Posts Tagged ‘Account Wagering’
Thursday, November 19th, 2009
By Ray Paulick
A number of people I respect most in the Thoroughbred industry consider Churchill Downs Inc. CEO Bob Evans to be the smartest man in the racing business. Last week’s $126.8 million stock and cash acquisition of youbet.com, which also includes the totalizator company United Tote, only strengthens that assessment.
With the deal, which won’t close until sometime in the first half of 2010, CDI will own roughly half of the Advance Deposit Wagering market share. According to a presentation made by youbet.com at an investment bank conference last month (click here to read the presentation), youbet.com and TVG are the market leaders, with about 29% market share each, followed by the Churchill Downs-owned TwinSpires at 21% and Magna Entertainment’s XpressBet at 14%.
The current North American ADW market is roughly 14% of the $14 billion expected to be wagered on horse racing this year. It has been growing steadily, but not nearly as quickly as online transactions in other businesses such as event ticketing, travel, or music. It is widely viewed as the only current growth sector in racing. The growth of online wagering is in Evans’ sweet spot.
ADW wagers are also more profitable for a company like CDI than other types of bets, including those made on-track, especially when they are made at one of the tracks the company owns (Churchill Downs, Arlington Park, Calder, Fair Grounds).
So the acquisition of youbet.com looks very much like a win for CDI shareholders, because of the anticipated jump in both revenue and earnings, stemming from the bigger share of the ADW market and the reduced costs of personnel, marketing, technology, etc that Evans discussed in a conference call following the deal. It also gives the company a stronger technology platform than it has with TwinSpires. CDI’s purchase of AmericaTab from Bloodstock Research Information Services jump-started the company’s ADW business, which it was slow in developing. “I’ve been pretty impressed by the technology capabilities of the youbet organization,” Evans said in the Nov. 13 conference call.
The United Tote part of the deal makes sense, too. United Tote currently has contracts with Churchill Downs, Keeneland and the New York Racing Association tracks, but not with CDI-owned Arlington, Calder, Fair Grounds, 19 off-track betting parlors and TwinSpires—all of which use AmTote. Look for United Tote to pick up those contracts either as existing deals expire or buyout clauses are used.
There is the potential for pushback from some of United Tote’s current customers who might fear that Churchill Downs is becoming too powerful, but the upside to the ownership of United Tote far outweighs any downside. Also, as Evans said, United Tote might be able to improve tote system stability, performance and wagering integrity. If that occurs, it’s good news for the entire industry and especially for horse players, who have serious concerns about the integrity and dependability of the current wagering systems.
Of course, there could be some losers in this deal. As CDI gains more market share with its ADW company, it will wield even more clout than it currently carries in contract negotiations with horsemen around the country through TrackNet Media, which negotiates its simulcast contracts with wagering outlets. That could reduce purse revenues from ADW wagers even more than the already-too-low levels that currently exist.
The other obvious losers will be some employees at either TwinSpires or youbet.com, but that’s pretty standard in corporate mergers and acquisitions. There will be plenty of corporate carnage, either at the youbet.com offices in Woodland Hills, Calif., at CDI’s Louisville, Ky., headquarters or its Silicon Valley “digital think tank.”
One of the unanswered questions of Churchill’s acquisition is whether youbet.com will continue to operate in “gray” states where Advance Deposit Wagering is neither expressly legal or illegal and if TwinSpires will move into those states. In the past, youbet.com recruited customers in states where other ADW companies, including TVG and TwinSpires, did not conduct business.
One final note about the deal. Youbet.com executive chairman Michael Brodsky will join the CDI board of directors, a move that some insiders greeted with a yawn. Neither Brodsky or youbet.com’s largest shareholder, Hyatt Hotel mogul Jay Pritzker, were viewed as visionaries in the online gaming world. They both held onto longshot hopes that youbet.com would somehow, with approval from Congress, be able to move into the sports betting or online casino gaming business.
When that didn’t happen, their energies shifted toward selling the company, something they managed to accomplish.
But it looks to me like CDI and Bob Evans got the better end of the deal.
Copyright © 2009, The Paulick Report
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Tags: Account Wagering, advance deposit wagering, ADW, Arlington Park, bob evans, calder, CDI, churchill downs, fair grounds, Horse Racing, internet betting, jay pritzker, michael brodsky, online gaming, pari-mutuel wager, Paulick Report, Ray Paulick, twinspires, xpressbet, youbet, youbet.com
Posted in Account Wagering, Churchill Downs Inc., Wagering | 14 Comments »
Thursday, January 22nd, 2009
By Ray Paulick
Is anyone really surprised to see Churchill Downs Inc. involved in yet another dispute with horsemen’s organizations over contractual terms for account wagering or advance deposit wagering? The incident in California involving TrackNet Media, the company CDI owns in partnership with Magna Entertainment, is the latest in a series of contractual and legal disputes between the Louisville, Ky.-based company and horsemen’s organizations in several states.
The common thread in all of the disagreements is an effort by Churchill Downs to squeeze as high a percentage as possible for its TwinSpires ADW platform. In so doing, purses and state breeding programs, and in some cases racetracks, will get a smaller slice from account wagering dollars.
The formation with Magna of TrackNet Media in 2007, along with the subsequent launch of TwinSpires and the purchase of the AmericaTAB account wagering company, Bloodstock Research Information Services and an interest in the Horse Racing TV cable network, has made Churchill Downs a major player in the ADW world. The company can offer content (through its racetracks), wagering services (TwinSpires, which absorbed many of the AmericaTAB customers), television distribution (HRTV) and past performance information used by horseplayers (Bloodstock Research).
CDI is also rumored to be the leading candidate to buy TVG, the largest ADW company in terms of customers and pari-mutuel handle, and with much greater distribution on cable and satellite television than HRTV. TVG is believed to be getting a larger share of account wagering revenue than any of the other ADW companies, at least in California, in part because of their investment in programming and distribution. If CDI ends up owning TVG and keeping its customers, it will be the leading ADW company in the U.S. It also may put an end to a lawsuit filed by TVG’s owners against HRTV for alleged infringement of company patents.
TrackNet Media negotiates ADW contracts with racetracks, including those owned by Churchill or Magna, which is what happened in the current California dispute. In essence, then, a company owned by Churchill and Magna may be negotiating on behalf of ADW companies owned by Churchill and Magna with racetracks owned by Churchill and Magna – an interesting scenario, to say the least. In some cases, as in California, those negotiations do not include representatives of horse owners.
Many industry participants who have been following CDI’s activities over the last 18 months are convinced the company is intent on moving wagers made on track or at simulcast facilities – including those owned by Churchill Downs – to its TwinSpires ADW platform. The reason? Churchill is positioning itself to make more from each dollar wagered through TwinSpires than it does from a dollar wagered on-track or at one of its off-track betting facilities.
The company has refused to negotiate with the Thoroughbred Horsemen’s Group, a company formed in November 2007 to act as an agent on behalf of its members (local horsemen’s organizations throughout the United States) on ADW contracts. In fact, last year, when horsemen in Kentucky and Florida exercised their rights under the Interstate Horseracing Act to cut off signals for simulcasting or account wagering, CDI sued several local horsemen’s organizations and the Thoroughbred Horsemen’s Group, alleging anti-trust violations.
Some parties were dropped from the suits when CDI and local horsemen’s organizations reached contractual agreements on ADW revenue splits (in some cases, very short-term agreements). But at least one of the defendants, the Kentucky Horsemen’s Benevolent and Protective Association, which countersued CDI, opted not to have the legal action dropped after CDI and the horsemen reached an agreement on account wagering for the 2009 Churchill Downs spring meeting.
It’s an interesting case. In its counterclaim, the Kentucky HBPA pointed out a clause in the purse contract between Churchill and Kentucky horsemen that dealt specifically with possible future ownership of an account wagering company by CDI. The contract, said to be written by the Kentucky HBPA’s longtime counsel, the late Don Sturgill, with Sturgill, Turner, Barker & Maloney, was executed before CDI got into the account wagering business and is effective through the end of 2009.
