Speakers: Tim Ritvo: President of Gulfstream Park and COO of the Stronach Group
Trainer: Art Sherman (California Chrome)
Jockey: Mike Smith (Arrogate)
Operator: Good day, ladies and gentlemen. Welcome to the Pegasus World Cup Invitational from Gulfstream Park.
It is now my pleasure to introduce your host for today, Mr Jim Mulvihill. Please go ahead sir.
Jim Mulvihill: All right. Thank you so much, Melody. Welcome, everyone, to this very special NTRA, national media teleconference. We’re previewing Saturday’s Pegasus World Cup at Gulfstream Park racing and casino, it’s the richest thorough bred horse race ever run with a purse of $12 million. A full field of 12 was entered yesterday with each spot in the gate having been secured for a million dollars by the owners of each horse, an entirely new concept for our sport. The Pegasus, of course, represents a rematch of the top two finishers from the Breeders’ Cup Classic in November. Champion three-year-old Arrogate came out on top in that race, and for that performance earlier today, he was recognized at the Longines Awards in London as the world’s top rated horse of 2016.
The horse that ran second in the Breeders’ Cup, of course, California Chrome, he was named horse of the year at Saturday’s Eclipse Awards, in favour of Arrogate, and it was his second horse of the year title, and Saturday will mark the final race in Chrome’s story book career.
So obviously, a lot of very interesting story lines converging in the Pegasus both on track with these super star horses, but also behind the scenes with the business of creating a new, internationally significant race, totally from scratch, and recruiting the owners and horses, marketing the event, and so forth.
So, later on, on this call, we’re going to be joined by Art Sherman, the trainer of California Chrome, and Mike Smith, the regular rider of Arrogate. His trainer Bob Baffert would normally join us on these calls but he’s in London for that Longines ceremony that ended just short while ago.
So, first, we’re going to talk through some of those business storylines I mentioned with Tim Ritvo. Tim is the Chief Operating Officer for the Stronach Group and President of Gulfstream Park. He’s been working towards this event for more than a year I imagine, and I’m sure well before it was first announced publicly which happened last May, so let’s welcome in Tim right now. As usual I’ll get the conversation started with one or two basic questions but then I’ll get out of the way and leave it to the media to ask whatever you all would like.
So, Tim Ritvo. It’s Jim Mulvihill of the NTRA in Lexington. Thanks for joining us.
Tim Ritvo: Thank you, Jim. We are excited about this and we appreciate you having us on.
Jim Mulvihill: It’s our pleasure. We’re very excited as well. First of all, congratulations on the field that was entered yesterday, especially getting the top two horses in the world together again. We all know that that would never have happened without this race. So, congrats on getting to this point.
I guess to start, I imagine logistically speaking, this has been a heck of a year trying to pull all this together. So, I’m curious from your perspective, just what were the biggest challenges in your mind when you and your team first set out a year or more ago to fulfil this vision of Frank’s. What were you most concerned about?
Tim Ritvo: Yes, I mean, obviously anytime you have an inaugural running of something and you’re starting something or a new concept, there’s always a lot of twist and turns that you have to deal with where, you know, we’re fortunate, where we run a [inaudible] it’s run 141 year – a 146 years, and, you know, you have history and everything else to develop, and you become what you are, with the Breeder’s Cup now, 30 something years.
To start something off fresh like this, it took a lot of brain storming, a lot of ideas from the timing of the race, the distance of the race, how do we do it? And this was launched almost two years ago at the Breeders’ Cup, started to talk about it, then last year at the Breeders’ Cup, we’ve tightened everything up. And it was very important to the chairman that we positioned this race so not to be offensive to the Breeder’s Cup, to be an added amenity, not to be offensive to the Dubai World Cup, to also basically look for spots in the calendar that worked better than other sports. No football in that week, right? We’re between the playoffs and the Super Bowl. So, all of these little things, also with the breeding season, so that people still wanted to turn into stallions, they had the opportunity to do that.
