http://www.nytimes.com/2005/03/08/sports/othersports/08horse.html
March 8, 2005
In Horse Racing, an Odd Couple Seeks the Reins
By JOE DRAPE
On a steamy Texas afternoon last fall, Marylou Whitney floated into the paddock of Lone Star Park like royalty, moving along the barricade to accept the outstretched hands of admirers.
Ms. Whitney, at 79, is the doyenne of racing, a traditionalist like her late husband, C. V. Whitney. She believes that women should wear hats to the racetrack and that the best fertilizer for a horse farm is the owner\'s feet walking its bluegrass. As Birdstone, the colt she bred and owns, high-stepped into the paddock, Ms. Whitney\'s face flushed with delight.
Twenty yards away, another septuagenarian was disrupting what is usually a genteel prerace ritual. Frank Stronach, 72, had Gov. Rick Perry of Texas by the elbow and was hustling him through a jumble of television cameras.
Mr. Stronach also had a homebred horse in the race, the Breeders\' Cup Classic.
But he does not want to win big-money races nearly as badly as he wants to gain control of the last essential pieces of his planned empire: New York\'s three racetracks - Aqueduct, Belmont Park and Saratoga, where Ms. Whitney reigns over the summer social whirl.
Mr. Stronach, who owns or operates 11 tracks nationwide, is a rags-to-riches auto-parts magnate who has made a ruckus ever since he arrived on the American racing scene, waging warfare on an old guard that he insists has run the business into the ground. He is determined to add video slot machines and other forms of gambling to racetracks, along with musical entertainment, dancers and anything else that might broaden the sport\'s appeal - tactics that are viewed with distaste by many people in Ms. Whitney\'s social circle.
So Mr. Stronach has been courting Ms. Whitney as a potential ally, and their evolving relationship is likely to play an important role in determining the future of New York\'s beleaguered tracks. It will surely influence, as well, the competition among several major racing organizations and casino companies that have been vying for control of tracks across the country. Mr. Stronach\'s horse, Ghostzapper, was favored to win the $4 million Breeders\' Cup at Lone Star Park, one of his tracks. But Mr. Stronach was not here to talk about the race. He delivered a monologue to Governor Perry in the hope of making a powerful new friend in his campaign to transform the $15 billion North American horse industry into a $100 billion global one.
\"We can create 25,000 new jobs, increase the tax base, make more monies for the state, ya,\" the white-haired Mr. Stronach said in the melodic accent of his native Austria, not waiting for a response from the governor.
The morning before the Breeders\' Cup, Mr. Stronach had been sitting in a limousine outside Ghostzapper\'s barn on the dusty backside of Lone Star Park in Grand Prairie, Tex., about 15 miles west of Dallas. He could barely contain his disdain for New York\'s old guard, the generations of racing royalty with names like Phipps and Whitney that have controlled thoroughbred racing in the state.
He spit out the reasons why he should own its tracks: the New York Racing Association lost $20 million in 2003; it was enmeshed in a tax-evasion scandal that cost it a $3 million fine; and it is operating under a court-appointed monitor as part of a plea deal with federal prosecutors.
\"They screwed up a monopoly, and that\'s what happens when you run it like a club,\" Mr. Stronach said. \"They may be nice people, but when you operate on favoritism and friendly connections, and they all sit together in the trustees\' room for an afternoon of racing without any of their own money up, do you think they really care about the product or the business?\"
Still, Mr. Stronach knows that to purchase the New York tracks he needs help from beyond the phalanx of high-powered lobbyists, like former Senator Alfonse D\'Amato of New York, whom he has already hired.
He needs allies like Ms. Whitney.
Ready for Change, Within Reason \"I don\'t care if Frank Stronach is taking over - he\'s not moving me out,\" Ms. Whitney said with a bravado that seemed to startle her dinner companions at Lexington Country Club in the heart of Kentucky bluegrass country.
It was a Friday evening two weeks before the Breeders\' Cup, and Ms. Whitney and her 40-year-old husband of seven years, John Hendrickson, were celebrating over steaks and Champagne the opening of the fall season at Keeneland, which, like Saratoga, caters to rich owners and their best horses.
Mr. Stronach\'s horses race here, and he breeds high-quality steeds nearby on his farm of more than 1,800 acres. But Mr. Stronach, an Austrian factory worker\'s son who immigrated to Canada, is not one to work the dining rooms of old-line country clubs.
