42687_NTRA_AGS 4/17/03 1:08 PM Page 1 2002-2003 NTRA Annual Report to the Membership ® 42687_NTRA_AGS 4/17/03 1:08 PM Page 2 commissioner’s message hen the NTRA started operations five years ago, in 1998, it began in truth as a somewhat “underpowered” national office for Thoroughbred horseracing. Steadily, however, it has added building blocks like NTRA Productions,W NTRA Purchasing, NTRA Creative Services and various new legislative programs. These have helped considerably in boosting the NTRA’s ability to fulfill its two-part mission: to increase the popularity of Commissioner Thoroughbred racing and to improve economic conditions in the industry. Timothy G. Smith If there was a single, pivotal moment in the organization’s young history, it perhaps was the NTRA’s combination with Breeders’ Cup Limited, effective January 1, 2001. While the two corporations retained their separate legal identities, Breeders’ Cup programs were licensed to the NTRA to manage, and BCL personnel became NTRA employees. There was now one virtual corporation to generate new interest and participa- tion in horseracing and its culminating event. In many ways, 2002 was the time when these building blocks and the Breeders’ Cup “merger” coalesced to produce the NTRA’s most productive period to date. Last year’s accomplishments included, for example: • increasing national sponsors for the NTRA and Breeders’ Cup from three to nine, adding such global brands as FedEx, Guinness and NetJets; • boosting horseracing’s viewership and long-term TV presence: ratings were sharply up across the board, and ESPN’s programming commitments to NTRA Productions and live horseracing were extended through 2008; • improving promotion and results of the Breeders’ Cup World Thoroughbred Championships, including last summer’s launch of weekly “World Thoroughbred Rankings,” formation of an inter- national marketing alliance with Ascot and Longchamp racecourses and an all-time wagering record ($116 million) for the 19th Breeders’ Cup at Arlington Park; • expanding national marketing programs, including new award- winning commercials from NTRA Creative Services and use of a special Board-designated “stimulus fund” to increase consumer promotions in 2002, boosting both attendance and handle at more than 50 participating locations; and, 42687_NTRA_AGS 4/17/03 1:08 PM Page 3 2002-2003 Annual Report to • while much work remains to be done, effectively responding to the the Membership initial challenges of the Breeders’ Cup Pick Six situation, including TABLE OF CONTENTS coordination of immediate concrete steps to improve wagering systems security through the Wagering Technology Working Group, Commissioner’s Message retention of Ernst & Young and Giuliani Partners for a “systematic Events............................................2 review” of tote technology and wagering security standards, and Financial Highlights ......................4 organization of the Wagering Integrity Alliance to fund necessary Directors & Senior Management ...6 security initiatives. Marketing & Media .......................8 Looking forward, 2003 presents its own unique mix of challenges Consumer Promotions and opportunities. The unusually poor winter weather last December & Products ..................................10 and in this year’s first quarter has cost numerous racing days and result- Television ....................................12 ing loss of handle, which will be difficult to recoup. Sponsorship & Group Also this year, due to the sunsetting of certain revenue programs Purchasing .................................14 and other one-time factors, the NTRA operating budget will be missing Legislative & Regulatory..............16 several million dollars compared to 2002. Largely offsetting these Membership & Industry Programs........................18 declines, we expect, will be the continued growth of national sponsor- Organizational Structure .............20 ship, television and group purchasing income. AFinal Word...............................22 Clearly, another major priority for 2003 will be to complete success- Financial Statements....................23 fully the initial efforts of the Wagering Technology Working Group and the Wagering Integrity Alliance so that, during the current year, there will be no doubt that both the substance and perception of pari-mutuel security were markedly improved. Also, 2003 presents special marketing opportunities for horseracing —from the eagerly awaited opening of “Seabiscuit” to the 20th running of the Breeders’ Cup, hosted by Oak Tree at Santa Anita Park. Major promotional efforts—with significant sponsor involvement—will be undertaken in each of these cases. In addition, the NTRA Board of Directors held a two-day strategic planning retreat in