Horsemen Told of Rights to Influence Signal Fees

If horsemen believe they aren't receiving adequate compensation for their product, it's within their rights to be directly involved in the setting of host fees, a consultant said July 22 during the National Horsemen's Benevolent and Protective Association summer convention in Toronto, Ontario.

The National HBPA has addressed the revenue-to-purses issue at its twice-a-year conventions for several years. But when an official poll was taken during a meeting of the organization's Wagering and Alternative Gaming Information Committee, only a handful of affiliate representatives said they work with racetrack partners to set rates for signals.

Wilson Shirley, a consultant for the Thoroughbred Owners of California, said the federal Interstate Horseracing Act gives horsemen the right to set the price. But he also said, given the different categories of wagering outlets, horsemen should consider tiered pricing to maximize revenue and support live racing.

"It's not only the price of the signal that horsemen should concern themselves with, but fair distribution of total revenue," Shirley said.

Shirley offered a California model that lists nine categories of wagering outlets: Thoroughbred tracks, Standardbred tracks, Greyhound tracks, casinos, Indian casinos, account-wagering providers, off-track betting establishments, foreign entities, and rebate shops. He said that, for each different signal importer, the return of revenue to Thoroughbred racing varies.

In California, for instance, figures show that in 2000, 57% of the out-of-state handle on Thoroughbred racing was wagering through other Thoroughbred tracks. This year, the figure is 42.5%, Shirley said. In 2000, account wagering made up 6% of the total amount wagered out of state on the California product; this year's it's up to 23%, he said.

The end result is a reduction of about 10% in revenue for Thoroughbred horsemen. Some outlets, Shirley said, have no obligation to return revenue to support Thoroughbred purses.

"Horsemen's associations can and should evaluate out-of-state betting systems taking bets on their races," Shirley said. "Horsemen have the right under the law to do this, and they have a good reason to do it. You don't need to take the lead from the tracks."

Arkansas HBPA director Bill Walmsley asked Shirley what could be done when track management says tiered pricing would put their facility at a competitive disadvantage with other tracks in the simulcast marketplace. Shirley said California horsemen have found such resistance is "often a bluff," and that in most cases, the market will bear increases in host fees.

There is increasing evidence importers have gained substantial power in the marketplace. For instance, this winter New York City Off-Track Betting Corp. offered Turfway Park, considered a premier nighttime signal in the winter, a 1% host fee for its signal. (The industry standard is 3%.) The track and Kentucky HBPA rejected the proposal, but off-track handle on Turfway races declined substantially.

In Michigan, an importer offered Great Lakes Downs only $500 a night for it signal. Horsemen balked, said Gary Tinkle, executive director of the Michigan HBPA.

"Our board absolutely didn't want to go that way," Tinkle said. "It was the first time our board really addressed the issue."

Florida HBPA executive director Kent Stirling related the situation at Calder Race Course, where the Churchill Downs Simulcast Network handles the track's signal negotiations. He said, on several occasions when CDSN and racetrack cooperatives couldn't agree on price, the Calder signal was pulled from outlets unbeknownst to the horsemen and even Calder management.

"I wasn't notified," Stirling said. "I just took the hit. And you can guess who came out ahead. We've asked for every signal contact they've got, and what do I receive? A universal contract that's missing page 13--the rate page. This is taking trust to a new dimension as far as I'm concerned."

Stirling and other affiliate representatives also said they're hearing through the grapevine about alleged marketing and management fees linked to signal sales, as well as side deals tracks allegedly make with betting outlets, including account wagering companies. If the deals are in place, horsemen said, they receive no share of the revenue.

Shirley said California horsemen, at least, aren't aware of any side deals made by the state's racing associations with out-of-state betting systems.