Posts Tagged ‘CDI’
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 »
Friday, July 17th, 2009
By Bradford Cummings
As the state of Kentucky continues to spit in the eye of the Thoroughbred industry, it is essential the power brokers and decision makers capitalize on the few openings available to improve our product and bring racing to the casual fan. And quite frankly, until this summer there seemed to be little outside of the usual steps taken to grow our sport. That is why Churchill Downs’ extremely successful Downs After Dark has been such a bright spot for the historic racing landmark.
Many racing fans chortle at calling nighttime racing at Churchill out of the box thinking. Night racing has been part of the sport of kings for years. But for those of you high-fallutin naysayers, the magic of those three nights this summer came out of an understanding that racing to the average fan is about more than what’s on the track. What few in this business grasp onto is this sport’s greatest advantage is also its greatest disadvantage, the long delays between races. What you do with that gap clearly defines the experience for the casual fan and proved to be the difference between a one-night flash in the pan and a successful budding enterprise.
The thought process behind Downs After Dark actually began in 2001 when permanent lighting was part of Churchill’s expansion plan. But after 9/11 and the popular concern that the economy would tank, the lights were cut from the funding package. But as they say, the dream never died and remained in the plans to explore down the road.
Fast forward to last year when the folks at CDI decided to revisit the idea of a nighttime extravaganza. Looking at their properties across the country, it seemed only logical to test market the concept with temporary lighting at their flagship track. But even in test mode, they had the foresight to know night racing alone would not expand their fan base over several nights.
“We asked ourselves, what can we do to trigger those fans that may have attended Derby and Oaks to come back,” said Darren Rogers, senior director of communications and media services.
With this mantra, Churchill set up an evening for people with a wide variety of interests. For those with more expensive tastes, options included everything from high-end dinners cooked by celebrity chefs to dinner and dancing packages complete with multi-course meals. And for those who were not so picky, happy hour pricing and live music all night long gave the track a nightlife feel and an air of excitement that in some ways was better than those historic first Saturdays in May.
And yet, after the first event, those in charge of the evening’s festivities found themselves conflicted on the night’s story. As Rogers told the Paulick Report, “We knew this could be something special. And we knew at the end of the night, we messed it up.” While attendance expectations ranged from 12,000 – 30,000, Rogers insisted they should have been better prepared and continued to take full responsibility for the shortcomings and long beverage lines.
But it’s not if a mistake is made that shows true colors, it’s how well you respond and clean up the mess. With those parameters in mind, Churchill taught us all a virtual master class in altering public opinion and turning lemons into lemonade.
They took out full page ads in both major Louisville newspapers apologizing for the mistakes and promising to make things better. They tripled their food and beverage staff, lowered ticket prices, offered dollar drinks and even had executives work behind the bars shelling out drinks and hot dogs to patrons.
And yet still, the question remained, “How much will the food and beverage blunders of the first week affect the second night?” The answer: not by much at all. The second night, exactly a week after the first, brought in only 388 fewer fans, proving they had effectively neutralized the bad word of mouth from the first night. Even better, the same magic was there from the week prior.
“Our original plan was to scale back the ancillaries the second night,” said Rogers. But they solidified after that night, Downs After Dark was as much about the nightlife as it was about the racing. “If you weren’t here, it is very difficult to explain to people,” said Rogers. And as most know, their reward for sticking with the concept was a record 33,481 fans on the final evening, the most for any Churchill Downs date not called Derby or Oaks.
While they are still going through the handle numbers for the three nights, the early returns prove the theory that night racing was about more than the horses on the track. While the first two nights were significantly above the average race day, attendance was nearly four times more than usual. And if you were judging Downs After Dark on handle alone, the third day of record attendance was a disaster, barely performing above the average for a day of 7,500. There are factors that help explain these numbers with Belmont’s twilight racing being the only action for bettors to play the first and second night and there being nothing accompanying the final night. But still it is abundantly clear that night racing at the Downs is not a night geared for the hardcore horseplayer.
