Board unveils plan for New Zealand racing

NZRB chief executive Graeme Hansen left, and NZTBA president Peter Hutt listen to a question from the floor at last week's NZTBA AGM.

NZRB chief executive Graeme Hansen left, and NZTBA president Peter Hutt listen to a question from the floor at last week's NZTBA AGM.
Feedback from its members has made the NZTBA acutely aware of how domestic thoroughbred racing's poor performance has reduced investment by breeders. That's supported by New Zealand Thoroughbred Racing's latest Annual Report which records falling or stagnant trends in key breeding statistics: registered broodmares, mares covered and foals born.

The positive changes at NZTR under Guy Sargent's progressive, energetic chairmanship are signs of a turning tide. Perhaps New Zealand racing as a whole is now ready for the clear vision, dynamic leadership, professional business management and rapid implementation of policies necessary to reverse the industry's decline. If it is - and that is still a big 'if' given some industry sectors' history of fierce resistance to change - then New Zealand Racing Board chief executive Graeme Hansen looks and sounds like a man capable of fulfilling the Board's ambitious twin goals: to improve its own performance and revitalise the entire industry.

Mr Hansen presented a brief version of the Board's industry analysis and the initiatives it will pursue over the next two to three years at the NZTBA's Annual General Meeting on 12 July. His chairman, Warren Larsen had delivered the full presentation at the previous week's AGM of New Zealand Thoroughbred Racing. Video highlights of that presentation, supported by Mr Hansen with details of how the Board's initiatives will be implemented, are likely to be distributed to clubs and sector groups over the next few months. It is highly recommended viewing for everyone keen to understand what the Board plans to do.

Improving TAB and Racing Board Performance
The Racing Board's analysis shows that decreased revenue from domestic racing has been offset by increased betting on Australian racing and sports, but at the cost of reduced margins - because domestic racing generates higher margin returns for the industry than sports and Australian race betting.

The analysis funded two years ago by thoroughbred industry groups of TAB betting trends and funding distribution produced a rather different conclusion. The Brown, Copeland Report showed that betting on New Zealand thoroughbred racing was simply transferred to Australian thoroughbred racing, reducing the thoroughbred share of total domestic turnover from around 65% to its current 54%. Domestic greyhound and harness racing have benefited significantly from increased betting on Australian thoroughbred racing, while local thoroughbred racing has gone backwards.

This was the basis of strong thoroughbred code opposition to the new Racing Act which fixed the formula for TAB profit allocation based on each code's share of total domestic turnover. Although thoroughbred code representatives agreed to accept the fixed formula, it is not known whether the New Zealand Thoroughbred Racing board formally discussed or minuted that decision.

However, there may be some light at the end of this particular tunnel. Mr Hansen suggests that the current turnover-based formula is not necessarily the best way to fund domestic racing because it does not recognise the different resources required to present events at, for example, Awapuni and Kumara. Fee-based funding may well be a better option, and a better way of recognising the quite different cost structures of the three codes.

Adding prizemoney to high-stakes races has not made any difference to betting turnover. In fact, fifty-seven per cent of races with stakemoney above $20,000 do not recoup net betting revenue. The Racing Board believes that the stake-setting process must be aligned with net betting revenue, after allowance is made for high profile racing - both prestigious, valuable races, and recognised picnic and holiday meetings.

The Board also asks if ownership would be encouraged under a different system of prizemoney allocation. At present 50% of prizemoney is won by 14% of winners. What if 50% of stakes went to, say, 37% of winners? The Board doesn't yet have a particular allocation model in mind, but this kind of outside-the-square thinking will please those who have asserted for some time that owners need the incentive of better stakes at lower levels to keep putting young horses into training.

There has been a move away from betting in TAB agencies to pubs and clubs, but again there's been a cost: customer satisfaction. Mr Hansen notes that pubs and clubs don't earn enough from their TAB operations to offer high levels of customer service. The Board will focus on directing customers to the most efficient and cost-effective channels for placing their bets.

Where will the TAB get new customers and business from? A survey of TAB customers and non-customers offers some exciting possibilities:
* People under the age of 30, and women expect to bet more.

* 800,000 New Zealanders over the age of 19 who are not currently TAB customers think that race betting is enjoyable and exciting - in other words, they are likely to be willing to try it.

* There are 500,000 New Zealanders who don't understand betting, but are not
necessarily averse to it. They need to be better informed if they are
to become customers.

* Admittedly, one million New Zealanders believe that race betting is "rigged and immoral". They are therefore not a market worth targeting.

