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Showing posts from October, 2008

THE CREDIT CRISIS, VOLATILE MARKETS, RECESSION AND MEDIA

The churning flood of economic developments and the desperate measures of governments to lay financial sandbags to control the torrent present not one, but three calamities for media managers. Those that escape one may well be swept away by another.

Most media can survive the collapse of credit markets because media firms have high cash flows are typically require less short term credit than manufacturing and retail firms. Because most can acquire their most important resources without accessing credit lines or issuing commercial paper, banks struggling to keep their heads above water are not a major short-term concern. However, those media firms with large debts due in the short-term that were hoping to refinance face significant hurdles. Some will be rapidly shedding media properties in order to stay afloat.

The more immediate problem for some publicly owned firms is the financial damage caused by the dramatic drop in share prices following the credit market collapse. Because a number…

So Long Breeders Cup, Hello Aqueduct

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The Breeders Cup is over. So let’s get on to the important stuff.Which is that racing returns to Aqueduct on Wednesday.Well, OK, perhaps Aqueduct isn’t the center of the racing world any more – though it did host the Breeders Cup in 1985 – but for some of us in the game, it can be the center of our economic, if not aesthetic, lives.And for the New York Racing Association (NYRA), which operates the rusting old track on the fringes of JFKAirport, Aqueduct is, bizarrely, its most reliable profit center.Sure, Belmont and Saratoga have the famous races and, occasionally, draw the big crowds, but it’s Aqueduct that actually generates the cash.For those who haven’t had the pleasure of spending quality time at the Big A, here’s a video clip that can give you a bit of a feel for the ambience. True, the clip is 40 years old, and the crowds are a lot smaller these days, but some things never change.The original Aqueduct track opened in September 1894. At the time, long before there was an airpor…

New York Moves Toward Uncoupled Entries

The New York State Racing and Wagering Board – the state agency responsible for regulating thoroughbred racing – has proposed a rule that would allow trainers to enter a maximum of two horses per race as uncoupled entries, i.e., separate betting interests.The rule, which was announced by the Board on October 10th, could be adopted any time after the public comment period ends on October 29th.Coupling of entries has always been a hot-button issue for bettors.When a trainer’s horses run uncoupled, and the 20-1 longshot wins, while the 8-5 favorite runs up the track, many handicappers are quick to suspect chicanery. And who knows, in some cases they may be right.So the pressure for requiring a trainer to couple entries has always come from bettors and those in the press who say they’re representing the bettors.Uncoupled entries are already permitted in New York in stakes races. The proposed rule would allow them in all races.Coupling of entries as a single betting interest would still be…

Equine Hedge Funds

Even as the world financial system came crashing down over the last few weeks, it appears that promises of returns that are too good to be true aren’t limited to Wall Street.For those who, luckily, aren’t in the stock market, here’s a quick definition.A hedge is an unregulated, rich guys’ version of a mutual fund.It collects money only from “qualified investors” (i.e., rich people) and invests in, well, anything, from credit default swaps with Lehman Brothers to thoroughbreds with blazing speed and bad feet.For the promoters of hedge funds, the big lure is the compensation.The industry standard – don’t ask me how it got to be the standard, because it represents an unbelievable level of greed – is that the fund manager’s annual compensation is 2% of the value of the assets, plus 20% of the profits.So, if you can attract enough money into the fund, you’re guaranteed to do well even if your returns are no better than what one would get putting the money into the S&P 500. Or a mattres…

Stronach - Waist Deep in the Big Muddy

Back in 1967, folk singer Pete Seeger wrote “Waist Deep in the Big Muddy,” a trenchant commentary on the stupidity of pressing ahead – in that case, with the Vietnam War – when everyone knew the cause was hopeless. (Here’s a link to the song’s debut on national television in 1968, after CBS relented in its efforts to keep it off the air.) It seems to me that the song is once again appropriate, and not only to the current occupant of the White House.Frank Stronach seems intent on leading Magna Entertainment, and with it the shareholders in other Magna companies, deeper and deeper into the swamp that he has created.Only now people are beginning to speak out and call his bluff.As Lyndon Johnson discovered in 1968, once that happens, the question is not if the end is coming, but when.As I noted some time ago, Magna Entertainment, which owns Gulfstream, Santa Anita, Laurel and Pimlico, Lone Star, Golden Gate Fields, Remington Park and other racing properties, is insolvent, unable to meet i…

NYRA Cuts Purses, Axes Employees

As a TBA colleague  has already already pointed out, NYRA has announced major purse cuts for the upcoming Aqueduct winter meet, which opens October 29th.Apparently in response to the sharp drop-off in handle in recent months – Saratoga was down 10.6% from 2007, and the Belmont fall meet is down 10% so far – NYRA is cutting purses back to their January 2007 levels.That means open-company maidens will drop from $48,000 to $43,000, and N1X allowances from $50,000 to $45,000.New York-bred races in the same categories will pay $2,000 less than the open-company events.In addition, NYRA has announced that it will lay off 42 low-level employees when the Belmont meet ends.The folks who will lose their jobs – none of whom is named Charlie Hayward – include 19 seating attendants (“whitecaps” in NYRA parlance), 16 parking attendants, five admission clerks and two program sellers.OK, I understand that business is down, and I’m willing, as a horse owner, to take my share of the hit through lower pu…

The Economy Catches Up With Racing

Well, it took a while, but there are more and more signs that horse racing won’t be spared the ills that are affecting the rest of the economy.
There are three ways of measuring how well racing is doing, depending on what your economic interest is.If you’re a commercial breeder, what you care most about is the average, the median, and the buy-back rate at the sales.If you own a racing stable, you care about purses, which are funded by handle and by slot machines. And if you’re a race track operator or the owner of an ADW or OTB operation, you care about handle, because that’s where your revenue comes from.Now, for the first time that I can remember, all those indicators are heading down at the same time. Sales prices are down, and buybacks are up.According to a just-released NTRA/Equibase report, nationwide all-sources handle was down almost 10% in the just-completed third quarter, compared to the same period last year, and down 5.75% for the first nine months of the year. And purses, …