When looking to the future, Rogers told the Paulick Report there was no option not on the table at this point. It is too soon to give hard numbers on the business figures, but they are clearly gearing up for another round of this extremely successful experiment by asking how to take the next step.
Will they install permanent lights? It’s certainly a possibility, although the cost is prohibitive and may delay a final decision. If you want to be of influence on this decision, Churchill is running a poll on their website and one lucky voter will receive a box seat for six at next year’s Derby. Of course, all decisions of this magnitude will have to be brought to the board of directors, but it would be difficult to believe there wouldn’t be support for more of the same success. When asked if a night Derby was on its way, Rogers said, “There are currently no serious discussions on the Derby being at night.” On the other hand, Rogers reiterated “There is no option that is not on the table at this point.”
Could Downs After Dark be the precursor to a primetime Derby that would benefit the sport with primetime ratings? Only time will tell. But one thing is for sure. Churchill Downs has stumbled upon a winner with this new format. It may not be a hit with the institutional gamblers, but if we are to grow this sport it is important we give the average fan what they want: to be entertained. We have a feeling Churchill will gladly plead guilty to that charge.
Tags: belmont, CDI, churchill downs, Darren Rogers, Downs After Dark, Kentucky, kentucky derby, Louisville, Night racing
Posted in Churchill Downs Inc., Good News Friday, Horse Racing, Industry, Industry Reform, Kentucky | 5 Comments »
Friday, May 1st, 2009
It is easy to become a skeptic in the business world when everywhere you look hardworking, loyal employees are being laid off by the thousands. One can’t help but shake the thought our current economic downturn is sometimes used as an excuse to make otherwise unpopular and unwarranted decisions to trim staff. So when a corporation the size of Churchill Downs does right by its employees, attention must be paid.
Not even a year ago, Tricia Amburgey, coordinator of the Chief Party Officer and the new Infield Club, walked into her bathroom and felt like she had run into the door. Realizing she was clear of any structure, Tricia felt her chest and knew something was not right. After a visit to her doctor, she learned the sensation she felt was the onset of breast cancer.
“That was the moment the tumor broke through the breast wall,” explained Amburgey. What ensued was a series of chemotherapy treatments for her stage three condition, a serious but treatable stage of this disease that accounted for over 40,000 deaths in 2008.
For those who have not seen a loved one go through chemotherapy up close, it is a long and often torturous process causing dramatic swings in energy and stamina. When it comes to the workplace, this can become problematic. But that wasn’t the case for Amburgey and Churchill Downs.
“I have heard some negative stories where other employers were not as understanding,” said Amburgey. “But not here. They’ve been just fantastic.”
 The company has gone above and beyond in helping this 17-year veteran of all things Churchill Downs adjust to her new reality. When she is in the office, Tricia’s co-workers are constantly checking in on her and insisting she go home whenever she needs to, almost to the point of being overbearing. They have even gone as far as to put a computer and printer in her home just in case this self described workaholic has to work from home.
That sort of awareness and accommodation is already considered a cut above the call of duty for most places of employment. However, the real magic here seems to have come from the spirit of Amburgey’s co-workers.
At the beginning of her chemo treatments, the others in Tricia’s small Entertainment Business Unit showed their support by wearing pink. As she continued to receive further treatment, this movement spread beyond their four-person unit and within a relatively short amount of time the entire company was expressing their support. This sisterhood of the traveling pinks has become so popular, Churchill has asked all in the crowd who attend Kentucky Oaks Day to Pink Out by wearing their favorite pink outfits in support of all breast cancer patients.
During this same timeframe, Amburgey’s division at Churchill was continuing the work started last summer in trying to build the Kentucky Oaks brand. According to Casey Cook, Senior Director of Marketing and Licensing, it was important the Oaks took on principles that celebrated women’s interests. Sisterhood, celebrity, fashion and charity became the core ideas behind this marketing strategy.
