Account Wagering Structure Said to Need 'Urgent' Action

The Jockey Club has weighed in publicly on the topic of account wagering economics, urging the pari-mutuel industry to urgently work together to devise a model that benefits horsemen, racetracks, and patrons.

The Jockey Club has weighed in publicly on the topic account wagering economics, urging the pari-mutuel industry to urgently work together to devise a model that benefits horsemen, racetracks, and patrons.

Account wagering, also called advance deposit wagering, was among several pressing topics on the agenda Aug. 19 for The Jockey Club Round Table Conference in Saratoga Springs, N.Y. Presentations by individuals representing a racetrack company, a horsemen’s group, and an account wagering provider indicated a lack of agreement on a structure for the pari-mutuel industry’s leading growth channel.

Jockey Club president Alan Marzelli supplied figures indicating it took Major League Baseball five years to recover from the 1994 strike.  Horse racing, he said, can’t afford to wait that long. He again used Equibase, the partnership of The Jockey Club and Thoroughbred Racing Associations, as an example of how stakeholders can work toward a common goal.

“Companies and organizations throughout this industry have drifted away from collaboration in recent years, but the view here is that we won’t solve this--or any of the industry’s problems--by each going our own way,” Marzelli said. “We need to resolve our problems in a collaborative and cooperative manner.

“Quite frankly, I’m not sure we could find the unity to create Equibase today, given the current mindset that permeates the business environment in this industry. We are more than just a collection of corporate entities and trade associations that happen to co-exist in the same industry. We are a highly interconnected group of stakeholders that together form the nucleus of the most interactive sport in the world. In times like this, I think it’s important to remember that.

“As I said at the outset, we didn’t get to this point overnight, and it’s unrealistic to think we can solve our problems in one day. But we must begin to address them with a sense of urgency--for the sake of our racetracks, our horsemen, and our fans.”

Marzelli also read from a letter sent to The Jockey Club by about 400 horseplayers who posted a petition on the forum Web site The horseplayers said the current environment that requires them to sign up for multiple wagering accounts to gain access to various signals is chasing away bettors.

Presentations by Robert Evans, president and chief executive officer of Churchill Downs Inc.; Joe Santanna, president of the National Horsemen’s Benevolent and Protective Association; and David Nathanson, senior vice president and general manager of TVG, boiled down to whether exclusive content contracts--a staple of the TVG business model--benefit the industry. While TVG remains under fire for that practice, it noted several of its major partner tracks registered substantial handle gains in the second quarter of 2006.

Evans questioned numbers released by TVG and cited three problems with account wagering: exclusivity doesn’t foster innovation; sufficient revenue isn’t returned to tracks and horsemen; and the model costs too much for what it delivers. He is unconvinced that televising races drives handle.

“The industry has spent about $500 million buying television in the last 10 years, and in my view, 10 years of televised racing hasn’t moved the handle needle,” Evans said. “If distribution matters, every show on ABC, NBC, and CBS would be a hit.”

Earlier this year, CDI purchased 50% of Magna Entertainment Corp.-owned HRTV to have a TV distribution outlet for its tracks. CDI previously had an exclusive arrangement with TVG.

Nathanson acknowledged the industry has changed since it largely embraced TVG when it launched in 1999. Despite criticism, he said the network “is the only way to conveniently access horse racing on a daily basis,” and noted handle on races from partner tracks jumped at least 30% in the second quarter.

Evans challenged the claims. “Let’s get real,” he said.

“People will bet on what they can watch on television,” Nathanson said. “The facts--wagering on TVG and its track partners--are indisputable.”

When asked after the Round Table how TVG is dealing with repeated criticism of its business model, Nathanson said: “We stuck to telling our story, and we took the high road. We could have dispelled the misinformation directed at TVG but in the interest of the industry presented facts, not rhetoric.”

Santanna said the National HBPA advocates a simpler account wagering system that would eliminate sub-licensing fees and some source-market fees; standardize fees paid to get races on television; remove content restrictions for total access; and separate TV rights from wagering rights. HBPA affiliates account for $597 million of purses paid in a year and $8.7 billion in annual handle, according to HBPA figures,

“Protecting turf through exclusivity is a detriment to our sport,” Santanna said.

Santanna also touched on an issue discussed at the National HBPA summer convention in July: horsemen’s rights under the Interstate Horseracing Act of 1978, which gives them the power of consent in sending signals. He cited the IHA and noted horsemen have a say in the pricing model, as well.

“Horsemen’s groups no longer want racing associations to negotiate (contracts) beyond what’s in an original agreement without (horsemen) being involved,” Santanna said.

After the presentations, National Thoroughbred Racing Association president and CEO Alex Waldrop said the organization has no plan to form a task force to study ADW, although the matter has been discussed. He said the NTRA believes “progress is being made behind the scenes.”