Big Event Economics 101, and Why Eventers Should Chip in for Kentucky Before Sunday

Oliver Townend and Cooley Master Class, winners of the 2019 Kentucky Three-Day Event. Photo by Shannon Brinkman Photography.

I am not qualified to speak for the management team of the five-star Kentucky Event or why $750,000 is the number chosen as part of the fundraising drive to allow for the cancelled 5* to get resurrected and run successfully without spectators this April as scheduled. However, as the manager of a 4*-L competition and a past bidder for a 5* at the Ocala Jockey Club, I am uniquely qualified to provide some perspectives to the readers of Eventing Nation on why the fundraising drive is a genuine call for help that should be heeded by the individuals in the eventing sport. If you already know you want to help, here is the website link to do so. If you are not sure why you should care or be the one to fill out a donation form, read on.

The fundraising call is not a ransom note, it is not a sign of mismanagement by EEI, and it is not like other marquee events like the Kentucky Derby that can easily run without spectators. It is simple Economics 101 of costs and revenue. At its most basic, a big event has big costs. It can
run if those big costs get covered. If not, someone is left holding the bag to cover the losses. When the organizer doesn’t have a method for enough revenue, the organizer goes bankrupt, suppliers don’t get paid, or worn-out Board members are writing big checks that they didn’t plan on writing. So, it is a sign of honesty, integrity and responsibility by EEI that they are trying to balance the math before running the 5*, rather than relaxing standards by running a shoddy or unsafe 5* or running on hope only to run out of money and have to fold as an organization after the fact.

Some riders have stated that the 5* cancellation was a sudden surprise. It shouldn’t have been. EEI has been asking for help for quite some time. Eventing Nation ran a story on the funding issue if EEI couldn’t run with spectators (Jan. 15: “Hoping for the Best, Preparing for the Worst: How We Can Help the Kentucky Three-Day Survive.”) I wrote a story for Eventing Nation on this as well (Jan. 21: “Support What You Wish to Keep.”)

The cancellation was a predictable outcome from a “meh, not my problem” response by the eventing world. Now that the chickens have come to roost, we can either be without a 2021 Spring 5*, reach into our own pockets to help, or wait for a big-pocketed savior who may or may not materialize. Hint, there are not many deep-pocket saviors in three-day eventing. The few like that are expected to step up too often, and often not appreciated enough for when they do. There are more of the ramen-dinner, pull-me-up-by-bootstraps folks in the rider, owner and sponsor ranks.

There is strength in numbers, even if each supporter only has a bit to pitch in. Bernie Sanders and Donald Trump both raised millions by activating small-dollar grassroots fundraising campaigns, so we know it can work if enough heed the call. The big questions I see on social media posts about this come down to “We were betrayed by the cancellation. Why should we help?” Here are the economic considerations from my experience of running a 4*-L event and having worked on a 5* bid. I am hoping it will help folks to understand why help is essential this year:

COSTS: Yuge. Eye-popping, surprising, incredible, holy-cow-really, big costs. To run a 4*-L event, when I ask people what they think it costs and add some more to the estimate, they think it’s about $100K tops. Nope. About five times more, and that’s a shoestring budget where the entire tiny organizing team is tired for six months before the event and three months after the event, the facility doesn’t get a fee, much of the competition is run by volunteers rather than paid staff, and the owners get paid zilch. So, when the 5* organizer says it costs about $1.5 million to run, yes, please believe them.

FUNDING: There are a few ways to bring in income for an event, depending on whether it is competitor-driven or fan-driven:

  • Entries and stabling. This is most common for lower-level events where entries provide the bulk of the income. The higher the competition level, the lower the entry fees, the higher the prize money expectations. Why? The reasonable expectation that the high- level athletes who represent our country shouldn’t have to pay to participate, but that they should have an opportunity to earn money for their talents. Few people bat an eye that NFL and NBA players make millions for playing games. It should be OK for top level eventer athletes to expect to make some money by competing. Pie in the sky for now, but a good goal. Besides, it would be astronomically prohibitive to expect 5* riders to cover production costs of a 5*. At 80 riders, each would need to pay $18,750 to cover a $1.5 million production cost. Ouch. Not feasible.
  • Sponsorships. No, Land Rover or other sponsors can’t just write a bigger check. Corporate sponsors provide funds because there is a business reason for them to do so. They write bigger checks when they expect greater returns from a particular crowd, and smaller checks when there is a smaller return on their investment. For example, Anheuser-Busch spent an estimated $350 million on sponsorship rights deals in 2016, but they can do so because typically people drink a lot of beer at sports events, and its annual revenues of $45.5 billion that year were more than enough to justify such investment. For sponsorships to make sense, people involved in the sponsored sport need to buy the things that sponsors sell. How many Land Rover vehicles or Rolex watches need to be sold to justify a hefty sponsorship year after year? Sponsors have told me repeatedly that eventers aren’t particularly loyal to sponsor brands and don’t spend enough to justify big sponsorship deals. Ouch. It’s higher value for a sponsor to present their company and products to a live audience of spectators than to an event without spectators. Many sponsors have also seen their revenues decline in the pandemic. Double or triple whammy for an organizer of a 5* in 2021.
  • Media Rights. I don’t wish to speak out of turn as I am not privy to this for a 5* level, but I don’t believe that even an event as large as the Kentucky 5*. U.S. sports rights were estimated to be worth a total of $22.42 billion in 2019. But this money is only attractive to spend by networks on sports with high viewership, because then the networks in turn sell coveted advertising spots during the broadcast. For sports with low viewership or low advertiser interest, the sports event needs to instead pay the network to be televised. When we last checked, it would be a $500K cost to have the $4*-L event televised. Besides, USEF and FEI own the media rights, the organizer does not.
  • Governing Body Support. For three-day eventing competitions, the governing bodies (USEF, FEI, USEA) license the competition, get paid licensing fees and ensure event quality and safety standards. But they do not provide any direct financial support to competitions. There may be some governing body sponsors who indirectly sponsor some aspects of certain competitions, but the organizer is expected to be responsible for all fundraising. To the best of my knowledge, USET raises funds for rider grants to get to the Olympics and other podium events, but doesn’t fundraise for venue or event grants.
  • Spectator Revenue. It is very costly to attract spectators to low-level competitions, just because it is much more exciting for a parent to watch a kid go around a low-level cross-country course than for a spectator with many choices of what to do with their weekend time. On the other hand, a 5* like the Land Rover Kentucky attracts up to 80,000 spectators for its “Best Weekend All Year” for a simple reason. Even on a typical rainy April weekend, 5* cross-country is exciting, they want to be there to watch, they are willing to pay for a $40 ticket or more, some will pay a $800 VIP ticket, and they all show up to buy cool unique items at the vendor fair. How much funding does this provide?Hard to know exactly but let’s say 40,000 tickets at $40. That’s a cool $1.6 million.Probably a lot more, that’s just my estimate. Yes, it costs money to print tickets, have the technology to deliver them, etc. But it’s a significant source of funding of the rest of the big, expensive production. This year, with no spectators allowed? Poof. Gone. All of that ticket income. All of that VIP income. Along with the vendor fees who would sell to those spectators, or the sponsors who only sponsor because of the live spectator presence.
  • Gambling Income. This has been the reason why horse racing has been able to continue running big spectator-less events like the Kentucky Derby, Breeders Cup or the Pegasus, with multi-million purses and production costs. This is not an available option for three-day eventing competitions of any level.
  • Other Sales. If the venue or event organizer have something else of value to sell, perhaps land parcels, hotel rooms, other event entries, year-round boarding, or other expensive items, they may be able to take a loss as a marketing cost to reach potential buyers of those big ticket items. This may apply to venues like Tryon or WEC, but is not applicable to an organizer like EEI who needs to raise funding to run one 5* per year. Yes, there is a movement on social media for that type of venue to run the 5* this year. Does it benefit the sport overall to put EEI out of business completely, after all it has done for the sport for decades? Riders need diverse venues, not just one or two that can absorb losses because they have other things to sell.
  • Donations. In the world of political campaigns, donations are the main source of income. People expect nothing in return other than the hope that their chosen candidate will win the right to represent them. In the world of sports events, donations are not so common. People expect some form of direct value back, either the ability to compete, the marketing value, or the right to spend time with friends next to the Lady of the Lake complex, wondering who will clear the big jumps and who will end up floating in the lake with their inflatable vest. This year, the willingness of eventers to donate could make or break events until times are back to normal. What will it take to get to a $750,000 goal? 750 eventers who give $1,000 each, the cost of less than one month of full board for one horse. Or 3,000 eventers who give $250 each, the approximate cost of hay for a month for one horse. Or 15,000 eventing fans who give $50 each, about the cost of one ticket to the 5* that they would instead watch on a livestream this year. Among a mix of bigger donations by those who can and smaller donations by others, the grassroots movement can get it done and keep the springtime tradition going this year so it can happen again in the future.

Whose problem is it if the 5* doesn’t run, or if it doesn’t run in Kentucky? Is it just the 5* riders who may not have a place to go play in the April Kentucky mud? No. Everyone in eventing loses if the 5* doesn’t run. 5* riders and owners pay big money for younger horses if they know they
can take them to elite events. Little girls watching 5* events are more inspired to show up at the barn to muck stalls if they have 5* visions to dream of at night. Fans watching 5* events may turn into a competitor, owner or a sponsor. Properly prepared 5* competitors provide national pride in their sport when they compete in big events from the Olympics to WEG and Pan Am Games. It isn’t just the elites in the sport who benefit from the Land Rover Kentucky 5* happening in 2021. It’s all of us with any connection to the sport.

Please, go ahead and support EEI by donating before 11:59 pm on Sunday, February 7th. They need $750,000 to make it happen. According to posts by Sara Kozumplik-Murphy who is leading the fundraising charge in eventing, there is already about $200,000 in private donations secured. EEI has promised to make 2021 donations optionally refundable if they cannot reach the fundraising goal by Sunday. Erik and I just donated, because the Ocala Jockey Club understands both what it takes to run a big event, and the huge value to the eventing community, the Kentucky Horse Park and to the Kentucky community. It isn’t just a donation, it is an investment in the sport. Donate. Be part of the solution.

[Link to the EEI donation page and refundable donation form]