The counterclaim (click here for a copy) against CDI reads: “Section 4E of the contract clarifies that wagers made on races through an ADW owned by CDI, i.e. TwinSpires, are to be treated as if made physically at Churchill Downs racetrack for purposes of determining the percentage of monies to be paid into the Horsemen’s Account for horsemen’s purses. Section 4E specifically states:
“Telephone Account or Other Electronic Media Wagering: For purposes of determining the amount of purses to be paid under this Paragraph 4, a telephone account wager or other wager made through an electronic media wagering system, the majority of which is owned by Churchill, shall be deemed to have been made at the racetrack or Trackside (Churchill’s OTB facility), as the case may be, and Churchill revenues received therefrom shall be allocated and paid to Horsemen as purses in the manner decribed in the appropriate subparagraph of this Paragraph 4. Fifty percent (50%) of any source market or other similar fees received by Churchill from telephone account wagering systems as a result of wagers made in Kentucky on races simulcast from within or outside of Kentucky shall be allocated and paid to the Horsemen as purses. For purposes of this Agreement, the term “source market” or “other fees” shall mean: any and all fees paid to Churchill and/or its horsemen by Television Games Network or any other account wagering entities not owned by Churchill for the right to accept wagers from account holders located in the state of Kentucky.”
The HBPA claims that Churchill Downs has not paid horsemen in accordance with that clause in its purse contract, and estimates a $3 million shortfall in purses.
Judge John Heyburn II of the U.S. District Court for the Western District of Kentucky at Louisville has ordered a Feb. 19 conference to discuss and argue the pending motions in the case. Judge Henburn also wrote a draft (which can be seen by clicking here) containing “a statement of the relevant facts and Plaintiff’s (Churchill Downs) legal theory as well as discussion of the standing, statutory immunity and contract issues.”
The HBPA must feel as though they are on solid ground with their counterclaim against CDI. Otherwise, why wouldn’t they have agreed with CDI to have the legal action dropped?
Account wagering has brought about many changes in the pari-mutuel industry. It’s clear that what is decided now on the division of revenue, either in the courts or among horsemen, tracks and ADW companies, will have a major bearing on the future economics for horse owners, tracks and the wagering companies, as well as on the horseplayers who fuel the game.
Let’s hope these issues are resolved while we still have people interested in betting on our sport.
The Paulick Report is interested in what you think about this issue. Write a publilc comment in the section below, and take the Daily Paulick Poll (located on the left-hand column of the home page) about whether you think it’s in the best interests of horsemen and fans for Churchill Downs Inc. to purchase TVG.
Copyright © 2009, The Paulick Report
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Tags: Account Wagering, advance deposit wagering, ADW, americatab, ameritab, anti-trust laws, bloodstock research, bris, CDI, churchill downs, don sturgill, hbpa horsemen's benevolent and protective association, Horse Racing, horseplayers, HRTV, judge john heyburn, kentucky HBPA, Magna Entertainment, pari-mutuel wagering, Paulick Report, Ray Paulick, sturgill turner barker & maloney, Thoroughbred Horsemen's Group, tracknet media, tvg
Posted in Account Wagering, Churchill Downs Inc., Industry Organizations, Simulcasting, Wagering | 9 Comments »
Monday, January 5th, 2009
By Ray Paulick
“It’s hard to get half the people in this industry to agree on what day it is,” a Central Kentucky breeder said to me a couple of weeks ago, shortly after the Breeders’ Cup announced suspension of the stakes supplement program for 2009. “I can’t believe 83% of the people voting in your poll agreed that the Breeders’ Cup board made the wrong decision.”
The day after the results of the Daily Paulick Poll were reported (83% opposed the decision by the board of directors not to use cash reserves to fund the program, 10% supported it and 7% were unsure), the Breeders’ Cup reversed field, reinstating the stakes supplements – at least for 2009. Breeders’ Cup president Greg Avioli said he did not “anticipate the fervor of the response” to the original decision to suspend the program. Apparently, the poll results reflected the response Avioli and board members received in the way of telephone calls and emails from nominators to the Breeders’ Cup from around the country.
This wasn’t the first time judgments ran strong on an issue on which readers of the Paulick Report were asked to vote. The polls are not scientific, but the results are quite interesting and we are flattered by the daily response. This much we’ve learned: You’ve got opinions.
The most recent results, in fact, represent the strongest sentiment of any of the 40 polls we have conducted since just before the Breeders’ Cup World Championships in late October. (Click here to see archives of all the Daily Paulick Poll results.) We asked, “Does the National Thoroughbred Racing Association provide a strong central organization to move racing forward in the future?” The results have been stunning, with 94% saying “no” and only 6% answering “yes.”
In some ways, the question about the NTRA mirrored the results of earlier polls regarding the state of the industry and thoughts about some of the organizations that lead it. In mid-November, we asked, “In general, are you satisfied or dissatisfied with the way things are going in the Thoroughbred industry in the United States at this time.” The question was parallel to the right track/wrong track question the Gallup organization periodically asks of American citizens about the state of the nation.
According to our poll, 91% answered “dissatisfied,” suggesting the industry is currently on the wrong track. Of the remainder, 4% said they were satisfied and 5% were unsure. One e-mailer suggested that the 4% who said they were satisfied must not have understood the question.
Along those same lines, in early December we asked, “Are you confident the individuals in charge of the most prominent racing and breeding organizations in the United States are adequately addressing the problems the industry is currently facing?” That resulted in an 85% no confidence vote, with 10% saying they are confident in our industry leaders and 5% unsure.
A specific question about one of the year’s biggest stories, the creation of the NTRA Safety and Integrity Alliance, indicated skepticism among voters. While 8% agreed that it was a “major step forward in the areas of medication and safety issues and will result in significant improvements” and 27% called it a “good idea, but it’s too early to say whether or not it will be effective,” fully 44% voted that the alliance was “designed to keep the federal government from stepping in and taking action” on safety and medication. Another 22% said it will be “ineffective because the NTRA lacks authority to enforce its recommendations.”
Poll responses to questions about how to improve the economics of racing were less conclusive. For example, we asked which of three areas of growth were most important to the future success of racing: reinvigorating on-track business, expanding account wagering through TV or on-line video streaming, or getting subsidies from slot machines or other forms of gaming. Reinvigorating on-track business got the most votes, 45% of respondents, barely ahead of the 41% who believe account wagering is the industry’s best hope. Only 14% believe growth from slots/alternative gaming is the answer. A more specific question about slot machines ended with a four-way dead heat, with each of the following answers getting 25% of the votes: 1) slots are a short-term fix to boost revenue; 2) they are a long-term necessity for racing to be competitive; 3) they are a necessary evil; and 4) I oppose slot machines at tracks.
On the issue of simulcast revenue, the poll run in conjunction with an article by Fred Pope on what he calls “ Priority 1: Racing’s Business Model” found 63% agreeing with Pope that host tracks and owners where the live race is run should get the lion’s share of takeout revenue. Another 29% believe it should be divided equally between the host site and where the bet is taken, and only 7% support the current model that leaves most of the revenue from simulcast wagers with the bet takers.
The level of takeout has been hotly debated in the comment sections of Pope’s article and several other related pieces. Our only poll question on the subject came after the Kentucky Horse Racing Task Force recommended an increase in takeout to help fund additional staff for the Kentucky Horse Racing Commission. Only 17% agreed with that recommendation, with 83% opposed to an increase in takeout to fund the commission.
We’ve touched on many other areas in our polls. For example, 55% of voters opposed Breeders’ Cup putting all of the filly and mare races on the Friday program of the two-day championships, with 18% in support and 27% taking a “wait and see” approach; 49% opposed having the Breeders’ Cup dirt races run on a synthetic track, while 39% supported it and 12% unsure. In the breeding world, in mid-December, 65% of voters said stud fees had not been reduced enough, 31% said the reductions were “about right,” and 4% felt they had been lowered too much. A comparison of the three highest-priced new stallions of 2009 found that Henrythenavigator offered greater value and opportunity for success to breeders than Curlin and Big Brown. The votes were 52% for Henrythenavigator, 44% for Curlin and 4% for Big Brown.
