HRTVG?
Tuesday, July 29th, 2008TVG, 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
