Twenty years ago, in the infancy of whole-card simulcasting, there were fears that only the so-called "super tracks" would survive—those offering the highest-quality racing signals to receiving sites around the country.
That hasn’t happened, in part because of the structure of simulcast contracts and a revenue split that allowed receivers to take five times as much from the takeout as the track and horsemen where the live race was run.
Typically, the host track receives 3% for the sale of its signal, with the betting outlet getting roughly 15% or higher from the takeout. One-half of the revenue from the host and tracks receiving the simulcast signal goes into purses.
For example, if an Ohio racetrack handles a $2 wager on a race from New York, six cents is collected by the New York Racing Association, which then splits it with its horsemen. The Ohio track divides approximately 30 cents with its horsemen on the $2 wager.
If that same $2 wager was made on-track in New York, approximately 36 cents would be divided between the NYRA and horsemen.
Some would say this simulcast split isn’t fair to the track and horsemen putting on the show in New York, but the revenue going to the Ohio simulcast outlet helps put on its show, too. Without simulcast revenue, smaller racetracks (at least those without slot machines) would face hard times.
With limited exceptions usually tied to major races, prices for premium simulcast signals have not increased over time. With more and more wagering dollars moving away from the track where a live race is conducted, it has been difficult for many tracks to increase their revenue. Purses have stagnated, too.
The problem was compounded several years ago when offshore wagering sites were granted access to wagering pools. If a betting shop in Antigua paid the same 3% signal price, it would wind up with the same 30 cents as the aforementioned Ohio track on a $2 bet. But the offshore site has no horsemen to split revenue with and no racetrack infrastructure to fund. These operators began profit-sharing with their best customers, giving them up to a 10% rebate on every dollar wagered.
The rebates only served to expedite the loss of on-track wagers, since the rebaters often made recruiting trips to tracks to explain their benefits to high rollers. Frankly, I can’t blame the offshore sites for how they conduct their business, and can’t fault horseplayers for seeking a rebate. I do blame the racetracks and horsemen who have allowed this practice to go on.
One reason the offshore model has worked—to the benefit of the operators and the detriment of tracks and horsemen—is that tracks have virtually engaged in competition with one another to make their signals available to the rebaters.
The March 5 announcement that Churchill Downs Inc. and Magna Entertainment have formed a media management company, TrackNet Media Group, means these companies will try to prevent the leakage from the pari-mutuel pools by increasing the signal fee to the offshores. CDI and MEC own 15 Thoroughbred tracks combined, including some of the top signals: Santa Anita Park, Gulfstream Park, Churchill Downs, Arlington Park, Laurel and Pimlico, and Fair Grounds.
In the past, there have been concerns about possible anti-trust violations or price-fixing if tracks worked together on simulcast contracts. That issue was dismissed without great detail by Bob Evans and Michael Neuman, the chief executives from CDI and MEC, respectively, who fielded questions from reporters about TrackNet Media Group.
Addressing rebate shops is a crucial first step toward a new simulcast model, one that must be more efficient in returning dollars to the racetracks and horsemen who invest so heavily in live racing.
