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The Breeders' Cup and Global Expansion

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Thursday morning I had the pleasure of speaking with Ken Kirchner, President of Falkirk International.  Mr. Kirchner directs the wagering product for the Breeders' Cup and specializes in domestic/international wagering operations, television and simulcasting, account wagering, product and business development, government affairs, and marketing. Ken shared with me his thoughts on the upcoming Breeders' Cup, development of the event from the international side, television, growth of handicapping tournaments, and a vision for the future.

A special thanks to Ken for taking time out of what is certainly a busy schedule to speak with me today.

A transcript of our discussion can be found below the jump.

MATT: What are your expectations heading into this year's Breeders' Cup at Churchill Downs from a wagering and handle perspective?

KEN: I think our expectations are very high right now.

With the release of the pre-entries it showed the fields are going to be outstanding. Not only do you have fourteen horses pointing towards the Classic on Saturday - including the big trio of Quality Road, Blame and Zenyatta - but there are other horses that have thrown their hats into the ring like Paddy O'Prado, the Japanese horse Espoir City, First Dude, Fly Down, Looking At Lucky - horses that can't be overlooked.  So you've got this tremendous field shaping up for the Classic. But when you go through and you start to look at some of the other races like the Filly and Mare Turf - which drew eight different Group 1 winners from Ireland, England, France, Japan, Canada, and the U.S. - the Filly and Mare Turf is a tremendous international race.  Then you start going through the Juvenile, the Sprint, the Dirt Mile, and you've got the Arc winner coming over for the Turf.  Once we look at the fields from top to bottom and from race to race, I think we have every reason to be optimistic that handle and fan interest is going to set new records.

MATT: International wagering is obviously a huge area for growth and one that the Breeders' Cup has focused on over the past several years - where do things stand now and what are you looking to do in the future in terms of continuing to grow wagering outside of North America?

KEN: We have done very well with the international expansion. We now have France, Hong Kong, Australia, Singapore, Italy, Turkey, Great Britain, Ireland, as well as Germany, Austria, Spain, and many places in South America. The international expansion has been important and we've grown [international handle] from $13 million the last time we were at Churchill Downs to last year when it was over $23 million, so we have seen significant growth in that area.

There are a number of factors that inhibit the growth, primarily the absence of common pools with a number of countries like Hong Kong, Australia, Singapore, and Japan.  We're not able to common pool with those countries and as a result their punters have to bet into a separate pool.  This restricts some of their bigger players from going after our trifectas, superfectas and the Pick Six.

MATT: Are there things you can do to bring some of those countries into the common pools?

KEN: It's something that we talk to other countries about at international conferences but unfortunately, in the case of Japan, you need legislative change in order to allow common pooling which gets into a political process.

MATT: The implementation of $.10 Supers in 2007 and the introduction of $0.50 Trifectas, Pick 3s and Pick 4s was welcome news for a lot of horseplayers.  Can you describe the thought process behind those changes to the wagering minimums?

KEN: One is that it makes bets more affordable, particularly on days where you have trifectas, Pick 3s and Pick 4s with twelve and fourteen-horse fields like you have at the Breeders' Cup. At a dollar minimum it's difficult to wheel a horse or wheel an entire field of horses.  In the Pick 3 you may have a strong opinion that Goldikova is going to win and you may have no opinion in a couple of the other races. To wheel around that at $0.50 is more affordable and gives a smaller player a chance to compete. Hopefully that adds to their number of winning tickets which, of course, increases the churn which increases the handle.  Hopefully it's a benefit for everybody associated with being able to play at lower bet minimums and we're hopeful that it will produce additional handle for us.

One of the other reasons that we look at [lower minimums], particularly with trifectas and Pick 4s, is the tax implications.  Playing at $0.50 helps some players avoid the onerous, ridiculous $600 or 300/1 threshold that's out there, or the $5,000 threshold that's out there for the withholding.  Those are clearly problems that the federal government hasn't solved yet and racing hasn't been able to persuade Congress to act.

MATT: What are some things the Breeders' Cup is considering in the future to continue to tap into the increasingly popular handicapping tournaments?

KEN: We launched the Breeders' Cup Betting Challenge last year and had 75 players. We brought it back this year at Churchill and are expecting between 90 and 95 players, so there's solid growth in that. The prize pool will be over $250,000 this year with first place at $130,000 to $140,000 - so we think there is good value.  Obviously, the buy-in of $10,000 is not for everybody but we were able to award over 22 seats through on-line qualifiers, with some buy-ins as little as $100. We've got ten or twelve players this year competing in the Betting Challenge that won their seat for $100 which they could turn into $140,000, plus whatever their betting bankroll is.  They could potentially earn about $200,000 on that $100 buy-in. That's the kind of thing we think will be attractive as we move forward in the next few years in getting players interested in our betting tournaments and the Breeders' Cup.