Ms. Whitney and her husband were dining with friends: the Oxleys and the Farmers, wealthy Kentucky farm owners who have bred or raced a slew of top-flight horses. The conversation had turned to the woes of the New York Racing Association and Mr. Stronach\'s efforts to buy its racetracks.
No one at the table disagreed that the industry was in trouble; Las Vegas, state lotteries and the proliferation of gambling and slot machines in state after state had been siphoning gambling dollars from horse racing for decades. But no one was eager to embrace Mr. Stronach, either. They were tired of what they considered his bullying and hectoring, and suspicious of his plan to Las Vegasize racing. Look at what he had done at Gulfstream Park, his track in South Florida: rock concerts, scantily clad cheerleaders. What next?
Mr. Stronach had to be stopped, they agreed, and an advocacy group was forming under the banner of Friends of New York Racing. The clock was ticking already - the state franchise for the New York Racing Association expires in 2007, and Gov. George E. Pataki\'s latest budget suggested that the cash-strapped government, tired of scandals and mismanagement, was ready to put the tracks up for bid as soon as the end of this year.
The racing association was established in 1955 as a nonprofit corporation to consolidate and run the tracks under a state franchise. Its trustees, among them members of some of the state\'s oldest families, have fought off previous attempts to sell the tracks to private interests, and secured their latest franchise extension in 1997 after contributing more than $210,000 to the state Republican and Democratic committees.
The group\'s purpose was to come up with a new business model for New York racing, then to lobby the Legislature for the changes it wanted. But the list of its supporters read like the \"enemies of Frank Stronach\" and included rival racetrack operators.
Was Ms. Whitney a part of this cabal? Surprisingly, given her dinner comment, she was not. She and her husband had refused when approached by the group for support and money.
It turned out that Ms. Whitney\'s relationship with racing\'s old guard was as complicated as her pre-Whitney past as an accountant-attorney\'s daughter, actress, real estate agent, TV cooking show personality and divorced mother of four.
Tradition Comes With a Price
Unlike some in the old guard, Ms. Whitney is an economic pragmatist. She says she believes that for horse racing to survive and prosper, the sport and its purses need to grow with new money, along with new owners who have ideas and financial discipline. \"We cannot just race our horses against each other anymore,\" she said. \"It can be a pastime and still be run like a business.\"
Then there\'s the issue of the Jockey Club, whose mandate is to protect thoroughbreds by recording blood lines and the like. Its concern for breeding may extend beyond horses. Ms. Whitney has never been invited to join this stronghold of the Phipps family - the descendants of Henry Phipps, partner of the steel magnate Andrew Carnegie - even though several members are women, and Whitney men have commonly served on the board.
\"It hurts because I\'m not sure you can find anyone who has devoted as much energy and passion to this sport, especially who has been as good a friend to New York racing as I have been,\" she said.
At the dinner table, Ms. Whitney\'s blue eyes sparkled and her back stiffened as she allowed that Mr. Stronach may be a kindred spirit after all. \"I\'m not a snob - I\'m a traditionalist,\" she said, her lockjaw delivery loosening up as her voice rose.
\"I am not old guard,\" she added, enunciating each word with great deliberation.
Once more, Ms. Whitney had startled those at the table.
Mr. Stronach is another force in racing who has not been invited to join the Jockey Club. So, aware of Ms. Whitney\'s ambivalence toward the very elite with which she is identified, he made a play for Ms. Whitney\'s allegiances.
On the eve of the Breeders\' Cup, he invited her to a presentation in a conference room off the lobby of the Mansion on Turtle Creek in Dallas. A cocktail bar had been set up and easels positioned around the room, propping up drawings of the racetrack makeover under way at Gulfstream Park in Hallandale Beach, Fla.
The track\'s grandstand and clubhouse had been leveled to transform it into Mr. Stronach\'s vision of a multipurpose, entertainment destination - a prototype for what he hopes to create in New York.
Mr. Stronach and Ms. Whitney wished each other luck at the Breeders\' Cup. Then Mr. Stronach, the tool-and-dye baron, and Ms. Whitney, the Edith Whartonesque Queen of Saratoga, wandered from easel to easel, where laser-printed color renderings mapped out the future of horse racing.
