Wednesday, March 7, 2018

CDI - The Darth Vader of Racing?

It's no surprise that corporations act in the interest of their shareholders top executives. Other constituencies or stakeholders -- employees, customers, cities and states where the corporations do business -- are just obstacles to be placated or overcome on the way to ever-higher profits. That's called capitalism.

But still. One hopes, dreams, deludes oneself that perhaps racing is different. So many of us are in the game for reasons other than profit-making. If we wanted to make money, there are a lot of better ways to do it. But we love the horses, we love the thrill of the race, we love the radical democracy of the racing world, where the opinion of a dark-skinned immigrant working a minimum-wage job has just as much value as that of a white male Wall Street lawyer. Yes, we need someone to run the tracks (although perhaps a not-for-profit model of some sort would be better than corporate ownership anyway), but this really isn't a game for unbridled (sic) capitalist greed.

So what happens when a corporation does own race tracks? The most egregious example is Churchill Downs, Inc. (CDI, to distinguish the corporation from the eponymous race track), about whose foibles I've written quite a few times. CDI's latest move, reported in the Paulick Report and on, is to obtain a jai alai permit for its Calder property in South Florida. That would allow CDI to dispense entirely with messy, inconvenient horse racing at Calder and substitute something that's a lot cheaper -- though of course no one bets on it -- as a means of retaining what it really wants, the slot machines and other "gaming" at the site. CDI has already demolished the grandstand and the barn area at Calder, and merely rents the track out to Frank Stronach's Gulfstream to keep the racing dates that are required for it to maintain its gaming license. But even that seems too much for a corporate executive suit(e) so narrowly focused on the bottom line their bonuses and stock options. To a corporation like CDI, racing is a necessary evil, because many jurisdictions foolishly, in CDI's view, condition the award of the slot machine and other gaming licenses on running actual real live horses at least a few days a year.

We've become inured to outrages from CDI. Buying and selling race tracks as if they were lifeless interchangeable machine parts, raising takeout on bettors, treating horse people as unwelcome interlopers in the horsefolk's's own world, etc. etc. But it wasn't always so. Perhaps a little history is in order.

Today's CDI is the inheritor of the fabled Churchill Downs track in Louisville created by one Kentucky Colonel, M. Lewis Clark, and made famous by another, Matt Winn, whose never-ceasing public relations efforts made the Kentucky Derby (presented by whoever this year's paying sponsor might be) into the one horse race that almost everyone in America knows about. While in its early years, Churchill was loosely affiliated with other tracks, especially Latonia (now Turfway) in northern Kentucky, it ran from 1875 until 1991 as pretty much a stand-alone operation whose business, whose only business, was horse racing.

Matt Winn

Starting in 1991, as full-card simulcasting seemed to be the industry's new savior, CDI went into expansion mode, buying the Louisville Downs harness track, which it converted into a simulcast and training facility. Then in 1994 it bought Hoosier Park in Indiana, in 1995 Ellis Park in western Kentucky, in 1998 Hollywood Park in California and Calder Race Course in Florida, in 2000 Arlington Park near Chicago (by way of merger) and in 2004 Fair Grounds in New Orleans. Just looking at the acquisitions, one might be forgiven for thinking that CDI was actually interested in horse racing.

Not so, and certainly not so after Bob Evans became the company's CEO in 2006. Evans does breed a few horses, as do most rich folks in Kentucky, but all his pre-CDI business experience had nothing to do with racing; he was an executive at Caterpillar and involved in a number of investment firms. (Rather like current New York Racing Association CEO Chris Kay, who also knew nothing about racing when he got the job, having worked at Toys R Us and Universal Studios.)

Beginning with Evans's reign, CDI stopped being a horse racing company and became what it is today, a casino and online betting company that still, because of those pesky state lawmakers!, has to operate a few race tracks. CDI sold Hollywood Park, which was later torn down to make way for a new football stadium. By the end of 2006 it had also sold Ellis park and Hoosier Park. At the same time, it started opening up race track slot machine parlors, beginning in 2007 at Fair Grounds and then in 2010 at Calder. In 2007, it also launched the Twin Spires online betting platform, which now makes more money for the corporation that does actual horse racing. CDI even bought a couple of stand-alone casinos in Mississippi between 2010 and 2012. And while it did acquire another race track, the Miami Valley harness oval, that was only because the Ohio legislature had just authorized slot machines at that state's tracks.

Evans's move away from racing has pretty much been endorsed by his successor, Bill Carstanjen, who took over in 2014. Carstanjen did reverse the 2014 purchase of Big Fish Games, which distributed such online hits as Gummy Drop!, and he did oversee the purchase this year of Presque Isle Downs in Erie, PA, but apparently that was to acquire Presque Isle's slots license more than for its under-the-radar racing program.
Does this look like a race horse?

Along the way, CDI has managed to enrage horsepeople, with its my-way-or-the-highway approach (something I saw first-hand after CDI bought Calder); bettors, by raising takeout; horse owners, by treating the owners of Kentucky Derby hopefuls as cash cows and not welcomed guests, and even other race tracks, as in  its ham-handed efforts to squelch the innovative Kentucky Downs track.

Carstanjen, the current CEO, has been with CDI since 2005. Before that, he was at General Electric, not known for its horse racing expertise, but well known for its executive pay packages. In 2016, he made a mere $5.5 million in cash and company stock (eat your heart out, Chris Kay!). The numbers for 2017 aren't out yet, but are likely to be higher.

Under both Evans and Carstanjen, Churchill Downs Inc. has acted like a corporation. And that's a pity.

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