MATT: With the explosion in popularity that has taken place with poker over the last decade do you see things you can apply from that game towards horse racing and the Breeders' Cup?

KEN: I think we'd be foolish not to look at a highly successful model that's out there in a game like poker and not try to apply that to horse racing.  There are clearly avenues that are similar to both sports in that in poker you're betting against others at the table and in horse racing you're betting against others at the track.  We ought to be able to develop a similar type of format and tournament structure to draw interest and fans to these horse racing tournaments. I think we are doing that and there are several out there - the Breeders' Cup Betting Challenge and the National Handicapping Championship - that are proving successful in getting players interested.  We do need a greater outreach; we need more media to promote it.  We have a block at the base that we can build upon and that does have the potential to bring in these kinds of players.

MATT: In terms of television, the Breeders' Cup - despite it being the biggest day in horse racing - trails all of the Triple Crown races in ratings - what are your thoughts with regards to ratings?

KEN: I think television is always a difficult medium when you start to talk about the ratings for horse racing. The Derby enjoys a 135-year-old tradition, it's an icon of American sports properties, and it does attract casual viewers in the spring that tune in and drive those very high ratings for the Derby.  Does that translate into the Breeders' Cup?  Probably not directly.  We're not able to have that same kind of presence - we're only 27 years old at this point - and the multiple divisions that the Breeders' Cup has makes it more difficult from a media perspective to focus, whereas with Derby day the focus is on a single race. 

We've got 14 championship races over two days and a very diverse field of horses but it's a very difficult story to explain.  In addition, you have over ten hours of television coverage as opposed to one or two hours of a very condensed show focused on the Derby.  It's sort of apples and oranges in some ways.  The Derby's been very successful at building their audience and a media presence that focuses upon that.  The Breeders' Cup is still working through some of those things.

Many of the fans that are at home watching the Derby are at betting parlors and simulcast facilities around the country betting the Breeders' Cup. We have a very strong, positive, hard-core audience of horse racing fans that every year saves their bankroll for the Breeders' Cup because they know the betting value. You don't even need to hit that many races, you could hit one good race on the Breeders' Cup days and that will make your year.  We've got trifectas that average over $2,000 and superfectas paying $20,000 and $30,000 and $40,000.  We've got Pick Sixes that pay in the millions of dollars.  You really only have to be right once or twice on Breeders' Cup day to have a really successful day, week, month, or year.

But as far as television, obviously there are big differences between the Derby and the Breeders' Cup in the approach.

MATT: This year's Ladies' Classic and Classic will be run under the lights at Churchill with 7:30 and 6:45 local post times.  Has there been any consideration of pushing the Cup races further into prime time? 

KEN: I think we're going to have to see what happens this year.  Obviously, we're back at Churchill next year so there's an opportunity to build on elements that are successful in 2010.  We need to get past this event, sit down and have a chance to review and evaluate what goes right with everything from media to television to the betting.

MATT: What is the message from the Breeders' Cup to the casual fans of the game?

KEN: There are two messages.  One, this is the world championships.  We have horses from Japan, France, England, Ireland, Germany; we've got horses from around the world competing here in Grade 1 races for over $25 million in purse money.  This is truly outstanding, world class racing that brings the best jockeys, the best trainers, the best owners to American soil to compete for these championships.

The second thing would be that these are the best betting races in the sport. The value is there in pool after pool and race after race.  If you're going to be betting on horses any time during the year, the Breeders' Cup is what you should be focused on because the payouts are so extraordinarily high.

MATT: Where would you like to see the Breeders' Cup in ten years?

KEN: I think clearly the focus is on the world championships.

The changes to the nomination process that happened this year will be implemented over the next few years, and those are designed to bring more international horses to American soil to compete. Those changes come as we look to the future; we want to have horses from Hong Kong, from Australia, from Japan, from Europe and South America, all coming here to compete.  And along with that what we want is global common pools so that the fans in Japan, Australia, Hong Kong, South America, and Europe can all be betting into the same pools.  They could be betting into an Ultra Pick Six pool that is $10 million, $15 million, $20 million and the potential payouts are so life changing that anyone in Hong Kong will say "I have to be playing the Breeders' Cup".  We want folks in Japan or Singapore or Australia saying "we're going to pick up our racing sheets, we're going to analyze it, and we're going to watch it."  We're broadcasting not just the races but the works shows - we're sending those this year to Hong Kong, Singapore and Europe - so that fans there can watch the works leading up to the Breeders' Cup. 

An internationally integrated program of competition on the race track and common wagering pools is where we want to be in ten years.