Much to digest as we absorb the Messara report

Fall out day.  That’s what a racing friend of mine dubbed today.

Friday 31 August 2018 will be remembered as the day those in the racing industry woke up and suddenly found our industry leading news bulletins across the board.

All those mainstream media types, whose exposure to racing previously may have involved being wined and dined by the Racing Board at a major Cup meeting, were in a muck lather.  Without the benefit of any understanding of what went before and the mess we were in, the recommendations of the Messara report had them in tizzy.

They weren’t alone.  The previous night, while the Rt Hon Winston Peters was delivering the report and before it had been released to the wider public, comments on the live stream of the event proved once again that some people should not be allowed near a keyboard.

There was, and still is, much to digest from the Messara report, this blog post will tackle what featured on this morning’s news.  The points most media latched on to, possibly due to their inability to understand the depth of our problems and what has driven us here, related to track closures and TAB outsourcing.

In general media land these have ended up translating as club closures and the TAB being controlled from Australia.

Subtle differences but enough to churn up a feeding frenzy.

Before we delve further into the mainstream media misconceptions here is the full list of recommendations from the Messara Report.  I do recommend that anyone with any involvement in the industry first reads the report in its entirety before making any comment you can find it here:

https://www.dia.govt.nz/vwluResources/Racing-Report-August-2018/$file/Review-of-the-NZ-Racing-Industry-Report.pdf

  • Change the governance structure, so the NZRB becomes Wagering NZ with racing responsibilities devolving to the individual Codes. This will sharpen the commercial focus of TAB operations and improve the decision-making and accountability of the Codes.
  • Establish Racing NZ as a consultative forum for the three Codes to agree on issues such as entering into commercial agreements with Wagering NZ, approving betting rules and budgets for the integrity bodies, equine health & research, etc.
  • Change the composition and qualifications for directors of regulatory bodies.
  • Request that a Performance and Efficiency Audit of the NZRB be initiated under section 14 of the Racing Act 2003, with particular emphasis on the operating costs of the NZRB.
  • Amend the Section 16 distribution formula of the Racing Act 2003 to a more equitable basis for fixed 10-year terms.
  • Initiate a special review of the structure and efficacy of the RIU and allied integrity bodies, to be conducted by an independent qualified person.
  • Begin negotiations for the outsourcing of the TAB’s commercial activities to an international wagering operator, to gain the significant advantages of scale.
  • Seek approval for a suite of new wagering products to increase funding for the industry.
  • Confirm the assignment of Intellectual Property (IP) by the Clubs to the Codes.
  • Introduce Race Field and Point Of Consumption Tax legislation expeditiously. These two measures will bring New Zealand’s racing industry into line with its Australian counterparts and provide much-needed additional revenue.
  • Repeal the existing betting levy of approximately $13 million per annum paid by the NZRB, given that the thoroughbred Code is a loss maker overall, with the net owners’ losses outweighing the NZRB’s net profit.
  • Clarify legislation to vest Race Club property and assets to the Code regulatory bodies for the benefit of the industry as a whole.
  • Reduce the number of thoroughbred race tracks from 48 to 28 tracks under a scheduled program. This does not require the closure of any Club.
  • Upgrade the facilities and tracks of the remaining racecourses with funds generated from the sale of surplus property resulting from track closures to provide a streamlined, modern and competitive thoroughbred racing sector capable of marketing itself globally.
  • Construct three synthetic all-weather tracks at Cambridge, Awapuni & Riccarton with assistance from the New Zealand Government’s Provincial Growth Fund. Support the development of the Waikato Greenfields Project.
  • Introduce robust processes to establish traceability from birth and the re-homing of the entire thoroughbred herd, as the foundation stone of the industry’s ongoing animal welfare program.
  • Increase thoroughbred prizemoney gradually to over $100 million per annum through a simplified three-tier racing model, with payments extended to tenth place in all races.

Now let’s just take a look at those two items which have been the focus of media attention today.

The recommendations around the outsourcing of the TAB’s commercial activities are as follows:

  1. Progress full operational outsourcing of all domestic wagering, broadcast and gaming operations, to a single third-party wagering and media operator of international scale, under a long-term arrangement with the NZRB (Wagering NZ) holding the licence and contracting all operational activities to a selected outsourced operator.
  2. Seek the approval for the NZRB (Wagering NZ) to: • Conduct virtual racing games; • Remove legal restrictions in Section 33(3) of the Gambling Act that prevent the NZRB (Wagering NZ) from acquiring class 4 gaming licence venues; • Conduct in-the-run race betting; • Conduct betting on sports where there is no agreement with a national sports organisation.
  3. Complete the chain of agreements and arrangements to prepare for the outsourcing process including the assignment of Intellectual Property (IP) by the Clubs to the Codes.