So when Cook and company started to look for a partner to help with this effort, Amburgey’s relationship with the Susan G. Komen Foundation became a perfect moment of kismet. With one in eight women diagnosed with this disease, very few issues affect women like breast cancer. And with the Susan G. Komen international brand so synonymous with the cause, Tricia’s setback became the impetus for a major fundraising initiative.
“I certainly don’t want to take credit for this large idea,” said Amburgey. But when pressed further, she did confess it was her involvement that most likely led to the Komen affiliation.
 For each Oaks ticket purchased, Churchill Downs will be donating $1 to Susan G. Komen to aid in research as they continue towards finding a cure. According to Cook, their goal is to raise $135,000 this year while still promoting a great day for all in attendance. “I think that’s the beauty of the day. You can come out with your friends and family and know you are giving back, helping to fight breast cancer.”
And a worthy fight it is. When asked how Komen has helped her, Amburgey points to the strides taken in the medicine she takes to help nausea caused by her treatment. “I can’t imagine what chemo must have been like 10-15 years ago.” Once she is finished with the chemotherapy, she will be able to plug into an immediate support system that she describes as a “sisterhood”.
That being said, this is one sisterhood Amdurgey would like to stop dead in its tracks.
“Because of what Komen has done, it isn’t a death sentence anymore. Hopefully, we’ll be able to find a cure so my eight year old daughter won’t have to go through this.”
And because of the generosity Churchill has shown, we will be one step closer to that goal. A day at the races never had such high stakes.
Copyright © 2009, The Paulick Report
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Tags: bradford cummings, breast cancer, casey cook, CDI, churchill downs, good news friday sponsored by liberation farm, kentucky oaks, komen, Paulick Report, paulick report good news friday, pink out, Susan G. Komen, tricia amburgey
Posted in Churchill Downs Inc., Good News Friday | 6 Comments »
Thursday, March 19th, 2009
By Ray Paulick
Purses for Thoroughbred horsemen in Illinois hit a 10-year low in 2008, and things may only get worse if the Illinois legislature enables Churchill Downs Inc., the owner of the state’s biggest track, Arlington Park, to get the Advance Deposit Wagering language it is seeking.
Illinois horsemen have had to put up with a ridiculous law since 1995 that allows racetracks to “recapture” money from purse accounts the law says tracks have lost on live handle since the authorization of full-card simulcasting. Since 1995, over $170 million has been taken from purses earmarked for Thoroughbred and harness horsemen and handed over to the racetracks. (For more details on the recapture provision of the Illinois racing law, see page 10 of the Illinois Racing Board’s annual report for 2008, which can be viewed here.)
This law needs to be repealed, and representatives of the harness and Thoroughbred horsemen’s organizations are working in the state capital in Springfield to do so. Racetracks seem to have more clout, however, and it will be no easy task.
Lobbyists for racetracks and ADW companies are also pushing for approval of Advance Deposit Wagering in Illinois, a state that permits casino wagering, off-track betting and has offered a lottery for many years. Those lobbyists represent Arlington Park, which is owned by the same Churchill Downs Inc. that operates TwinSpires.com. The largest shareholder in CDI is Richard Duchossois, the Chicago industrialist who owned Arlington Park before merging it into CDI. Another company pushing for ADW approval is Youbet.com, one of whose principals is Chicago billionaire Jay Pritzker, heir to the Hyatt Hotel chain. A member of the Youbet.com board of directors is former Illinois Gov. Jim Edgar (one of those rare Illinois politicians who has avoided public scandal or indictment). Edgar knows his way around Springfield.
ADW would be a good thing for Illinois, provided that the horsemen are taken care of. The fear is, however, that Churchill Downs and its lobbyists are crafting a bill that will be more to their benefit than it is to the horsemen.
An example: the bill ( SB1298, which has passed out of committee and is on the floor of the Senate waiting approval), includes an amendment that permits Advance Deposit Wagering terminals to be placed at Illinois tracks. The language of the bill (see page nine, line nine of SB1298) suggests an “organization licensee” (in other words, a racetrack like Arlington with its own ADW) may operate Advance Deposit Wagering without horsemen’s permission. If a track doesn’t own an ADW, it may contract with a third-party company, with horsemen’s permission, to operate Advance Deposit Wagering. In other words, it appears tracks that operate their own ADW can do so without contracting with horsemen.