The presentation described the Racing Board's goals in terms of "prizes" for the industry.
The Board expects to achieve $10-$15 million growth in betting revenue from product management and development, channel growth and cost efficiencies.

Revitalising the Industry
Mr Hansen emphasises the Board's determination to position on-course racing as entertainment with the aim of improving on-course betting income. The unique excitement of live horse racing is the industry's key competitive advantage over casino and poker machine gaming. Here's an example of how significant an increase in on-course betting revenue could be for the industry:

Let's say that ten per cent of the population are racegoers, and ten per cent of these people attend race meeting three times or more each year. If only ten per cent of that group go to the races just two more times each year, that represents a potential increase in net industry profit of $300,000.

Mr Hansen expressed personal surprise that the TAB should boast about the huge number of New Zealanders who bet on the Melbourne Cup, but not on local racing. Instead, he suggests the TAB should be working to convert that interest in one major event into a regular interest in domestic racing. There's a good financial reason for that too: the average domestic thoroughbred race generates $130,000 in turnover; the average overseas thoroughbred race generates around $50,000 in local betting turnover.

The Board has come up with some interesting ideas to support local racing and on-course betting. On the thorny issue of venues the Board believes simply that it must make the best use of resources to support the industry's strategic facilities. This may include using mobile equipment (eg marquees, stands, screens) rather than investing in permanent buildings and fixtures.

Meetings and programmes must be driven by the good of the industry as a whole, and not fuelled by competition among clubs as at present.

Crowds may not be necessary at every meeting. Some racedays may be designated feeder events, designed specifically to lead horses into bigger meetings.

The Racing Board is willing to trial new programmes at selected venues, reduce winter programmes and change the traditional distances of some races.

Television and radio programming also receive attention. Mr Hansen wonders why the industry-owned television channel Trackside doesn't operate 24 hours a day and suggests that it should replay various programmes through the night for the increasing number of people who work and travel non-standard hours. The acquisition of three more radio frequencies will allow the Board to launch its own dedicated racing channel.

And the prize for revitalising the industry? Another $10-20 million, with $6-$12 million achievable from increased participation in thoroughbred racing alone. The Racing Board will commit $10 million from its reserves to help the three codes rise to the challenge of meeting this target.

What happens now?
The new Board may have taken almost twelve months to find its new chief executive, begin re-building its management team and gather the information it needs to formulate its policies, but the proposed two to three-year time-frame for achieving its goals signals that the pace of change is about to increase dramatically.

The Board has not set an order of priority for its policies, electing instead to pursue ten initiatives at once. Each initiative has a project leader and a sponsor, and Mr Hansen himself will take responsibility for the Calendar and Funding. The ten initiatives are:

Improve NZRB Performance
1. Products, channels, Trackside, costs
2. Branding
3. Technology
4. Gaming
5. Taxation

Revitalise the Industry
6. On-course = entertainment
7. Ownership
8. Venues
9. Performance benchmarking
10. Costs & efficiencies

Mr Hansen's grasp of racing industry economics and management processes is impressive, and his appreciation of on-course racing and the culture of the horse will please those who feared the new combined Board would be dominated by betting rather than racing priorities. He appears genuinely enthused, rather than daunted by the prospect of reviving New Zealand racing.

He's supported by a highly regarded professional chairman in Warren Larsen whose achievement of difficult reforms in the dairy industry is exactly the experience needed to re-shape New Zealand racing. Alan Jackson leads the Board's taxation initiative and adds strong analytical and corporate governance skills to the Board's resources. Presumably Mr Hansen can also rely on the support of the other members of the Board, including the three code representatives.

As a New Zealander fresh from fifteen years in Canadian banking and stints in Sydney, London, New York and Hong Kong, he has the advantage of being a "cleanskin" unlikely to be unduly influenced by any particular sector or group. He is already proving adept at sorting vested interests from genuine industry concerns.

Mr Hansen's biggest immediate challenges are to build a strong management team, and win acceptance of the Board's policies among the broad base of industry participants and organisations across the three codes, especially those suspicious of change. His best allies will be found among those who work and invest in New Zealand racing, but he needs to communicate with them directly, and through members of his board and management group who make themselves both accessible and visible. This effort will be especially important during the next six to twelve months.

If he can do that, and pursue the Board's initiatives without being deflected from his task, Mr Hansen has a good chance of being the first truly successful chief executive in the three-decade history of the Board and its predecessors.

- Susan Archer


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