To Zorn's chagrin, Stronach to retain Laurel, Pimlico with sale to bankrupt Magna's parent company

Steve Zorn, managing partner of Castle Village Farm and a blogger on The Business of Racing, reports at his blog and on Facebook that lawyers for Frank Stronach's Magna Entertainment Corp. are in bankruptcy court today, presenting a revised reorganization plan that will (again) cancel an auction of Maryland's racetracks that was set for Thursday, leaving Stronach and MEC in charge of Maryland racing. Zorn says that's "bad news" both for racing in Maryland, and nationwide.

The Baltimore Sun has confirmed that the auction is off.

Zorn earlier had voiced concerns that Stronach and Magna would again find a way to stave off the auction of its majority ownership in Laurel Park and Pimlico. His breaking of the news that the auction is off to some degree contradicts reporting earlier today by The Blood-Horse that MEC had reached a settlement with the DeFrancis family, former owners of the tracks, on the family's future rights to potential slot revenues at the tracks, "apparently (clearing) the way for an auction of the tracks on Thursday."

Or not. Perhaps with the DeFrancis issue out of the way, Stronach and MEC have successfully argued that their position is sufficiently strengthened, permitting MEC's continued ownership of the tracks.

The Blood-Horse cited the Baltimore Sun as reporting that the deal between MEC and the DeFrancis family could pay Joseph DeFrancis and his sister Karin $8 million from MEC and $4 million from the Maryland Jockey Club to settle their claim to future slot revenues. It also was reported that the DeFrancis siblings could receive 15 to 25 percent of the proceeds of the auction if the total sale price is more than $39 million. (Ontario-based MEC paid $117.5 million for just 51 percent of Pimlico and 58 percent of Laurel in 2002, and another $18.3 million to acquire an additional 20 percent of each track in 2007.) But the newspaper reported that the DeFrancis siblings would only receive $1 million if the tracks wound up being purchased by MEC's parent company MI Developments, outside the auction process -- exactly what appears to be happening.

Now the Associated Press reports that MI Developments will pay $89 million to settle a lawsuit filed by a committee of Magna's unsecured creditors, $13 million to cover secured claims of PNC Bank, about $6 million to the holders of unsecured claims against the Maryland Jockey Club, and $5 million to "the former owners of Laurel Park and Pimlico."

The DeFrancis family was reportedly among the half-dozen or so potential bidders in the now-canceled auction. Others mentioned include the Cordish Cos., Penn National Gaming Inc., and Blow Horn Equity LLC, a Pennsylvania-based horse breeder and racing consultant backed by private equity.

The Sun's Web site story says that "plans to sell the track had raised concern about the future of ... racing in Maryland and the fate of the Preakness, the second leg of horse racing's Triple Crown." But clearly leaving the tracks in the hands of Stronach's people hasn't exactly allayed all concerns. After all, how much faith can be instilled in the Maryland racing community and its fan base by leaving in charge the company that went bankrupt in the first place? That's better than giving someone else a shot?

After all, the once-lengthy list of MEC-managed racing-industry properties includes such notable investments ditched or gone wrong as:

• The ill-fated, once-famed Bay Meadows Racetrack in San Mateo, Calif., now sold and bulldozed for a redevelopment plan that has stalled to nothing, leaving piles of rubble in its place.
• Great Lakes Downs in Michigan; closed by Magna in November 2007 and sold to the Little River Band of the Ottawa Indians for redevelopment as a casino.
• Remington Park in Oklahoma; sold for a reported $70 million profit to the Chickasaw Nation in a deal that is yet to close.
• Thistledown Racecourse in Ohio; sold for a reported $75 million profit in September to Harrah's Entertainment, another deal yet to close.
• And, Lone Star Park in Grand Prairie, Texas, bought for $100 million and reportedly being sold to the Chickasaws for just $27 million, yet another deal not yet competed because the Delaware bankruptcy judge delayed the sale in light of a competing bid from Penn National Gaming.

Yes, Magna still manages the likes of Santa Anita, Gulfstream Park, and Golden Gate Fields. It also owns HRTV and XpressBet.com. But the firm's list of scratches and also-ran finishes certainly rivals, if not exceeds, its record for racing biz wins. So it isn't surprising that some, perhaps many, industry insiders like Steve Zorn would rather wager on a new shooter -- or maybe an old veteran like the DeFrancis family -- in the race toward Maryland's horse racing future.