But the main concept was through the years, people have bought million dollar horses, always looking to get in the big race, and what we did is said, ‘Why not buy the spot in the gate and then try to find your horse after that?’ So, we kind of reverse engineered that in the thought process. And then the fun part of, you know, obviously, an owner that bought a spot would love to have a horse for that spot, but if he didn’t, how he would negotiate and go out and try to bid and find a horse to make this an exciting race.
So, you know, no one knew exactly what it was going to turn out to be like, and we couldn’t be more thrilled to have the first three finishers of the Breeders’ Cup Classic. It definitely expands the racing calendar, it makes people think that maybe they don’t have to retire these horses at three and gives us superstars for another year, three or four. So, these are things that all went into the thinking. By no means are we perfect in the way we got everything structured, I think we’ll get better as we continue to have years running. Like anything else, you get better with practice. So – but we’re happy. We’re really thrilled to get the number one, and the number two horses, you stated, in the world in a rematch, and really a good field of a bunch of other grade one winners in this race.
You know, this is a spectacular race, at a spectacular time of year and it really gets the purpose of what we were trying to do, is to extend the racing calendar so that fans could continue to see horses that they may have never seen on this circuit.
Jim Mulvihill: Now, Tim, I’m sure you’ll understand that once the race is run on Saturday, a lot of the folks on this call will be – you know, it’s part of their job to assess the success of the event as a whole. Now, there aren’t any previous years’ figures to look at, there really isn’t a comparable event to look at. So, I’m just curious internally how you and your Stronach Group colleagues will assess the success of the Pegasus on Saturday?
Tim Ritvo: That’s a great question. Now, obviously from the ground, the GSP team, we would asses it – hopefully we could beat Florida Derby handle which was about $36 million this year, one of the highest handles ever in this building. So, that’s something that we have on our target. We have a $40 million, you know, and I’m reaching out there hoping that we do at least $20 million on the race and then $20 million on the undercard. It might be a little bit of a stretch but we have high goals.
But the true measurement, because of the size of the building and some of the problems that we deal with this, day in and day out, this is a great building, it’s a new concept of how racing is being watched, and most of the time it carries enough people. But when you do an event of this size, we will struggle a little bit with the on track on exactly how many people we can get into here. But what we will look at is our NBC ratings. We believe that we’ve done a lot of new – and Belinda – to really give the credit on this, Belinda Stronach – to kind of get involved and to reach outside the bubble, outside the racing industry with these marketing ads she has done, with the PR that she’s done with this, with Conor McGregor, these are the things. And the true measurement from the Stronach Group perspective is, what would the television ratings be? And the true return for the partners in future years is what is this worth on television, what would we be paid for to have it, what would it be for NBC, Fox, and ESPN or ABC to compete against each other to try to buy it, and also sponsorship value?
So that’s the true – to make sure that we execute as best we can a flawless event, and that’s the true value of what the success will be measured by.
Jim Mulvihill: Fascinating. Well, thanks for that answer, and I’ve got so many more questions for you but I want to turn it over to the media because that’s why we’re really here, so, let me check with Melody and see what they’ve got for you.
Tim Ritvo: Great.
Operator: Ladies and gentlemen, again, it’s *1 if you have a question. Again, it’s *1 to ask a question.
We’ll go to Frank Angst with Blood‑Horse Magazine.
Frank Angst: Hey, Tim, looking forward to Saturday.
Tim Ritvo: Thank you, Frank. Thank you.
Frank Angst: Hey, do you think having the stakeholders set up this unique setup helped ensure the 12 horses that are in the field?
Tim Ritvo: Yes, I mean, we think it did. Like, you know, the one thing we’re trying to compare things to which is really hard because you have a $12 million purse compared to a $500,000 purse – I mean, as people know, we have 12 in this race, we have nine in the Poseidon, which was like the backup race for the AE horses that wanted – in case something happened that we launched at the same time. So, in reality, to have 21, over handicap horses in this area, at this time, normally we struggle to get like eight in the dawn. So, you know, we looked, we said, ‘Well, who would be here? Who wouldn’t be here?’ So, obviously, having the shareholders put up the money, the $12 million purse has definitely made a difference than say what the draw would be at this time of year.