Finally, in light of the depressed bloodstock markets and a downward trend in pari-mutuel handle in 2008, a year-end poll asked readers if they believe 2009 will be a better year. Only 24% said they feel 2009 will be improved from 2008, with 52% saying it will be worse and 24% believing it will be the same.
Naturally, we hope our readers will be proven wrong and that 2009 will be a year that the industry addresses some of its biggest issues: organizational structure, leadership and a new business model that reflects the reality that roughly 10% of wagers are taken on-track where a race is being run. It’s clear there is a high level of discontent currently running throughout the industry, but it’s just as obvious that the passion to have racing stage a comeback is equally strong.
Copyright © 2009, The Paulick Report
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Tags: Account Wagering, advance deposit wagering, ADW, Big Brown, Breeders' Cup, Breeders' Cup World Championships, Curlin, daily paulick poll, filly friday, fred pope, gallup poll, Greg Avioli, henrythenavigator, Horse Racing, kentucky horse racing task force, National Thoroughbred Racing Association, NTRA, ntra safety and integrity alliance, Paulick Report, priority 1: racing's business model, racing's business model, Ray Paulick, right track/wrong track, Simulcasting, stud fees, synthetic racetracks, takeout, Thoroughbred breeding, thoroughbreds
Posted in Account Wagering, Breeders' Cup, Breeding, Horse Racing, Horse Welfare, Industry, Industry Organizations, Industry Reform, National Thoroughbred Racing Association, Simulcasting, Slot machines, Synthetic surfaces, Thoroughbred Business | 15 Comments »
Saturday, January 3rd, 2009
A recent guest editorial by Fred Pope entitled “Priority 1: Racing’s Business Model,” brought forth a vigorous discussion among Thoroughbred owners, breeders and horseplayers about revenue splits from simulcasting and the levels of takeout in pari-mutuel wagering. Comments continue to be posted on that article two weeks after its original publication (including a lengthy reply from Pope on Jan. 2), as well as on a follow-up piece I wrote on the subject.
The following analysis on the issue was written by a California-based horseplayer who goes by the pen name “Indulto.” He previously wrote a Paulick Report guest commentary on the Breeders’ Cup in October and has contributed to other racing-related blogs and web sites. Indulto’s views, like those of any guest commentary, do not necessarily represent those of the Paulick Report. – Ray Paulick
By Indulto
I heard there was a mugging going on at the Paulick Report recently, but when I got there it looked more like a series of drive-bys.
What is it about Fred Pope that riles up horseplayers? When the Paulick Report offered a second exposure to Pope’s agenda in “ PRIORITY 1: RACING’S BUSINESS MODEL,” it was swamped by responses from horseplayers including multiple comments from several staff members of HANA (Horseplayer’s Association of North America).
In pari-mutuel pool participant parlance, it appeared to be an attack of pirHANAs.
As usual, Mr. Pope’s crafted arguments are logical, persuasive, and targeted at racehorse owners. The reader who is primarily a horseplayer, however, soon realizes that Pope doesn’t acknowledge their existence much less recognize them as having any stake in his new business model for racing despite the fact it involves funding purses with pari-mutuel handle – a breath-taking omission to some. Understandably, a few initial reactions from responding horseplayers were overly negative and/or derisive.
Considering the volume and passion of his opposition, Pope’s willingness to engage was laudable, but his live responses to the onslaught were not as convincing as his canned content. One of my objectives in this belated response is to address the concerns of some of racing’s customers who are not among the horseplaying elite; in theory, practice or internet participation. Perhaps a chronological presentation of the salient portions of Mr. Pope’s defense – with assistance from Ray Paulick — will permit easier reader verification, if desired. The bolding in quoted portions is mine.
Pope’s initial reply disparaged most of the industry’s customer base.
“… I value bettors greatly. We have somewhere in the neighborhood of 100,000 handicappers in America and we are losing some every day. They are not being replaced, so time is of the essence. We have about 3 million people who go to tracks each year and have a generally good feeling about racing, but they don’t know how to handicap, so betting isn’t much fun unless the color they picked wins. ….”
Who are those “100,000 handicappers” he referred to and where does that figure come from? How many of them are whales and/or professionals, i.e., the tiny minority of players whose huge bankrolls give them the clout to force the industry to effectively lower takeout on their wagers through rebates. This perversion of the pari-mutuel system puts the vast majority of non-rebated bettors at a competitive disadvantage, especially in the exotic wager pools. Takeout is obviously too high, but only the wealthy are eligible for relief. Some of the average player resentment against horsemen today is derived from the horsemen’s shutting off signals from tracks they were negotiating with to onshore ADWs, but still allowing them to go to offshore ADWs that service those high-volume players.
Where are the free videos the industry should be generating for internet and on-track viewing to acquaint the novice with the game and the environment before, after, and even while attending the races for the first time?
Mr. Paulick then came to Pope’s defense.
“I didn’t interpret in reading Fred Pope’s article that the horseplayers don’t matter. Of course they matter. But so do the owners who invest a whole lot more than an OTB or a phone betting company, and so do the tracks that have huge investments in bricks and mortar. Horseplayers lose on average 20% of what they bet. Horse owners lose more like 50%. Tracks may be show a minor profit, but not enough to rebuild their infrastructure or invest in the future. Right now, no one seems to be winning.”
Those percentages are misleading, in my opinion. Without implementing a level playing field from an equine medication standpoint, wouldn’t the bulk of any purse increases continue to go to the same owners who currently collect a disproportionate share of purses just as rebated professional bettors cash a disproportionate number of IRS signers?
Apparently emboldened by that support, Pope responded to his detractors in kind.
“ Now, how some of you got the impression that I am against lowering takeout and don’t care about bettors, is hard to understand. But, I have a wife, so here it is: I apologize honey for not considering your feelings and I promise to never do it again. I was trying to get the front door back on and should have thought about the fact you are feeling a chill.”
Okay, Mr. Pope. We are a sensitive bunch. We’re watching an industry devoid of leadership and deficient in integrity self-destruct. You aren’t the only one passionate about saving it and seeing it prosper. Concentrating on the unhinged front door while ignoring the broken back door hardly seems a recipe for success. Like a politician whose message changes with his audience, you provide no indication in any of your speeches and articles that bettors should benefit as well as owners.
In his concluding response there, Pope wrote, ”But, I think most people were not aware the bet takers were getting the lion’s share and now most want to change the IHA to restore live racing. What I would like to hear is from some young folks in marketing about what this change could do for the host tracks and the sport.”
I would guess that as many people were unaware of who gets the “lion’s share” as were unaware that the playing field is tilted against the non-rebated bettor. Horseplayers prefer ADWs to other bet takers when they provide rebates or access to venues the others do not. In my opinion, enabling residents of all states to wager on-line through the bet taker of choice on races at any venue, would by itself justify modifying the IHA. Establishing a centralized industry authority would be icing on the cake. John Pricci once proposed Bill Clinton for Racing Commissioner. Is anyone better prepared to deal with industry politics?
In Paulick’s last response he wrote, “What has gone up is the access to exotic wagers (multiple types of exotics on every race, which wasn’t the case 25 years ago). With that increased access to exotics is an increase in the blended takeout, since players invest more in exotics than in lower takeout WPS wagers. Did racing make a mistake in offering too many exotic wagers, or should the higher risk-reward bets have the same takeout as WPS, which most serious players don’t seem to play?”
Currently the “serious players” dominate the Pick Six wagering pools because the $2 minimum for each combination effectively bars virtually all but big-bankroll bettors from playing it competitively. Defenders of the current minimum insist that a lower minimum would reduce the number of carryovers and thus the huge payoffs the wager sometimes generates. Perhaps a compromise is warranted. New York offers a lower Pick Six takeout on non-carryover days. Lower minimums on weekends and holidays – and only when there is no carryover — would enable more players to compete in the Pick Six Pool. Allowing on-track patrons to purchase a minimum of say 100 combinations at $.50 on those days should spur attendance as well as handle.
