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2016 Annual Report 2 Table of Contents 2016 ANNUAL REPORT 2 TABLE OF CONTENTS Message from the Chairman. 2 2016 Accomplishments .............................................4 Championship Racing .......................................... 4 Santa Anita Shines Bright ....................................... 6 Revenue Growth .............................................. 7 Nominations ................................................ 8 World-Class Racing Competition ..................................... 11 Increased Championship Purse Structure ............................ 11 Challenge Win and You’re In Series ................................ 11 Relentless Focus on Integrity and Safety ............................ 12 Brand Enhancement & Experience .................................... 14 Celebration of the Sport and Lifestyle of Horse Racing ................... 14 Provide Enhanced Experience that Matches the Quality of Racing Product ...... 16 Television Exposure .......................................... 17 Host Site Plan .................................................. 18 Planning for the Future ........................................ 18 Financial Performance ............................................ 19 A. Select Financial Data ....................................... 19 B. Management Discussion and Analysis of Operating Results .............. 20 Appendix. 31 A. Breeders’ Cup Directors & Members ............................. 31 B. Breeders’ Cup Staff ........................................ 32 C. 2017 Breeders’ Cup Challenge Series Schedule ...................... 34 D. 2017 Breeders’ Cup Challenge Series Television Schedule ............... 36 1 MESSAGE FROM THE CHAIRMAN On behalf of our Members and Directors, I am very proud to share the accomplishments our organization achieved during 2016 and the positive results projected in 2017 and beyond for the Breeders’ Cup. Our 2016 Breeders’ Cup World Championships was one of the most successful in our 33-year existence. In particular, we were extremely proud to accept the Longines World’s Best Horse Race award for the Breeders’ Cup Classic that featured a fantastic finish between Arrogate and California Chrome. Santa Anita in 2016 delivered in spectacular fashion with world-class racing, a two-day record attendance of 118,500, $169.2 million in handle, and $9.6 million in ticket sales revenue (a 13% increase from the 2014 event at Santa Anita). The 150 participating horses had 143 Grade/Group 1 wins prior to the World Championships. Participating horses included winners of the Dubai World Cup, Prix de l’Arc de Triomphe, Arlington Million, King George VI and Queen Elizabeth Stakes, Darley July Cup, Queen Anne Stakes, Whitney, Pacific Classic, Jockey Club Gold Cup, Kentucky Derby and the Travers, among many other prominent stakes winners. Notably, Breeders’ Cup achieved net operating income of $398,165 in 2016. While this return is modest, it compares dramatically to actual net losses from operations of $3.5 million in 2014 and $3.8 million in 2013 under similar circumstances at Santa Anita. This significant improvement reaffirms Breeders’ Cup’s decision to create a sense of competition among potential host sites through the introduction of new venues (to date, Keeneland and Del Mar) resulting in improved service, support and ultimately financial return. Additionally, the significant positive variance can be credited to active management of expenses with strategic focus on core growth areas such as ticketing, sponsorship, wagering and delivering a best of class racing product in order to maintain total purses and awards in excess of $28 million. At the same time, we have reduced outstanding lines of credit to zero and project positive operating income in both 2017 and 2018. In 2015 we began a new 10-year partnership with NBC Sports that will televise the Breeders’ Cup World Championships through 2025. We also extended our Breeders’ Cup Challenge Series agreement with NBC through 2018 as a part of a focused lead up to the Championships. This true, long-term television partnership with NBC (now the self-described television home of horse racing) allows the expansion of the Breeders’ Cup brand throughout the Summer and Fall while simultaneously constructing a storyline leading up to the Breeders’ Cup World Championships in November. This was very evident in the recent coverage by NBC of Royal Ascot that repeatedly highlighted the road to the Breeders’ Cup. Plans for the first Breeders’ Cup at Del Mar are well underway, as are those for Churchill Downs in 2018. I can assure you that both events will be outstanding and live up to the Breeders’ Cup reputation as the highest caliber international racing event. Most importantly, once again we would like to thank our nominators for their continued