Consider this chilling scenario: Customers of several advance deposit wagering companies – and possibly some large off-shore rebate shops – won’t be able to place wagers on the Kentucky Derby Presented by Yum! Brands (gr. I) through those entities.
That premise of shut-out wagering is a live possibility at the present moment, as negotiations between members affiliated with the Thoroughbred Horsemen’s Group and TrackNet Media Group are at a stubborn impasse.
The THG, which represents 18 horsemen’s groups across the nation, has told TrackNet, the content consortium of Churchill Downs Inc. and Magna Entertainment Corp., that it will withhold ADW signal distribution rights for the upcoming Churchill Downs spring meet – as well as at Calder Race Course – unless its demands for a new revenue-sharing model are met. The signals have already been withheld at Lone Star Park, which started its meet April 10.
“So far, the Texas horsemen, the Florida horsemen, and Kentucky horsemen have all taken the same position; and that is, they will not consent to any sale to any account wagering company, unless that account wagering company has a signed licensing agreement with THG,” said TrackNet’s president, Scott Daruty, in an April 18 telephone interview.
Leaders of the Kentucky Horsemen’s Benevolent Protective Association and the Kentucky Thoroughbred Association, which collectively must grant such approvals for the Churchill Downs meet, confirmed the stand-off.
“At this time, we are not ready to give our approval for the signals to go to (ADWs) if we don’t have an agreement with them,” said trainer and Kentucky HBPA president Rick Hiles. ”We have put the ball in their court. It’s up to them.”
David Switzer, executive director of the KTA, added: “We have granted permission for Churchill to simulcast from track to track, and to some of the OTBs, but we are trying to work with them, and hope they will work with us on the ADWs.”
THG wants a third of the takeout revenue to be distributed to purses, and feels current agreements between racetracks and ADW entities at times circumvent proper distribution of funds.
“There is so much confusion right now with the existing ADW model in that people can’t find the money, and they don’t know what to do with it when they get it,” said THG president Bob Reeves, criticizing TrackNet’s system of charging traditional host fees and also source-market fees for wagers made by ADW bettors located in a 25-mile radius around a racetrack. “And if they (racetracks) don’t pay it, people sometimes don’t even know it was coming. There needs to be more accountability in regards to these things.
“And right now, as far as I am concerned, you have large amounts of money being transferred around casually, with practically no accountability.”
Daruty has previously said the THG proposal can’t work because it would require unreasonable fees to ADWs, and wouldn’t work as a “one size fits all” model because of varying state regulations governing purse payouts.
“THG is requiring an economically infeasible deal,” he said. “Plus, they are requiring significant portions of the revenue to be distributed to the THG, for them to distribute as purse funds as they see fit.
“In my opinion, every racetrack is going to be opposed to paying fees to a national horsemen’s association, and then having that association then decide how purses are going to be allocated,” he added.
Reeves is also executive vice-president of the Ohio HBPA, which April 18 said it would let THG negotiate agreements for the upcoming Thistledown and River Downs meets. He said the purse redistribution Daruty references will not go to other jurisdictions.
“How would my members let money that is due to them go to other horse groups?” he said. “We are directed by our member horse groups, and our members are going to tell us where to send the money.
“Although Scott says the racetracks don’t want us to redistribute the money, I told Scott, as we go through this state by state, our horsemen’s groups will be glad to sit down with the tracks and have them reach a comfort level in how we are going to redistribute any money the THG collects and redistributes.”
WHO’S IN AND WHO’S OUT?
Excluded from the signal fray for the moment are ADWs that service customers within state limits, such as in New York. But some prominent off-shore rebate shops, such as Elite Turf Club and Racing & Gaming Services, may also realize a block-out from the Churchill meet, which starts April 26.
“I would hate to think the signals would go off-shore if they are not going to our ADWs,” Switzer said. “So I think it possibly could affect the two off-shore facilities. But I am hopeful that we will be able to work this thing out. I think Churchill Downs wants to work out what is best for the industry as a whole.
“And then the ADWs will have the signal, and the off-shores will have the signals, and we will build a fire, hold hands, and sing ‘Kumbaya.’ ”
But Reeves said the THG is not at this time focusing on off-shore shops, which includes as customers big-time bettors known as “whales.”
“We are taking one bite of the apple at a time,” he said. “We collectively, THG and TrackNet, have asked each other the same questions about off-shores. I have talked to the principals of off-shores and I still don’t have the answers.
“If someone is wagering a million dollars a year, does he deserve a volume discount? How much can you raise those prices to where they don’t play any more? It’s an answer that not only the horsemen need to focus on, but the racetracks as well.”
As of late afternoon April 18, Calder Race Course had not signed contracts with the Florida Horsemen’s Benevolent Association for Calder’s meet that begins April 21.
FHBPA members who have entered horses for Calder’s nine-race opening day card will run them even without a purses contract and other contracts, said FHBPA executive director Kent Stirling,
"We are not trying to stop racing," Stirling said.
Calder will be dark April 22-24.
Stirling said FHBPA feels it is "not far from an agreement" with Calder and its parent, Churchill Downs Inc., on a 2008 purses contract and a contract on future slot machines revenue. Calder could have a casino with slot machines as early as 2009, CDI officials have said.
The major issue remains a contract on advance deposit wagering.Calder needs FHBPA permission to send its simulcast signal to ISW tracks outside Florida, but does not need that permission to send its signal and imported signals to ITW tracks in Florida. Calder said Gulfstream Park is among tracks to which it will send signals on April 21, regardless of contract situations.
FHBPA will not sign purses and slot machines contracts unless it feels "there is substantial progress" on ADW negotiations, Stirling said.
No FHBPA-Calder meetings are scheduled for the April 20-21. But the horsemen "remain open to resuming talks," Stirling said.
“In our industry, deals are often cut on the eve of a meet’s opening,” he said. “So I am hopeful that happens again here, but I am not confident that it will.”
HANDICAPPING THE IMPACT
If things hold course, CDI’s Twinspires.com platforms and MEC’s XpressBet.com won’t have rights to the Churchill meet. Competitors TVG and Youbet.com weren’t likely to have the meet anyway, since they have been at odds with TrackNet since the joint venture was formed in March 2007. Neither TVG nor Youbet, which combined reported handle figures of $10.2 million on the 2006 Derby card, had access to the Churchill signal in 2007.
The all-sources handle of $168,018,982 was down 4.1% on the 2007 Derby Day card in a year-over-year comparison. On-track and simulcast totals were basically unchanged, so the $7.1 million decrease in all-source handle could easily be attributed in part to lost ADW wagers, though Churchill officials blamed it on smaller fields and threatening weather.
Derby Day handle last year for Twinspires.com, which was launched just days prior to the annual racing extravaganza, wasn’t reported last year, but wagers processed by the ADW company for the entire second quarter of 2007 totaled just $6.3 million, according to hub stats compiled by the Oregon Racing Commission. MEC reported XpressBet handled $7.6 million in wagers during the Derby week period.
Daruty and Reeves both said the upcoming Pimlico meet, which features the second leg of the Triple Crown, the Preakness Stakes (gr. I), appears to be open to wider ADW usage. Reeves said Maryland horsemen had granted approvals before recently joining the THG.
(The Blood-Horse correspondent Jim Freer contributed to this article)