What does this mean? It could mean that Churchill Downs Inc. will do everything it can to move handle from traditional on-track or OTB facilities in Illinois to its ADW platform, TwinSpires, where it would almost certainly retain a greater percentage of the revenue. We’ve already seen how it works in Kentucky, where a wager placed by a Kentucky resident through TwinSpires on a Churchill Downs race produces far less revenue toward purses and more for TwinSpires and its parent company, than would a wager made on-track or at an intertrack wagering facility in Kentucky on a Churchill Downs race. The percentages are even worse for bets made on out-of-state races by Kentucky residents through TwinSpires, versus at a simulcast facility. (See the graphs on pages 16 and 17 of a presentation on purses I made to the Kentucky Thoroughbred Farm Managers Club earlier this year for an explanation of how the revenue is divided.)
Illinois horsemen have to be careful not to let the racetrack and ADW companies dictate the language of this bill, or they are going to see purses fall even farther – if that’s possible.
Of course, bad news for horsemen could be very good news for Churchill Downs. Perhaps that’s why Duchossois continues to load up on CDI stock. I reported last September that Duchossois was gobbling up shares in CDI, and he’s been on two buying spree since. He spent more than $1.3 million to buy over 42,000 shares in November and in recent days spent another $285,000 on over 12,000 shares.
Copyright © 2009, The Paulick Report
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Tags: advance deposit wagering, ADW, Arlington Park, CDI, churchill downs, Churchill Downs Inc., duchossois, gov. edgar, illinois horse racing, illinois racing board, jay pritzker, jim edgar, kentucky thoroughbred farm managers club, pari-mutuel wagering, Paulick Report, pritzker, Ray Paulick, recapture purses, richard duchossois, sb1298, twinspires, twinspires.com, youbet, youbet.com
Posted in Account Wagering, Churchill Downs Inc., Illinois | 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.
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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, 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 »
Sunday, November 30th, 2008
By Ray Paulick
It was billed as the “Biggest Vegas Qualifier Ever,” but horseplayers who paid $250 to enter Saturday’s TwinSpires.com contest in hopes of getting a berth in the annual National Handicapping Championship might call it the biggest online screw-up since the Churchill Downs-owned wagering platform melted down on Kentucky Derby Day earlier this year.
Midway through Saturday’s 15-race contest, many of the 550 entrants were unable to make their online selections. Instead they got an error message saying “database connection failed; too many connections.” The problem went on for at least five races, and there was no communication from TwinSpires.com to participants. “Obviously, it was not pleasant for the players,” one contestant wrote to the Paulick Report.
 Vernon Niven, president of TwinSpires.com and executive vice president of Churchill Downs Inc., told the Paulick Report a decision was made to cancel the contest, refund all entry fees and reschedule the qualifying event as soon as possible. Fifteen berths were scheduled to be awarded for the National Handicapping Championship, to be held in Las Vegas Jan. 23-24. Prize money in that event, sponsored by the National Thoroughbred Racing Association and Daily Racing Form, is expected to be $1 million.
“We had a database failure with the contest engine that overloaded some queues and caused the login process to freeze,” Niven told the Paulick Report. “Not every player was affected but due to the nature of this we had to cancel the contest and will be refunding everyone.”
No wagers were processed incorrectly, according to Niven, although he said the issue also prevented TwinSpires.com telephone operators from placing wagers via telephone. Some TwinSpires customers not involved in the handicapping contest also experienced log-in problems.
“It’s a huge embarrassment for all of us, and we pride ourselves in our contests,” Niven added. “It’s a slap in our players’ faces. We’ll look at who was affected and how they were affected.”
Saturday’s problem, on top of the Derby Day online wagering malfunction, comes from a company that hired a CEO in Bob Evans with a tech-savvy reputation and has a “think tank” division based in California’s Silicon Valley.
