Account-Bet Dispute Lingers; CHRB May Act
by Jack Shinar
Date Posted: 10/25/2006 3:19:38 PM
Last Updated: 10/26/2006 7:48:40 PM

The simmering dispute between the organization representing California's horse owners and the racing television and wagering network TVG appeared unlikely to be resolved heading into the Oct. 26 meeting of the California Horse Racing Board.

The dispute centers on the hub fee rate charged by TVG--the percentage of handle it keeps from what is wagered through its betting platform--and the methods used to calculate those rates. The account wagering provider is charging a 6% rate on California wagers, which was agreed to by the racetrack associations that are exclusive partners with TVG without approval from the Thoroughbred Owners of California.

"Discussions are ongoing," TVG general manager David Nathanson said during a phone interview Oct. 24. "We continue to meet with Drew (Couto, president of the TOC) and the rest of the TOC board in an attempt to reach some sort of agreement. Look, we recognize the important place and role horsemen play in this industry. We all want what is in the best interest of racing. Nine out of 10 times, we are on the same page."

Couto, however, said there have been no meetings held since the last CHRB commission hearing Sept. 21, when the board nearly imposed lower hub-fee rates on TVG that matched what rival account wagering providers are charging. At that time, CHRB chairman Richard Shapiro urged TVG and the TOC to work out their issues in the interim so the board would not have to intervene.

Nathanson and John Hindman, TVG's general counsel, reaffirmed their position that California's advance deposit wagering law does not mandate that the TOC be part of an operating agreement between the tracks and the network. The TOC, by granting use of racing images to the racing associations in the state, has fulfilled its role through the federal Interstate Horseracing Act, they contend.

"We are operating under the guise of the law and we will continue to do so," Nathanson said.

Nathanson declined to speculate on what is likely to occur if the TOC and TVG are unable to resolve their differences. He said the California legislature, which is to undertake the expiring account wagering legislation in 2007, is "the proper forum for that. We would certainly be active participants there."

Couto said the two sides are to meet Oct. 25, a day before the CHRB meets at Arcadia City Hall. On the same agenda, the board is to consider license applications for the state's three account wagering providers for 2007.

"It's the same old thing," Couto said of the negotiations with TVG. "We can never get them to respond so we can schedule a meeting where everyone can attend."

Couto said that in addition to the hub-fee dispute, the TOC is dissatisfied with TVG's accounting of revenue.

Nathanson said TVG, which has been licensed in California since 2002, has committed more than $100 million to purses in the state, more than the combined contributions of their two rivals, XpressBet and Youbet.com, over the same period.

While his company charges a higher hub fee than the others (5% for California races and wagers and a 4.5% rate on out-of-state races), and also charges sub-license fees to companies that want to take wagers on TVG's exclusive tracks, Nathanson said TVG has much greater operating expense.

Youbet.com said it has paid TVG more than $100 million in licensing fees.

"Youbet keeps more of every dollar that is wagered after they pay TVG," Nathanson said. "HRTV/XpressBet has a much more limited distribution, and it's obvious if you watch the two networks which one puts the most into its programming. Of the three companies, we are keeping the least for ourselves and putting more back into the product."

"The bottom line is that we see the value in what (the other companies) do," Nathanson said, but each "has very different business models."

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