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SBJ/June 18 - 24, 2001/OpinionPrint All
In his SportsBusiness Journal column of June 4-10 ["Two pawns in MLB's theater of the absurd"], Marvin Miller suggests that I am doing the baseball owners' bidding in the upcoming collective-bargaining negotiations. If this is so, the owners have a very peculiar way of showing their gratitude.
SBJ readers do not need another column from me on competitive balance in baseball. I do, however, want to note two things. First, I don't think it is taking sides to observe that there is a balance problem in baseball which is assuming new dimensions. Second, Marvin has taken some of my arguments out of context and invented others.
That said, Marvin, I still love you.
An economic crisis in California is getting a good deal of attention these days. And I don't mean the energy crisis.
Live thoroughbred racing in California, long a major hub for the sport at such legendary tracks as Santa Anita and Golden Gate Fields, is in a relative decline in popularity and purses across the state. And this is notwithstanding a recent 50 percent cut in thoroughbred racing's tax burden. As a result, more and more California horse owners are rightly looking to run their horses in heretofore-foreign territories, like Delaware and Florida. Talk about suffering a loss in local horsepower!
The plain fact is that pari-mutuel thoroughbred racing in California and elsewhere is perhaps the last industry in America subject to comprehensive economic regulation. It's not just regulation for the sake of integrity and safety. California, and virtually every other state with thoroughbred racing, regulates the economics of the sport, to wit: when and where racing takes place, prices for pari-mutuel wagering — that is, the precise percentage of the pari-mutuel wagering pool, or "takeout rate," retained by the track (and the state government) — and how the product will be distributed to racing enthusiasts, if at all, in addition to the live gate. This includes simulcasting, off-track betting, account wagering via telephone and Internet, and other licensing and revenue sources.
Looked at another way, thoroughbred racing may be the last remaining enterprise where states make sure there is no head-to-head competition in a metro area on the same dates and times, and also make sure that businesses don't cut prices to attract customers.
To be sure, all of this regulation was put in place at a time when racing was the only betting game in town, unless your town was Las Vegas. Aside from a possible general policy of limiting the extent of gambling among the local populace, economic regulation arguably controlled the thoroughbred racing "utility," just as it controlled the electric, gas and telephone companies.
But times have changed in three important respects. First, wagering opportunities may not be ubiquitous in all states, but there sure are a lot of them these days. States themselves have become prime competitors of the horses via the lottery, freely varying pick-and-scratch games, prices and distribution channels. Casinos of one form or another are far more accessible to virtually every metro area, with huge entertainment and dining attractions built into the proposition of a trip to the blackjack tables.
As a result, thoroughbred racing, which 30 years ago accounted for nearly a third of all gambling dollars in the United States, accounts for only about 6 percent today. That translates into a paltry $3.5 billion out of the gaming industry's present total of $60 billion.
Second, your local racetrack isn't the only pari-mutuel betting opportunity in town anymore. Simulcast betting today accounts for fully 80 percent of wagering on thoroughbred racing, with betting on live races at the track down to 20 percent. As recently as 15 years ago, the numbers were heavily reversed, closer to 10 percent for simulcast and 90 percent for live gate. So there is no longer a need to control the market power of racetracks: the market itself can do that very nicely, thank you.
In these circumstances, economic regulation is a pure drag on the ability of racetracks to compete for consumer dollars by dint of creative pricing, marketing and distribution. To put it more bluntly, everyone — the racetracks, horse owners and certainly the betting public — would be better off if racetracks were subjected to the discipline of consumer demand rather than to the judgments of regulators and legislators. If the past 80 years have taught us anything, it is that markets are far more nimble than the brightest and fairest bureaucrats.
But there is also a third change, one that could affect thoroughbred racing just as it has so many other American marketplaces. It is the rise of the high-speed, networked computer. With these information systems, racetracks now could have the ability to change their prices — that is, takeout rates — and keep their customers informed up-to-the-minute, much as most businesses do to attract customers and thereby increase profits. For example, tracks could reduce prices on non-featured races early in their daily cards — often maiden and claiming races — while keeping higher prices on the highly popular Triple Crown races and other features. Tracks could improve their ability to distribute, as well as compete with, simulcast racing taking place across the state, or across the country.
The issue is not simply that present racetrack fans — and potential new fans — would be better off if racetracks could compete fully and fairly for the wagering dollar. It is that they will be clearly worse of if regulation continues. Regulators simply can't hold back the rising tide of "rebates" and other favorable treatments now being offered to large bettors, ultimately at the expense of smaller bettors. Nor should they. If the cost of servicing large bettors is lower today, then the competitive price they pay should be lower as well. The situation is no different than it was in the 1960s, when fixed commission rates on stock trades led first to "givebacks" to large institutional investors and then to deregulation of commissions.