Frank Angst: And then I was interested in some of the unique conditions of this race. I saw the five-pound weight allowance if you race without Lasix. Kind of, how did that come together and is that something we could see in other races?
Tim Ritvo: Yes, you know, the chairman, Mr Stronach, is a no race day medication guy. He would eventually like to see it get there. Me as an ex horseman, I understand both sides and I understand how horsemen and culture for so long have been – you know, I’ve trained, myself, for 30 years, 25 years, and, you know, from when I started and we didn’t know anything better than Lasix. Everywhere else in the world can do it. So we’re trying to get that way.
We did have some no Lasix races this year, two-year-olds. We’re trying to look at that and eventually, hopefully, one day be a medication Lasix-free racing environment. And, you know, I mean, that’s always one of the incentives the chairman wanted to put in there to see if he could incentivize people that had horses that weren’t running on Lasix.
And also to reach out to the international horses, to say, ‘Well, you have a five-pound advantage if you continue to run your horse not on Lasix or racing medication.’
Frank Angst: And the last question along the same lines of that, of the uniqueness. The alternate entries for owners where they can also have a back-up that if that horse don’t get in, they race in the Poseidon, how did that come together and is that something that maybe we can see going forward in other races – race days?
Tim Ritvo: Yes, the biggest thing here was, we were trying to figure out – and I mean, when this was all thought out, you know, like a year ago, when we’re trying to get – let’s say, what if a guy puts up a million dollars and he enters on Monday and his horse gets sick? You know, so we throw – why not allow these people to train two horses up to the race, so they could have a back-up horse, and what we’ll do is we’ll put this other race on, the Poseidon which will be an undercard race, so that if both horses train really well up to the race, they’d have something to do with the other horse at that time? So, that was the thought process behind it.
In the beginning, it sounded like a great idea. Everybody would have two, you know, would have this other race. As it started to evolve, less and less people had the two horses, and, you know, felt confident that, well, you know what it is like, the horse, if they missed a spot, they missed a spot. But anyways, that was the concept. Was to try to make sure that, god-forbid, training – and when they put the million dollars up it with so far ago, that if something happened to the horse that they were keen that they could always have a back-up horse.
Frank Angst: Thanks so much. That’s all I got.
Tim Ritvo: Thank you. Thank you.
Operator: We’ll go next to Danny Brewer with Horseracingscoop.com
Danny Brewer: Mr Ritvo, how are you doing?
Tim Ritvo: Good, Danny. How are you?
Danny Brewer: Outstanding. I just want to ask about this snowball that’s hopefully rolling downhill. I mean, you liked the direction and you feel like this can be a tremendous kick-off to a fabulous year of horse racing?
Tim Ritvo: Yes. We think that – you know, the dawn has always been kind of the kick-off of the year, but you really never know, it was just too early to get horses started and stuff. We’re truly hoping – I mean, we’re thrilled right now with the race obviously. It would be hard not be thrilled with this, so many grade one winners and the two best horses in the world rematching. But, yes, we’re hoping that we can extend horses careers, or give horses opportunity. You already heard like California Chrome’s people thinking, ‘Jeez, you know what, if there’s a $12 million race and a $10 million race in Dubai, and a $7 million Breeder’s Cup Classic, and if somebody else did want in in the middle of the year or something, or the – you know, one of these other great handicap races where we could have this continued schedule where a horse can make $12 million or $15 million in [inaudible] runnings for the year, he could still be a good stallion at five or six.’ And we can extend the career of these horses, and really grow a bigger fan base. So, that’s kind of the hope and the thought.
And I know we’re in our inaugural year. And I know we’re far from perfect. But like you said, it’s really off to a good start. I mean, couldn’t be prouder with the field that’s put together here, and even the undercard.
Danny Brewer: I know that you’re a Gulfstream guy, but since Mr Stronach is kind of the brains behind this, could this event go to Santa Anita maybe, or do you think it’s going to be strictly a Gulfstream Park event in the years to come?