Shortly thereafter, Paulick followed up with his own summary in “ POPE’S UPSIDE-DOWN BUSINESS MODEL PROVES HOT TOPIC.”
“Comments from horseplayers focused largely on what they believe is an onerous level of takeout,… Not many of the horseplayers who commented seem to have much sympathy for horse owners who spend at least $2 billion a year on training costs and compete for half that amount in purses.
“Many of those horseplayers want to see takeout reduced, especially on exotic bets such as exactas, trifectas, superfectas or multi-race wagers where the takeout often exceeds 25%. Some of them feel ADW companies should get a large enough share of the takeout so they can be profitable and still offer rebates to their best customers.
“The problem with that, as I see it, is that the stronger position the ADW companies have, the greater a percentage of handle will migrate from on-track business to phone or internet wagering . … As handle moves from on-track to ADWs, there is less retained revenue for the tracks and local horsemen to put on the show. Less revenue means lower budgets for marketing, capital improvements and technology advancement for tracks, and less incentive for horse owners to stay in the game.”
Sympathy on all fronts is obviously in short supply. Maybe I should have changed the title to “Can’t we all get along?” Seriously, owners need to consider reducing costs where practical. Purses aren”t supposed to support extravagance or subsidize bad judgment. Trainer fees, vet bills, stud fees, and sales prices are likely places to start. Why are fees generally greater for high-profile trainers whose "expertise" is funneled through assistants and applied increasingly hands-off across venues and among clients? Are their total earnings to total charges (including vets) ratios always competitive?
Pope added: “You know, it is hard to have it both ways. You want a better racing product, but the money from a better product is now going to the bet takers who give you a discount. … Which way do you want it? Do you really want a better product that will grow the sport, or do you want your discount.”
Actually, we want both. To imply the two are mutually exclusive is also misleading. One problem that players now attribute to owners, as well as tracks, is the degradation in quality of the product. Higher purses aren’t drawing large fields, and graded stakes seldom attract previous winners at the higher levels. There are simply too many races being carded and insufficient cooperative scheduling. The result has been lower demand and thus handle. In fairness, synthetic surfaces may also be a contributing factor in this area.
Pope then rallied back to his original position.
“So, you guys are contending the growth of claiming races to over 70% is a better racing product?
And, the main reason for racing’s decline is the takeout rate?
… I think you will find the people spending $500 million each year on yearlings want to get back more than the claiming ranks provide. They also want to participate in a sport, not just make a bet.
So, I’m going to say horseplayers are overpopulating this discussion.
Thoroughbred racing is the racehorse owners’ game. The track facilities are important partners, but at the end of the day, racehorse owners and breeders will decide the racing product, its distribution, pricing and promotion. From time to time, they need to stand up and fix problems. I think that is exactly what they will do with the IHA.”
The internet wagering/viewing genie is out of the bottle, and it is the only access for fans too remotely located or too physically infirm to attend live racing. Racing should expand that market with the IHA, not abandon it. As one who follows the sport at its highest level and bets for entertainment, I would prefer to compete on a level playing field for all bettors regardless of bankroll size; just as many horsemen would prefer to compete in an environment with uniform medication policies accompanied by more appropriate penalties for violators.
Pope continued, ”The reason we have the problems in the sport is the lack of owner leadership. We need the basic structure of a major league like the other sports. … I apologize for jumping in on those who want to discuss takeout, however, I think that issue belongs in another forum. It would not be a part of the IHA.
… We spend too much time hiding from the truth. The truth is medication, drugs, animal welfare and the details of the right mix of takeout and customer service are not the basic problem. The basic problem is structure, or more specifically, the lack of it.”
One truth Pope can’t hide from is that his plans will have to not only overcome resistance from his fellow horsemen, but also from horseplayers. If nothing else, he must now realize that there are people as determined as he is to put racing back on track, and that they have organized in order to accomplish some of the same objectives. Another truth is that my former colleagues’ reactions had prior momentum. I was still working with the founding HANA team when the Pope agenda got its first airing on the Paulick Report in “POPE TO OWNERS: ‘IT’S YOUR GAME’.” After experiencing a similar reaction to Pope’s remarks in that article, I submitted an opinion piece to the HANA Blog, “Horseplayers to Pope: It’s Our Game Too.” I assume, Mr. Pope either never saw it or felt no response was necessary.
It’s probably no coincidence that, in the absence of my daily dissidence, HANA has progressed well beyond a handful of posters at the www.paceadvantage.com Web site to become a corporate entity with now very public officers, a distinguished advisory board, and an internet sign-up membership that has (to the best of my knowledge) quadrupled since Mr. Pope’s work initially appeared on the Paulick Report. HANA is now led by its president and principal spokesman, Jeff Platt, who is no less logical and persuasive than Mr. Pope in articulating his organization’s concerns and goals. It’s clear to me that these two gentlemen should be talking to one another and developing a new business model that both horsemen and horseplayers can support.
Among the many worthwhile player comments focused on ADWs and takeout, there was one that I am certain deserves wider distribution. Poster BombsAwayBob Grant wrote, “The first track in the country offering strong rebates for bettors making wagers AT THEIR TRACK will be the first one to see their bottom line improve. It will get bettors back to the track, while still allowing full ADW access for their signal.”
Simulcasting and technology helped create the off-track wagering advantage in terms of cost, convenience, and competitiveness. It’s time to reverse that drain by pulling customers back to a future where on-track patrons are viewed and treated as racing’s best customers. Hopefully, Hollywood Park will get the message by next April. What have they got to lose?
Copyright © 2009, The Paulick Report
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Tags: Account Wagering, advance deposit wagering, ADW, betting rebates, fred pope, hana, handicappers, horseplayers, horseplayers association of north america, indulto, jeff platt, pari-mutuel wagering, Paulick Report, racing's business model, Ray Paulick, Simulcasting, simulcasting revenue splits, takeout, thoroughbred owners, www.paceadvantage.com
Posted in Account Wagering, Industry Reform, Regulatory Issues, Simulcasting, Thoroughbred Business, Wagering | 56 Comments »
Monday, December 22nd, 2008
By Ray Paulick
Though Tom Meeker hasn’t been directly involved with the Thoroughbred industry since stepping down as CEO of Churchill Downs Inc. in August 2006 after 22 years at the helm, he has been an interested sidelines observer. Never one to mince words, Meeker said he doesn’t like what he sees right now, particularly the battle going on between racetracks and horsemen over advance deposit wagering. At the center of the fight on the racetrack side is the man who replaced him at Churchill Downs, Bob Evans.
“The squabbling that is going on right now could not have occurred at a more inopportune time,” Meeker told the Paulick Report. “Throwing grenades back and forth while the industry is crumbling around them does no one any good.”
Meeker said he doesn’t side with either party in the dispute. “In the cold light of day I side with horsemen on a couple of things, but track management is investing their capital and trying to put together a system. I’m not sure there’s a whole lot of money in the ADW business, and the margins can’t be great. I don’t think TVG and Youbet have done that well.
“Racing needs to get much more aggressive about marketing, and there needs to be a consolidation of racetracks and a number of functions so you can run the business in a more orderly manner. With the economic downturn and the squabbling that’s going on, it’s not a good thing. Everyone is just trying to whack up a smaller and smaller pie.
“The fighting makes no sense. There may be irrational people on the racetrack side or among the horsemen, but at some point even the most ill-informed or most radical will have to realize that we can’t keep doing this.
“And I don’t see any sense of urgency on anybody’s part,” he added. “I could think of 10 different things that can be done. Let’s agree that we don’t know the answer today, but let’s come to an agreement and have a reopener in a year or two years. We can’t afford not to have this thing out in the marketplace right now because we are losing customers. It takes five times as much energy and money to regain customers that you’ve lost than it does to keep them.”
Meeker said it’s important for racetracks to get into the ADW business . “They will use it as their primary marketing tool, whether it’s ADW or the various deployment devices – interactive television, telephone , the internet, whatever. That’s going to be the marketing arm of racing.”
