Louisville, Ky.

Bill Carstanjen called his first decade as CEO of Churchill
Downs Inc. “a wild and fun ride so far.”

The context of that comment was his response to a question
about the meteoric rise in the value of CDI stock, which is nearly nine times
higher than it was when he was promoted from chief operating officer in August
2014.

Flatter Pod: Hear full interview with Carstanjen.

In addition to seeing annual revenue reach $2.6 billion and record
handle for the 150th Kentucky Derby, Carstanjen also navigated the company
through a spate of horse deaths last year, the launch of federal oversight
under the Horseracing Integrity and Safety Act and the contentious suspension of
Hall of Fame trainer Bob Baffert after Medina Spirit failed a drug test and
ultimately was stripped of his 2021 Derby victory.

In the second part of his 45-minute interview this week for Horse
Racing Nation’s Ron Flatter Racing Pod, Carstanjen responded to questions about
these challenges.

Among the highlights:

The July 19 lifting of Baffert’s three-year suspension “wasn’t
anything magical,” Carstanjen said. “It’s just when we reached the end of that
chapter, and we appreciated what Bob said about the saga, how he chose to wrap
it up and think about it, and we agreed with that.”

There is no zero-tolerance clause or poison pill that went
along with Baffert’s invitation to return to Churchill Downs. “He’s in the same
position as everybody else that runs in the Derby,” Carstanjen said. “There are
no hard feelings. There’s no baggage.”

Taking a thoughtful view of HISA, Carstanjen said, “I think
there’s been a lot of alarm about the cost of HISA and how those costs are
reined in and how are they are controlled and how do we make sure they don’t
get out of hand and don’t overly burden the industry.”

Carstanjen said he does not support HISA’s transparent
reporting of horse breakdowns. “I’m not happy with it,” he said, adding, “What
I’m never in favor … is of sensationalism and from people that start with the
conclusion and then try to find some kind of fact that they can throw out that
they think supports it.”

When he is not at a CDI track, Carstanjen said, “It’s fun to
go to Saratoga. … The whole town is abuzz, and I always find that fun. Plus I’m
not responsible for it, so I can just enjoy it as a fan and have a couple beers
and just have a good time.”

The entire, unedited interview recorded Tuesday at CDI headquarters
is on the current episode of Horse Racing Nation’s Ron Flatter Racing
Pod. Part 1 was transcribed in Q&A form Friday. This is part 2:

Let me zero in on the Kentucky Derby and the big elephant
in the room was Bob Baffert for 2 1/2 years (actually three). Why was the
timing right (July 19) to end his suspension when you did?

With respect to Bob, I think of every year and every era as
sort of a chapter in a book. That was a troubled chapter. It’s not a chapter
that anybody wanted to see written. No one wants to see a positive test, etc.
But when you get to the end of the chapter, you turn the page, and you go on.
There wasn’t anything magical to the timing with respect to resolving the
dispute. It’s just when the work got done. It’s just when we reached the end of
that chapter, and we appreciated what Bob said about the saga, how he chose to
wrap it up and think about it, and we agreed with that. He certainly took
accountability and demonstrated a real desire to move on and learn from that
lesson and given all that, it was time to move on. He’s welcomed back with open
arms. This is America. You get a second chance. If you make a mistake, you own
it, and you move on. I have to say, watching him and some of his clients at the
sales, I think the fever is still there. I think the hunger is still there. I
think he and some of his clients have a real commitment to making it back and
trying to get to the top of that mountain. We wish him well, and I’m sure it’ll
be a great feeling of accomplishment and redemption if he’s able to get back on
top, and he’s earned that right to go for it again. I don’t blame you for
wanting to take me back to those troubled times, but the reality is I moved on,
and I think he has, too. As an institution we’ve moved on. It’s time to turn
that page, forget about that negativity, forget about those troubles and just
go make the future great.

Is there any proviso on his return? Is there a
no-tolerance clause, for lack of a better word?

