Highlights from Day One of the 36th Asian Racing Conference

Session One: Wagering

The business sessions of the 36th Asian Racing Conference began in Mumbai yesterday as Asian Racing Federation Chairman and Hong Kong Jockey Club Chief Executive Officer Winfried Engelbrecht-Bresges positioned the next three days of sessions in light of the lifeblood of the industry – wagering.

"The global economy is facing very strong headwinds and the general prevailing conditions will make it very challenging for the wagering business in the future," said Mr. Engelbrecht-Bresges. "Illegal gambling has always existed but what we are facing now is a fundamentally new threat, with the market size growing beyond US$500 billion annually. The astronomic scale and multi-jurisdictional character of illegal gambling is now such that it is one of the greatest challenges facing racing and other sports," Mr. Engelbrecht-Bresges continued, alluding to Thursday's business session which tackles the topic in greater detail. "The notion that wagering on racing is a fully mature product is a trap which must be avoided. Innovation and internationalization are key opportunities for growth."

Bernard Saundry, Chief Executive Officer of Racing Victoria, reviewed the changing face of the content distribution marketplace, especially as it relates to the experience of Australia's free-to-air and digital media rights. "We must always remember that racing is a global and wagering entertainment business which demands intensive platforms to engage existing and future customers. Our decisions last year on shaping a new distribution model were based on core principles – we wanted racing for all, more people, more often, engaged and enjoying racing, nationally and internationally," said Mr. Saundry, citing the recent launch of Racing.com, a digital platform operating in joint ownership between Racing Victoria and the Victorian racing clubs.

Tom Ascher, Chief Executive Officer of Longitude, highlighted his firm's growing business innovations connected with wagering. "The historic norm of one bet type per pool has held us all hostage to the limits of split liquidity. The ability to extract new bets from existing liquidity and the ability to deliver greater liquidity by combining existing bet types into merged pools has broken the liquidity barrier," said Mr. Ascher. The technology has been adopted by the Hong Kong Jockey Club, merging its first four and quartet pools, along with a "new way" to bet to win, called Composite Win, which is an enhancement to an existing pool using Longitude technology to provide customers with more diverse offerings. "The global industry is positioned to exploit technologically enabled exotic wagering. To fully develop liquidity, it is imperative that we adopt advanced tote communications protocol," added Mr. Ascher.

Patrick Jay, a global sports consultant, concluded the session with a review of the changing nature of funding for racing in the United Kingdom. "Currently the existing bookmakers levy is 10.75% paid on the retail gross win for UK horse racing bets only, which is subsequently distributed to racecourses, predominantly for prize money. It does not capture any of the online business at all. The funding source of the industry is at serious risk", said Mr. Jay, adding that if the current situation remained unchanged, British racing is facing "potentially an 80 percent reduction in prize money by 2020."

Session Two: Global Breeding Trends

The trends of the global thoroughbred breeding industry were discussed during Session Two, chaired by Ronan Murphy, Chief Executive of The General Stud Book, Weatherbys Ireland, who kick-started the panel discussion with a reminder of the fabulous, mature results from the world's finest matings – successes on the global stage.

A diverse panel of experts reviewed the industry, opened by Jocelyn De Moubray, a bloodstock consultant and author of The Thoroughbred Business. Mr. De Moubray identified the current market position for the American and European yearling markets, especially in light of sharp declines in foal crops this century. "33 percent fewer foals were born in 2014 than in 2000, while German foal crops have dropped 46 percent, they are down 42 percent in the U.S. and Japan is down 22 percent."

But over a larger timeline, the American market is even worse off, says Mr. De Moubray. "The American foal crop has fallen from more than 50,000 in the 1980s to just 20,000. This century, Europe has overtaken the American market in terms of aggregate and yearling sales averages in real dollars." Still, Mr. De Moubray thinks the current market dynamics could yield a shift. "The European bloodstock market is close to an all-time high. While depending on currency movements and new interest from China and South Africa, demand at the top could be more competitive. Still, the American market has more obvious potential for further growth."

The breeding industry of the ARC's host nation took centre stage next as Zavaray Poonawalla, Chairman for the Royal Western India Turf Club, outlined the storied history of the breeding industry in India. "The Indian 1,000 Guineas, 2,000 Guineas, and Indian Derby were first run in 1942 and 1943, and since then, Indian racing and breeding have not looked back in spite of having had several severe setbacks due to government policies which do not favour racing," said Mr. Poonawalla.

