Tuesday, May 18, 2010

Let it Fail

The news today has stories about New York Racing Association's continued troubles as well as General Motors taking the next step in its turn-around. I see these stories as two companies at different points in the same trajectory. NYRA is at the precipice of running out of cash and ceasing operations while GM presented it's first quarterly profit in three years. GM was in NYRA's shoes not too long ago but took real action to fundamentally fix its problems and set itself up for ongoing success.

General Motors was once the standard of the world. It was a profitable institution with great product. However, the company did not change with the times, was hampered by government regulation and spent decades in decline. Hmm, sounds a lot like NYRA. On some days, NYRA still has great product, but they certainly have failed to evolve with the world and have clearly been hurt by unfair government regulation. And, like GM, NYRA has been dying a slow death since the 70's.

General Motors ultimately hit bottom and restructured through bankruptcy. They left the bad behind and moved forward with the good. They dramatically shrunk the company down to reflect the realities of the market and emerged as a fundamentally strong entity with a business plan that could work. It's failure was necessary for future success.

This may be blasphemy to some, but I think NYRA needs to do the same. It needs to fail in order to be strong again. The various OTBs need to fail too. The people in charge have to use the power of legal bankruptcy to restructure the entities in a way that can provide for long-term viability. No more half-hearted bankruptcies to obtain financing without changing the underlying way that business is done.

There are a few changes that can be made to greatly improve the chances of a "New NYRA" succeeding:

1) Merge OTB and NYRA - Of course, this is easier said than done, but it must be done. On-Track and Off-Track can't compete against each other. The concept is insane. They need to reduce redundancies and ensure that a fair share of takeout from Off-Track gets to the track and the horsemen.

2) Redevelop Belmont Park - The casino should be at Belmont Park, not Aqueduct. It's a bigger, more accessible facility that is in a better socio-economic area for a big development. Long Islanders will flock to a Belmont casino and City folks will have plenty of access by car and train. The redevelopment should include an all-weather inner track because we are also going to.....

2) Close Aqueduct - This facility is a vestige of the phenomenal history of racing in New York. However, the current climate does not support two facilities located so close together, and upgrades at Belmont will make it acceptable for bad weather racing. It must cost a fortune to maintain that beast so it must be slain. I think the State of New York holds title to the property now so they can use it for something else.

3) Make the fees paid to the State reasonable - The folks in Albany will certainly want to get their hands on some of the revenue of "New NYRA" and I don't have a problem with some money flowing into the Capital. But, the "tax" rate must be reasonable. The fees currently paid by NYRA and the OTBs to several government entities seem very high and prevent them from investing money back into their product and facilities.

4) Reduce racing days - Remember Pontiac and Saturn? They were eliminated by "New GM" just as a lot of race days and races should be given the axe by "New NYRA". I will not pretend to know where to scale back, but there is too much product and resources are spread too thin. Less is more.

I am a fan of horse racing in New York and I want it to succeed in perpetuity. The actions taken over the last few years (and maybe decades) are not going to sustain this industry long-term. It needs to be restructured so it can thrive. Without real change, the sport and industry will continue to slowly bleed until there is nothing left.

I drew a parallel to the controversial General Motors example, but NYRA's resurrection will not even need a cash "bail-out". The State merely needs to give NYRA the money that is owed them, award a casino franchise, make a few changes to the highly restrictive racing law and get out of the way.

Let it fail now so it can succeed tomorrow.


Teresa said...

Alan, the structure in New York State makes it nearly impossible for NYRA to implement your suggestions. Racing days, for instance, are set by the State, not by NYRA.

And the money from the state is not a bailout. It's money owed to NYRA by the State under the most recent franchise agreement. NYRA is in the position it's in because of the State's failure to meet its obligations.

I don't necessarily disagree with your suggestions, but without the State taking a leadership role, in many things NYRA's hands are tied.

Alan H. said...

We are on the same page, Teresa. Please re-read my last paragraph. I state that a cash bailout is not necessary, that the State should pay NYRA what is owed to them and that changes have to be made in the racing law.

Teresa said...

Yep, saw that, but also saw the suggestion that the "new NYRA" ax races and race days, and the number of race days is mandated by the State. NYRA can't ax anything without its approval.

Anonymous said...

Alan H: Excellent post. Sounds like this Theresa must be in bed with NYRA. I like your ideas, especially taking advantage of Belmont's expansive property, the neighborhood, the Island crowd, changing the racing laws and closing the decrepid track that is AQU. It takes someone thinking outside of the box to right the sport. Thanks for taking the time to share your thoughts.

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