Meeker sees other issues that have plagued the industry for decades. “We need consolidation in so many areas,” he said. “We have all these racing commissions, horsemen’s groups, what have you. There’s no sense of coordination at all on racing programs among different tracks. If Churchill were to cut out a few days of racing, somebody else would jump in and add more days. We need to cut back on the number of racing days."
He seems happy to let someone else deal with those issues. “For the last few years I’ve just been a mere mortal. I get online now and then and read the racing rags and other things, but I haven’t spoke to Evans since the day I left.”
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Tags: Account Wagering, adw advance deposit wagering, bob evans, churchill downs, Horse Racing, pari-mutuel wagering, Paulick Report, Ray Paulick, tom meeker, tvg, youbet
Posted in Account Wagering, Churchill Downs Inc., People, Simulcasting, Wagering | 14 Comments »
Saturday, December 20th, 2008
By Ray Paulick
Fred Pope touched a nerve throughout the Thoroughbred industry with his commentary about what he called an “upside down” business model for simulcasting, where the track and horse owners putting on the live race get one-fifth of the takeout, the remainder going to the simulcast site, OTB or ADW taking the bet. If the bet taker/simulcast site is affiliated with a racetrack, its share is usually split with the local horsemen.
The article, published in the Paulick Report on Friday, was a reprint of a speech Pope gave earlier this month at the University of Arizona Symposium on Racing in Tucson, Ariz. The Lexington advertising executive wants to see racing adopt a new business model, one that pays the lion’s share of simulcast revenue to the track and horse owners putting on the live race. Pope has long been an advocate for horse owners to exert greater control over the terms of simulcast contracts.
Though his widely-read article has elicited nearly 90 comments from horse owners, breeders and gamblers whose opinions fall on all sides of the issue, participants in the Daily Paulick Poll voiced overwhelming disapproval of the current business model. To date, only 6% of those who voted say the current model is the right one. Sixty-five percent believe the lion’s share of the simulcast proceeds should go to the track and owners putting on the race, while 27% feel it should be divided evenly between the live track and horsemen and the simulcast site, OTB or ADW and affiliated horsemen at that end.
Comments from horseplayers focused largely on what they believe is an onerous level of takeout, but many of them also feel disenfranchised or taken for granted by an industry that once had a monopoly on gambling and has not done a very good job of competing in this new world of Indian casinos, riverboats, and online gaming, whether it be poker or sports betting through offshore bookmakers. Not many of the horseplayers who commented seem to have much sympathy for horse owners who spend at least $2 billion a year on training costs and compete for half that amount in purses.
Many of those horseplayers want to see takeout reduced, especially on exotic bets such as exactas, trifectas, superfectas or multi-race wagers where the takeout often exceeds 25%. Some of them feel ADW companies should get a large enough share of the takeout so they can be profitable and still offer rebates to their best customers.
The problem with that, as I see it, is that the stronger position the ADW companies have, the greater a percentage of handle will migrate from on-track business to phone or internet wagering. We’re already seeing horseplayers at the track making wagers through ADW companies because some of them will offer rebates. As handle moves from on-track to ADWs, there is less retained revenue for the tracks and local horsemen to put on the show. Less revenue means lower budgets for marketing, capital improvements and technology advancement for tracks, and less incentive for horse owners to stay in the game.
Pope’s proposal may not be without flaws, but the current model clearly is upside down, and any business structure that puts more power in the hands of the bet takers is going to make it even worse.
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Tags: Account Wagering, advance deposit wagering, ADW, daily paulick poll, fred pope, Horse Racing, horseplayers, off-track betting, otb, pari-mutuel wagering, Paulick Report, Ray Paulick, symposium on racing, takeout, university of arizona symposium on racing
Posted in Account Wagering, Industry Reform, Simulcasting, Wagering | 56 Comments »
Friday, December 19th, 2008
Fred Pope is one of those rare individuals in racing who does more than identify problems and complain about them; he actually spends a great deal of time working on solutions. Whether it’s the National Thoroughbred Association, an owners-driven organization he created more than a decade ago, or pushing for a "major league" of racing, the Lexington advertising executive has been a strong proponent of horse owners and their rights to get a greater share of simulcasting revenue.
Pope’s current proposal, which he outlined recently at the University of Arizona Symposium on Racing, is for a change in the Interstate Horseracing Act of 1978, the federal law that governs interstate simulcasting. By providing for more rights to the racehorse owners where the live race is run, Pope believes purses and bloodstock prices will greatly increase and the sport of racing will grow. The complete text of his speech follows.
What is your opinion on this subject? Do you believe the lion’s share of takeout from simulcast wagers should go to the business taking the bet (simulcast site, OTB, or ADW company), or to the track and horsemen’s organization where the live race is run? Take the Daily Paulick Poll (located on the left-hand column of the Paulick Report home page) or leave a comment at the bottom of Pope’s article. — Ray Paulick
Correcting the Interstate Horseracing Act
Racing’s Off-Track Business Model Favors Bet Takers. It Should Favor Host Tracks Putting on the Show.
Speech by Fred Pope at Univ. of Arizona Racing Symposium, December 11, 2008
 Let’s start off today with a show of hands. Be honest. How many of you feel that Government should be involved in Thoroughbred racing? I see just one or two hands, so perhaps we should work to get government completely out of Thoroughbred racing.
First, let’s tell government we want them to take back the laws that make it legal to bet on racing. Why should government intrude and force our sport to have a monopoly on legal wagering?
Next, let’s ask Jay Hickey when he returns to Washington to see if we can get the federal government to rescind the Interstate Horseracing Act. Why did government feel the need to give our host tracks expanded distribution across state lines?
And third, for good measure, let’s tell government that we don’t want the exemption they gave us in 2000 from the law that prohibits gambling on the Internet. That ought to do it.
Ladies and gentlemen, the truth is racing is more involved with government than any other sport. Government involvement is at the core of racing’s existence. If it weren’t for government involvement in racing, the only place we would enjoy our sport would be at the County Fair.
I understand why most of you didn’t raise your hand today. Government involvement comes with strings doesn’t it? There’s a yin and a yang to government and politics.
It seems when government steps in and passes a law to do one thing; it inadvertently winds up hurting something else.
That’s why I am here today, to talk about how government’s gift of the Interstate Horseracing Act (IHA), has inadvertently resulted in an Upside Down business model that is killing Thoroughbred racing.
We are all aware of how our once-healthy American automakers are suddenly on the verge of collapse because they failed to take action and correct their business model.
Talking about off-track betting and business models isn’t a very sexy subject. It causes a lot of people to get a glassy look in their eyes; however, that is where 90% of all the money in racing is today. If you want to have a future in racing, or breeding, you need to understand where the money from off-track wagering is going now, and where it needs to start going.
Here’s how wagering under the IHA should have worked. The regulated host tracks and racehorse owners putting on the show would have licensed and paid a small commission to those taking off-track bets on their product. For example, if someone bet $100, the host track and purse account would get about 15% and perhaps pay a 5% commission to the bet takers.
That’s the model used by lotteries. Lotteries pay a 5% commission to the convenience stores punching in the numbers on the lottery bets. It is a very straightforward distribution model. The lotteries and the IHA in racing kicked in about the same time, but last year the lotteries grossed $50 billion and paid out about $2.5 billion to their bet takers. Racing could have used that same distribution model, instead racing invented its own model.
Now, here’s how wagering under the IHA actually happens today. The host track and racehorse owners putting on the show contract and receive only 3% from the people taking bets on their product. The bet takers keep 15% or more for just taking the bet.
Whether the bet takers are other racetracks, or OTBs, or ADWs, or casinos, they keep the majority of the takeout on the host track and racehorse owners’ live racing product.
Why? The short answer is because the bet-takers felt they owned their betting customers. If the bettor was going to wager on other tracks’ races, the bet-taker was going to get the lion’s share. Today, bettors can bypass the receiving tracks and pick up the phone or go online. The genie is out of the bottle and won’t ever go back in again.
The 3% going to the host track is split between the track and its purse account. It isn’t enough to pay for the live show, but 3% is the going rate established by the receiving racetracks taking the bets. Since the Interstate Horseracing Act has a provision that requires approval by the group representing horsemen in the receiving state, the host track has no option, but to accept the going rate of 3%.
