Where Does the Ontario Sired Program Fit in WEG’s Future?

In a broad-ranging interview in October with Canadian Thoroughbred, Woodbine Entertainment Group, WEG, CEO Jim Lawson acknowledged “broader consultation — whether it was by the HBPA, Woodbine, or both together… may have been helpful” before changes were made to the Ontario Sired (OS) program in January that caused widespread outrage in the breeding community.

Some breeders and owners contend those changes were a factor in the Canadian Premier Yearling Sale being off about eight per cent in average from a year ago.

Yet, Lawson said changes were necessary both because the program was paying out more than $2 million more than was allotted for it, and open horses were not getting in to race often enough, leading to short fields which is a detriment to handle.

The initial changes amounted to dropping the OS bonus on allowance races and maiden special weight (MSW) races from 40 per cent (in 2015) to 30 per cent. The bonus for all other eligible races declined from 30 per cent to 20 per cent. The changes in the conditions proved to be the most controversial with breeders.

“I’ve said to numerous stakeholders that really what Woodbine is trying to do is to just get our horse population to run,” Lawson said. “We did make some adjustments. I think the good thing is that we were flexible, collaborative. We listened to the industry, and working with HBPA, we made adjustments during the year. Whether the initial approach was the right one or not, I’m not sure. But I think broader consultation during the year helped.

Though Canadian Thoroughbred Horse Society (CTHS) Ontario president Glenn Sikura said breeders continue to be unhappy about not being consulted directly before changes were made, he acknowledged WEG only has “a legal obligation to consult with the HBPA; not to agree to what the HBPA may suggest, but to consult with them. So, there is no obligation (to consult with the CTHS) other than perhaps an ethical obligation or from common sense stand point,” Sikura said. “But this business is not big enough in Ontario that we can really afford to tick off any of the participants. We need owners, we need breeders, we need a racetrack. All three of those things need to be healthy and as soon as one of those three isn’t healthy, then the other two are not healthy by definition. So we absolutely need to be involved in the process. I don’t know if there will ever be a one-size-fits-all solution that everybody will go away happy with. So, maybe we all need to take a little bit of the pain and move on with a program that we all find at the very least is acceptable, if not if not positive.”

Lawson said WEG would continue to work through the Horse Improvement Program (HIP) advisory group to craft a long-term plan for the OS program.

“I think it’s got to work through that HIP advisory group which we participate in, and we’ll see where it goes. It’s not a case of not wanting to work with anyone in particular,” Lawson said.

Lawson said early numbers indicate the changes to the OS program have had some degree of success.

“I think what’s happened is the maiden claiming races increased significantly. We went up to 177 races,” Lawson said. “It gave the OS horses… and open horses a chance to run and, at the end of the day, despite some very difficult challenges in terms of horse supply, our field size is up – just slightly, but it’s up.”

“I think we’ve paid out a couple million dollars in Ontario Sired bonuses so far this year. It’s performed as we might have expected in certain categories. And that’s despite the reduction of the bonus from 40 per cent to 30 per cent. So I think (Ontario Sired horses) performed fine. One of the areas that is important to us is that first level allowance, that non-winners other than. We’ve increased the number of races in that category and the OS bonus went up, I think, 17 per cent despite the 10 per cent decrease in percentage bonus. So that gives you a sense right there. One of our major objectives was that type of category.

“And, we announced before that the yearling sales this year that we will not be eliminating the OS overnight program… I hope that gives people confidence.”

Lawson said changes WEG made to the OS program likely will require more tweaking, though no major overhauls are in the works or anticipated.

“These are difficult issues, and you kind of learn as you go,” he said. “It’s a fine line that we walk in terms of making adjustments. Sometimes you have to try things and you’re not sure how they’re going to go, or how horsemen are going to react.”

Sikura said he would like to see the data to determine whether or not program changes were, indeed, effective.

“I understand why the focus is to leave the open horses to make more races go,” Sikura said. “We need to provide them more opportunity, but we have more or less built a program in recent years very strongly around the OS horses and it’s unfair not to maintain a level of privilege that they have so they need to continue to have their opportunities and if they run against open horses they need to get a little bit of an edge.”

Lawson said he also has to balance the interests of all owners, not just breeders.

“The owners… want to be appreciated and we need to do a better job of making sure that our owners are looked after and appreciated,” Lawson said. “We are focusing on that. It’s become a more competitive world for horses and the horses come from the owners so, I think that making sure that their needs are looked after is important… What I hear mostly from them is they want to have a chance to run their horses. And it comes back to the same issue that is the theme of this discussion, which really is horse supply. I hear, ‘I would love to stay here. I would love to run more. I’d love to bring other horses here.’”

Sikura agreed with Lawson that a horse shortage is “the biggest issue” at play.