It isn't that racing's faithful don't want to see Frank Stronach and MEC succeed in managing racetracks. It's just that they've reviewed the past-performances and don't see much reason to bet on them.

Ringing in the new year with a new winner

Over the past few years of his stud career in New York, my stallion Silver Music -- then the property of Pinebourne Farm -- served a declining book and with spotty results. So his number of current runners is quite small.

But, today I get to extend my congratulations to Steve Zorn and Castle Village Farm, who own one of those few Silver Musics who are presently at the races. Castle Village Farm's Talking Blues (Silver Music-Time to Chat, by Gallant Hour) broke his maiden on the day he (and all thoroughbreds) officially turned 4, taking the sixth race at Aqueduct on New Year's Day.

Talking Blues and jockey Rosie Napravnik stalked the pace at the outset of the $12,500 maiden-claimer for New York-breds, going a mile and 70 yards on the inner dirt, then came on to win by a strong 5 1/2 lengths. The gray or roan gelding breaks his maiden in his eighth lifetime start, having finished second in three of seven prior races. His lifetime earnings are now $21,705.

Formerly trained by Billy Turner, when that conditioner moved his string to Gulfstream for the winter, Castle Village Farm transferred Talking Blues to Bruce Brown's barn at Belmont in order to take advantage of the many NY-bred opportunities at Aqueduct during the winter months. Looks like the decision paid off.

The Pinebourne Farm-bred horse is a full brother to Silver Music's highest lifetime earner, Time to Rap. A chestnut gelding also bred by Pinebourne Farm, Time To Rap won seven of 17 lifetime on the New York circuit, for $169,894.

When less isn't more ... which is most of the time

Steve Zorn -- a casual but respected online acquaintance of mine, blogger on the subject of the horse racing business, and managing partner of New York-based Castle Village Farm -- wondered in his latest posting whether it's time for the racing industry to engage in some "serious downsizing."

These thoughts have been raised by more than just Zorn. Short field sizes at Churchill Downs and the California tracks this year have led to questions about whether there's simply too much racing. So have declining on-track attendance numbers. And now, declining handle.

Trouble is, as the economy makes its way through the roughest stretch since World War II, if not the Great Depression, it's difficult to really get a grasp on what is a nightmarish downward trend for horse racing that will continue regardless of economic recovery and must be stemmed, and what is just a remarkably predictable decline in an entertainment industry (particularly as measured by handle), fully explainable by the staggering economy.

The U.S. economy shrank 6.2 percent in the fourth quarter of 2008 and another 5.7 percent in the first quarter of 2009 -- is it a surprise that a recreational expense like gambling on horse races would decline for the year thus far by around 10 percent amid such contraction and job loss? Particularly when one response to the down economy in some jurisdictions has been to cancel race dates?

Handle on dark days at any given track is a highly predictable $0.

Decisions made out of fear at the height of a recession are decisions prone to be deeply regretted later. The vast majority of the sharp decline in handle is almost certainly a product of recession, not of racing's problems, though racing indeed has myriad issues that demand addressing.

My current profession, the newspaper industry, is busy laying off journalists left and right, eviscerating its product. When the economy improves, and it will, "readers" will have become "former readers," many of them never to return. It's because we will have shown that when times get tough -- and there's no less news to report, indeed, perhaps more -- we'll just shrink staff and the news product and leave our subscribers paying more for less.

How often has that been a successful business model?

I hear and read much about how over-saturated the racing industry has become. Fingers often get pointed at the lesser tracks, and at conflicting schedules diluting fields throughout a given region.

Indeed field size is important, particularly to horseplayers. But from what I see (check the entries at Equibase.com) the everyday tracks where there's racing year-round, i.e., Charles Town, Mountaineer, etc., are the ones that aren't short on horses. So from a horseplayer's perspective, those should be good races to bet, whether the ponies are stakes horses or $4,000, NW2L claimers.

Zorn notes that though the economy is suffering and the costs of buying a horse have declined (desperately bad news for breeders who sell to make a living), the cost of maintaining the horse in training are not declining. Certainly true.

