TOC Chairman: Deal is a 'Critical Benchmark'

In an open letter to the California Thoroughbred industry, Thoroughbred Owners of California chairman Jack Owens said the organization has taken its "stewardship role very seriously" in regard to account wagering, and said its agreement with Magna Entertainment is a "critical benchmark" for negotiations with other companies.

Account wagering operations by Magna and the TV Games Network were approved by the California Horse Racing Board Jan. 24. Wagering commenced two days later, and both companies reported a bump in activity.

Owens said TOC has struck a deal that "works to safeguard the industry against cannibalization of on-track betting, while allowing the (advance deposit wagering) providers to make good on their promises to promote horse racing." It also "presents the potential of a significant upside for building purse revenues as ADW grows," he said.

In addition, distribution for purses on wagers made by California residents on California races is about identical to what horsemen receive on win, place, and show bets on-track in California. Purses receive almost 22% more on bets placed by Californians on out-of-state races than is currently the case, and distribution for purses on out-of-state wagers on California races might be triple what is now paid on out-of-state simulcasts.

"This is an excellent deal for California's Thoroughbred owners, trainers, and breeders," said Owens, who noted TOC insisted breeders receive their historic share of out-of-state wagering revenue.

Negotiations continue with TVG and YouBet.com, which must resubmit its license application. Owens credited TOC president John Van de Kamp, board members Ron Charles and Drew Couto, and consultant Wilson Shirley for their role in previous negotiations.

In mid-January, a group called Concerned California Horsemen took out a full-page ad in Daily Racing Form. The organization accused the TOC of not being up front with horsemen on the accoung wagering issue.

"Much remains to be done in the ADW arena," Owens said in the letter. "Certainly, we are not satisfied that either of the newly licensed ADW systems are where they need to be in terms of television product and distribution. Magna is starting off with only a telephone and Internet wagering system. TVG does have some television product, with limited satellite and cable television distribution in place.

"If ADW is to succeed, TVG and Magna need to reach a broader and much larger audience."

XpressBet, Magna's account wagering service, pays a host fee equal to 25% of pari-mutuel takeout, according to company documents. In addition, XpressBet pays a racetrack with which it has a television and Internet signal distribution and account wagering agreement a territorial fee equal to 35% of takeout if a wager is placed by a person who lives within 25 miles of that track.

If a wager is placed by a person who lives within 25 miles of a track with which XpressBet has a television and Internet signal distribution and account wagering contract on a race run at that track, XpressBet will pay 60% of takeout to that track (25% of takeout as a host fee and 35% of takeout as a territorial fee).

"It is important to note that this model, when based on a 20% takeout rate, results in a host fee of 5% of handle, a territorial fee of 7% of handle, and a combined host and territorial fee of 12% of handle," the documents say.