Magna Releases Host and "Territorial" Fees for Account Wagering

Magna Entertainment Corp. said it would pay a racetrack partner in its new XpressBet account wagering system up to 60% of the takeout if the bet is placed with a 25-mile radius of that track.

The Canadian racing conglomerate outlined its account wagering strategy and proposed fee schedule in a letter released to the racing industry earlier this year. Some details of the letter were released Monday as part of a Bear, Stearns & Co. analysts report on account wagering.

MEC intends to pay host fees and source market fees, or "territorial fees" as it call them, as a percentage of the takeout rather than the handle, even though it acknowledges the differences in takeout between racing markets.

In its letter, the company said it would pay a host fee equal to 25% of the takeout (or approximately 5% of the handle), and pay an additional 35% of takeout (about 7% of handle) in territorial fees on any wagers made within a 25-mile radius of a partner that has a TV, Internet signal, and account wagering distribution contract.

Unlike the TV Games Network, MEC has said it will not seek exclusive contracts. An appendix to the letter outlined how any account wagering competitor would be able to reciprocally distribute its content through XpressBet. MEC president Jim McAlpine on several occasions has said the company believes account-wagering customers should have access to all racing content through all the service providers. He also said MEC would be willing to spearhead efforts to create an industry-owned account wagering company that would negotiate collective contracts with the service providers.

As for television, MEC said it plans to develop a subscription satellite service with multiple horse racing channels. Two of the channels would be produced by MEC with one channel dedicated to California racing and the other broadcasting races from XpressBet partner tracks. All racing content will be available through the Internet as streaming video, according to the letter.

MEC officials have said they are optimistic about the future of XpressBet based on their experience with Call-A-Bet, the telephone account wagering service it bought from Ladbroke Pennsylvania when it acquired The Meadows harness track in April 2001. The account wagering hub, owned by MEC and managed by Youbet.com, reportedly handled $135 million last year.