While Churchill Downs Incorporated will continue to focus on racing as its primary business, its ability to expand into more profitable ventures such as alternative gaming and concerts will be key to future growth.
That was the message from CDI president and CEO Robert Evans to about 200 shareholders attending the company’s annual meeting June 18 at the flagship racetrack in Louisville.
"Tracks without slots are going to struggle mightily, there's no way around that," Evans said.
Evans used a slide show to reiterate the various alternative gaming or other forms of entertainment presented at Churchill Downs, Fair Grounds, Calder Race Course, and Arlington Park over the past year, explaining how each benefited the company and investors. He also cited the growth of TwinSpires.com, CDI’s advanced deposit wagering entity as an example of how “thinking outside the box” can benefit racing.
“Each one of them has its own unique relationship to racing,” Evans said, citing how racing benefits from gaming and vice-versa. “No racing license, no gaming license… Racing enables us to conduct gaming. And gaming returns the favor in the sense of purse contributions. We need to still have to figure out how to crack the code on this but I think there is still a way to use gaming to attract new fans to racing. The third thing that gaming does for racing is it creates profits growth. For racing to go forward and for racing to thrive somebody is going to have to take some risks.
“Racing inherently is not a business that is particularly attractive from a profit standpoint,” he continued. “But we can use the profit growth from these other businesses to expand the overall economic performance of Churchill Downs and take more risks and try to grow racing in a different way… The primary message here is growth. What are we doing to build a growth-based company.”
In his opening remarks to shareholders, board chairman Carl Pollard concurred that racing is the focal point of CDI’s mission. “Although we will expand and diversify the business in which we operate, racing will remain the core at Churchill Downs Incorporated,” he said. “Our license to do gaming is dependent upon our license to race. The racetracks themselves are venues in which we hope to expand our sport and entertainment offerings.”
During his hour-long presentation, Evans went through a long list of accomplishments for CDI over the past year. They included the financial successes of this year’s Kentucky Derby Presented by Yum! Brands (gr. I) and Kentucky Oaks (gr. I), implementation of health and safety initiatives, enhancement of technological advances at the company’s tracks, and the slots revenues in Louisiana and Florida.
Evans noted that CDI is unique among the largest racing companies in the U.S. because the company has no indebtedness. In contrast, Magna Entertainment has filed for bankruptcy protection and the New York Racing Association was in a similar position before re-emerging from bankruptcy.
Evans said it appears CDI made the right decisions over the past three years in selling three of its racetrack holdings — Hollywood Park in California, Ellis Park in Kentucky, and Hoosier Park in Indiana — that have not fared as well since they left the CDI umbrella. This could be the final year of racing at Hollywood Park, Ellis Park has sharply curtailed its 2009 season, and Hoosier Park has said the cost of its slots license is prohibitive, Evans said.
“I think we got rid of the worst assets and kept the best assets,” he said.
The CDI president said he was unable to comment on whether CDI would be in the bidding for any of Magna’s assets, including HRTV, in which Churchill is a partner.
Evans also would not say where CDI would install slot machines if pending legislation for video lottery terminals is approved.