support. The Breeders’ Cup would not be possible without your efforts as nomination fees totaled $15.6 million in 2016. I am confident to report that through the support of our nominators, and the participating constituencies of the Thoroughbred industry, we are well positioned to meet the demands of a competitive future. Sincerely, William S. Farish, Jr. Chairman 2 3 2016 ACCOMPLISHMENTS Championship Racing The 2016 Breeders’ Cup World Championships finished in dramatic fashion at Santa Anita Park in front of a single-day record* of 72,811 spectators when Arrogate closed in on fan favorite California Chrome to win the Breeders’ Cup Classic. The Classic would go on to be recognized by Longines and the International Federation of Horseracing Authorities (IFHA) as the Longines World’s Best Horse Race with a rating of 125.25. A total of 185 individual horses (210 pre-entries) were received in 2016 of which 160 entered and 150 started. These 150 starters had 143 Grade/Group 1 wins among them and 322 graded wins prior to the Breeders’ Cup. A total of 72 individual Group or Grade I winners were represented in the 13 Grade I Championship races. At pre-entry, seven of the 13 races had full fields or were oversubscribed. Four races fielded a maximum number of starters and the Breeders’ Cup races averaged 11.5 starters. An outstanding eleven returning Champions from previous World Championships competed, starring Beholder who with her third Breeders’ Cup Championship win equaled the great Goldikova. In addition to Beholder, the top two Longines IFHA highest rated horses in the world, Arrogate at 134 and California Chrome at 133, participated in the World Championships. Seven out of the ten highest rated horses competed at Breeders’ Cup and 14 of the top 33. Tourist set a new track record for the Mile winning in an incredible 1:31.71, holding off the defending Champion mare Tepin. Championship runners included the winners of the Dubai World Cup, Prix de l’ Arc de Triomphe, Arlington Million, King George VI and Queen Elizabeth Stakes, Darley July Cup, Queen Anne Stakes, Whitney, Pacific Classic, Jockey Club Gold Cup, Kentucky Derby, Travers and other notable stakes races. *Since Breeders’ Cup switched to a two-day event. 4 Arrogate wins the $6 million Breeders’ Cup Classic Record crowds watched the 2016 Breeders’ Cup at Santa Anita Beholder wins the $2 million Longines Breeders’ Cup Distaff 5 Santa Anita Shines Bright Santa Anita and the local Arcadia, Pasadena and Los Angeles areas offered first-class racing, hospitality and ancillary events that enhanced the experience for Breeders’ Cup participants and fans. The newly created Silks Lawn Chalet in the infield at Santa Anita added 350 premium seats and offered some of the best views of racing anywhere at the track. A revitalized partnership with Los Angeles Tourism and the Los Angeles Sports & Entertainment Commission led to marketing support of more than $150,000 to promote the Breeders’ Cup in the Los Angeles-market. New programs included 100 street pole banners in prominent downtown LA and other locations, a social influencer campaign and a street horse exhibition that featured five life-sized horses painted by prominent LA artists and located in high-traffic areas around the city. Pasadena hosted a community event, the Pasadena Fan Fest, featuring a live performance by popular band The Spazmatics, local food trucks and Breeders’ Cup activities. A total of 670 tickets were sold to the general public and Breeders’ Cup hosted sponsors, Breeders’ Cup Betting Challenge players, media and select VIP guests. The City of Arcadia hosted Arcadia Night: Salute to Zenyatta, a community event featuring the unveiling of the Thoroughbred Walk of Champion’s Zenyatta plaque and the distribution of the 2016 Maker’s Mark Commemorative Bottle featuring Zenyatta. Over 500 guests attended the public event including Team Zenyatta, comprised of Jerry Moss, Mike Smith and Dottie and John Shirreffs. The Commemorative Bottle program raised over $116,000 for Old Friends. 6 Revenue Growth There were several highlights and accomplishments among many achievements in 2016, beginning with the highest ticket sales revenue ever reported for a Santa Anita event totaling $9.6 million, a 13% increase over 2014 at Santa Anita. This is inclusive of ticket revenue as well as parking, processing and other associated fees. Total handle of $169.2 million was the second highest in Breeders’ Cup history, second only to Churchill Downs’ $173.8 million in 2010 which featured 14 Breeders’ Cup races versus 13 in 2016. As an expanded growth opportunity, for the first time, the Breeders’ Cup Filly and Mare Turf race was simulcast into Japan and contributed $7.8 million to total handle. Viewership of the NBC and NBCSN telecasts on Friday
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