ADW Impact on Churchill Downs Unclear

ADW Impact on Churchill Downs Unclear
Photo: Anne M. Eberhardt

It’s difficult to gauge the immediate effect of the ongoing dispute with Kentucky horsemen on the Churchill Downs’ spring meet, as handle on racing from the opening weekend of the Louisville track was down only slightly from 2007, according to one data source.

Churchill’s handle, not including separate-pool wagering, dropped about 5.5% to $18,141,245 opening weekend compared with $19,202,048 in 2007, according to The Jockey Club Information Systems. Separate-pool wagering, which often includes bets from certain international entities, generally accounts for between 3%-7% of total handle.

A well-publicized fracas between Kentucky horsemen’s groups and TrackNet Media Group prevented the distribution of the Churchill Downs signals to advance deposit wagering companies owned by the content providers, Churchill Downs Inc. and Magna Entertainment Corp., as well such as other selected wagering companies.

First viewed by many as a widespread lockout of ADW signals over revenue-sharing differences, the ban for the most part is limited to a select group of domestic companies, including CDI’s TwinSpires.com and MEC’s XpressBet.com, as well as TVG and Youbet.com, and a few others. TVG and Youbet.com weren’t likely to have had the Churchill signal anyway, as they have been at odds with TrackNet Media since the content company formed in March 2007.

But several domestic ADWs had the Churchill signal, including online services affiliated with Philadelphia Park Casino & Racetrack, the New York Racing Association, the New York City Off-Track Betting Corp., Colonial Downs, NJBets, and Bettor Racing, among others. Such outlets are regarded by horsemen and TrackNet Media as servicing primarily customers in their respective states.

Some offshore rebate companies, including large-volume shops Elite Turf Club and Racing and Gaming Services, also had the Churchill signal.

THG president Bob Reeves acknowledged the horsemen are focused for now on the larger domestic ADWs that deal in high volumes of interstate wagers, and were holding off, at least for now, on other entities, such as offshores.

“Everyone is still trying to figure out how to handle (the offshores),” Reeves said. “Where is the sweet spot? How high can you raise the prices before you damage the handle?”

But David Switzer, executive director of the Kentucky Thoroughbred Association, which ultimately granted approval for the offshores, personally doesn’t believe they should have the signals when others don’t.

“We feel it isn’t fair that our domestic ADWs don’t get the signals, but the offshores do,” said Switzer, whose group, along with the Kentucky Horsemen's Benevolent and Protective Association, granted approval for the current lineup of Churchill Downs signals.

Neither TVG nor Youbet.com had access to the Churchill Downs meet in 2007. TwinSpires.com was just getting launched on the opening week, so its effect on handle was likely negligible.

A CDI spokeswoman declined to discuss Churchill’s opening weekend handle, including segment performance. CDI last year enacted a policy where it said it would only discuss handle figures in quarterly earnings reports.

About offshore entities

Offshore rebate shops, which offer significant cash rewards to large-volume players, have come under closer scrutiny since the so-called Uvari indictment of 2005. In that case, the federal government leveled charges of money laundering, tax fraud, and race-fixing against individuals allegedly operating, in part, through offshores. Guilty pleas from some of those indicted followed.

Some tracks, including those affiliated with the New York Racing Association, stopped sending signals to offshores. Keeneland, which recently completed its spring meet, also does not send its racing signal to offshores.

Keeneland president Nick Nicholson said such entities that could receive the track’s signal must meet two criteria: Go through the comprehensive due-diligence process administered by the Thoroughbred Racing Protective Bureau, and have a regulatory body that provides oversight.

“We don’t mean to cast aspersions on anyone,” Nicholson said. “We are just concerned about integrity of the pools, and security of the pools issues. We feel it’s appropriate to go through the TRPB process; and secondly, it’s important to have a regulatory body.”

The TRPB process, which was instituted in part as a response to fallout from the Uvari indictment, is not a certification process, said the group’s president, Frank J. Fabian. Instead, he said it is a “robust” due-diligence process of fact-gathering so that member tracks of the Thoroughbred Racing Associations of North America can make enlightened decisions on individual entities.

“The purpose was to give a clearer understanding of the ownership, the business model, the technology, and regulatory oversight in the location in which they existed,” said Fabian, who had a 20-year career with the Federal Bureau of Investigation. “We are not certifying them – perhaps there are those that wish we could – but we are here to report the facts. And then our racetracks can make an independent decision.”

Fabian said seven entities have gone through the TRPB due-diligence process, most recently Premier Turf Club, a domestic cash-rewards ADW operating in North Dakota that was then able to carry the Keeneland spring meet signal. Fabian said Elite Turf Club and RGS have begun the due-diligence process.

Other rumblings

Some members of the THG, which include 18 horsemen’s organizations, are asking for a one-third share of the yield realized from ADW wagers, which in general terms is about double what they have historically received. TrackNet Media says the demand is economically not feasible because it would force unreasonable fees charged to ADWs.

At the CDI-owned Calder Race Course, handle was off about 75% through the first three days of the meet. In addition to the ADW signal, horsemen have withheld approval for the Calder simulcast signal.

In a lawsuit filed last week by CDI and affiliated entities, documents suggest the Florida HBPA has only withheld approval on eight ADWs: BetAmerica, BetPad, Premier Turf Club, The Racing Channel, TVG, TwinSpires.com, XpressBet, and Youbet.com.

Florida HBPA executive director Kent Stirling told The Blood-Horse early last week that TrackNet Media was offering 5.49% for its ADW signal, which on the surface is 83% higher than the 3% Youbet.com paid last year. But Stirling contends that when a 5.5% sub-licensing fee he said Youbet.com paid to TVG is factored in, the rate Youbet.com paid was actually 8.5% on the Calder signal.

“If they can do it, so can TrackNet,” he said.

The lawsuit, which levels allegations of anti-trust violations against the THG, Florida HBPA, and affiliated officers, followed an announced 30% cut of purses by Calder. In addition to the ADW issue, the Florida horsemen are negotiating agreements for purses and future revenue from slot machines.

Stirling said he continues to seek open dialogue with Churchill Downs, and the parties met the morning of April 29, with no progress to report. "We came to no resolution," he said.

Despite the presence of a lawsuit in the Florida arena, CDI says it has no plans to launch a similar legal attack on Kentucky horsemen.

“Our talks with Kentucky horsemen are ongoing, and we are still hoping to work something out,” CDI vice president of communications Julie Koenig Loignon said in an e-mail. “At this time, we do not plan to file suit.”

Meanwhile, on April 29, MEC-owned Lone Star Park announced it will cut overnight purses by 10% effective May 8. Officials in a release said the purse cut is in response to the recent decision of the Texas Horsemen’s Partnership, in conjunction with the THG, to withhold the Lone Star signal to all ADW companies in the ongoing revenue dispute.

“Obviously, we are extremely disappointed to announce a 10% purse cut three weeks into our season, especially when we have gotten off to such a great start this year,” Lone Star president and general manager Drew Shubeck said. “When the Thoroughbred Horsemen’s Group and the Texas Horsemen's Partnership chose this direction, unfortunately, Lone Star Park was left with no alternative.

“The current situation has no winners. We remain hopeful of a quick resolution that will allow us to provide the quality horse racing our fans and horsemen are accustomed to and deserve.”

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