Alan Balch - Past is prologue?

By Alan F. Balch

Just over 35 years ago – when I was entrenched in California track management – I spoke publicly, and much more vehemently in our private executive confines, about my belief that the racing industry should invest heavily in research and development to meet the competitive challenges to come.  

While we could still afford to do it.

What I had to say then was met with shaking heads, laughter, rolling eyes, and then confined to the round file.  As this essay undoubtedly will be, too.

But the fact of the matter is that the future of racing then appeared dubious to me, even while on the crest of the wave we were riding in the mid-1980s.  The California State Lottery had been approved by the voters in November 1984, and its first tickets were sold in October 1985.  The United States Supreme Court upheld native American tribal sovereignty over the states in 1986, and by 1988 their gaming was beginning in several jurisdictions via compacts with state governments.  Satellite and intertrack wagering throughout California were well underway, and national simulcasting between jurisdictions was “old” then by comparison.   

At that point, we certainly couldn’t have envisioned all the ramifications of the Internet revolution; web browsing began about 1990.  Amazon was founded in 1994.  Websites became prolific.  My own marketing agency even had a Cool Site of the Day on the World Wide Web, and our client Del Mar developed one of racing’s first websites.

In short, it was no secret in 1985, and increasingly understood thereafter, that traditional gaming enterprises, and horse racing in particular, were going to be subject to greater competition than ever before, on a wider and deeper scale.  Shouldn’t we then have been sparing no effort to determine how we were going to innovate and compete in the evolving world?  

I remember citing Ted Levitt’s landmark work entitled “Marketing Myopia,” which pointed out the obvious (every successful business was once a growth enterprise) to demonstrate the not-so-obvious.  What happened to the vastly successful railroads, for example?  Well, they kept on insisting they were still in the railroad business (as opposed to defining the transportation business they were actually in, with all its other opportunities) until they were out of business almost entirely.  

Just think about that for a moment.  And apply it to horse racing.

In some ways, it’s a testament to racing’s strength as a sporting proposition that it has survived at all, or as well as it has, given the onslaught of competition and our continuing ignorance of potential opportunities.

One of my favorite corporate stories is American Totalisator Company, now AmTote.  Imagine what a revolutionary step it was in 1933 to be able instantaneously to calculate and display odds and payoffs, illuminated electronically via giant Tote boards to tens of thousands of bettors!  Based on the Straus patents, it’s no wonder that company had virtually no competition in American racing by 1940, when our sport was far and away this country’s biggest, most successful, and richest of all.  And is that possibly why Straus’ own myopia about what his company was really doing left the door open to its competitor IBM and every other technology enterprise since then?  

Technology now literally rules the world, and racing is becoming increasingly insignificant, a micro-market compared to its position 90 years ago.

My original racing mentor at Santa Anita, Robert Strub, used to warn all of us, “we don’t want to go the way of the buggy whip.”  And that’s what originally got me interested in industry, product, and brand life-cycles.  But heading a public company, as he and his Board did, also caused them to focus more on earnings-per-share-this-quarter, rather than assessing or investing in nebulous future opportunities.  And confronting the real threats we faced, covert and overt.  We didn’t have the discipline to do either.

So, rather than having had a coordinated industry approach developed decades ago to revolutionize betting on the races in America, we now have three behemoths – NYRA, Churchill, and 1/ST Racing/Stronach – battling each other.  They use outmoded ground rules, competing for horses now that foal crops are again at 1965 levels, while field sizes and starts per horse are at or near historic lows.

Here on the island of California, decreasing field size is leading to increasing competitive disadvantage in the national betting picture.  There’s so much hand-wringing you can practically hear it.  Rather than address these complex issues jointly among all organizational stakeholders, with some modicum of sophistication applied to objective data, our ongoing internal blame game has reached unprecedented heights of popularity.  Even though it’s never been a laggard in the ratings. 

The advent of the new Horseracing Integrity and Safety Authority [HISA] may level the national competitive plane somewhat in California’s favor, once our safety protocols become widely observed.  But the fundamental structural problems will remain.

California trainers, owners, tracks, regulators, and key legislators, urgently need to understand and brainstorm the situation we face, together, the same way, at the same time, with the same data.  No idea should be off the table.  Sophisticated purse redistribution and participation incentives, based on level of competition, field size, field content, and surface, should head the list . . . along with potential realignment of racing schedules to fit the horse populations available, joined with robust recruitment programs . . . and critically needed capital improvements at Santa Anita and Golden Gate Fields particularly.

We’ve suffered from a California version of myopia for just short of a century now . . . isn’t it about time to open all our eyes, together?