Nope. He’s in the same position as everybody else that runs
in the Derby. There are no hard feelings. There’s no baggage. Our team is going
to treat him just like we treat every other horseman that’s lucky enough to
qualify for the Kentucky Derby. There was nothing left unsaid, privately or
publicly, that’s still to be revealed. It is what it is. It’s done, and good
luck to him and the connections he works with. I’m sure they’re going to give
it a hell of a go to try to get back there.

Let me pivot to HISA. How is it going?

How’s HISA going?

Mm-hmm.

HISA, of course, is a really complicated topic in the
industry, so I’m going to give you one perspective on it. It’s just our
perspective. I’m always deeply respectful of everybody else’s. The challenge
that led to the creation of HISA from our perspective was this sort of real
inflection point. This real trouble, a point of danger, this time of troubled
water where we were at risk in the eyes of American of the American public of
losing our credibility as a sport. Was our sport fair? Did it have integrity?
Was it safe for the horses? Was it safe for the jockeys? Was it a real sport,
or was it source some sort of carnival act that needed to go the way of
bear-baiting and other things from the past. We were in a real inflection
point. I think we need to respect that, as a country, the country is always
changing, and its standards and morés are always evolving, and there was a real
risk that we were going to lose the public’s trust as a sport. You think back
to some of the issues a couple years ago at Churchill. You think back to some
of the issues in California with breakdowns, etc. There was a crisis, and I
don’t want people to lose that frame of reference, to lose that memory that
we’ve seen what’s happened to sports like dog racing and other sports. We’ve seen
what’s happened to other things that that we’ve had in the country over time.
Other events. I think HISA has been successful in helping us establish
credibility in the eyes of the American public that we can demonstrate
satisfactorily that the sport is run fairly. That there isn’t rampant cheating.
That there’s methods and resources devoted to catching cheaters. That it’s
safer than it’s ever been for the horses. It’s safer than it’s ever been for
the participants. All of those are important and worthy goals that everybody in
the industry should share. Everybody should want that. We’re all making a
living one way or another from this, and we should want the sport to be
perceived and to actually be safe and fair. That said, I think there’s been a
lot of alarm about the cost of HISA and how those costs are reined in and how
are they are controlled and how do we make sure they don’t get out of hand and
don’t overly burden the industry. With respect to the horsemen, I think they
felt disenfranchised in that they didn’t have enough say into how HISA was
passed or what the terms were. Also, I think for a lot of these horsemen, not
that they asked me to speak for them, they don’t. I think it’s fair to say that
a lot changed for them. They had costs that they never had before. They had to
spend time that they never had to spend before. There was a bunch of
uncertainty introduced that they didn’t fully understand and hadn’t wrapped
their minds around, so it had a real impact on their lives and how they ran
their business, and how they plan for their future. You can’t blame them for
saying, “Well, it’s great that the industry feels like our brand is better, but
we don’t take that in a takeout package home for dinner on Friday night. We
can’t cash that. We have to go incur the costs and the detriments of this new
system, and the awards for it seem pretty amorphous to us, but the costs seem
pretty real.” Here’s the thing, HISA is pretty controversial still in the
industry. Obviously, you’re aware of the lawsuits, and I think there are
legitimate perspectives on both sides, on all sides. There’s probably more than
two sides. From our perspective, I think it’s really making a difference for
better establishing the credibility and the long-term survivability of our
industry. I think we should take pride and be happy that we are able to evolve
and change, so that we can better meet the expectations of the American
consumer who is increasingly less personally connected to farming and to
horses. We’re becoming a more urban society, and that’s a change over the last
50 or 75 years. We should feel good about that, but we also need to be
thoughtful about the cost of this infrastructure, and we also need to be
respectful and open to conversations with horsemen who’ve been asked to take a
big chunk of this burden. It’s fair when they say, “Well, why didn’t this apply
to the sales companies? Why hasn’t this applied to breeding? Why is all the
burden of establishing the credibility of the sport or reestablishing it in the
eyes of the public? Why is it all on those of us on the racetrack?” You have to
respect when they say things like that. They’re not wrong to say things like
that. If we can’t find a way to work together and a way to discuss those issues
without them feeling personal or damaging to our relationships with each other,
then we’re going to fail. So more to come on HISA. More to come. It’s a
complicated subject, but we don’t live in a little bubble. We live in this
complex American sports and entertainment scene, and anybody who thinks that
sports involving animals or activities involving animals are viewed the same
way in 2024 that they were in 1954 just isn’t paying attention. We need to make
sure that we are cognizant and thoughtful about the American public. That we
are explaining what we do. That we are meeting their expectations for safety
and for integrity. But at the same time, we’ve got to balance cost and we’ve
got to be respectful to the horsemen who are the ones that put on the show.
They are the ones that produce the horses that we need to run these races, and
we need to be deeply respectful of fact that these people are making a living
at this. They’re not multi-millionaires, per se, just entertaining themselves.
They’re trying to make a living at this, and we’ve got to be thoughtful and
respectful of how we are impacting small-business owners.