February to review lessons learned in the first five years and organizational priorities for the future. A recurring theme of this long-range planning session was that the NTRA needs to do even more to bring the industry together and, where appropriate, to lead it. We welcome this challenge. One of the lessons learned and relearned since 1998 is that there is, indeed, strength in numbers. With sufficient cooperation, optimism and commitment, much is possible— particularly now, based on the results of 2002 and the promise of 2003. On behalf of our Board and staff, we extend sincere thanks to everyone who has helped make the NTRA possible these last five years and look forward to working together in the future. Respectfully, Timothy G. Smith Commissioner & CEO 1 42687_NTRA_AGS 4/17/03 1:09 PM Page 4 e vents Record pari-mutuel handle of $116 million at 9,400 U.S. and international simulcast and racing facilities highlighted a banner year for the Breeders’ Cup World Thoroughbred Championships. he Breeders’ Cup World Thoroughbred Championships Breeders’ Cup added to its stature as a global property in 2002, as the World Thoroughbred event became the cornerstone of a strategic marketing Championships Day Wagering alliance between the NTRA, Breeders’ Cup, England’s Ascot (in millions) $120 TRacecourse and France’s Longchamp Racecourse. The alliance, announced in June, led to a new marketing partnership 100 among NetJets, the worldwide leader in fractional aircraft ownership, the 80 NTRA, Breeders’ Cup, Ascot and Longchamp for a series of race 60 sponsorships, including the NetJets Breeders’ Cup Mile. 40 The Breeders’ Cup event was re-branded as the Breeders’ Cup World 20 Thoroughbred Championships in 2001. That branding was extended in 0 2002 through expanded merchandising and by the creation of the World ’91 ’92 ’93 ’94 ’95 ’96 ’97 ’98 ’99 ’00 ’01 ’02 Thoroughbred Rankings—top-10 lists of horses in each Breeders’ Cup division, produced weekly during the racing season by an international panel of racing experts. International media coverage for the Championships grew, reaching an audience of 1.5 million homes in England through television cover- age provided by Channel 4 and the BBC. England’s new racing televi- sion network and wagering service, attheraces, also broadcast the eight Championships races via Sky Digital Television. Pari-mutuel wagering on the Championships was offered in England for the first time in 2002, while wagering from France—first NBC Sports again covered begun in 1997—exceeded $2.5 million, an increase of nearly 18 per- the World Thoroughbred cent over the last year. Championships, with ratings for the 2002 show up 18 percent With horses, owners, trainers, jockeys and breeders from more over the previous year’s. NBC than a dozen countries, the sell-out event—hosted for the first time at has broadcast the event since its Chicago’s Arlington Park—attracted a crowd of more than 46,000, inception in 1984. produced an economic impact of $54.3 million for the state of Illinois and raised nearly $150,000 for charity. 2 42687_NTRA_AGS 4/17/03 1:09 PM Page 5 “Seabiscuit” star Tobey Maguire, with NTRA Commissioner Tim Smith, presented the Horse of the Year trophy to the connections of Azeri (pictured at left), one of six 2002 Eclipse Award-winning horses who also won World Thoroughbred Championships races. NTRA, Daily Racing Form and the National Turf Writers Association vote on and present the annual awards. 5TH ANNIVERSARY FACT The number of World Thoroughbred Championships sponsors has tripled and now includes Guinness and FedEx. ® Breeders’ Cup awareness in the Chicago metro area increased 900 percent over the prior year, boosting horseracing’s profile in the country’s third-largest market. 3 42687_NTRA_AGS 4/17/03 1:09 PM Page 6 financial highlights Priorities for 2003 include an aggressive program to grow revenues from sponsorship, television and group purchasing. The figures represent budgeted Operating Revenues 2003 Budget* 2002 Actual projections for the calendar year Revenues from BCL $29,800,000 $32,691,909 2003 and include NTRA and Membership dues 16,560,000 18,971,982 NTRA Purchasing. Certain Television, sponsorship & promotions 11,261,000 6,633,906 reclassifications have been Drug Testing Task Force – 138,552 made to 2002 actual figures to Other revenues 50,000 53,738 conform to the 2003 budget Total operating revenues 57,671,000 58,490,087 presentation. Consolidated Operating Expenses Financial Statements for Television 8,899,000 8,071,747 National Thoroughbred Sponsorship 5,589,000 4,076,924 Racing Association, Inc. and Advertising, marketing & promotions 18,284,000 18,709,811 Subsidiaries are attached as Purses & awards 19,150,000 20,797,914 an appendix to this report. Legislative & regulatory**