend on them.

Horse racing thrived during the 20th century because it was the only way many people could gamble. That’s no longer the case. There are now many quicker, cheaper and more accessible ways to gamble — and, it seems, new ones are being invented every day.

The only way for horse racing to survive is for the industry to build a fan base around the enjoyment of watching and wagering on competition among equine athletes.

Putting slot machines at racetracks would clearly be in the best short-term interests of both state government and the horse industry. But what about the long term? That’s the real issue the General Assembly must face.

In the long run, will slot machines improve Kentucky’s economy and quality of life or detract from it? Will they help save the horse industry or hasten its demise?

Would more gambling be good for Kentucky?

April 7, 2009

I’m not much of a gambler, but I don’t have anything against it.

I’ll probably lose a few dollars at Keeneland this month, and a few more dollars at Churchill Downs on Derby Day, and have fun doing it. Plus, I’ll know I did my small part to keep beautiful horses grazing in bluegrass fields.

I buy a lottery ticket every now and then — when the jackpot gets really big — even though I know I probably have a better chance of being struck by lightning than cashing the ticket.

With the economy hurting and state government revenues far below the budget, the governor is likely to call legislators back to Frankfort this summer to consider tax reform. I hope they create real reform, because we badly need a tax system that produces enough reliable revenue to meet Kentucky’s needs.

Odds are, the discussion will lead to more talk about expanded gambling. The drumbeat for slot machines at racetracks and casinos has been getting louder for years, and this economy is causing more people to listen.

I wish I knew the answer to the big question: Would more options for gambling be good or bad for Kentucky?

Let’s look at the pros and cons. We won’t get bogged down in numbers, because I think most of the numbers thrown around are little more than wild guesses. It’s like many forms of economic forecasting: They make weather forecasting look like exact science and voodoo almost seem respectable.

First, let’s take an easy argument: Slot machines or casinos would keep many Kentuckians from driving across the Ohio River to gamble. That’s probably true.

Here’s another argument: Expanded gambling would bring a lot of additional revenue to state government, perhaps reducing other tax burdens. That may be true, although I suspect it would generate a lot less money than supporters claim.

The trouble is that the extra revenue reflects only one side of the ledger. For each million of gambling revenue that comes into state coffers, how many million more must be shifted from the pockets of Kentucky gamblers into the pockets of the gambling industry?

What’s the social cost of expanded gambling? In other words, how many children will go unfed? How much rent and child support will go unpaid? Sure, some of that new state revenue will go to offset gambling’s collateral damage, but it probably won’t be enough. When has Kentucky ever adequately funded social services?

Will expanded gambling grow Kentucky’s economy? We will keep many of our current gamblers from taking their money across the Ohio River. We may even lure some gamblers to Kentucky from neighboring states.

But we won’t be making Kentucky’s economic pie much bigger; we’ll just be slicing it differently. For the most part, new money spent on gambling would be money now spent on something else in Kentucky.

For all of those reasons, I’ve never thought government-assisted gambling was good public policy. Besides, gambling sends taxpayers the same unrealistic message it sends gamblers: You don’t need to work for the success you want, you just need to have Lady Luck on your side every now and then.

The best argument I’ve seen for expanded gambling in Kentucky is that it would help keep those pretty horses in bluegrass fields — and all of the jobs and economic activity they create. Not to mention the positive image the horse industry gives Kentucky. Horses are our international brand — and a good one, at that.

Kentucky’s thoroughbred industry wants racetracks to be allowed to have slot machines to provide more money for higher race purses and breeder incentives. That’s because other states with expanded gambling are doing that, threatening Kentucky’s preeminence.

Anyone who has been the parent of a teenager is suspicious of the “but everyone else is doing it” argument. In this case, though, the problem seems legitimate, even if the proposed solution is, at best, a short-term fix.

For one thing, I think it’s naïve to think Kentucky’s thoroughbred industry will be able to keep gambling to itself. There’s just too much money at stake. Other powerful interests will want slot machines, or full casinos, or some of the gambling money the horse industry hopes to keep for race purses and breeder incentives.

Besides, what’s the long-term future of any industry that depends on something else to prop it up? If thoroughbred racing hopes to survive and thrive in the long term, it must create more fans. Other tracks must cater to fans the way Keeneland and Churchill Downs do. Racing must find a way to support itself, not find something else to support it.

Of course, all of that is easier said than done. And if it can be done, it won’t happen quickly. Racing, like the economy, is where it is. So what should we do now?

Would more options for gambling be good or bad for Kentucky?

It’s a question we all need to ask ourselves, ask each other and ask our elected leaders. Because if there were ever a year it could happen, I’ll bet this is it.