But is it going to be more economical to prep and maintain a horse in race training when there are fewer opportunities for him to earn his keep?

Zorn attempted to draw a parallel between professional baseball and racing. He notes that in the 1948, there were hundreds of minor league baseball teams with attendance of 39 million. By 2007, there were only 160 minor league teams remaining, with attendance of 42 million.

I don't believe the major-minor league baseball analogy is much of a success story for racing to emulate. Among other things, the population of the United States essentially doubled between Zorn's stated dates of 1948 and 2007. (Census 1950 showed 151 million Americans; 2000 showed 281 million and rapidly growing; over 306 million as of 2009.)

That minor league baseball attendance "grew" from 39 million fans in 1948 to 42 million fans in 2007 is actually not "growth" at all -- it's a stifling contraction. Drawing 42 million in attendance in a nation of 300 million suggests considerably less popularity (almost a 50 percent reduction) for minor league baseball compared to attendance of 39 million in a nation of 151 million.

And lost in that contraction of minor leagues were the very roots of the game of baseball, and, I believe, no small amount of its populist appeal.

I grew up in an area where Class D teams were prevalent back in the 1940s and 1950s. Mickey Mantle played his first professional baseball games for the New York Yankees' Class D affiliate in Independence, Kan., in the county of my youth (albeit long before I was born). He was later promoted to the Joplin (Mo.) Miners. At both assignments, it was a short drive for thousands of southeast Kansans, northeastern Oklahomans and southeast Missourians and a few Arkansas natives to see future greatness. And in those days, fans of what was then America's inarguable pastime, took advantage.

Players who would one day be World Series heroes (and thousands who'd never throw a pitch or catch a popup in a league higher than Class D or Class C) rented rooms in the community. They were fixtures at soda shops -- or bars -- and became local celebrities. Major League teams had fans across the country not because of ESPN and DirecTV, but because their players had shopped at a Chanute, Kan., five-and-dime or walked the streets of Bartlesville, Okla., then in the evenings performed live before appreciative audiences in the coziest of venues, in the smallest of communities. Like those 1949 Class D Independence Yankees (four future big-leaguers!) of the Kansas-Oklahoma-Missouri League, in Riverside Stadium, where 33 years later I would play football as a member of the opposition from Coffeyville, and later still would report on many a sporting event for The Coffeyville Journal.

While it was really the Korean War (and resulting player shortage) and the advent of televised Major League baseball that would drive the Class D and Class C leagues out of existence, for the first half of the 20th century, minor league baseball was woven into the fabric of American small towns. The papers covered the games and the players like they were favored local sons. The stories old-timers tell of bigtime ballplayers getting their start in tiny burgs across the country are true Americana; and are (or were, for those no longer with us) told in no less reverent tones than the stories of those who "once saw Seabiscuit race at Narragansett Park."

Where's Narragansett Park now? ... Mostly under concrete. ... And another Seabiscuit haunt, Bay Meadows? A recently removed pile of rubble, destined to become an office complex and business center, you know, when they get around to it. ... And yet another, Hollywood Park, seemingly doomed to a similar fate, and it is not because there's too much racing, but because the general public cares about racing too little.

And that's a very different problem.

So horse racing today is wondering whether less is more. Usually, it isn't.

With simulcasting and the ability to wager from home (for many horseplayers, though not for me in North Carolina) there's less reason to attend the races in person, except for special events. ... Of course, it used to be that racing was special. Back when many of the best horses ran on for season after season, building a fan following. And you didn't have to wait eight or 12 or 15 weeks for the next time your favorite horse would race.

So it isn't that there needs to be less racing; there needs to be better racing, and more racing by top horses, and better-marketed racing. Some say fewer races will make it easier to make those reduced dates seem special. Maybe, but I doubt it.

However, Churchill scored an undeniable hit with lights and Friday racing at night. Welcome to the 21st century.

To paraphrase another great Yankee, Yogi Berra, if the fans don't want to come out to the racetrack, you can't stop 'em.

Rather, somebody needs to convince 'em to get started coming out again.

And "Welcome to the new American horse racing -- now with fewer opportunities to watch!" just doesn't strike me like all that great a sales pitch to potential fans who already find our sport all too easily ignored.