Mr. Stronach tailored his presentation for her. The stage in the middle of the sports bar was for performers like magicians, he said (not the dancing girls, and guys, he has pitched before). The new parimutuel video racing game his company created - it whirls and rings like a slot machine - was designed to make the racetrack more accessible to the young people who crave faster-paced action.
Ms. Whitney looked and listened, oblivious to the executives from Magna Entertainment milling around the room and stealing furtive glances to see how the boss was doing. When it was her turn, Ms. Whitney was succinct.
She told him what she liked: the training center he had already built in South Florida with a state-of-the-art racing surface and first-class housing for stable hands, who have typically been treated as afterthoughts in racetrack design. Ms. Whitney told him, too, what she did not like: rock concerts and anything else that took the focus away from the horses.
It was an intense 45-minute match of wills and wits between high-powered people who wore their smiles easily. Ultimately, an alliance was at stake, but for now, the two remained at arm\'s length.
\"She\'s a nice lady who knows and loves horse racing,\" Mr. Stronach said afterward.
A Populist With Many Admirers
Although she does not hold formal reins of power in thoroughbred racing, Ms. Whitney is still the woman to see. She has played host to and supported a who\'s who of New York politicians, including two of the men who control the future of horse racing in the state: Governor Pataki and Joseph L. Bruno, the majority leader of the State Senate.
One day at lunch on the C. V. Whitney Farm in Lexington Ky., in a dining room overlooking the slave-quarters-turned-guesthouse where Ronald and Nancy Reagan once stayed, Ms. Whitney told a story that illustrated how she became the public face of American horse racing. She said she had returned one night after a society gala in a white Bill Blass gown, dripping with emeralds, to find the farm manager and the veterinarian with their hands full trying to deliver three foals.
\"Off came the jewels and heels, and I was up to my shoulders in the mare, pulling with all my might until my suit was red\" with blood, she recounted.
\"But that baby ended up being Banshee Breeze, a champion filly, and I foaled her,\" she said.
The anecdote often provokes eye rolls from some of her peers, who cannot get past the fact that she married, rather than was born, into a fortune built on oil, tobacco and New York City street cars. But it does explain her appeal to readers of publications as diverse as The Daily Racing Form and Vanity Fair.
Of the tens of millions of dollars that Ms. Whitney has donated to or raised for charity, much has been directed toward horse hospitals, equine research and efforts to save used-up racehorses from the slaughterhouse. She treats breeders and owners of more modest means as equals. She courts everyday racetrack patrons with playful banter, and for her highly anticipated entrances at her annual summer gala in Saratoga Springs, N.Y., Ms. Whitney has arrived in everything from a Model T to a hot-air balloon.
Ms. Whitney stayed true to her populist form when an ankle injury forced her beloved Birdstone into early retirement in the days after the Breeders\' Cup. She turned down multimillion-dollar offers from commercial breeders and decided to stand Birdstone as a stallion herself, just up the road from the C. V. Whitney Farm. She set a modest stud fee of $10,000 per coupling with Birdstone.
\"We don\'t need the money,\" she said. \"And we wanted to make him affordable to breeders at all levels of the game.\"
In contrast, after Ghostzapper won the Breeders\' Cup Classic, Mr. Stronach increased the stud fee for the colt\'s sire, Awesome Again, to $125,000 from $100,000.
A Newcomer\'s Drive to Succeed
Mr. Stronach has long favored aggressiveness over accommodation. It worked in transforming a single tool-and-dye shop in Canada into Magna International, an auto-parts powerhouse with 219 manufacturing divisions in 22 countries. In the process, he has amassed a personal fortune of more than $585 million, according to Canadian Business magazine.
Mr. Stronach, who once washed dishes and peeled potatoes for a living, now lunches in the clubhouse of the golf course that he had built at his sprawling company headquarters in Aurora, Ontario. His inner drive seems unabated in his quest to become king of the sport of kings.
Over the past six years, Mr. Stronach has threatened to withdraw his financial support from the horse industry\'s trade group, saying power and policy were in the hands of an entrenched few. He has broken with custom by refusing to sell the simulcast signal of races from his tracks to rival tracks and wagering companies.
Instead, he has built his own satellite television network with 11.5 million subscribers and purchased an Internet wagering company. This expansion has been costly, as demonstrated by the $41 million loss that Magna Entertainment reported for the fourth quarter of 2004. The company reported a loss of $95.6 million for the year.