Tim Ritvo: Yes, everything’s up for grabs. Everything – obviously, we want to do what’s – we really like to do what’s best for the shareholders. He made a speech last night that he wants to really use the original shareholders, the people that got in at the ground level, to hear their input through the season. So there’s a chance –
I mean, the Pegasus statue that he built here is just an absolutely monumental thing to see, and he always wanted it to be something that was iconic with horse racing. So, he wanted to kind of brand Gulfstream with this statue to say basically, you know, when you go somewhere that you think about horse racing, you think about Pegasus, you think about Gulfstream Park.
There’s a chance that it could be ran at another facility. But I think if we’re successful and if we’re not too restraint on the ability to give people a good time in this facility, I could see it happening again here. What I can see is more of these concepts popping up and then maybe even doing an international grass race, you know, at the highest level. So, I think we could add to it.
But we want to walk before we run, and get all the kinks out this year, and see where we’re at. But yeah, positively, this thing could move around. We think we have great properties, not just Santa Anita but in Maryland also between Washington and Baltimore and Laurel. We know we can have big events there too. So, you know, we’re hoping that this concept is accepted to the shareholders to get into a little bit of the financial details of it.
If eventually someday, the four top guys could make money, the four middle guys could come close to breaking even and the four bottom guys lost just a little bit of money, I think people will be lining up to get in. So, these are the things that we’re going to work on with NBC, with sponsorships and Pari-Mutuel Handle so that we’re sharing properly with the shareholders.
Speaker: [Inaudible] of the purse, but I’m just still trying to wrap my head around how this is going to work in terms of wagering sponsorships and media rights.
Tim Ritvo: Yes.
Speaker: So, can you talk about how much of those things are going in this year and can you give us kind of an estimate of what you’re looking for, for this year?
Tim Ritvo: Yes. So this year the biggest revenue source for the ownerships, the Group, will be the purse, right? All the Pari-Mutuel Handle – 100% of that revenue from the Pari-Mutuel Handle will go to the shareholders being split. It was being split equally and we made a little bit of an adjustment later on where we try to reward the fourth, fifth and sixth a little bit more, but that’s kind of between the shareholders and the purse agreement.
Then the sponsorship level of what we’ve sold in sponsorships this year, the final number is not in yet, and minus obviously some of the accommodations that had to be made. And then obviously NBC, there’s no revenue this year to the shareholders and we’re hoping that by having good ratings and then, as I said earlier next year, networks bidding on it, that we would be able to get more revenue.
We know right now that the industry pays for three races. They pay for the Kentucky Derby, they pay for the [inaudible] and they pay for the Belmont television coverage. What we would like to do is get into that mix so that there’s a little bit of a bit more that they think that it’s worth covering and that they can sell spots and everything else. So hopefully in the future years, NBC or ABC or ESPN or Fox or one of these networks will be able to pay, and that money would be divided up equally between the partners. Also as television ratings improve, sponsorship will improve, and that money will be divided up between the partners the same as the purse revenue.
Speaker: So as of right now, there’s absolutely no revenue sharing between NBC and the partners?
Tim Ritvo: No. Actually we had to pay NBC. The Stronach Group took the commitment on themselves to take care of the hit this year to pay for the coverage, but Belinda thought it was worth the marketing initiatives in the long run to try to have a bigger reach. So the hour and half of the NBC telecast was paid for by The Stronach Group.
Speaker: All right. Thank you very much.
Tim Ritvo: Appreciate it.
Operator: We’ll go next to Art Wilson with Southern California Newspaper Group.
Art Wilson: Yes, Tim. Can you tell me how many, besides yourself and Mr Stronach, how many people kind of came together and made the final parameters for this race and had a say in it or hand in it?
Tim Ritvo: Yeah. The concept – like I said two year ago was launched at the meeting at Breeders’ Cup. And then we kind of talked through it for a complete year. And then the last year’s Breeders’ Cup, we – not this year obviously but the year before – we sat down and we really banged out all the details. And it was Alon Ossip, who’s the Chief Executive Officer, Mike Rogers, who’s the President of Stronach Group, Belinda is the Chairman now, Frank, you know, being the Honorary Chairman and the Founder and myself. Also, Keith Brackpool, who’s on the Executive Board from California. So more the five or six of us sat down and really kind of worked out the details on what this would look like, why people would sign up. We also brought in Jack Wolf who had experience with syndicates and stuff like that to kind of give us what he thought would happen.