“CDI, which promotes itself as racing’s technology company has failed to deliver,” a contest player wrote to the Paulick Report. “I know I’ll be cancelling my account after this and the Derby Day fiasco.”
“We do pride ourselves on having an outstanding technology team and are working on this as best we can,” Niven said. “We did have problems on Derby Day 2008. That was a different issue – a wagering platform problem. We fixed that issue, as evidenced by Breeders’ Cup Day. This was a different issue. It is one of those things that our guys missed. It was a programming error on our part having to do with database queries that allowed our queues to overflow.
“Our players should not have to worry about that. We are contacting our players to let them know that we apologize and that we will be refunding them within 24 hours.”
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Tags: biggest vegas qualifier ever, bob evans, Breeders' Cup, CDI, Churchill Downs Inc., daily racing form, derby day, handicapping contest, internet wagering, kentucky derby, national handicapping championship, National Thoroughbred Racing Association, NTRA, online wagering, Paulick Report, Ray Paulick, silicon valley, twinspires, twinspires.com, vernon niven
Posted in Account Wagering, Churchill Downs Inc., National Thoroughbred Racing Association, Wagering, kentucky derby | 11 Comments »
Friday, November 21st, 2008
By Ray Paulick
Bob Evans, president and chief executive officer of Churchill Downs Inc., said during a Friday morning press conference at the company’s flagship track in Louisville, Ky., that the CDI board of directors discussed the possibility of reducing the field size of the Kentucky Derby during a regularly scheduled meeting in New Orleans last week.
The Derby’s maximum field size of 20 is under scrutiny in the wake of the death of the filly Eight Belles in last year’s Derby, even though her fatal injuries occurred after the finish and apparently were unrelated to the number of runners or trouble she may have encountered in the race. The Derby traditionally has the largest field of any race in the United States. No Derby starter has fallen during the running of the race since 1970, when Holy Land clipped heels and fell going into the far turn.
By contrast, Breeders’ Cup fields are limited to 14 starters.
Maximum field size of 14 horses and the prohibition of fillies running against males were considerations in an original discussion document circulated by the National Thoroughbred Racing Association to industry leaders who formed what ultimately came to be known as the NTRA Safety and Integrity Alliance.
Field size or sex limitations were not part of the final recommendations of the NTRA Safety and Integrity Alliance Pledge, which can be viewed by clicking here.
Evans said CDI has devoted a great deal of time and resources to examine a wide range of safety issues since the death of Eight Belles and has adopted all of the safety recommendations made by committees formed earlier this year by the Jockey Club and Thoroughbred Owners and Breeders Association.
The CDI board discussed the reduction of the field size, Evans said, though he gave no indication whether a change will be made. “For now, it’s the way it’s always been,” he said. Nominations to the Triple Crown races, including the Derby, state that the size of the Derby can be “up to 20 horses.”
A reduction in field size might not be greeted favorably by horse owners and trainers who throughout the winter and spring closely follow whether their 3-year-olds are in the leading 20 contenders, based on money earned in graded or group stakes races. Churchill recently announced a marketing agreement with Kempton racecourse in England that will guarantee one spot in the Derby field to the winner of the Kentucky Derby Challenge Stakes, a 1 1/8-mile race on Polytrack, on March 18.
Handle on the Derby would also decline in the event of a reduction in the field size. Evans said Churchill has researched Derby handle in relationship to field size but would not say how much handle might fall. A reduction from 20 to 14 starters would also cost Churchill Downs $300,000 in lost entry and starting fees ($25,000 to enter and $25,000 to start).
Evans discussed the Derby field size and other safety measures following a media briefing announcing that Oaks and Derby ticket prices, with a few exceptions, would be frozen in 2009. “Our slowing economy is having a pronounced effect, and many of our customers have been affected in various ways as well,” Evans said. “Although the Kentucky Derby occupies an elite spot in the world of sports and tickets are typically in high demand, we want to keep our price points at the same level to help our customers in this challenging economic climate.” Click here to read more about the ticket price freeze.