Still, Mr. Stronach envisions horse racing as the anchor of a 24-hour, seven-day-a-week global gambling and entertainment colossus. He envisions a day when customers at his tracks can bet on horses, play slot machines or his racing game, shop and dine. Away from the tracks, they could watch races on his TV network and bet on them online. The New York tracks, with year-round racing, rich purses and high-level horses, would become the prime piece of programming for his empire.
Mr. Stronach says he sees himself starkly as an entrepreneur being stymied by a culture of entitlement.
\"I came up in the automotive business, the most competitive industry in the world,\" he said. \"You could be Henry Ford\'s brother, but if you don\'t make a high-quality product at a low price, they aren\'t going to buy it from you.\"
He makes it clear that neither old guard resistance nor shareholder wrath over his company\'s recent losses would derail his plans to transform the sport. \"I decided early that I was never going to suck up to anyone again,\" he said, \"that I wouldn\'t get on my hands and knees and crawl, no matter who it was.\"
Considering Another Approach
But it is hard to cultivate the upper reaches of power with a steamroller. And cultivate, it seems, you must, especially if you have jittery shareholders and an impatient gambling public to satisfy.
On Jan. 3 - opening day at Gulfstream Park - Mr. Stronach was the one being clutched by the elbow and bulled around the clubhouse. He was being harangued not by a governor but by patrons, retirees mostly, and rank-and-file horse owners.
Things were going badly. The first race of the winter season had to be declared a no-contest. The horses turning for home had to be pulled up by their jockeys, because a tractor had failed to cough to life and pull the starting gate away from the finish line.
As one person after another buttonholed him to complain about a lack of seating and television monitors, obstructed views and a host of other inconveniences, Mr. Stronach took it in stoically and promised to have them fixed. (It will take a year for the entertainment complex to be completed.)
\"You won\'t recognize this place next winter,\" he said. \"But for now, the show must go on.\"
Gulfstream Park was not his only worry that day. A revolt was brewing among investors unhappy with his gambling investments. They wanted him to sell or spin off Magna Entertainment, his horse-racing subsidiary, to restore share value in another subsidiary, a real estate company. To mollify them, Magna Entertainment instead made a series of concessions that were at odds with Mr. Stronach\'s public comments, moves that smacked of, \"If you can\'t beat \'em, join \'em.\"
The first was committing $100,000 to join the Friends of New York Racing. Then Mr. Stronach reversed himself further and made the live video feed of his tracks\' races available to rival tracks and wagering companies. Magna Entertainment even entered into a partnership with its chief competitor, Churchill Downs Inc., to simulcast each company\'s races in Europe.
Was Mr. Stronach now willing to take on partners in New York? Or was he cagily infiltrating the opposition?
Finally free from fielding complaints and suggestions, and a word or two of praise, Mr. Stronach pulled up a chair in Gulfstream\'s dining tent. Like a politician, he stayed on message. He insisted that he still wanted the New York racetracks for his own. But he conceded that it may be time to see if some give-and-take could penetrate the old guard.
\"Let\'s see what happens by trying to work together,\" he said.
A Meeting of Two Like Minds
At around the same time, Ms. Whitney was back in Saratoga Springs at her 135-acre estate, Cady Hill, preparing to fly to Florida. Horse racing was very much on her mind.
Birdstone was about to mate with his first mares in Kentucky. In Albany, Governor Pataki had released his proposed budget, which called for the state\'s track franchise to be put up for bid starting at $250 million, with annual payments of perhaps tens of millions more on top of that.
The New York Racing Association did not have that kind of money. In fact, it had lost tens of millions of dollars and had failed to pay its franchise fees in recent years. It had also been unable to install video lottery terminals that were approved for Aqueduct.
It seems now that a changing of the guard is imminent: the Friends of New York Racing announced last month the composition of its board of directors, a mix of owners and breeders from the state, as well as national industry leaders. One of Mr. Stronach\'s executives was among them, as were representatives from the Jockey Club and Churchill Downs Inc.
Ms. Whitney, however, is not a board member. But as an old sport remakes itself in New York, she will continue to be a behind-the-scenes presence. She will make her opinions known to the right people, like advising the governor on the panel he intends to form to oversee the bidding for New York\'s tracks.