The time was right then, and large and small investors benefited from that deregulation. The benefits came in the form of generally lower prices for all and, more important, a great diversity of the mix of brokerage services and investment information available to investors from discount brokerage, full-service firms, and all stops in between.
The time is right now for racetracks to compete on their own merits, for the chips to fall where they may, and for racing fans to reap the ultimate benefits.
Louis Guth is senior vice president of National Economic Research Associates, a global economic consulting firm. The National Thoroughbred Racing Association is a client of NERA.
Back in the mid-1990s, a sports forum was held by the Charlotte Sports Commission to help young professionals aspiring to break into the sports industry. Marketing executives from various show companies were sharing their wisdom with regard to successful sports marketing and the media relationship.
A Nike VP was reflecting on the most recent French Open in which Mary Pierce (Nike athlete) was playing Iva Majoli (Reebok athlete). Pierce took a brief water break. Majoli, during the break, showed her "spunk" and personality by hitting balls with a ball boy. A newspaper reporter reflected on the event by suggesting to the Nike VP that this was a defining moment for Majoli and Reebok. From this event, her image would be established.
Yet, with two quick questions, the Nike VP clarified the oldest rule in sport media. 1) How many spectators were there? Answer, only about 3,000. It was an early round in the tournament and it was before the growth women's tennis has experienced since the late 1990s. 2) Was it televised? No, the break was not covered.
Then, the VP replied, "It did not happen. If no one saw it, it didn't happen."
One of the oldest and most vital rules in this media-driven sport landscape — "If no one saw it, it didn't happen." — played itself out last month in Scottsdale, Ariz. A historic event occurred for those of us fortunate to be in the right place at the right time when executives from throughout professional women's sports served on a panel at the Women's Sports Foundation Summit. The biggest names in the emerging women's sport industry were gathered to give a status report on women's sport: Val Ackerman, WNBA; Lauren Gregg, WUSA; Bart McGuire, WTA; Ty Votaw, LPGA; John Carroll, WPSL; and Ilana Kloss, WTT.
The gathering of this panel and resulting discussion were historic. Never before was it even possible to have gathered a group like this to discuss the strategy to secure a solid stake in the sport industry for their respective entities. Historic. Unprecedented. A defining moment.
How many television cameras would you expect to see during a historic sport gathering such as this? To the disappointment of this women's sport fan and others, this event "did not happen." Summit officials indicated that a representative from the local newspaper was covering the event. Yet, there was no explanation why the local television crews had failed to come.
Television and print media continue today to trivialize women in sport by consistently passing on the "real" news to show the skin whenever bared. If not skin, then the choice will always be the pretty girl before the accomplished one. Yes, I'm talking about the Anna Kournikova phenomenon.
Just ask Christine Brennan about this problem. She shared with summit attendees her frustration when the editors at USA Today gave Gabrielle Reece — an unproven pro golf hopeful — front page coverage, when just one week previous Annika Sorenstam, a legitimate LPGA pro, made history by coming back from 10 strokes down and shooting a 59 to win. Sorenstam did not get front page. Reece, the unproven (though attractive) wanna-be, warranted the coveted coverage.
In this day, media is crucial to the success of every sport property. Is this a barrier too big for women's sport to overcome? No. Women's sport has more to offer than pretty babes in appropriate sports. We are way beyond the 1970s and 1980s in that regard. Leagues of girls will tell you that they are fans of professional female athletes and teams. These same girls know the difference between coverage based on merit and coverage based on looks. Even our boys, young enough to know only a sport landscape inclusive of women, appreciate, recognize and admire successful women athletes.
Which means the only significant barrier left to overcome is the antiquated view exposed by the media decision-makers who opt for appearance over substance.
Still, the most important lesson to be gained from sport is that we are all on one team. Women's sport needs the media. No question. And with growing fan frustration and defection, with skyrocketing salaries and lagging ticket sales in some of the more "mainstream" sports, the media needs women's sports. We're all one in the shared passion for sport.
Increasingly, the voices of women's sport fans will make their way to sponsors to inform them that "yes, we will buy your product when you support women's sport." According to the commissioners gathered in Scottsdale, women are loyalists and women's sport has become a "cause." We've fought long and hard and one day — very, very soon — they will come. By they, I mean the media, who will deserve credit for showing the public the side of the sports world many fans miss.
Women's sport has arrived. Even if that day in Scottsdale wasn't televised — it did happen and it will continue to happen.
Nancy Lough is assistant professor of sport administration at the University of New Mexico.