Racing’s self-driving cars and halftime shows

On Feb. 27, USTA directors will be voting for their next president. After reading the ideas and resumes of all the candidates, I can honestly profess that I am very impressed with the entire field. Each man has a lot of strengths, and few weaknesses. The sport should be very proud it has attracted such talented people.

While examining the platforms of the candidates (you can read them all here), one item did intrigue me; from Jason Settlemoir:

“Arrange a shareholders’ meeting to discuss a funding mechanism for marketing the harness racing industry… Follow the Racing Development and Sustainability Plan that was presented in 2010 by Standardbred Canada as a stepping stone.”

Jason, along with others, have floated this idea before, and it hasn’t gained much traction, but I think we may want to open our minds a little bit and think of how important something like this is to debate.

For me, halftime at the Super Bowl is the same every year. It’s my time to refresh a drink, chat with some friends, or see how my bets are doing. When the bell rings for the second half kickoff I become Pavlov’s dog and dutifully find my chair.

I’m clearly not normal, because at halftime most everyone else is watching U2, or Springsteen or Coldplay.

This year when Lady Ga Ga takes the stage at halftime it’s important to remember it wasn’t always like this. For over 20 years, Super Bowl halftime consisted of marching bands; not much unlike a halftime at a West Texas high school game. In 1991, the NFL decided that halftime could be part of the game’s branding, and since so many were watching at home, exploiting it had revenue potential. That year, the New Kids on the Block were paid to perform, and it has gotten bigger and bigger since.

For years, the NFL spent a good deal of cash (at a loss) to put on the halftime show, but that’s come full circle. Lady Ga Ga will be receiving nothing from the NFL for her performance, and last year it was floated that artists actually pay the league to perform. In addition, Pepsi will pay the NFL $12 million this year for halftime sponsorship rights.

The NFL created revenue by investing in a ‘nothing’. They made a silk purse from a sow’s ear.

We can profess this is something unique, the NFL was just much smarter than everyone else, or that this was inevitable, but I think that would be wrong. This strategy – in some way — happens in every sharp company or firm.

Google is the most valuable company in the world. The revenue stream that makes this possible is not – on the surface – tech related; their cash flow comes from you, consumers, clicking paid text ads in search results. There’s a slight problem with that, though. This revenue (as the world changes with products like Amazon’s Alexa, voice enabled search, and virtual reality) won’t always be there in present form and numbers, and Google knows it.

To respond, Google has been investing for years through something called “Google X”. Google X has nothing to do with search, and everything to do with (at times) just about everything else. It explores dozens of new ventures, including self-driving cars, Fiber, wired homes (through Nest) and personal health tech through Verily. Yes, one day soon your car will be driving you home, your fridge will be messaging that you need milk, and since you’re diabetic, your contact lenses will alert you that your blood sugar is low. All of this may be courtesy of this so-called ‘search company’.

Slowly but surely, this investment has been driving business. In Q4, revenue for this unit reached $262 million, which was up from $150 million the previous year. The operating loss (no, it’s not yet profitable, and won’t be for some time, no doubt) is about three per cent of revenues.

While looking at Jason’s proposal, the three per cent of revenues number is one that strikes me. If the largest company in the world can see that the world is changing, its core revenues may not be there forever, and it wants to remain relevant by investing three pennies of every dollar into finding new streams, why can’t harness racing?

Harness racing, since about 1998, has received (in the U.S. and Canada) over $10 billion dollars of slot money. How much of that has been invested in a ‘Google X’? How much of that has been invested in a Super Bowl halftime show? This sport’s core-revenue from slot machines won’t be here forever, but we see little alarm at this simple fact.

Currently one candidate wants to “arrange a shareholders’ meeting to discuss a funding mechanism for marketing the harness racing industry,” and “follow the Racing Development and Sustainability Plan that was presented in 2010 by Standardbred Canada as a stepping stone.” But I hope each and every candidate embraces at least the exploration of this concept.

This idea is not radical, nor is it out of the mainstream. It’s how most of the world works.