To be honest, we were – there was lots of debate whether we would sell the shares as fast we sell them. Frank was – Mr Stronach was committed to buy three shares if he had to, to make it successful. And within the announcement, within a couple of days, we had to call him and tell him we had good news and bad news. And the bad news was he was down to one share and he said, ‘That’s what it is. You’re down to one share.’
So that was good, and we were surprised how fast – and surprised to have different diverse group. We’ve had people that have never been in horse racing say, ‘Hey. This is a great idea. I want to be in it.’ And experts and people like [inaudible] and stuff like that jumping in and obviously [inaudible] and stuff like that. It was just a pleasant surprise to see it all come together so fast.
Art Wilson: And you mentioned the fact that there’s the possibility that it could move around year by year. Depending on the success of it, is there also a chance that it could expand from 12 horses to 14 in the future?
Tim Ritvo: Yeah. And obviously depending on, right, the facility that’s running that. We are already pushing the envelope at 12 at a mile-and-an-eighth at Gulfstream. But distances, number of races, all of those things will be thought out. And like I said in the beginning, when we thought out the mile-and-an-eighth distance, we tried and have – good horses as possible. Would a mile horse try to go a mile-and-an-eighth? And we thought they would. The mile and a quarter horses, obviously, would go the mile-and-an-eighth.
So we thought of all of these little things but we want to – we definitely want to involve – now that the concept is launched, to involve more of the partnerships to – the partners to sit down and have mid-year meetings and say, ‘Hey, what do we think?’, and have open discussion about how do we move forward to make it as successful as possible. And then also the addition of maybe even a second race down the road on the grass or lawn.
Art Wilson: So the reason that you guys set on a mile-and-an-eighth was because you hoped to attract some horses that maybe didn’t feel they could go a mile and a quarter or milers like you mentioned?
Tim Ritvo: Yes. That was the mile-and-an-eighth concept. And it was debated strongly from both sides. The mile and a quarter is a real classic distance, so we should really consider that. We just thought that if we could get a really good miler that, you know, would try to push the envelope at a mile-and-an-eighth for $12 million, then we could actually have a more attractive race than alienate those kinds of horses.
Art Wilson: Okay. Great. Thanks. Good luck with the event on Saturday.
Tim Ritvo: Thank you for your questions. Appreciate it.
Operator: We’ll go next to Debbie Arrington with Sacramento Bee.
Debbie Arrington: Thank you very much for coming on today. This is such an unusual concept and, you know, like you said, it’s something that is ground-breaking. It could really set a lot of precedence. So we’re still trying to wrap our heads around exactly how it will work. So that mutuel handle, that 100%, goes toward the stakeholders, is that just on-track handle or is that the national handle?
Tim Ritvo: The national handle. Every source of revenue that comes in that’s been on that race and a percentage of the multi wages which is the pick four, the pick five, the pick six, all that percentage would go to the shareholders also. Obviously, it is the host that takes, there’s us, and then there’s the sites that take the bets, they get their percentage, but then all the rest that comes to the house goes all to the shareholders.
Debbie Arrington: You’re looking at – for first place is that going to be $6 million for the purse?
Tim Ritvo: $7 million for the purse. The purse is already set and has no relation to – that’s set for the horses. So, it’s a $12 million purse total, $7 million for first and then downward. Then the separate revenue driver is how much do they bet on the race, what’s the total revenue and divide that up by 12.
So just a quick math and a quick example. If we did $25 million on the race, everybody would receive somewhere around $200,000 to $225,000 a piece in revenue plus everybody gets $250,000 just for starting from last to fourth, and then the rest of the horses get more first, second, third, right? So the guy that finishes last right now even though he put a million dollars could end up getting somewhere around $500,000 back.
Debbie Arrington: Wow. Okay. All right. That’s what we’re trying to figure exactly all the math in this. And the stakeholders, do they hold on to those stakes from one year to the next or do you have new bidding or how does that work?