I’m hearing in all the nuance you just mentioned a good
deal of thought that went into this. I’m also hearing some of what you had said
five years ago, when you had told the L.A. Times, “We need to make
change, but hoping the feds can run a state-regulated industry, we don’t think
that’s a very good bet.” But here we are in the midst of that five years later.
How much were you influenced perhaps by Sen. (Mitch) McConnell’s support of HISA
to get you to say, “Hmmm, maybe we better look at this.”

Over time we as a company have listened to everybody, and
first and foremost we’ve listened to the public. We’ve seen the importance of
needing to establish and constantly reestablish credibility and showing a
willingness to change. Ultimately, our decision making isn’t driven by any
political element or political party or person out there. It’s just constantly
reevaluating our circumstance. I would tell you, in our company, you’re never
penalized or denigrated because you change your opinion on something. If the
facts warrant it, you change your opinion. You deal with the realities that
that you face. For us it was an evolution, and what HISA is and how it works
has really changed over time from the initial drafts of that legislation. That
had an impact on us, too, as that evolved towards something we thought might
actually work more predictably.

Are you comfortable with the demand for transparency that
HISA has brought, particularly with casualties on the racetrack? Not just
Churchill, but as a state, as a commonwealth, Kentucky has not necessarily
embraced that culture.

It’s a broader topic, but it’s all a work in progress. No, I
think if you told me that the regulatory framework was frozen in time right
now, I’d say no, I’m not happy with it. I think there’s going to be constant
evolution and change, and there may be heightened expectations from the public
on what they want to see. What I’m never in favor, though, is of sensationalism
and from people that start with the conclusion and then try to find some kind
of fact that they can throw out that they think supports it. I think there can
be a lot of sensationalism and nonsense, and what we’re interested in as a
company is true learning, true incremental improvement and a process and an
infrastructure that inspires credibility, not only from the public at large but
from the participants. Ron, I think we all know that that hasn’t yet been
achieved. That’s why they’re all these lawsuits out there. It’s in the court
system. It’s working its way through, and there’s still a lot of angst and
distrust and anger over the fact that HISA exists. That’s regrettable, and
that’s going to have to be worked through, but we all need to remember that
we’re in this together, and we exist because there’s an interest in this
product in the public, and we better always go back to what does the public
expect of us? What standards do we need to meet in this evolving world of
standards? What is expected of us? Because we can’t just sit around and argue
with each other and get mad at each other. We’re a business that relies on
consumers. It relies on fans and customers, and we’ve got to meet their
expectations, and their expectations are always evolving.

I want to at least lob out one question that came in from
a listener when I did invite this. He is from Pennsylvania. He asked me to ask
you, “Do you ever see a time when Churchill Downs might host a boutique meet a
high-end boutique meet like Royal Ascot?”

It’s definitely an interesting idea. When you talk about
Churchill, you can mean Churchill Downs, or you can mean one of our other
facilities?

He didn’t specify, so it’s up to you. The canvas is
blank.

I would say look at what we’re doing in Virginia. Look at
the investment we’re making in Virginia. It’s always run sort of
August-September, but as we expand the number of days there, as we go from 27
or so in 2024 to 47 or so in 2025, we’re creating a four-day meet in is it
March or April?