Bet Takers Keeping All the Off-Track Money
If you bet $100, only $1.50 goes to purses at the track putting on the live show, but more than $15 stays with the place taking your bet.
You might think the cumulative effect of 3% from lots of sources totals more than the bet-takers receive, but it doesn’t. If $3 million is bet off-track, the host track and purse account split 3%, or $45,000 each, while the off-track bet takers keep $450,000 or more and many have no connection to racing.
This upside down, business model impacts 90% of the handle and it is the reason Thoroughbred racing is dying in America.
The bet-takers are gaming the IHA to the effect that there is no incentive for the host track to produce the live racing show. Just like the American automakers; racing has to correct this model or risk a total collapse of the business.
The potential closing of Hollywood Park is the new reality that no matter how large the market, a host track cannot overcome the upside down business model that is enabled by the wording in the IHA.
The IHA is supposed to help racing by simply expanding the distribution of the host tracks’ product. That is all it was supposed to do. Racing was relatively healthy in 1978 and this new distribution should have seen the sport and business revenue explode. If we had used the normal distribution model like the lotteries, racing too could have $50 billion in handle.
Now that it has been identified, this is a problem we can fix. With the stroke of a pen, the promise of the IHA can be realized. We can turn the upside down business model, right side up.
Racing has a monopoly on legal sports betting. We have virtually national distribution of a wagering product. We have a monopoly on Internet gambling. All we are missing is a real world business model and that comes quickly by correcting the Interstate Horseracing Act.
The American automakers’ business model doesn’t work because labor costs are too high. Even if a labor official knew the business was going to collapse, you can image how hard it would be convince the members to go from $70 an hour to $40 an hour.
And the same in our business, even if receiving track horsemen know the off-track business model means major tracks will fail, it would be hard for them to voluntarily give up making 15% as a bet-taker in order to save the host tracks.
That’s why it will take responsible people who have a national interest in racing to get involved, because few people will ever agree to a haircut in the interest of the sport.
That’s the beauty of correcting the Interstate Horseracing Act. Without state by state turf battles, the national law will fix the problem. Racing’s upside down business model will be turned right side up.
At a time when everything in racing and breeding is heading south, correcting the IHA would see $1 Billion going to the host tracks in the first year. Half, $500 million, would go into racehorse owners’ purses at the host tracks. For breeders it should be noted, that $500 million in racehorse owners’ purses is more than all yearling sales in 2008, and it is reasonable to expect racehorse owners would reinvest that purse money into new racing prospects.
So, here’s what we need to do to correct the Interstate Horseracing Act and have a normal business model for off-track wagering that will restore the business of Thoroughbred racing.
1) Change from the term “horsemen” to “racehorse owners”. There is no reason for trainers to be making business decisions for racehorse owners. This should never have been written into the original legislation. Like in California, the HBPA should be funded for benevolent activities in every state.
2) Eliminate the provision in the IHA requiring approval of horsemen in the receiving state taking the bets. This provision, while well intentioned in 1978, is obsolete today and is responsible for the upside down business model that has evolved over the past thirty years. Approval of racehorse owners at the host track should remain in the IHA.
3) Mandate the host racetrack and host purse account receive a minimum of 50% of the takeout on interstate bets. This will allow the host track and a receiving track taking the bet to share the same amount. All other bet takers, like ADWs and OTBs, will need to contract with the host track and racehorse owners who approve the host track agreements under the IHA.
The Interstate Horseracing Act is business distribution legislation and these corrections, that must be made, are relatively minor amendments. I do not support using the IHA as a vehicle for non-business issues like safety and medication.
Once this new business model for off-track wagering is law, racetracks and racehorse owners putting on the show will have great incentive to package, present and yes, promote their Thoroughbred races.
Under the new business model, the host track will be free to go direct to the betting customers in every racing state. Racing can be a leader in the new economy and take advantage of technology that can deliver the same business model we enjoy with on-track wagering.
The problem is today a bettor can be standing in the paddock at the host track putting on the show and make a phone bet that results in very little money going to that host track and its purses.
After these corrections to the IHA, it will not matter where the bettor happens to be at the moment, the majority of the money will go to the host track putting on the show.
That means if even small tracks, like Turfway Park or Tampa Bay Downs, puts on a good day of racing and attracts wagers of $10 million, they could split up to $2,000,000 with the purse account. That’s how you bring Thoroughbred racing back. And, when racehorse owners start winning these purses, that’s when the breeding business has a firm foundation for the future.
Every track in America will have the opportunity to provide their races to every wagering jurisdiction, with no gatekeepers, or middlemen siphoning-off the fruits of their labor.
This philosophy of owning the bettor and giving the majority of the money to the entity taking the bet is a worldwide problem. We have the technology for live racing to be sold to a worldwide audience, yet because of protectionism and old economy thinking, we do not have a business model to grow the live racing product. Everything today favors who takes the bet, not who produces the live show. Change that premise and you assure the international future of racing.
Leaving the Old-Economy Model and Moving to the New Economy
The day of the franchise that values bet taking is over. It has no place in the new economy.
When racing’s business model moves away from the old economy thinking of we own the bettor, to the new economy realization that we own the show, then our sport has a bright future.
Changing economies are frightening things, particularly with the realization that if you don’t change you die. The new economy for racing, under a business model that favors those putting on the show, will bring innovation and opportunities that are unimaginable today.
Nothing succeeds like a profit motive and corrections to the IHA will bring solid incentives to package, present and promote its races. The sky is the limit for our host tracks.
The unfair advantage racing has been given, time and again by government, has never been realized because of the stranglehold bet-takers have had over the sport.
The Holy Grail of Sports Marketing
A monopoly on gambling, with national distribution and a solid profit margin is the holy grail of sports marketing. How we have screwed this up all these years is a crying shame.
Five years ago, I was hired by a racetrack company to do the most extensive consumer research ever done on Thoroughbred racing. I reviewed the research done by the NTRA, and then set out to find more in-depth answers using a top research firm.
I’m restricted from telling you the results, however, I can tell you this: The research did not support other entertainment or alternative gambling at the tracks. The facilities are not the problem and they are not the solution.
The research did show there is nothing wrong with Thoroughbred racing that cannot be fixed by packaging and presenting a better racing product. The first step though, is to change the business model to make it all possible.
The Kentucky Derby and the Breeders’ Cup have shown us the daily market for racing exceeds $100 million. That’s a good goal for host tracks to aspire to each week.
This current ADW problem is a symptom of how upside down our business model has become. ADW’s should be simple businesses that just handle transactions. Not companies trying to game the IHA with schemes and kickbacks called source market fees. When we correct the IHA, the ADW’s will no longer be a problem.
The real problem that must be solved is between the bet-takers, and the host tracks and racehorse owners putting on the show. Everything else at this time is just noise.
We have the opportunity for a new golden age of Thoroughbred racing, in full partnership with government. This industry is all about jobs and a way of life we all love. This is how we take action and reclaim our sport.
To those who might say we should not risk correcting the Interstate Horseracing Act, I say how can we not risk correcting it? Do we, like the automakers, risk total collapse of our business because we’re afraid to change and act?
We cannot fail to correct the Interstate Horseracing Act now.
Thank you.
© Fred A. Pope 2008
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Tags: Account Wagering, advance deposit wagering, ADW, Breeders' Cup, fred pope, Horse Racing, horsemen's organization, iha, interstate horseracing act, jay hickey, kentucky derby, national thoroughbred association, National Thoroughbred Racing Association, nta, NTRA, off-track betting, otb, pari-mutuel wagering, Paulick Report, pope advertising, Ray Paulick, Simulcasting, symposium on racing, university of arizona racetrack industry program
Posted in Account Wagering, Industry Reform, Regulatory Issues, Simulcasting | 112 Comments »
Monday, December 8th, 2008
By Ray Paulick
We can blame the economy, and people like National Thoroughbred Racing Association CEO Alex Waldrop will almost certainly do so, when the dismal year-end figures show that pari-mutuel handle in the United States is at its lowest level since 1998. But pointing to the dismal economy as the sole reason for the Thoroughbred racing industry’s woes will be a fatal mistake.
