The head of a Kentucky horsemen’s association said his group withheld approval for the Churchill Downs signal to go out to a pair of offshore rebate shops for the undercards of the Kentucky Derby Presented by Yum! Brands (gr. I) and Kentucky Oaks (gr. I), and is aggravated that the track is blaming horsemen for a decline in handle on the two programs.
Kentucky Thoroughbred Association executive director David Switzer said that while his group gave approval for Churchill Downs to send the signal to the Elite Turf Club and Racing & Gaming Services for its spring meet, which began April 26, it specifically withheld consent for the May 2-3 undercards.
The KTA and the Kentucky Horsemen’s Benevolent and Protective Association are both locked in a stalemate with Churchill Downs Inc. over revenue shares of wagers made with certain advance deposit wagering companies, including CDI's TwinSpires.com platforms, and Magna Entertainment Corp.’s XpressBet.com. As a bargaining tactic in the battle, the KTA and Kentucky HBPA have withheld approval for the signal to those ADWs.
A previous contract signed by the KTA and Kentucky HBPA allowed signals to go out for three races on the May 2-3 cards: the Oaks, the Derby, and the Woodford Reserve Turf Classic (gr. IT).
Switzer said the KTA put in writing that it didn’t want the May 2-3 undercards to go to Elite and RGS, a pair of high-volume betting operations that are located on the Caribbean islands of Curacao and St. Kitts, respectively.
“We had to respond to their simulcast sites they wanted to send to,” Switzer said of the approval process. “And we gave our approval for all sites, with the exception of certain ADWs, which we spelled out. RGS and Elite Turf were included in that list not to have it.
“Now, I understand they got the signal. And the handle (on the Derby card) was only down 2%. Our feeling was that we didn’t want to drive customers of TwinSpires and XpressBet to the offshores.”
A CDI executive said that per the Interstate Horseracing Act of 1978, which governs the distribution of signals, Churchill Downs is only obligated to deal with the Kentucky HPBA. The IHA defines a horsemen’s group as “the group which represents the majority of owners and trainers racing there.” The Kentucky HBPA, which says it has more than 6,000 members, has a larger majority of horsemen than the KTA.
“We still try and work with the KTA, but the Kentucky HBPA is the one we have to get approval from,” said Kevin Flanery, a senior vice president with CDI. “We want to have a good relationship with all of the horsemen’s groups that are represented in Kentucky.”
Kentucky HBPA president Rick Hiles said his group didn’t specifically request the May 2-3 undercard signals be withheld from the offshores, but said he was told by Churchill Downs president Steve Sexton that Churchill wasn’t going to send them the signals anyway.
“We didn’t tell them not to,” Hiles said. “They just told me they weren’t going to send it when I questioned about the places. Then I said, 'I guess there is no point in discussing it.' ”
Flanery responded to Hiles’ assertions by saying the negotiation process in the days leading up to the Oaks and Derby were “fluid,” and that CDI ultimately went with what was contractually stated by the Kentucky HBPA.
“We were having conversations with them every day, and the information changed on a daily basis,” Flanery said. “There were times we thought we weren’t going to be able to send to a couple of sites, but in the end, we went with the best way to get broadest distribution of the signal.”
Handle decline reaction
In separate statements issued following the Oaks and Derby, which realized all-sources handle declines of 7% and 2%, respectively, Steve Sexton in part blamed the drops on horsemen’s refusal to accept deals offered to them.
“It is unfortunate that horsemen in Kentucky and Florida prevented so many fans from enjoying a full day of wagering on Churchill Downs’ races,” Sexton said in a news release, noting a parallel negotiation impasse over the Calder Race Course signal. “Had more ADW and Florida customers been given an opportunity to participate, we could have seen a record day.”
Switzer takes umbrage with the comments of Sexton.
“I’m probably going to get chastised for saying this, but I am starting to get (angry) that Churchill Downs is only telling one side of the story,” he said. “It’s not the horsemen. It’s Churchill Downs' unwillingness to do what they say they are going to do. If they are going to be disingenuous, and say it’s all the horsemen’s fault for all of this, I don’t appreciate it.”
Switzer said horsemen have only received an offer of a quarter-point increase over last year’s contract. The 3.75% fee offer Switzer said Churchill offered is well below the “one-third” revenue-share model horsemen are trying to implement, which translates out to about a 7% fee on a 21% blended takeout.
“And we wouldn’t accept it,” he said. “They wouldn’t negotiate. They told us this is it.”
Switzer said CDI also would not discuss his interpretation of statements CDI chief executive officer Robert Evans has made for the last two years regarding open distribution.
“He has said everybody ought to get the signals,” Switzer said. “But they didn’t send it to Youbet. They didn’t send it to Youbet last year. They wouldn’t talk to TVG. We could have been a lot higher (in handle) if they had gone to TVG and Youbet."
“And when their own TwinSpires had a big hiccup, that might have taken care of the 2% (in Derby handle decline),” Switzer said with a chuckle, noting a technology problem that prevented TwinSpires.com customers from wagering for about 45 minutes leading up the Derby.
Purse cuts in works
Several horsemen’s associations, including the Kentucky HBPA and KTA, are using the Thoroughbred Horsemen’s Group to negotiate revenue-sharing plans. An impasse in negotiations at Calder has resulted in CDI filing an antitrust lawsuit against the THG, the Florida HBPA, and others in Florida federal court.
Calder announced a 30% purse reduction it claims it implemented in part to a drop in handle resulting from the curtailment in signal distribution.
On May 7, CDI officials said another purse cut at Calder is possible, as well as a purse cut at Churchill Downs the week of May 11.