Exclusivity: Racing Industry Debate Continues
by Tom LaMarra
Date Posted: 12/21/2001 10:30:36 AM
Last Updated: 12/21/2001 2:48:32 PM

The majority owner of a growing account-wagering service based in Ohio said Thursday exclusive contracts that govern betting could cripple the pari-mutuel industry at a time when it is poised for explosive growth. The comments came on the heels of a spirited debate between the TV Games Network and Magna Entertainment over exclusivity, an issue that won't go away.

Charlie Ruma, owner of Beulah Park, the majority owner of AmericaTab, targeted exclusive contracts. He said it is time the industry started looking out for what's best for the bettors.

"I'm fed up with this industry not reaching out to the fan," Ruma said. "All the fan really cares about is access to play. (Account wagering) is our best opportunity in five decades, and we have a giant like (Gemstar-TV Guide International, parent company of TVG) telling us how to do business. As long as we let racing's elite create deals of exclusivity with TVG, our industry is going to fall apart."

TVG chief executive officer Mark Wilson disagrees, and has stated his point on more than several occasions. In recent comments on the issue, he said: "Content exclusivity. Without it, you cannot get this sport on television. Simply look at the NBA, NFL, NHL, MLB, PGA, NASCAR, the Olympics, etc. Content exclusivity is essential for any meaningful television distribution."

Chip Tuttle, communications consultant for TVG, said the company, "just like NBC paid a rights fee for the Triple Crown, has in essence paid a rights fee for exclusive content" via its $100-million investment to give the racing product broad distribution through state-of-the-art technology. He also said bettors are best served when they can watch races on television, and the only "meaningful way" to accomplish that is through exclusivity.

Ruma said his concerns are more tied to wagering than television broadcasts. AmericaTab, whose wagering hub is located in Oregon, handled $3.3 million in November through telephone and Internet platforms. Handle in December could clear $4 million, Ruma said. The company said it now has 13,000 account-holders, 7,000 of which were added this year.

Ruma said the issue of exclusivity came to a head when he read published reports on the debate between TVG and Magna, which plans to launch its own distribution system, during the University of Arizona Symposium on Racing. Then, Turfway Park in Northern Kentucky told him AmericaTab could no longer offer wagering on its races by Internet or telephone.

"How stupid is that?" Ruma said. "We have 13,000 account-holders, Turfway Park is struggling, and we have TVG saying the track can't distribute a signal that people want to play. We have a cable company that doesn't know diddly-squat about racing dictating how we'll operate our business."

Ruma said there are ramifications in Ohio and beyond. River Downs, a one-third owner of AmericaTab (Beulah Park owns two-thirds of the company), and Lebanon Raceway, an Ohio harness track, aren't permitted to simulcast the Turfway signal because the three tracks share the same market. Under Ohio law, all tracks must have access to signals imported from out of state.

River Downs and Lebanon Raceway have waived their rights to the Turfway signal, but could reverse that decision and remove the signal from all Ohio outlets.

"If they're going to shut us down, we're going to shut them out of the state of Ohio," Ruma said. "If it's going to be a war, it's going to be a war."

Turfway Park president Bob Elliston said the track pulled out of the AmericaTab deal because TVG deployed in Ohio. The exclusive arrangement is maintained in states in which wagering through TVG is available, he said.

"TVG was recognizing the spirit of the contract," Elliston said. "Charlie has done a good job, and we wish AmericaTab the best. But we will continue to support TVG. We've seen a significant increase in revenue. It has been a good deal for us, and we have a sense it will be even better (when TVG launches in California)."

Wilson said TVG is more than willing to discuss a licensure agreement with AmericaTab similar to the one is has with Youbet.com. He said AmericaTab has done so in the past for major races.

"We have an open licensure policy, but we're not going to sit there and let somebody who has no costs freeload on the back of (TVG's) investment," Wilson said.

On Friday, Ruma said he has tried to negotiate for signals from Magna-owned tracks, such as Gulfstream Park, but was told no deal. Ruma said the way he understands it, access to Magna signals will be available only through a Magna wagering service or the company's strategic partners.

Magna officials have not yet released details on their account-wagering strategy, other than to say it will be Internet-based through a company Web site. There has been no public discussion of source-market fees through a Magna-operated system. Company president Jim McAlpine couldn't be reached immediately for comment.

TVG returns 10.5% of every dollar wagered to tracks and horsemen in the market in which a bettor resides. It also pays the standard host fee for signals, which usually is 3%. From September 1999 through February 2001, about $1.95 million in source-market fees were paid to Kentucky racetracks and horsemen.

Other account-wagering providers have been branded as poachers. AmericaTab, though, pays source-market fees, Ruma said.

Ruma said under the AmericaTab model, a non-affiliate track -- he used Suffolk Downs in Massachusetts as an example -- is paid a 3% host fee, and another 7% on all wagers made by AmericaTab account-holders within a 25-mile radius of the track. Affiliate tracks get 2% on top of that, as well as 1% equity in the company for $10,000 and assistance in building a Web site wagering portal.

AmericaTab is the first account-wagering provider since TVG to make it a point to make public its source-market fee scheme. The company is comprised of Winticket.com, BrisBET.com and TsnBET.com. Negotiations are under way with potential affiliates.

AmericaTab, which this year moved its hub to Oregon from Ohio, is the former Ohio TAB, which was formed in the mid-1990s. Ruma said he decided to expand the service in March 1999 when Beulah Park received a $35,000 check for source-market fees based on seven weeks of wagering by people in the Columbus, Ohio, market through other providers.

"I said, 'I'd better get into this business,'" Ruma said. "Otherwise, my market is going to be owned by outsiders."

Ruma said "it's great to watch races on TVG," and racetracks "should be chomping at the bit" to help expose the product to a broad audience. But he said he draws the line when it comes to exclusivity restrictions on wagering. He went so far as to say it could constitute restraint of trade.

Ruma noted that this summer, AmericaTab handled $427,000 on the Saratoga meet, and $957,000 on the Del Mar meet. He said the difference came because wagering on Del Mar was available through Internet and telephone platforms; Saratoga wagering was offered only by phone.

"Distribution is the key to our industry," Ruma said. "TVG can do what it wants to with TV presentation, but don't screw around with (other companies' wagering programs)."

Wilson said TVG has "performed" by virtue of the fact is now reaches almost eight million households. Wagering has tripled in the third quarter of this year compared to the same period in 2000, he said.

For its part, Magna has called for deregulation in the pari-mutuel industry and wants a free marketplace. Company chairman Frank Stronach has said businesses should be allowed to compete, and may the strongest survive.

In recent comments, John Van de Kamp, president of the Thoroughbred Owners of California, said he has some problems with TVG's exclusive contracts, but the TOC isn't a party to the contracts. It appears as though California bettors will have to open more than one account to wager on signals from all the state's tracks.

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