Based on monthly pari-mutuel handle figures from Equibase through November (and the expectation of a very slow December), the Paulick Report projects year-end handle in the U.S. will total just under $13.7 billion for 2008. This will be the fourth year of decline in handle over the last five years and the lowest since $13.1 billion was wagered in 1998.
Adjusted for inflation, the 1998 handle is equal to $17.4 billion in today’s dollars. The Thoroughbred pari-mutuel industry will fall more than 21% short of that figure. November’s numbers are actually worse than they appear on paper. The decline of 9.7% from November 2007 comes despite the fact there were five full weekends in the month of November this year compared with only four weekends last year. Weekend handle overall is higher than weekday handle. Handle will likely fall more than 10% this December, which only has four weekends (eight Saturday and Sunday programs) compared with five full weekends in December 2007.
The accompanying table, using statistics from the Jockey Club Online Fact Book, shows the trend in U.S. handle since 1996. If there is a sliver of good news from those figures it is the average amount of pari-mutuel handle per race, which has risen from $199,574 in 1996 to $287,014 in 2007. That number will drop this year.
U.S. THOROUGHBRED PARI-MUTUEL HANDLE, 1996-2008
| Year |
US Handle |
% Change |
** CPI Adjusted Handle |
No. Races |
Average Bet Per Race |
| *2008 |
$13,694,000,000 |
-7.00% |
$9,921,000,000 |
51,000 |
$268,527 |
| 2007 |
$14,725,000,000 |
-0.40% |
$11,143,000,000 |
51,304 |
$287,014 |
| 2006 |
$14,785,000,000 |
1.50% |
$11,507,000,000 |
51,668 |
$286,153 |
| 2005 |
$14,561,000,000 |
-3.60% |
$11,698,000,000 |
52,257 |
$278,642 |
| 2004 |
$15,099,000,000 |
-0.50% |
$12,541,000,000 |
53,595 |
$281,724 |
| 2003 |
$15,180,000,000 |
0.80% |
$12,944,000,000 |
53,503 |
$283,722 |
| 2002 |
$15,062,000,000 |
3.20% |
$13,136,000,000 |
54,304 |
$277,364 |
| 2001 |
$14,599,000,000 |
1.90% |
$12,934,000,000 |
55,127 |
$264,824 |
| 2000 |
$14,321,000,000 |
4.40% |
$13,048,000,000 |
55,486 |
$258,101 |
| 1999 |
$13,724,000,000 |
4.60% |
$12,925,000,000 |
54,644 |
$251,153 |
| 1998 |
$13,115,000,000 |
4.60% |
$12,624,000,000 |
55,894 |
$234,640 |
| 1997 |
$12,542,000,000 |
7.90% |
$12,260,000,000 |
57,832 |
$216,869 |
| 1996 |
$11,627,000,000 |
11.50% |
$11,627,000,000 |
58,259 |
$199,574 |
*2008 year-end figures are projected
**Adjusted for inflation using 1996 dollars
The decline in handle over the last 10 years has come despite the fact we’ve made it easier for people to bet, with account or advance deposit wagering now available in many states. In addition, betting menus at nearly every track have been expanded to include more exotic wagers (rolling pick 3s, pick 4s, super high 5s, etc) and lower minimum bet sizes (i.e., the ten cent superfectas).
The worst news of all is that there are no plans on the table to reverse these trends. Industry infighting is at an all-time high, with companies like Churchill Downs Inc. and horsemen’s organizations both entrenched in their negotiating positions on the division of revenue for account wagering. We have two competing racing channels, confusion over who accepts bets on which tracks, and a fan base that is increasingly fed up and finding other places to take their action. Many racetracks appear to have given up on ever building their core business and instead are latching onto slot machines for their own personal salvation. With Magna Entertainment as the poster child, corporate ownership of tracks has been a failure for the racing industry, whose few bright spots can be found in locally- or family-owned tracks like Tampa Bay Downs in Florida or Oaklawn Park in Arkansas.
The National Thoroughbred Racing Association, launched just over 10 years ago with great fanfare and anticipation, has been dismantled almost to the point of irrelevance. We have no national marketing, no cohesive strategy to grow the business and no central organization to develop one. Structure matters, and this industry has no structure in place to bring about meaningful change. Some of the so-called best and brightest among our leaders are saying our only chance of survival is to go through a massive retraction in the number of racetracks, racing dates and horses bred each year. But a "less is more" philosophy sounds more like an admission of defeat.
The upside down economics of maintaining a racing stable (average costs exceed purse potential by an factor of 2-to-1) are driving many people out of the business, especially those who have less discretionary money than they had just a few years ago. The image of the sport - one whose grandstands echo from emptiness and whose equine athletes often are cruelly discarded at the end of their useful careers - is not appealing to a growing percentage of the American people. We need a game-changing play, new leadership that will get us out of the old way of thinking, fresh ideas and a bold vision for structural change that can reverse the direction the industry is heading. Without that, we may be on borrowed time. Does there have to be a Thoroughbred racing industry in the United States, even in a place like Kentucky that calls itself the horse capital of the world? I’ll answer that question by asking another one: Does there have to be an American automobile industry?
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Tags: Account Wagering, alex waldrop, CDI, churchill downs, Horse Racing, horse racing economics, Jockey Club, National Thoroughbred Racing Association, NTRA, pari-mutuel betting, pari-mutuel handle, pari-mutuel wagering, Paulick Report, racinos, Ray Paulick, Slot machines, Thoroughbred Horsemen's Group
Posted in Account Wagering, Churchill Downs Inc., Horse Racing, Industry, Industry Reform, Jockey Club, Marketing, National Thoroughbred Racing Association, Simulcasting, Thoroughbred Business, Wagering | 27 Comments »
Friday, October 31st, 2008
By Ray Paulick
The dispute that’s prevented out-of-state horseplayers from betting on Hollywood Park races through account wagering or advance deposit wagering (ADW) companies is about money, of course. Isn’t it always? The same issues shut down account wagering on Churchill Downs, Calder Race Course and other tracks earlier this year.
No one who’s been paying attention to the hot-button issue of revenue distribution of account wagering dollars can say they didn’t see this coming.
Thoroughbred Owners of California has drawn a line in the sand against the ADWs, saying they deserve a more equitable share of ADW revenue from wagers made both in California and out-of-state. As more dollars shift from on-track or traditional simulcast locations to ADWs, the TOC claims, horsemen are getting a smaller slice of the action to fund purses. “We’ve been saying it for years, and the time is finally here,” said TOC president Drew Couto. “We’re not going to consent (to previous agreements).”
Horsemen’s associations have the contractual right through the federal Interstate Horse Racing Act to withhold simulcast or account wagering. However, it wasn’t until the creation last year of the Thoroughbred Horsemen’s Group, which assists local horsemen’s organizations with ADW contract negotiations in at least 17 states, that horsemen began to aggressively exercise that right. TOC helped create THG and Couto serves as vice president of the new organization. THG acts in a similar capacity to the American Society of Composers, Authors and Publishers (ASCAP), which negotiates and collects licensing fees on the use of copyrighted music created by its members.
While the dispute involves four ADW companies, the most vocal critic of TOC and THG is David Nathanson, president of TVG, the leading horse racing cable channel and largest ADW company. Since the Hollywood Park fall meeting began Wednesday, TVG has used its television and online platforms to urge fans to contact TOC with their complaints.
“The TOC decision is bad for everyone involved in horseracing,” TVG president David Nathanson said in a statement. “Purses are being cut. Horsemen will lose money. Hollywood Park will lose revenue. Worst of all, this action hurts the fans when the industry needs them the most.”
Hollywood Park already has announced purse cuts.
Couto sees it differently. “We’re trying to build a model where everyone can prosper,” he said. “(TVG) didn’t listen to us for seven years because we weren’t working with other groups. Now they are listening because they don’t have a choice.”