March.

Yeah. In mid-March, late March, where it’s a boutique meet,
and it’s a very high end meet, because it’s going to offer a Derby prep race
and an Oaks prep race, so it’s going to be built around that. When we have the
tools we need to create something new, we’re going to do it, and we’re going to
try this, and we’ll see if it works. For your listener from Pennsylvania, take
a look at what we do in Virginia, and I think that’s going to work. I think
it’s going to be really exciting. I think it’s going to build a connection to
the people of Virginia, and that’s a state with almost 9 million people. It’s a
really big state, and it’s going to give them a direct tie and a direct rooting
interest in the Kentucky Derby. Yeah, anytime we see an opportunity to try something
new, we will. It hasn’t been that many years ago since we started running a
Churchill Downs racetrack in September. I think this will be our 12th or 13th
meet, and I remember all the work that went into doing that. We’re never afraid
to try something new like that, and we might do more like that at Churchill
Downs racetrack. We certainly have the purse money.

In the few minutes we have remaining. I wanted to get
from you your fondest memories as a racing fan.

As a fan, I still treasure my initial trips to racetracks. I
was a navy brat. My dad was a career naval officer. I grew up sometimes in the
United States, but it felt mostly we were overseas, and I never went to a
racetrack with my mom and dad. They weren’t interested or familiar with racing,
but when I met my wife, we met when we were in school. She grew up in Hoffman
Estates (Ill.), which is really close to Arlington Park, and her family were
big, big racing fans. The first time I went to visit her family was in 1993. We
were still students. The first thing we all did is we went to the racetrack,
and also in the wintertime, we went to OTBs. They were that those kind of fans.
Those were some of my fondest memories, because I just sat there and learned
the game and had to make all the rookie mistakes and get everything explained
to me. That was a great time as I got to know my wife and as I got to know her
family, that’s where we spend time together. Those are still some of my
favorite memories as a fan. But I have to say these days I really like going to
Saratoga. I always feel a little guilty when I go to Saratoga, because that’s
not the rest of racing in America, but Saratoga at this point, having lived the
last 20 years in Kentucky, I know so many people there, and the whole community
buys into it. The whole town, the whole region, really invests and buys into
and gets excited about racing. It’s fun to go to Saratoga, and even if you
can’t make the track that day, or you can only go for an hour or two, the whole
town is abuzz, and I always find that fun. Plus I’m not responsible for it, so
I can just enjoy it as a fan and have a couple beers and just have a good time.
Those are my current best memories outside of our own tracks, where the reality
is I’ve got to be ready to deal with a crisis. You can always still be a fan,
but when we’re at our own track, when I’m at our own track, Churchill Downs
racetrack, the Fair Grounds, etc., you’ve always got to be ready to deal with
what comes up, so it’s not quite the same thing as a weekend in Saratoga.

So you’re thinking about that from the point of view, you
have to get ready for a crisis. Can you enjoy being the CEO at the racetrack?

Yeah, I love being the CEO of Churchill Downs. I really
enjoy it. I think my wife would tell you that for someone with a job like this,
I don’t seem particularly stressed or worried. We have a great team, and a lot
of us have worked together for a lot of years, so there’s a lot of trust and
familiarity with how we deal with issues. I enjoy the hell out of being the CEO
of Churchill Downs. There’s an obligation and a responsibility that comes with
that, too. Being ready to meet those responsibilities and those obligations are
something I take very, very seriously. When I show up to Churchill Downs
racetrack, part of me is enjoying it, but I also have my game face on, because
I know that if anything’s going on that day that’s unexpected, I need to be
ready to help out. I’m always going to take that very, very seriously. I never
visited Churchill Downs other than as a team member of the company. Over the
last 15 years either the COO of the company or the CEO of the company, the last
10 as the CEO, it’s been a long time since I’ve walked in there and didn’t feel
a direct and personal 100 percent commitment to making sure everything goes
well. But even with that commitment and that responsibility I have, I still
love it.