Amidst Positive Financials Reports, TVG Not Fearing Loss of Churchill Downs

TVG Network’s parent company reported a 150% increase in fourth-quarter earnings according to financial documents filed Feb. 28, and reiterated claims in a related conference call that a likely parting of ways with Churchill Downs will not have much affect on the racetrack network’s bottom line.

Gemstar-TV Guide International reported company-wide net income growth to $31.8 million in the fourth-quarter of 2006, up from $12.7 million in the same period of 2005. In separate year-end data, the company reported a 5.5% decline in 2006 revenues to $571.3 million, but realized 32% increase in net income to $72.5 million, or 17 cents per share.

Break-out data on TVG revealed a 10.9% increase in revenue to $57.1 million for 2006, bolstered by an approximate 9% increase in handle over 2005, said Bedi A. Singh, chief financial officer of Gemstar-TV Guide International. The company reported that TVG was in 19.4 million homes, a 7.8% increase over 2005, and a total 38.6% higher than 2004.

Singh was asked by one analyst how the projected loss of Churchill Downs racing products would affect next year’s results. TVG broke off negotiations with Churchill Downs on a new contract Feb. 15, less than a month before agreements with various Churchill Downs tracks will begin to sunset over the course of the next year or so.

Singh held to the company line drawn at the halt of negotiations, which were contentious due to a separate legal battle ongoing between the two racing entities. At the time, officials said wagering on Churchill Downs races through TVG dropped 17% over the span of the last two years.

“Churchill Downs . . . was becoming a relatively small piece of TVG Network business, and we don’t expect this to have any material impact on our numbers,” Singh said in the conference call. Later, addressing the inconsistency of wagering, he added, "It's difficult to give any quarter-by-quarter projections . . . it's stuff not in our control, so it's difficult to give any meaningful projections going forward."

Last November, Churchill Downs filed a breach of contract lawsuit against TVG over the latter company’s involvement in a British-based broadcast venture called “The Racing Network International.” Churchill Downs claims that it invested in a separate United Kingdom broadcast program called “Racing World” only after the company was told by officials that TVG had no interest in expanding internationally.

In legal filings, TVG has argued that it has in no way violated contractual agreements and suggests that Churchill Downs violated the pacts by partnering in “Racing World.”

TVG didn’t offer the Kentucky Derby Future Wager Feb. 8-11, telling subscribers the company felt it was “better served extending our resources to those products that we know we will be able to provide to our customers on an ongoing basis.”