Winston Peters

Much to digest as we absorb the Messara report

/ Mezzasez

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.

Time to embrace the process and be part of racing’s solution

/ Mezzasez

The date has been named and, next Thursday, our burning questions will be answered.

What will be in the Messara report and when and how will it be actioned?

Already though the naysayers are spreading their poisonous tendrils as they attempt to negate the report before it has seen the light of day.  They are no strangers to the industry, in fact it was possibly their ancestors who took machetes to every earlier report which sought to set the industry back on a profitable course.

All those missed opportunities to drag us back from the abyss – the bottom of which we now find ourselves – were the result of timidity of thought.  That inability to trust the people charged with doing a job and back the minds behind the likes of the McCarthy report has led us to this point in history.

It is one of the saddest differences between Australia and New Zealand.  Whereas the Lucky country is populated by gung-ho, optimistic, take-a-chance gamblers, we have a high proportion of dour, purse-lipped, wowsers who would rain on any parade.

Point out any positives in Australian racing to this lot and they will scowl, shake their heads and spit out some drivel about there just being more money in Australia.  Try and draw their attention to the gross over-spending and inability to rein in operating costs of our own NZ Racing Board and they have no answer.

What I find particularly sad is that some of those who have been sagely shaking their heads and claiming the Messara report will make no difference are supposedly journalists, current and former.  These people make (or made) their living from the industry, yet they are incapable doing their job which includes questioning those in power and taking them to task.  Instead, they accept puff-piece PR from the NZRB and seem to find it normal that we have an organisation whose costs outweigh its returns to the industry.

Of course, the difficulty we now have in New Zealand is the paucity of truly independent racing media.  This breaches many of the fundamental elements of journalism [Bill Kovach & Tom Rosenstiel] – its practitioners must maintain an independence from those they cover; It must serve as an independent monitor of power; Its practitioners must be allowed to exercise their personal conscience.

This lack of independence means those seeking out credible information need to look to the country’s only independent racing publication The Informant and its correspondent Brian de Lore, or the likes of the Otago Daily Times and its racing reporter Jonny Turner.

Racing coverage which seeps into mainstream media is either of the negative “rich racing people get given more money” theme; or, what should be the celebration of a wonder horse with a Kiwi connection, ending up being all about the money she has won.  The latter is due to a total lack of understanding of the industry from the presenters and those who have directed them towards the story.

What to do then when this long-awaited Messara report finally sees the light of day?

Read it through, breathe, read it again.  Sit back, mull it over and ask yourself one question.  Am I going to be part of the solution, or part of the problem?

Make no mistake, this is our last chance to finally get it right.  Tinkering around the edges and throwing a few all-weather tracks into the mix is not going to solve the problems we have.  This is going to take bold moves, some of which we may not immediately like.

You can be part of the problem or you can embrace the process and be part of the solution.

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Operating costs a mystery to NZRB

/ Mezzasez / 2 Comments

A new season and hope abounds.  So what do we know so far?  The Messara report has landed on Winston Peters’s desk and no doubt will be given due attention once he has dealt with small matters such as the ASEAN Foreign Ministers’ meeting in Singapore this week.

We do need to occasionally be reminded that while racing is front and centre of our minds at all times Winston has had other pressing issues to deal with as he was at the helm as acting PM for the past six weeks or so.

Patience dear readers, we will know what the report contains soon enough but what we need to hope is that this one, unlike the myriad prior, is acted upon quickly and completely.

As a media hound who believes the worst of everyone I couldn’t help but be moderately amused that the NZRB, with its usual tone-deaf timing, released its Statement of Intent 2019-2021 this week.

If you were someone relatively new to the industry or even somewhat less jaded than I am then you might find yourself buoyed by the messages contained within.

My BS radar is so finely tuned these days that I can barely read a sentence without querying the thinking behind it.  I suppose it is nice to know that some of those employed at great expense to the rest of us were toiling away to create this work of art and fiction designed with that grand old police motto in mind – “move along people, nothing to see here.”

As regular readers will be aware I have a real problem with two areas of NZRB expenditure which are of course interlinked – operating costs and salaries, not to mention the numbers employed,  Rather than conduct a deep dive into such a shallow pool of information and risk major injury I have instead focused on those areas when perusing this document.  The findings should have anyone with a financial involvement in the industry questioning how we can let these people continue to operate.