The only exceptions will be scheduled price increases in the 30-year personal seat license program, which are coming off a three-year price freeze; some luxury suites and Marquee Village accommodations; and reserved seats in the infield.
Churchill Downs is also offering the opportunity for on-track customers to buy Derby reserved seats in a sweepstakes running each day from tomorrow (Saturday, Nov. 22) through Nov. 29. Individuals whose names are drawn will be eligible to buy two Derby tickets ranging in price from $88 to $207. (Derby tickets range in price from $88 for infield reserved seats to $693 on millionaire’s row.) One thousand of the tracks 55,000 seats are being offered in the sweepstakes. For more details, click here.
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Tags: bob evans, Breeders' Cup, CDI, cdi board of directors, churchill downs, Churchill Downs Inc., derby field size, eight belles, Horse Racing, horse racing safety, Horse Welfare, Jockey Club, kempton, kentucky derby, kentucky derby 135, kentucky derby tickets, kentucky oaks, NTRA, ntra safety and integrity alliance, Paulick Report, Ray Paulick, Thoroughbred Owners and Breeders Association, TOBA, Triple Crown
Posted in Churchill Downs Inc., Horse Racing, Horse Welfare, Jockey Club, National Thoroughbred Racing Association, TOBA, kentucky derby | 12 Comments »
Monday, September 22nd, 2008
By Ray Paulick
Best unintentionally funny line of the week came from John Brunetti, the owner of Hialeah Park. Discussing a conversation he had with Halsey Minor about the technology wizard’s interest in buying and reviving the shuttered South Florida racetrack, Brunetti was quoted in a trade publication as saying: “I have told him that in some ways I don’t think he understands this business.”
Does Brunetti think he understands this business? How could he? If he did, how did he let Doug Donn outsmart him on every move and get control of the best winter racing dates for Gulfstream Park? Why did state legislators and regulators turn their back on him? How did Calder crush Hialeah in head-to-head competition? Why did Brunetti raise take out to the point that he chased away any remaining horseplayers Hialeah had? Why has the track sat empty for more than seven years?
It’s a mortal lock that Hialeah will never reopen successfully with Brunetti as the owner and operator. I happen to think John Brunetti is a nice guy who loves racing, but I have zero confidence that he can revive Hialeah Park on his own (and I may be more optimistic than state officials or Florida horsemen).
Does Halsey Minor know everything there is to know about Thoroughbred racing? Of course not. But he comes to the game with passion, enthusiasm, capital and confidence that he can return Hialeah to some semblance of its past glory.
Brunetti isn’t the only industry veteran who thinks Minor may be nothing but a dreamer if he thinks he can revive horse racing as a sport. I’ve heard from a number of racetrack executives and horse owners who said they’ve heard it all before. But what is the alternative for Hialeah Park or operating tracks that are hanging on by a thread? Lobby to get slot machines, turn the facility over to a casino company and hope it will subsidize the money-losing portion of the business indefinitely?
Should Brunetti and others in the industry just blow off this opportunity that Minor presents to give horse racing in the Miami area one last chance to stand on its own as a sport?
I remember when Frank Stronach came into racetrack ownership and said he would try to make the sport more compelling and entertaining. In the beginning, Stronach said he had no interest in getting slot machines at his tracks. But Stronach became a victim of his ego, forcing in too many of his own bad ideas and forcing out too many executives who dared to disagree with him. He almost seemed obsessed with getting control of as many tracks as possible without having any idea what he was going to do with them all.
Gulfstream Park was the first Florida racetrack to get slot machines. Under Stronach’s vision, Gulfstream became the least successful slot machine operation in North America, based on the benchmark of dollars won per machine per day. Calder will be adding slots as early as 2009 after getting approval in a local referendum in January of this year. The rebuilt Gulfstream Park is more slots parlor and simulcast theater than it is a facility to host live racing. In short, it’s a disaster.
