Mid-Atlantic Tracks, Churchill Working on Rate Plans

The Mid-Atlantic Cooperative and the Churchill Downs Simulcast Network continued negotiations April 24 in the wake of a standoff that threatens simulcast of the May 3 Kentucky Derby to wagering outlets in the Mid-Atlantic region.

The cooperative represents 17 Thoroughbred and Standardbred tracks in a six-state region that accounts for almost 25% of total handle in the United States each year. The contract dispute concerns simulcasts from all six Churchill Downs Inc. racetracks: Arlington Park, Calder Race Course, Churchill Downs, Ellis Park, Hollywood Park, and Hoosier Park.

Martin Lieberman, executive director of the cooperative, said he had a brief conversation with CDSN president Karl Schmitt Jr. the morning of April 24. Both parties, Lieberman said, "are working independently to come up with additional proposals."

The Mid-Atlantic Cooperative members are Delaware Park, Dover Downs, and Harrington Raceway in Delaware; Laurel Park, Pimlico Race Course, Ocean Downs, and Rosecroft Raceway in Maryland; Atlantic City Race Course, Freehold Raceway, Meadowlands, and Monmouth Park in New Jersey; Philadelphia Park, Penn National, the Downs at Pocono, and The Meadows in Pennsylvania; Colonial Downs in Virginia; and Charles Town Races in West Virginia.

The tracks in the Mid-Atlantic region are largely importers, and the handle they produce each year gives them considerable clout when they band together. Meadowlands alone does about $600 million a year in wagering on site, which makes it the largest single betting outlet in the United States.

In the fall of 2001, the Mid-Atlantic Cooperative pulled the plug on the Keeneland signal when the Kentucky track lowered takeout rates. Importers argued the rate cut skewed simulcasting economics and took a bite out of their bottom line. The dispute was resolved, though terms of the agreement were never released. Keeneland ended up restoring old takeout rates at a subsequent meet.

Lieberman said the issue of the Kentucky Derby signal came up after the cooperative and CDSN were unable to strike a deal for the company's package of tracks. CDSN then demanded that Mid-Atlantic racetracks pay unprecedented rates for the Derby if a master agreement could not be reached, he said.

The current rates or the proposed rates haven't been made public.

CDSN president Karl Schmitt Jr., in a statement released April 23, indicated negotiations are continuing.

"CDSN is still interested in reaching an agreement with representatives of the Mid-Atlantic Cooperative," Schmitt said. "We have negotiated in good faith, and as a result, have offered to continue sending CDSN signals to Mid-Atlantic outlets and plan to import their tracks' simulcast signals while discussions continue."

Of the CDSN Thoroughbred tracks, Hollywood opened April 23, Calder opens April 25, and Churchill opens April 26. Hoosier Park began its Standardbred meet in late March. The Mid-Atlantic outlets didn't simulcast the Hollywood opener and apparently won't take the other signals until a deal is sealed.

When asked if Philadelphia Park would like to have the dispute resolved by Derby Day, track chief executive officer Hal Handel said: "We'd like to have it resolved by this weekend (for the opening of the Churchill meet)."

Lieberman, who serves as spokesman on cooperative business, also said the Mid-Atlantic tracks want the other signals in the CDSN family restored as quickly as possible.

In early April, racetrack officials privately said there was some concern over a plan by CDSN to raise simulcast rates. (The amount couldn't be confirmed, but it was believed to be one-quarter of 1%.) At that time, Schmitt told The Blood-Horse the company doesn't discuss rates or individual agreements.

"We believe we offer an attractive product, and we price it to be competitive," Schmitt said.

The rate paid for signals generally ranges from 3% to 4%, though rates vary deal to deal. Premiums are paid for big-race signals such as the Triple Crown and Breeders' Cup events.

In one of the more celebrated simulcast disputes, Kentucky and Ohio knocked heads after full-card simulcasting was legalized in the Buckeye state in 1996. When River Downs and Lebanon Raceway, two Cincinnati-area tracks, offered simulcasts, handle at Turfway Park in nearby Northern Kentucky dropped considerably.

The situation led Kentucky horsemen to block River Downs and Lebanon from taking Kentucky signals, but after a few years, the two Ohio tracks ended up taking the signals at a higher rate. One year, River Downs and Lebanon paid a prohibitive 18% fee just to simulcast the Derby, and ended up losing money on the deal.

Officials said even the slightest increase in simulcast rates can impact business, especially when handle is significant. For example, if a betting outlet handles $20 million a year on a signal, and the rate the exporter charges goes up one-quarter of 1%, the importer would take a $50,000 revenue hit.