Apparently NZRB “remains committed to undertaking a broader review of our operating costs.”  Good on them, at least they are getting the message I thought.  Only to have to apologise to my office mates for an expletive-laden outburst when I read the following statement:

“This was paused following the commencement of the Messara review and other strategic options analysis but will be reconsidered in the 2018/19 season.”

It took me a while to get my head around this one.  So, the industry is undergoing a review which will examine, among other aspects, how to return more money to participants and the outfit in charge of the dollars WAS “undertaking a broader review” of its operating costs but paused it as soon as the Messara report was announced.

Rather than actually continue to look at how they could apply a little slash-and-burn to operating costs which, until last season exceeded the payout to industry, they decided to sit on their hands and wait and see.

I trust they have done something really useful in that time.  I would suggest dusting off their CVs and working on creating some handy LinkedIn contacts might have been a good place to start.

After reading that statement it was difficult to see this as something other than another NZRB puff-piece.

Prior to it landing this week I was intending to revisit a time when NZRB CEO was newly appointed to his position.

In 2015 with the bright enthusiasm of a newbie, John Allen told NBR that the Racing Board needed to lift distribution to the industry by $40-50million “over the next few years.”

“Unless we can do that and get the facilities right, get the returns to owners right, so we can begin to get the investment into the breeding stock again that we need to support the industry over time, the whole industry grinds to a halt,” he said at the time.

“Basically, every dollar we spend is a dollar that doesn’t get distributed to the codes,” he added.

“It’s really important that the codes trust us to be efficient and effective with that money.”

Reading that is was apparent that Allen had been well schooled on what the industry needed. So, a few years down the line and what have we seen?

Back when Allen originally commented the NZRB 2015 Annual report showed operating costs at $139m, with staff costs $62.4m while the distribution to the industry was $134.2m.

The following season operating costs had dipped ever so slightly to $138.7m, staff costs peaked at $66.8m and distribution was $135.3m.

The 2017 annual report listed operating costs as $136.2m (a drop of $2.5m – remember those figures), staff costs at $63.6m and the return to the industry finally bettered operating costs at $137.6m.

Just a couple of notes around the staff expenses for the past two years – in 2016 that number was made up of $60.2m in salaries, $1.8m in termination costs and $4.7m in (covers a multitude of sins) “other staff expenses”.  In 2017 those figures for the same items were $59.2m; $18,000; and $4.4m.  However, included in this was $1.3m of expenses relating to strategic initiatives ie FOB, Racefields Legislation, Customer and channels programme, and Optimising the calendar.

So what of the future according to the overview of the 2019-2021 document?

The prediction is distribution for 2018-19 “budgeted at $151.6m” explained thus: “a $0.8 million increase on last year (2017-18) to offset increased venue services charges to the codes from the vision capture upgrade. This includes the $12 million of additional funding targeted at increasing stakes across the 2017/18 and 2018/19 seasons that has been approved by the Board. A further amount of $2.6 million is being distributed to fund the continuation of the activities and expenses of the Event Marketing and Logistics (EML) business, which was transferred to the equine codes on 1 August 2017.”

So that increase included the $12m that we have borrowed to ensure our stakes aren’t a total embarrassment, yet the work on reducing operating costs was paused.  How are we meant to take these people seriously?

We are now living outside our means with a three year revolving debt facility having been established during the current season.  According to the SOI document this was to allow for “critical investments in growth initiatives.”

No need to panic though as they assure us “as the benefits of the strategic projects are realised, NZRB will take a prudent view to repaying debt while continuing to invest and increase distributions to the industry.”

I don’t recall anything in the NBR  article where Allen mentioned they may have to borrow to get close to the $40-50m he recognised was needed when he took the reins.

And what of the costs, of which, need I remind you, Mr Allen said every dollar they spent was one we didn’t get?

Well apparently in the 2017-18 year they are expecting “underlying operating costs to increase by $2.5m to $136.2m.”  Yes, that is correct – Increase, and what’s more this is in line with their budget.  So much for looking to rein in their operating costs.

The more observant of you might notice that $136.2m is actually the figure given as operating costs in the 2017 Annual report, which had me scrambling to back and double and triple-checking the figures.  I went so far as to seek the independent advice of an accountant (a real one, unlike those obviously used by the NZRB) and he confirmed my suspicions when he walked me through the figures.