Couto presented a detailed report on ADW wagering and revenue distribution during a meeting of the California Horse Racing Board in mid-October that showed how revenue to both in- and out-of-state horsemen and tracks is being squeezed with the growth of account wagering. “Up to about 72% of ADW revenues are retained by ADW companies, and overall about 50% is retained by those four companies,” Couto said. “We don’t believe that’s equitable or in the best long-term interest of the industry.”
TVG disagrees with Couto’s assessment of the distribution share that TVG has been paying, saying that it paid 67% to tracks and horsemen on wagers made during the 2008 Hollywood Park spring meeting.
Complicating matters in the current ADW dispute is what many see as a conflict of interest with Hollywood Park president Jack Liebau, who also serves as chairman of the board of Youbet, one of the four ADW companies involved in contract talks. Hollywood Park is expected to close next year, so some question whether or not Liebau is concerned more with the profitability of Youbet than he is with Hollywood Park. However, Couto has said Youbet and Magna Entertainment’s Xpressbet have engaged in good-faith negotiations. TVG and TwinSpires, the ADW platform owned by Churchill Downs, have not, he said.
Meanwhile, negotiations continue…sort of.
“We are on our seventh version of a model that would assure ADW companies of content for the next three years at slightly higher rates than they currently pay,” said Couto “The rates do escalate if ADW handle grows by 20% over three consecutive quarters. That recognizes that the ADWs incur no incremental cost in growth.”
Nathanson insists that TOC is turning down a deal that would bring horsemen and the tracks $500,000 more in revenue than they received in 2007. “The only reason they are withholding the signal,” he said, “is to benefit this out-of-state horsemen’s consortium (THG). It doesn’t make economic sense. We are ready and willing to sit side by side and face to face any time to resolve these issues. Ultimately these need to be rational decisions as opposed to decisions that aren’t in the best interest of their own constituency.”
Couto flatly rejects Nathanson’s contention. In a letter to TOC members posted on the organization’s Web site, Couto wrote: “To the contrary, CA Thoroughbred interests would have received over $165,000 more from TVG alone, and over $633,000 from all four licensed ADW providers during the spring meet alone! Over the entire calendar year, North and South, that adds up to millions more in purse revenues for California owners! “ “Why they would attack the only source of revenue that’s growing when the industry is in a state of decline across the board doesn’t make sense,” Nathanson said. “ It just doesn’t seem to be in the best interests of the racing industry.
“We have cut back on our Hollywood Park coverage,” Nathanson said. “We are showing 100% of Hollywood Park’s races, but when you are cutting off a large chunk of the revenue we can’t afford to send a full-fledged crew down there to do special shows. We had to eliminate the popular All-Access show because of this.”
“Nathanson is misleading people,” Couto said. “He’s saying let’s make one group happy and screw the rest. We had no success getting higher rates with the TVGs of the world. We got together, shared information, took it back to our boards and said, ‘Here’s what we’ve learned.’ Our boards individually said, ‘We’re getting screwed.’ The only way we can get the TVGs of the world to change is for us to say,’Enough is enough.’
“These guys have had seven years to work with each of the horsemen’s associations,” Couto added. “They created the situation, and yes, horsemen are saying we are going to solve this once and for all for everybody, so we can move on, so this industry can get healthy again.”
Copyright © 2008, The Paulick Report
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Tags: Account Wagering, advance deposit wagering, ADW, California Horse Racing Board, CHRB, david nathanson, drew couto, Hollywood Park, jack liebau, television games network, thg, Thoroughbred Horsemen's Group, thoroughbred owners of california, toc, tvg, youbet, youbet.com
Posted in Account Wagering, California, Industry Organizations, Simulcasting, Wagering | 7 Comments »
Tuesday, July 29th, 2008
By Ray Paulick
TVG, the horse racing channel sold earlier this year when parent Gemstar-TV Guide was purchased by the digital technology company Macrovision (MVSN) , is now being shopped around to potential buyers by Swiss-based financial services company UBS, the Paulick Report has learned.
The auction of TVG gives the horse racing industry a tremendous opportunity to consolidate its convoluted and contentious cable television and account wagering system platforms that frustrate and anger horseplayers who are often required to hold multiple online or telephone wagering accounts to bet on their preferred tracks.
To seize this opportunity a group hug would be required among the major players, including Churchill Downs, Magna Entertainment and the Thoroughbred Horsemen’s Group that now negotiates account wagering contracts for most state horsemen’s organizations. With ongoing litigation by Churchill Downs against the Thoroughbred Horsemen’s Group and rumblings of a divide between Churchill and Magna on their TrackNet Media simulcast business joint venture, a deal seems unlikely at this time.
But what if logic prevailed?
The merging of two unprofitable racing channels into one could lend truth to that overused business cliché of one plus one equaling three. There is just one Golf Channel for that popular sport and one Speedtv channel to cover all motorsports. It is not logical for a struggling industry like horse racing to have two full-time cable channels, with separate management teams, productions staffs, and on-air talent.
Churchill and Magna are partners in HRTV, which was launched solely by Magna in 2003 and has been the No. 2 network behind TVG in distribution. Both TVG and HRTV are on the Dish Network and HRTV is on some cable companies, but TVG has broader cable distribution and is also on DirecTV. TVG, which launched in 1999, was owned by TV Guide before being purchased by Gemstar. Macrovision’s purchase of Gemstar-TV Guide was valued at $2.8 billion, with TVG’s value estimated at roughly $112 million, according to a report in Multichannel News, which quoted SNL Kagan analyst Derk Baine. The deal, announced last December, closed the first week of May 2008.
With credit markets tight, it seems unlikely any outside media companies would be interested in buying TVG, especially given the declining number of exclusive contracts TVG holds with racetracks and the shaky state of the racing industry. Even with the number of exclusive tracks in decline, TVG remains the market leader, both in distribution of its signal and dollars handled through its wagering platform. TVG handled $479 million in 2007 through a wagering hub in Oregon, compared with $177 million for Magna’s XpressBet and $215 million for Churchill Downs’ TwinSpires.com and affiliated companies Churchill purchased midway through the year.
Negotiations between account wagering companies have become far more contentious with the recent formation of the Thoroughbred Horsemen’s Group, which negotiates on behalf of nearly every major state horsemen’s organization. Churchill was unable to reach an agreement with the Thoroughbred Horsemen’s Group this spring and as a result could not offer online wagering on any races other than a handful of stakes, including the Kentucky Derby. That led to a significant decline in handle during Churchill’s spring-summer meeting. Account wagering on other tracks, including Churchill Downs-owned Calder in Florida and Magna-owned Lone Star Park in Texas, was shut down when the two sides failed to reach an agreement on how revenue should be distributed.
Doesn’t it make sense for the two major companies that own so many tracks (Magna and Churchill) and the Thoroughbred Horsemen’s Group to quickly come to terms on a broad-based revenue distribution formula for account wagering, then put their previous differences aside and think in terms of working together to grow this part of the pari-mutuel horse racing business.
The best way to achieve growth would be through a single cable network that carries all of the best simulcast signals and a powerful wagering platform that offers virtually every racetrack with live racing. The cable network and wagering platform could be owned by industry stakeholders, including racetracks and horsemen’s representatives, and be more widely promoted than the current patchwork of television channels and account wagering.
There would be concerns, of course, principally from owners of small racetracks who fear their simulcast signals would not get the exposure they currently get with two full-time racing networks. Other independent account-wagering companies might find it hard to compete, but anti-trust laws should prevent them from being monopolized.
It’s a long shot that industry organizations accustomed to fighting at the table over a dwindling pile of scraps can think in terms of growth and cooperation, so we can only hope that logic will someday prevail. The pending sale of TVG provides that opportunity.
Copyright © 2008, The Paulick Report
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Tags: Account Wagering, advance deposit wagering, churchill downs, gemstar-TV Guide, HRTV, macrovision, Magna Entertainment, Paulick Report, Ray Paulick, Thoroughbred Horsemen's Group, tracknet media, tvg, ubs
Posted in Account Wagering, Churchill Downs Inc., Magna Entertainment, Television | 13 Comments »
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