CDI Chief Says Look at Revenue, Not Handle

A roughly 50% decline in account wagering handle on its two biggest days of the year had little impact on revenue from handle, Churchill Downs Inc. reported May 9 during a teleconference on first-quarter earnings.

For the May 4 Kentucky Oaks (gr. I) and the May 5 Kentucky Derby Presented by Yum Brands! (gr. I), Churchill Downs lost up to $12 million in handle from TVG and based on 2006 figures. The two account wagering services didn’t offer wagering on Churchill races this year because of conflicts with TrackNet Media Group, the entity that now buys and sells simulcast signals for CDI and partner Magna Entertainment Corp.

Handle through account wagering services that did offer wagering both days--AmericaTAB, CDI-owned, and MEC-owned XpressBet--was up a combined $6.2 million, CDI president and chief executive officer Bob Evans said. And though account wagering handle through those five services was cut in half from last year, Evans said an increase in host fees brought the revenue bottom line to almost even.

“Everybody makes the mistake of equating handle to revenue,” Evans said. “The handle we gave up was at lower host-fee rates.”

The host fee for the handle in question was 5.49% last year and 8.25% this year, Evans said. The net result was only a $21,000 loss in revenue for both days, half for Churchill and half for horsemen.

(Host fees are the amount paid to racetracks for their signals. They don’t include source-market fees, which, in the case of TVG, return tens of millions of dollars to tracks and horsemen on top of the base percentage. TVG has long contended its model returns the most revenue to racing.)

Evans indicated the results of the Oaks and Derby--reduced handle but almost a wash in revenue--are evidence the TrackNet Media plan can work.

“This is why I’m confident as other tracks consider how to distribute their signal, they’ll find this economic model appealing,” Evans said.

Evans said the “end game” is allowing every account wagering platform to have all content, which in turn would increase distribution, competition, and ultimately revenue. TrackNet Media was formed in part to target TVG’s exclusive contracts for content; CDI contracts began expiring in March.

“We’ve sent TVG a number of proposals (for content-sharing),” Evans said. “There is nothing we can do about it at this point. We hope (tracks with TVG exclusives) will see the merit of the model I’ve described and choose to make their content available to all tracks. I don’t see a scenario under which any track wouldn’t want to make its content available on a non-exclusive basis.”

Total handle May 4-5 at Churchill was down about $7.5 million from last year’s Oaks and Derby days. Evans said field size was a major issue--of the 23 races held, 10 had smaller fields than in 2006.

“There were four races that really killed us, one on Oaks day and three on Derby day,” Evans said. “That cost us about $6 million in handle.”

Meanwhile, CDI officials said a temporary slot-machine parlor at Fair Grounds in Louisiana is expected to open in October. Operations in Louisiana, including the reopening of Fair Grounds and two off-track betting parlors, helped CDI trim its losses for the first quarter of 2007.