Tim Ritvo: No, they have the first right of refusal into the second year. So as we continue to build this series and, obviously, the first year is the toughest to get television revenue and to get sponsorship. As it becomes more and more popular, if we look at the Breeder’s Cup 31 years later or whatever, you would see the difference from the first year to now.
So those ownerships, the shareholders or stakeholders as we call them, would have the first right of refusal.
Debbie Arrington: And is there a re-up fee to go for another year?
Tim Ritvo: I mean right now I mean, obviously, it would be the same. It’s a million dollars.
Debbie Arrington: It would be the same million dollars. Okay.
Tim Ritvo: Yeah. And like once again in reality, we’re just kind of facilitating this. So now that, you know, we’ve got this thing going in the right direction. We would take the lead from the shareholders if they thought of putting in more money and having a second race, if they thought of putting more money and having a bigger purse. I mean there’s all different kinds of ways. And I have to tell you, it’s been really good. For an industry where people normally compete against each other trying to win, you know, this is a lot like, let’s say the NFL or something, where each team has an interest in winning but, at the same time, they’re very important about selling the whole group together, you know. So it’s been great, and a pleasure to work with these guys.
Debbie Arrington: Very good. Okay. Thank you very much. Great luck on Saturday.
Tim Ritvo: Thank you very much.
Operator: We’ll go next to Tom Jicha with South Florida Sun Sentinel.
Tom Jacob: Good. Do you have any estimate about what the crowd might be? You’re kind of moving into uncharted waters with a barely hefty price point. And I know you got a plan for hotdogs and beers and sodas and everything. What are you hoping for and what would you consider a success?
Tim Ritvo: Yeah. And Tom, you know the facility so you’ve been here, and it’s really hard without turnstiles through the years. You know, we’ve had free parking and free admission for so long. You know, we’ve estimated Florida Derby crowd up to towards 20,000, we really stacked them in there.
We think a success is somewhere between 15 and 17.5 because of the limitations when we really started to count the seats and what we could sell and the bodies we could put in the seats. Basically, the general admission with the TT area and Frank Beach side. So, you know, a success in our way is not how many people we can get in here, it’s the idea that it’s a comfortable and fun environment that will be measured by customer service, right? Can they get to the concession stands, can they get their bets down, can they use the restrooms, are we – you know, so those are the things that we’ll really be watching for. But, you know, we think that we can handle the crowd of 17,500, Something in that area, and still be able to accommodate and let people have a customer – a great customer experience.
Tom Jacob: And the other thing. With the money back 250,000 even if you finish last, I saw something the other day that wasn’t well explained. It’s some kind of an agreement has been struck with the jockeys about what they’ll get. Like if the normal purse, the guy who finishes last will get 25,000 just for riding around the track. Do you know – can you explain that to me?
Tim Ritvo: Yeah. So the jockeys have struck an agreement with the shareholders that give them the basic – I believe – and I don’t want to be quoted on, but I think it’s the Breeders’ Cup analysis, where if the trainer and jockey do not have a side agreement, which you’re entitled to have, the basic withholdings will be 10% for the winner, 5% for second, 5% for third, and a $1,000 mount fee for the rest. So that’s what the agreement was made with the jocks and that was agreed upon. Everybody was very comfortable with that.
Now if the jockey and the trainer or jockey and an owner, I should say, want to make a side agreement where they get a little more or a little less, that’s up to those people. And if they give us a signed declaration of the two bodies, then we’ll do it accordingly.
Tom Jacob: As this goes forward and if money is produced for the partners and everything, do you think you’ll maybe scale back on paying horses to finish tenth, eleventh and twelfth?
Tim Ritvo: It will be between the ownership. You know, if we were to – obviously if we were to be able to get more money on the revenue side for the shareholders, then there would be less gamble. So the idea was to try to make sure everybody got back a good chunk, or a fairly decent chunk of their money.
But yeah, we could see putting more in second, third, fourth and fifth, right? To make more of an incentive up at that level. But, once again we would pull the ownership group