If you check out the figures used on page 5 of the SOI under the heading Managing Costs you will find the following: “Excluding investment behind our key strategic initiatives, underlying operating expenses in the 2016/17 year decreased by $5.0 million (3.6%) to $133.7 million compared to the prior year ($138.7 million in 2015/16.”  So the mystery $5m decrease which leaves us with $133.7m is largely fictitious as the actual figure in the 2017 Statement of Profit or Loss is $136.2m.

Perhaps I should’ve been alerted to the fact this was not going to be a document which could be relied upon for its veracity when an email follow-up was sent out one day after the SOI was released into the wild.

It stated: “Unfortunately, there was an error in the summary document of the NZRB Statement of Intent sent to you yesterday. The document should have read ‘ Reported net profit before distributions of $173.5 million is budgeted for 2018/19, $201.2  million in 2019/20 and $219.6 million projected in 2020/21.”

If you fancy torturing yourself then go read the fantasy document yourself.  I’ve read so many of these promise-the-world documents over past decades that I believe none of it any more.  The creative accounting/obvious muck-up just confirms that my skepticism was well placed.

Like so many who have watched our industry driven into the ground by people with no skin in the game I am tired and jaded.

However, I am also damned if I am going to walk away before I see this current mob marched out of their cushy NZRB offices and replaced by people with the dedication to see this industry succeeds. Let’s make sure it happens.

No pressure Winston, but it’s up to you now.

Missing the mark with media

/ Mezzasez

If ever you needed an example of how far below the radar New Zealand’s racing industry is travelling, there was a glaring one on Newshub’s AM Show this morning.

While talking politics with, surprise, surprise, political reporter Tova O’Brien, host Duncan Garner queried the connection acting prime minister Winston Peters has with racing.  It would appear that, like the racing minister, the industry itself has little relevance when it comes to this show.

In the past there have been cringeworthy interviews around the NZ Derby meeting – focus being fancy hats and how much the trophies are worth.  Prior to the yearling sales there was a confused introduction of Sir Patrick Hogan with Garner claiming he was about to have “one last crack at the Karaka Million.”

Racing, once part of the nation’s fabric, is de trop and something which retains the stigma of back-alley betting shops and aged beer-swilling smokers, at least with this news outlet.  So much for the marketing and communications efforts of the six-figure salary earners in Petone!

Every step of the way those charged with promoting the industry have missed their mark.  They have failed to mark out a place for an industry which contributes $1.6 billion to the economy.  Their sole focus with media is on top end events.  Hospitality for media types at these events is more about the food and booze in isolated marquees rather than checking out the stars of the show and giving them an authentic experience.

It’s probably not their fault as one would expect few of those who work at the Racing Board have had an authentic racing experience themselves.  They certainly have no grasp of the industry’s rich history.

For example, here we are, coming up to the 40th anniversary of the first day women rode against men in New Zealand (15 July 1978).  Today females make up around half the riding ranks, some are even second-generation jockeys and there are numerous fantastic story opportunities.  If we are relying on anyone from the NZRB to lead the way when it comes to celebrations and some media acknowledgement to mark the occasion then, I imagine, we will be left disappointed!

The incredible story around “letting” women ride against the men has been there since day one and this one could even appeal to Duncan Garner and the AM Show crew – well, maybe not Mark Richardson!

While the industry hierarchy may have had to been bitch-slapped into allowing women to apply for licences once they took that step they ensured there was no discrimination when it came to pay scales.  From day one – 40 years ago – female jockeys have been paid the same amount as their male contemporaries.

Given the cacophony in the general media around gender equality – especially in the area of pay equity – this is one story which the industry should be shouting from the roof-tops.

I imagine there is a reason that the six-figure earners at the NZRB aren’t trumpeting this one (apart from the fact that any reference to pay rates might focus more unwanted attention upon the $60 million in salaries which the organisation siphons out of the industry).  Most likely it is that they probably don’t know (and don’t care) because they are so far removed from the industry they work for they wouldn’t have the first clue what jockeys are paid.

I can’t imagine any of them have ever used any of that six-figure salary to enjoy a share (or two, or three) in a horse and therefore are aware of the actual costs of racing a horse in New Zealand.

It is no wonder then that media outlets like Newshub continue to think of racing as some misty, murky relic of the past – populated by the likes of Winston “and his mates.”

Those who are charged to do as follows – via the Racing Act 8 Objectives of the Boards  The objectives of the Board are – (a) to promote the racing industry – have failed dismally and will not be missed upon their (hopefully imminent) departure!

 

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