Tracking Signals and Revenue: The Battle Begins

The National Horsemen's Benevolent and Protective Association is trying to track where signals go and whether horsemen are getting the revenue to which they're entitled. Comments made during a Jan. 28 workshop indicated that process has a long way to go.

A simulcasting workshop, held as part of the National HBPA winter convention in Phoenix, Ariz., was designed to lay the groundwork for the organization's efforts and help it come up with a mission statement. The session ended up posing even more questions, and it left attendees wondering just how much control the industry has over its product.

Panelists talked of signal "leakage" when a product is passed on beyond a wagering hub or racetracks listed on a simulcasting contract. Horsemen wondered whether they're receiving the proper amount of revenue from Internet wagering. And they all acknowledged that any explosion of international simulcasting would only make matters more difficult.

"It's hard to envision a world where we know where everything is going," said Barkley Porter, who is assisting the National HBPA through Stevenson & Associates. "There are number of racetracks that don't know where their signal is going."

"There is a redistribution issue," said Rebecca Stevenson-Douglas, president of Stevenson & Associates. "Is that product being protected as it's passed down the line? The signal is leaking out the back door, and nobody is paying attention."

National HBPA president John Roark called the endeavor a fact-finding mission with a goal of maintaining information for the industry. When asked for an estimate of how much money horsemen might be losing, he said: "I don't think anybody knows yet."

David Stevenson of Stevenson & Associates said horsemen sell themselves short. He said the hundreds of millions of dollars invested by racetrack companies such as Churchill Downs Inc. and Magna Entertainment pales in comparison to the $2 billion to $3 billion invested in horses that race in the United States.

"The world seems to forget that investment," Stevenson said. "When you look at the investment by horsemen, it's incredible."

Kirk Brooks, president of Racing and Gaming Services, which caters to big players who receive "dividends" for wagering on horse races, said horsemen must be involved in the process to ensure that wagering deals are properly structured. RGS, which rewards its customers for wagering through its system, is interested in making sure horsemen get their share, said Brooks, who called on horsemen, racetracks, and gamblers to devise a business model.

"Gamblers are making an investment even with the 20% takeout (rate)," Brooks said. "It comes back to customer care, and what the customer is demanding."

British-based Betfair, which offers online proposition wagering, was discussed during the workshop. The company, with a booming business that handles as much as $45 million a week, may be new to U.S. racing but not to the racing industry in Great Britain.

Rupert Arnold, chief executive officer of the British Trainers Federation, said Betfair pays the racing industry revenue up front. "Betfair went to the tracks and horsemen to discuss how to expand the market," he said. "They are feeding money back to the racing industry. Others haven't been so forthright."

Arnold also said the pari-mutuel industry is wrong to believe that the signal, or picture, has the highest value. He contends it's the data, or past performances, needed to make intelligent wagers.

"Income (for British racing) has doubled to $170 million based on the value of data, not the pictures," Arnold said. "People can't bet without data, but they can make a bet without pictures."

Horsemen have said how easy it is to open a bookmaking operation using a satellite dish and the Internet, where handicapping information is readily available. Roark said he has had discussions with Equibase, the industry's data provider, on how to perhaps secure the release of information.

The call for horsemen to work hand-in-hand with racetracks is viewed as necessary, though some horsemen are somewhat skeptical given past history in the area of contract negotiations.

Marty Maline, executive director of the Kentucky HBPA, said the very heart of the system is flawed. He indicated the root of the problem began when racetracks negotiated the first simulcast contracts.

"Our product was grossly underpriced by racetracks," Maline said of the standard 3% fee charged for signals. "When we found out it was worth much more than that, it was already set. I feel the racetracks were asleep at the switch, not the horsemen."

Roark said that, because of "federal issues," he didn't want to start a discussion about fees paid for signals. He said the National HBPA wouldn't discuss individual deals between racetracks and horsemen's groups, but he did say: "I've gotten comments from major racetracks that they're ready to work with us."