Frank Stronach is not moving Marylou Whitney out of New York racing. If anything, she might help him move in.
\"I like what he\'s doing for the people on the back side who tend to the horses and his vision to bring more people into the sport,\" she said. \"He has already spent hundreds of millions of dollars in the sport and is willing to spend more. He is a smart man and should be taken seriously.\"
coming from her, the last paragraph speaks volumes. unfortunately, slots hit a major roadblock in maryland last week. if slots fail there, and if the measure fails in florida tomorrow, the guy might not be able to compete.
by the way, between magna tracks GP and SA, i can\'t ever remember seeing a better day of racing in early march than i did this past saturday.
Post Edited (03-07-05 22:06)
>by the way, between magna tracks GP and SA, i can\'t ever remember seeing a better day of racing in early march than i did this past saturday.
Agreed.
If the Slots Bill succeeds and he (Stronach) is able to complete his Gulfstream facility by the start of the next meet, then this will be all the evidence he needs to take his plans elsewhere. A defeat in Maryland isn\'t the end of the world, there is always the next round of voting and his potential success in his Florida project could help him get over the top in Maryland.
The New York project is still a ways away but with the kind of momentum he would have by then, he would be virtually unstoppable.
Stronach may have bet his entire Empire on the outcome of tomorrows Slots Bill vote in Florida.
And we all think we have BET OUT a time two at the track before.
Not Hardly
Good article, entertaining juxtaposition of Frank Stronach and Ms. Whitney.
I remain a Frankaphobic, but realize that in 2007 Magna and CD will be the major players to replace NYRA. As I have said in the past, maybe we all should be concerned that 2 entities will eventually control all of the major racing venues in the US.
With regards to Magna and NYRA, my greatest fear is that the Saratoga meet, which IMO is a week too long at 6 weeks, will be expanded to 8 - 10 weeks.
Winter racing at my favorite venue, the Inner Course, should probably only be conducted four days a week. Right now, on a 5 day schedule (45 races), we are seeing 15-20 maiden races per week. These cheap maiden races and state bred maiden races produce chaotic results and big mutuels, but in the long run are bad for the breed and bad for racing. To me, this is a result of too many horses being bred in this State. Good for the economy, maybe, bad for the quality of racing. Too many N1X- N2X allowance horses are being given the opportunity to procreate. To train these mustangs we have a whole generation of \"stuportrainers\" who probably would not have been hired as grooms in the elite barns that raced in NY in the 70s.
The entire NYC OTB network needs to be streamlined. It has never recovered from the Tammamy Hall like appointment of Hazel Dukes, a civil rights activist who didn\'t know..er, duke about racing and wagering. If Frank could fix OTB and Aqueduct, I could see myself being transformed from skeptic to sycophant.
And while I\'m on scheduling, I wish NYRA, or someone, would race on Tuesday. I mean the choices are Philly, Tampa, Turf Paradise and Sunland. Now thats what I call a dark day.
Post Edited (03-08-05 03:15)
SC,
It has been said (Herald, Sentinel, Blood Horse, USTA) even if the bill succeeds, Jeb Bush and the Florida legislature may have it repealed or trimmed down (operating slots under racing hours only) So even if they win they are not home free.
xichibanx
Hilarious...\"He spit out the reasons why he should own its tracks: the New York Racing Association lost $20 million in 2003...\"
Everything I\'ve read indicates that Magna Entertainment is hemorrhaging cash; as they article points out, they racked up an impressive $95.6 mil of losses in 2004.
\"They wanted him to sell or spin off Magna Entertainment, his horse-racing subsidiary, to restore share value in another subsidiary, a real estate company...\"
That real estate company gave M.E. $192 million in loans, interest-free until 2008, to help finance the reconstruction of GP and some work at, I believe, the Meadows. So, what if the investors succeed in forcing a spin-off - are those loans still OK as is? I\'m asking, I have no idea.
\"In Albany, Governor Pataki had released his proposed budget, which called for the state\'s track franchise to be put up for bid starting at $250 million, with annual payments of perhaps tens of millions more on top of that....\"
Even Magna\'s own PR shills admitted, during their public comments after the year\'s \"earnings\" report was released, that they are hamstrung for awhile as far as taking on more debt. Wouldn\'t cash outlays required by the up-front bid fee and the annual payments weaken M.E. even further? What happens if they get the NY franchise and then a few years down the road they can\'t make the annual payments?
