Account-Bet Dispute Continues; Hawthorne Signal in Jeopardy

Churchill Downs Inc. exercised its contractual rights in regard to an account wagering dispute in Illinois by revoking permission for TVG sub-licensees to take bets on the Arlington Park signal, a company official said a day after the Arlington meet ended. Meanwhile, it remains unclear whether the Hawthorne Race Course signal would be available through TVG or other account wagering outlets.

The situation came to light Sept. 6 when the Illinois Thoroughbred Horsemen's Association suspended the Arlington signal to TVG. Illinois THA president Joe Kasperski said horsemen attempted to force negotiations between TVG and Youbet.com over the licensing fee TVG charges Youbet.com to offer wagering on the Hawthorne Race Course meet that begins Sept. 15.

Because Arlington and Hawthorne have exclusive contracts with TVG, Youbet.com and other account wagering companies must pay TVG sub-licensing fees for the products. Youbet.com chief executive officer Charles Champion has said the company opted not to offer Hawthorne because it doesn't make economic sense given the sub-licensing fees.

"It's kind of in TVG's hands right now," Illinois THA president Joe Kasperski said the afternoon of Sept. 13. "We'll see if TVG and Youbet can work things out. Hopefully, it will be resolved so we can all make money."

Hawthorne president Tim Carey couldn't be immediately reached for comment, nor could Youbet.com officials. Thus far, TVG has refrained from issuing a statement on the Illinois situation, and it isn't known whether TVG and Youbet.com are in negotiations.

On Sept. 12, closing day of the Arlington meet, the Churchill Downs Simulcast Network pulled the Arlington signal from Youbet.com, which continued to offer wagers on Arlington even though TVG could not. Julie Koenig Loignon, CDI vice president of communications, said Arlington's signal was "used for leverage" and its customers hurt even though the track isn't directly involved in the dispute.

"We were alerted to the horsemen's decision to pull the Arlington signal from TVG the day the change was to happen, and did not have a chance to voice our concerns or be part of the discussion before that decision was made," Koenig Loignon said Sept. 13. "Because the Illinois horsemen have revoked their permission to send the Arlington signal to TVG, we now have the right--per the terms of Arlington's TVG contract--to revoke our authorization to send the Arlington signal to TVG sub-licensees, such as Youbet.com and AmericaTab.

"We elected to take back those rights (Sept. 12) because we are not happy with the circumstances in Illinois and would like the opportunity to revisit the situation with regard to account wagering providers who carry Arlington's signal now that the Arlington meet is over."

Koenig Loignon said CDI has discussed the situation with all parties in an attempt to understand the dispute. She said the company believed "it was important to take action immediately" even though it was closing day at Arlington.

Mike Weiss, general manager of AmericaTab, an Ohio-based account wagering company with a hub in Oregon, indicated the company received a letter from CDI Sept. 12 saying the company couldn't take the Arlington signal. AmericaTab also pays TVG sub-licensing fees for exclusive product.

Weiss said he planned to contact the parties involved to find out where things stands for the upcoming Hawthorne meet. AmericaTab took the track's signal earlier this year.

"Right now, I'm kind of standing on the sidelines," Weiss said.

The issue of sub-licensing fees has been raised at meetings of the National Horsemen's Benevolent and Protective Association, members of which have questioned why horsemen have no role in the process. In addition, former CDI president and CEO Tom Meeker, during an earnings teleconference in March, indicated the account wagering model needed revision.

Exclusive contracts the company's racetracks have with the TVG will begin to expire in March 2007. Meeker said CDI was considering its options.

"As we look to the future, several objectives are clear," Meeker said. "We must reorganize the business model in this area to ensure horsemen and racetracks obtain their fair share of revenue...And we must begin to operate an account wagering system or systems in a customer-centric manner. Our customers deserve more from the industry, and absent that, may go elsewhere."