Dr. Akira Yamanobe, General Manager of the Equine Department of the Japan Racing Association addressed the steps taken to firmly establish Japan's own successful breeding industry. Dr. Yamanobe cited four foundation pillars applied by the Japanese – improving pedigree of stallions and broodmares, improving techniques in feeding and stallion management, supporting industry-run training programs for staff, and improving the quality of training facilities and grazing land. "We operate under the model that good people make good horses. The JRA has established the largest training facilities in the main breeding industry area in Japan, hence, creating a special and key infrastructure to attract key talent to support this growth," said Dr. Yamanobe. While Japan still relies on the importation of broodmares, Dr. Yamanobe noted the number of imported stallions in Japan has dropped from a high near 30 in 1988 to more recent totals under five.

Representing South Africa, Summerhill Stud owner Mick Goss offered an update on his country's struggles to compete in the global marketplace. "When I first addressed the ARC in 1995, [South Africa] was home to 545 breeders, 158 stallions, the foal crop was north of 5,000, and I had a mop of blonde hair. In 2014, there were 148 registered breeders, 103 stallions, the foal crop was at 3,400. The attrition in South Africa has partly been due to the global financial meltdown, but much has to do with the frustration we have with our exports," said Mr. Goss. "We continue to face major headwinds in getting our horses to the jurisdictions of our trading partners out of an apparent fear that we may contaminate them with the African Horse Sickness virus," added Mr. Goss. "We have never, ever exported the virus to any country. It is puzzling to me that despite the technological age and the vast investment we have committed to our export facilities, it is now more problematic than it has ever been to get a horse out of South Africa."

Next to the session was Daniel Kruger, Manager of the German Thoroughbred Breeders and Owners Association, discussing that country's unique programs designed to achieve success through concentration. "I think German breeding is successful because we concentrate. We have only 800 to 900 foals per year, and while you might find a good sprinter or miler in Germany, you probably won't find a champion sprinter or miler. We concentrate on stayers," said Mr. Kruger. "That is where we are good and strong. We are really specialized for long-distance horses and all our major fixtures for 3-year-olds and older are over the longer distance of 2,400 metres. We have the opinion that horses should not race on medication. If a horse raced one time on medication, he would be banned from receiving German breeders' premiums. We get breeders' to follow these rules by paying breeder premiums of 20 to 30 percent for races won by 2-year-olds and 3-year-olds and 10 to 15 percent for older horses."

Johnny Weatherby, Chairman of Ascot Authority and the International Stud Book Committee (ISBC), spoke of how the world's racing authorities collaborate to enable a global standard to ensure the integrity of the thoroughbred breed. "This provides the foundation for a healthy, international breed," said Mr. Weatherby. "Now as we look ahead, one of the principle challenges we face could be to the essence of the thoroughbred itself. Recently, following a discussion with the International Federation of Horse Racing Authorities and the breeding industry worldwide, we have given a clear message that any manipulation of the heritable genome could result in the removal of thoroughbred status. Thoroughbred production beats the latest drug."

Session Three: Select Asian Racing Jurisdictions Profiled

The third business session offered three profiles of Asian Racing Federation members Qatar, Turkey and Korea. In the session chaired by Yu Pang Fey, President and Chief Executive of the Singapore Turf Club, delegates heard of the history, challenges and future plans of racing in these member jurisdictions.

Nasser Sherida Al Kaabi, General Manager of the Qatar Racing and Equestrian Club identified his nation's ongoing development of racing both in the country, but also through overseas marketing efforts, while also beginning a commercial breeding operation. While Qatar's partnerships with racing operators in France and England have focused on the Qatari brand, the goal is to "bring back competition to Qatar in the long run," said Mr. Al Kaabi. The recent retirement by Qatar-owned Toast Of New York, second in the Breeders' Cup Classic and a winner of the UAE Derby, is serving as a first foray to become a global breeding centre, with incentives for those sending mares to Qatar.

Inanc Inal, betting manager for the Jockey Club of Turkey, revealed an update on racing in the country, which included 984 race meetings for 5,428 races. With US$135 million in total prize money available, Turkish business has bucked other downward trends experienced by many other jurisdictions.

Finally, Park Yang Tae, Executive Director of Racing from the Korea Racing Authority (KRA) outlined the significant developments in recent years towards rebranding the racing experience. The KRA's focus has been on internationalizing its racing product and revealed they will two Korean Group 1 events on 11 September at Seoul Racecourse with eight foreign-trained runners invited to compete against a similar number of local stars. This has led to significant attention on the development of modern quarantine and export protocols.

The KRA has faced challenges in addressing the illegal markets as they estimate the turnover through illegal channels to be US$11 billion compared to their legal handle, totaling US$7 billion last year, Mr. Park reported. Positively, though, brand awareness and favourability ratings of racing are on the rise, and the KRA is planning a new racecourse to be completed in 2020, with the project operating under the theme "unplugged horse utopia."

More from the 36th Asian Racing Conference tomorrow.

Hong Kong Jockey Club (p)