Calder, built to host hot-weather summer racing, has always struck me as a cold and impersonal track, but it’s never seemed colder or more impersonal than it is today. In a recent weekday visit there I stumbled across what seemed like no more than several hundred fans scattered throughout the first two floors (most of the third floor is closed).
 Count on Churchill Downs management to pigeonhole those fans in as small an area as possible once the slot machines are installed and plugged in. Racing at Calder will become secondary, though its purses will be healthier than they are today because of the slot subsidies. But what will Churchill Downs management’s long-term vision be for racing at Calder?
Minor said he has no interest in bringing slot machines to Hialeah Park. The competition for slots players is intense, with the Seminole Native American tribe holding the market share advantage at their Hard Rock Casino in Hollywood, Fla. Minor wants to focus on the excitement of racing and the fact that it’s the only sport you can legally bet on.
Racing needs people like Halsey Minor, and people in the industry should be doing everything possible to help him succeed.
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Tags: calder, CDI, churchill downs, doug donn, Frank Stronach, gulfstream park, Halsey Minor, hard rock, Hialeah Park, Horse Racing, john brunetti, Magna, Magna Entertainment, Paulick Report, racino, Ray Paulick, seminoles, Slot machines, thoroughbred racing
Posted in Churchill Downs Inc., Florida, Halsey Minor, Hialeah Park, Horse Racing, Magna Entertainment, Slot machines | 11 Comments »
Monday, September 15th, 2008
Ray Paulick
What in the world is going on inside the Churchill Downs Inc. executive offices? It’s slashed purses at Calder Race Course in South Florida by 17% and whacked almost $1 million from the fall stakes program at its home track in Louisville, Ky. Key management changes have been made at Calder and Fair Grounds in New Orleans, La., and press releases seem to be blaming horsemen for most of the problems.
Investors haven’t been wild about Churchill Downs stock ( CHDN), which closed at $46.45 Friday and hasn’t seen $50 a share since May 1. It’s 52-week high, $57.55, was achieved last December.
CEO Bob Evans and the TrackNet Media Group that was formed with Magna Entertainment to broker simulcast deals has refused to talk seriously with the Thoroughbred Horsemen’s Group, which is negotiating account wagering contracts with racetracks on behalf of local horsemen’s groups such as the Kentucky or Florida Horsemen’s Benevolent and Protective Associations. In fact, Churchill has filed anti-trust lawsuits against the organizations. Evans may be hoping that the longer he puts off dealing with the THG, the less resolve the horsemen will have to stick together in attempting to forge a better contract on account wagering.
That strategy doesn’t appear to be working. To the contrary, it looks more like Churchill Downs’ partner in TrackNet Media is bailing. Frank Stronach, the chairman and acting CEO of Magna Entertainment, sent out a press release a couple of weeks ago saying that Magna recognizes the THG as a beneficial national organization and is negotiating with THG.
For too long, horsemen have been losing ground and losing revenue as the percentage of dollars wagered that goes to purses has declined. The growth of simulcasting to non-pari-mutuel entities such as off-shore rebaters and account wagering companies has been at the expense of horsemen. It’s important horsemen understand why the status quo isn’t good enough and why they need to change the simulcast model, something the THG is trying to do.
SPEAKING OF WAGERING, hats off to Bloodhorse editor Dan Liebman for calling out the Jockey Club after it capitulated to Evans and to Churchill Downs’ biggest shareholder, Dick Duchossois, and decided to no longer provide the trade magazine with meet ending pari-mutuel handle figures. Churchill tracks under Evans and Duchossois have said that handle is no longer a meaningful statistic. Oh, really?
The decision by the Jockey Club to no longer provide this key economic indicator was disgraceful, but I wouldn’t hold out any hope the poobahs there will change their mind.
NO ONE PREDICTED KEENELAND’S SEPTEMBER YEARLING SALE WOULD BE UP, so it’s not that surprising to see a 13% drop in the gross receipts through the first six sessions of the 15-day marathon. That 13% equates to a $41-million decline in revenue that will not go into the pockets of breeders this year, and that red number only figures to increase as the sale reaches the second half. The drop in revenue will ripple throughout all kinds of Thoroughbred-related businesses.