“If there was an abundance of horses either (OS or open) we wouldn’t even be bothering to have this conversation,” Sikura said. “So, we cannot afford to drive the OS horses out because they are (about) 50 per cent of the backstretch. So, we definitely need to maintain a healthy program. Once you start a program it is really difficult to go backwards. Everybody got used to a program that was extremely beneficial to OS horses, then the rules were changed, and they were changed fairly abruptly, and it’s not a surprise that were heavily invested in the OS program what would have taken offense to that.”

Lawson said some 2,800 thoroughbreds have raced at Woodbine this year and WEG is committed to running 133 race dates.

“Of our horse population, currently of the ones that are on the track this year and that have run so far, we’ve got about 55 per cent of them are open horses and about 45 per cent of them are Ontario Sired horses,” Lawson said. “When you look at the world we play in, Ontario produces just three per cent of the entire North American foal crop.”

Filling races has become increasingly challenging in recent years for a number of reasons, Lawson said,

“We’ve historically relied on U.S.-breds to fill our racing program,” Lawson said, “but, we’ve struggled with currency, we’ve struggled with immigration, which we’re trying to address. We can’t control the currency, but we’re working with immigration to try and eliminate the concern that grooms and exercise riders are unskilled labour and the trainers can’t get them across the border.”

Since the end of the Ontario Lottery and Gaming (OLG) corporation’s Slots at Racetracks Program (SARP) in 2013, WEG has also struggled to keep up with some jurisdictions on purse level.

“Even though it’s been a supportive relationship with OLG, we continue to deal, North American wide and horse supply wide, with horse racing companies… that run the gaming at their racetracks, which is a very difficult thing to compete with,” Lawson said. “When you look at the purses at Parx, and they’re running $80,000 maiden races in U.S, dollars, it’s a challenge.”

There’s also a number of tax issues working against WEG.

“If we’re hoping to generate interest, generate investment, I think the federal tax laws are not helpful to people being involved in horse racing in terms of the loses being deductible against your income. That’s a real challenge that we have as an industry in this province or in this country,” Lawson said.

“The other big aspect to it is our pari-mutuel commission tax structure in Ontario. I think that has to be looked at quite seriously with government in terms of that wagering dollar. What comes out of that at the end of that day, when we are non-competitive with the US tracks in terms of the net margins that we have on our wagering which puts us in a very difficult position vis-à-vis the competition, because wagering is where we get our income from and our income pays our purses,” Lawson said.

Dealing with a horse shortage is further compounded by breeding numbers that make long-term projections difficult.

“Are we going to continue at our current breeding levels? What does that mean for the future? How do we fill the amount of races that work for everyone? We’re down to, for 2015, 720 foals,” Lawson said. “We’re doing the analytics now in terms of what that means to our 133 days of racing. A number of those (Ontario Bred) horses would have been sold at Keeneland – what can we do to retain those horses or get them back here to run through our Ontario Bred bonus program? We really need to figure our how many horses we need and what’s the optimal number of dates. It’s a complicated puzzle that we really need to roll up our sleeves and look at the analytics and say, ‘How are we going to make this work for everyone?’”

Lawson, Sikura and others agree the only solution is collaboration. Making WEG the enemy does not help that process, Lawson said.

“People have to be patient and understand that we’re trying to do our best for everyone,” Lawson said. “We’re just trying to make races go. As with a lot of issues we have around here, we’re much more aligned than people think. We’re here for the horsemen, we’re here for the stakeholders, the employees, the trainers, the owners. We’re just trying to make this work for everyone. At the end of the day we have to try and have larger field sizes. Our only real source (of revenue), leaving aside the gaming relationships… is wagering. We have to do everything we can to produce wagering in order to try and sustain this industry. Running a racetrack is a very difficult economic model – one that you just have to work very hard at field sizes to try and make a go.

“I think every jurisdiction in North America – California, Florida, Maryland in particular — are grappling with the same questions in terms of sired programs vs. bred programs. New York is another one. Most of them have a very successful bred program as opposed to sired program. Most of the programs are not overnight programs on the sired side. A lot of them are stakes programs and I think that’s an important distinction that we have to look and see what works best of the provincial industry over the long-term.”

Sikura said it’s a major challenge that needs a number of bright minds working to find a solution.

“I think (WEG has) to accept that part of the process should be some form of consultation with the breeders,” Sikura said. “I don’t believe we are going to be sitting in the room and telling them how to write their races, but at the very least we do have some bright minds and let’s see if we can come up with some solutions that work for everybody.”

Woodbine Entertainment Group (WEG) CEO Jim Lawson acknowledged “broader consultation — whether it was by the HBPA, Woodbine, or both together… may have been helpful” before changes were made to the Ontario Sired (OS) program in January that caused widespread outrage in the breeding community.

“I think (WEG has) to accept that part of the process should be some form of consultation with the breeders.”