Hollywood, Horsemen Squabble Over ADW
by Jack Shinar
Date Posted: 9/19/2008 11:36:46 AM
Last Updated: 9/21/2008 12:58:04 PM

With horsemen and Hollywood Park unable to come to agreement on revenue splits from account wagering sources for the upcoming autumn meet at the Inglewood track, the California Horse Racing Board agreed to conduct a special hearing to settle the impasse. 

The dispute was made public during the board's Sept. 18 meeting at the Los Angeles County Fairgrounds in Pomona, in which the CHRB considered Hollywood's license application for the 40-day stand.

The board approved the application, conditioned upon the completion of the horsemen's agreement with the Thoroughbred Owners of California, which is seeking a larger cut of the ADW take in future contracts. The TOC has authorized a national coalition, the Thoroughbred Horsemen's Group, to negotiate on its behalf for a larger percentage of the revenue.

A hearing date on the ADW dispute, which concerns language that Hollywood Park wants to see in the contract that is resisted by the TOC, was not determined. Richard Shapiro, the CHRB chairman, indicated it would be held prior to the board's next regular meeting, scheduled for Oct. 15 in Arcadia.

Jack Liebau, president of Hollywood Park and also chairman of Youbet. com, one of four licensed account deposit wagering companies in the state, said he wanted the matter resolved by the CHRB as quickly as possible in order to avoid last-minute pressure and to allow implementation of an overnight and stakes purse schedule for the meet, which is to run Oct. 29 through Dec. 21. Hollywood's application includes all four state-licensed ADW providers -- TVG, XpressBet, Youbet.com and Twinspires.

Drew Couto, president of the TOC, said he was taken by surprise by Hollywood's position. He said that the contract he had negotiated, with regard to purse agreements, contained virtually the same points as previous documents.

"We thought we had an agreement on ADW until Monday (Sept. 15) when I received a page-and-a-half e-mail of contract language we've never had before," he said after the meeting, adding, "It was nothing we feel comfortable with."

Both Hollywood Park and the TOC agreed to allow the CHRB to intervene.

Earlier, Couto told the board that he has heard rumors that "without a horsemen's agreement, Hollywood Park may consider closing the track" because of the ADW impasse. In that event, he suggested that the CHRB extend the Oak Tree meeting at Santa Anita farther into the fall racing season.

Couto also said the four ADW companies, who had agreed at the beginning of the Del Mar meet to engage the THG in "a meaningful discussion" about increasing the percentage of host fees paid to horsemen in California, had so far not done so.

"Four ADW companies control 90% of the ADW market in this country," Couto said. "We're concerned that there is the possibility of collusion. We think there are serious anti-trust issues."

In a separate ADW dispute, Golden Gate Fields, which is owned by Magna Entertainment Corp., has agreed to allow Youbet.com to take wagers on its current meet, which began Sept. 17. Golden Gate, which broadcasts on HRTV and is part of Magna's XpressBet wagering platform, had previously been included in a statewide test that allowed betting on its races to be taken by all four ADW companies. But it has thus far been unable to come to a new agreement with TVG and Twinspires for this season.

During the board's six-hour meeting, account wagering was also at the center of a long-winded discussion on whether the CHRB has the regulatory power to require, as a condition of licensing, that no ADW provider hold exclusive wagering contracts with any Thoroughbred racing association in the state.

Board members expressed a desire to see all signals available to all licensed ADW providers, although Shapiro was concerned about whether the regulatory agency has the power to "interfere with the economic terms" of contracts between the companies and tracks. The discussion concerned only wagering exclusivity and did not extend to broadcasting rights.

Shapiro suggested that the board get an opinion from the state attorney general's office on how much power the CHRB has in invoking conditions on ADW licenses before meeting again in a month. He also directed the agency's staff to generate a proposed rule change for consideration.
 
During an eight-month period this year, an "experiment" that opened up wagering on all California tracks to all ADW providers was deemed a success, although some tracks benefitted more than others.

Robert Miller, general counsel for the CHRB, said placing a condition on the ADW licensees prohibiting exclusivity agreements was within "the prerogative of the board." All four ADW companies are up for renewal later this year.

Representatives from TVG argued that setting conditions against exclusive agreements and other contractual arrangements between companies and racetrack associations contradicts the intent of state legislation on ADW passed in California last year that included provisions from the federal Interstate Horseracing Act.

John Hindman, representing TVG, which is the largest of the ADW companies, noted that its business model differs from its competitors XpressBet and Twinspires (TrackNet Media Group). TVG is "not vertically integrated," he said, in that it is not involved with ownership of any tracks, making exclusivity an important component of its success

"We paid back $65 to $70 million to horse racing last year and we're proud of that," Hindman said. "The majority of people that watch horse racing on television are watching TVG."

Other ADW representatives, however, sided with non-exclusivity in wagering, saying that was the fairest way to allow competition for customers.

Commissioner David Israel suggested that tracks could work out "most favored nation" agreements with ADW companies, guaranteeing that all of them get the same terms and rates.



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