Hardly what it was painted as by an over-exuberant AM Show this morning, but that is what happens when an industry is so far off the radar as to be non-existent for most!

Again, I suggest reading the entire report to see all the alternatives which were considered and how these recommendations were reached.

The issue of track closures was one which also tripped up more than a few this morning, with most of the courses mentioned being ones which were labelled to continue.  For some reason the perception seemed to be that those tracks destined end their days would all be country tracks.

There will, of course, be a grieving period for those associated with the following 20 tracks:

  • Dargaville • Avondale • Thames • Rotorua • Wairoa • Stratford • Hawera • Waipukurau • Woodville • Reefton • Greymouth • Hokitika • Motukarara • Timaru • Kurow • Oamaru • Waimate • Omakau • Winton • Gore.

However, as the Messara report stresses, the clubs associated with the tracks would be encouraged to continue to race at nearby venues.  Had the recommendations of the 1970 McCarthy report been acted upon in full then many of these tracks would have closed some 45+ years ago and perhaps we may not have required such bold actions now.

The recommendations around track closures, which also includes those around prizemoney (the positive news which appears to have been overlooked by the general media) follows:

  1. Reduce the number of existing thoroughbred racing venues in New Zealand over the next 6 years by 20, from 48 to 28 venues, and establish Cambridge as a new synthetic track racing and training venue within 1 year, so making a total of 29 venues. Sell all freehold racecourse land of the closed venues with the proceeds to accrue to NZTR. Maintain racecourses in all regions of New Zealand where racing is currently conducted. Not require any Race Clubs to close but encourage them to race at another venue or merge with another Club.
  2. Significantly improve the racing and facilities infrastructure at all remaining tracks over the next 6 years and build 3 synthetic racing and training tracks (including Cambridge) over the next 3 years, at an estimated total cost of about $190 million.
  3. Fund all the proposed capital expenditure by the sale of surplus freehold racecourse land, grants from the Provincial Growth Fund for the synthetic tracks and co-funding by some Race Clubs. Clubs racing at retained venues (or NZTR as per recommendation 5 below) should also be required to sell any surplus freehold land holdings to help co-fund infrastructure investment.
  4. Build an exceptional new racing and training venue in the Waikato within the next 8 to 10 years at an estimated cost of at least $110 million and then close and sell the Te Rapa, Cambridge and Te Awamutu racecourses to fund the development. There would then be 27 thoroughbred venues racing in New Zealand.
  5. To allow for recommendations 1 to 4 to be implemented, amend the Racing Act 2003 and any other relevant legislation to provide for the vesting in NZTR of the ownership of freehold racecourse land and other net assets of Race Clubs. This would allow NZTR, if it decided not to issue licences to a Race Club/s to hold any race meetings at a venue, to then take possession of the Race Club/s freehold racecourse land and sell the land with the proceeds being used to benefit the entire thoroughbred racing industry. The proposed amendments to the Racing Act 2003 should also facilitate the ability of NZTR to negotiate loans, secured by the freehold racecourse land, to fund infrastructure investment before the freehold land of the closed venues is sold.
  6. To introduce a simplified 3 Tier structure for New Zealand thoroughbred racing and a simplified Prizemoney Matrix that will provide for about $110 million of prizemoney (up from $53.7 million in 2016/17 and an estimated $59.4 million in 2017/18), including 6th to 10th prizemoney, subject to the implementation of the other recommendations in this report. All races at the same meetings to have the same minimum prizemoney whether they be an Open Handicap or a Maiden race.
  7. To introduce the measures described to reinforce the importance of good corporate governance practices by Race Club controlling Boards or Committees, to improve the Race Club management skills of CEOs and senior staff and to lift the NZTR minimum acceptable standards for racecourses in terms of the presentation of racing tracks, training tracks and facilities infrastructure. Increased attention should also be given to ensuring the adequate training of all Race Club staff and, in particular, track maintenance personnel.

If you have managed to get this far then you will realise that this report is not a “once over lightly” effort.  There is depth and the type of insightful and intelligent analysis which, had it been present at NZRB may have precluded the need for a report.

Over the following weeks I will be unpacking the report and, with luck, following its progress through to implementation of Mr Messara’s recommendations in their entirety.

As our Racing Minister said last night,”Many will have plenty to say,”  however I encourage them to take on his advice to “judge [the report] against what is critical for the industry to survive.”

The Minister, as he concluded his address last night, ended with the words Brutus spoke to Cassius in Shakespeare’s Julius Caesar:

There is a tide in the affairs of men.
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries.
On such a full sea are we now afloat,
And we must take the current when it serves,
Or lose our ventures.

This quote adorned my office wall for many years.  A reminder to seize opportunity when it came so as not to be left rueing what might have been.

As the Minister said last night, we can either accept parochialism and poverty or use Mr Messara’s report as a blueprint for survival.

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