Richiebee, I agree with both your comments on the Spa - it IS too long at six weeks, and Stronach would certainly extend it to AT LEAST 8-10 weeks. (By the way, isn\'t CD planning to run a longer summer meet? Even a 6 week SAR meet suffers a probable loss of ship-ins under that scenario, the effect is obviously amplified if the meet is 8, 10, or 12 weeks...). And let\'s not forget the \"upselling\", as his folks call it, that would take place at the Spa...jacked up seat prices, jacked up admission prices, who knows what sort of luxury tents and boxes crammed into who knows where. Call me a misty-eyed idealist, but I do feel that Saratoga needs to be handled somewhat differently than a run-of-the-mill \"racing plant\", it holds obvious and significant historical value, and it needs to be run with an eye on that fact.
So, Stronach\'s company loses money hand over fist and its future seems dangerously tied to what happens with slots in a number of states. In many cases, the future of slots is precarious at best, and even here in NY, where slots are operating right now, a lower court ruled last year that it is against the state consitution for racing to get a piece of the slots action. That decision got kicked up to a higher court that is full of Pataki appointees, so it may well get reversed - but who knows, really.
Obviously racing has big problems here in NY and elsewhere, but just because this guy made a ton of money selling sprockets, that means he is The Savior the racing industry has been waiting for all these years? I don\'t buy it.
Magna lost a lot of money last year. I applaud the track work at Laurel and Hallandale, but other than that I\'m not overly impressed.
Santa Anita to my eye is going downhill. The field size and quality has been suffering. The worst abuses in the sport are out there, why can\'t the Magna folks get their act together? I had horrible experiences with them and Xpressbet. So bad I cancelled my account. Some of Stronach\'s ideas are fanciful. The Horse Wizard is comical.
I don\'t know. I\'m certainly ready to give him a chance to succeed, but I wanna see proof of success. I don\'t see it yet.
Marylou Whitney is notable for parties. Shes not the power behind NYRA.
Unfortunately, Magna is not really about horseracing but about gimmicks surrounding horseracing. There is the horse wizard, slot machines, beauty contests, malls, hotels, etc. Xpressbet is a complete failure in my opinion. Where do you get HRTV and after April it\'s not good anyway unless you want to watch LoneStar.
Slots is not the cure for horseracing, period. We need to get new fans involved in racing, not in activities around racing like rock concerts, slot machines, horse wizards, etc. One way is to have more TV, more tournaments(a la the World Poker Tour) and less 5-10,000 mc/ claming races.
Albany politicians are famous for long delays with the benefit of continuing to collect the perks from the lobbyists. There is still a big issue of who owns the lands where the tracks sit. This issue will be litigated for years if NYRA loses the franchise. The only reason Pataki, Bruno and Silver raise the issue of putting the franchise up for bid will be the influx of lobby dollars until 2007. Watch Ken Bruno\'s bank account as the Magna dollars roll in for Dad.
As of 9:00P.M. with 610 of 800 precincts reporting.
Get ready for $100,000 purses for $5,000 Maiden Claimers OPM.
Slots in at GP
Slots not in at CRC
XichibanX
Gowand -
Excellent insight. NYRA has been paying taxes on those properties since the 1950\'s and I\'d wager they won\'t roll over easily. This issue of the franchise for NY Racing has been nothing but a political power struggle originating when slots were on the fast track. The real issue was who was going to control and benefit most from those dollars. It\'s still the issue and the main reason Magna is interested at all. Along the way and through a myriad of specious investigations NYRA was found to have made some mistakes - somes serious errors in the way they conducted business. Most of those problems have been resolved or are in the process of being resolved. It would be interesting to see how any race track management group, charter authority, or even legislative office would hold up under the same bright light that came down on NYRA. Gowand hit the final point head on - the guys in charge of running NY State never saw a lobbying dollar they didn\'t love. If one side gets some traction, they will tilt the field just enough so the other side won\'t give up and they will keep those mighty dollars flowing from every avenue as long as they can. They are true professionals.
One last thing - in my opinion - NYRA consistently puts on the best show in the country when it comes to racing product. Imagine what they could do with slot revenue.