The good news from the first four days (Books 1 and 2) was that the median held up fairly well, declining only 10% from $200,000 to $180,000. The home run horses, those selling for a million dollars and up, didn’t materialize as often as they have in recent years, but the middle market was relatively steady. “Most of us survive off the middle,” one breeder told the Paulick Report. “Getting one of the big horses is like hitting the lottery, but it’s not something you really plan on.”
Smart gamblers don’t play the lottery, and intelligent breeders know there are far more people playing in the middle market than at the top. As long as the middle is healthy, so are the breeders. There is just a lot less icing on the cake this year.
Others who are selling throughout the September sale breathed a sigh of relief if their best horses sold well during the first two books out of fear that the bottom of the market may collapse once the sale reaches books five and beyond.
WHO HAS BOUGHT THE MOST HORSES SO FAR IN THE MONTH OF SEPTEMBER? It wasn’t John Ferguson, or Shadwell Estate or the newly formed Legends Racing. Hint: It wasn’t at the Keeneland September yearling sale.
September’s busiest buyer so far (though not biggest spender) is a fellow named Mike Gill, the 2005 Eclipse Award-winning owner who has been on a claiming binge this month at Philadelphia Park. By our count Gill has claimed at least 30 horses in September at Philadelphia Park alone after similar buying sprees in Maryland and Massachusetts earlier in the year.
You remember Gill, don’t you? He’s the fellow who built a huge claiming operation earlier this decade, bought a training center, won a bunch of claiming races and then publicly complained when he led the nation in wins and earnings in 2003 and 2004 but didn’t get voted an Eclipse Award as outstanding owner.
The whining did him some good. When balloting was conducted for the 2005 racing season, Gill was once again the owner with the most wins and purse money won. This time, in what may be the worst decision in the history of the Eclipse Awards, voters representing the National Turf Writers Association, National Thoroughbred Racing Association and Daily Racing Form gave Gill the award as “outstanding owner.”
Why do I say that it was the worst Eclipse Award decision in history? I’ve got nothing against claiming operations and recognize it is the bread and butter portion of nearly every racing program in the country. However, in my mind, the Eclipse Awards are about excellence, whether it’s horses or people. Sheer numbers, especially at the claiming level, should not be misconstrued as excellence. In the category of outstanding owner, breeder, trainer and jockey, the leading candidates should be judged by how they performed at the top level of the sport, not the bottom level.
Gill, who was recently in the news because of some regulatory problems at his mortgage company, said he was getting out of the horse industry in 2006 when he accepted his Eclipse Award as outstanding owner. Many people had two words for him: good riddance.
“I’m going to miss racing, and I think racing is going to miss me, too,” Gill told Bloodhorse magazine.
Actually, Mike, we didn’t.
THE PHILADELPHIA INQUIRER WON’T BE COVERING GILL’S EXPLOITS since it accepted the early retirement of Turf writer Craig Donnelly only a month after the paper, the nation’s eighth largest, dramatically reduced the space allotted racing in its sports section. At that time, Inquirer editors told the Paulick Report it was keeping Donnelly but obviously they had a change of heart.
Newspapers may be an endangered species in the near future. Turf writers at daily newspapers already are.
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Tags: bob evans, calder, CDI, chdn, churchill downs, claiming, craig donnelly, daily racing form, dick duchossois, eclipse award, Frank Stronach, john ferguson, Keeneland, keeneland september yearling sale, Magna, Magna Entertainment, mike gill, National Thoroughbred Racing Association, national turf writers association, NTRA, ntwa, Paulick Report, philadelphia inquirer, Philadelphia park, Ray Paulick, shadwell, thg, Thoroughbred Auctions, Thoroughbred Horsemen's Group, tracknet media
Posted in Account Wagering, Churchill Downs Inc., Industry Organizations, Jockey Club, Keeneland, Magna Entertainment, Racing Media, Simulcasting, Wagering | 9 Comments »
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