The Endless Fight

TThe California Horse Racing Board is scheduled to meet on Jan. 24 to consider, among other things, what to do about advance deposit wagering, commonly called telephone or account wagering in other racing states.

The horse racing industry in California fought hard to legalize account wagering. The state legislature passed a bill authorizing account wagering in 2000, but Gov. Gray Davis vetoed it. The following year, after the U.S. Congress approved legislation that cleared up any question about the legality of interstate and account wagering, California lawmakers passed legislation almost identical to what Davis vetoed in 2000. This time around he signed it, citing the previous year's federal legislation.

Unfortunately, the same industry that fought so hard to get account wagering is now fighting over what to do with it.

The Television Games Network has been banking on Californians wagering through its system, but Frank Stronach's Magna Entertainment Corp. owns Santa Anita, Golden Gate Fields, and Bay Meadows, which account for a large slice of what industry-speak now refers to as "content." (It used to be called horse racing.) Magna also owns Gulfstream Park in Florida and several smaller tracks.

TVG, on the other hand, doesn't own any racetracks, but it has very serious financial backing through its parent company, Gemstar-TV Guide International. Major shareholders in the company include media giant Rupert Murdoch and cable magnate John Malone. Rather than owning "content," TVG convinced most racetracks--Magna being the primary exception--to give the network exclusive broadcast and wagering rights to the tracks' races.

Part of the reason the tracks jumped onboard the TVG bandwagon was the promise of a wide distribution network. So far, however, growth has been slower than expected. The network is on cable in a few metropolitan areas, including Lexington and Louisville in Kentucky, and on digital cable systems throughout Maryland. TVG also is on the basic programming package of the Dish Network satellite, and it is expected to be available on digital cable in Los Angeles County within two months.

Magna, according to its chief executive officer, James McAlpine, first went on a mission to "accumulate content," and now will concentrate on how to distribute it. Magna currently does not have the presence of a media company like Gemstar to gain access into a large number of homes, but Stronach and McAlpine apparently believe they can get that access without TVG.

The company has kept its account wagering and television business plan--if it has fully developed one--close to the vest. McAlpine has said he hopes to have Santa Anita races on the air in some form by the end of the current meeting. But it seems a sure bet that Magna won't have the kind of distribution opportunities TVG has.

McAlpine and others at Magna are smart enough to understand that TVG will have a much easier time getting on additional cable outlets in California and elsewhere if it can offer racing from Santa Anita, Golden Gate, Bay Meadows, and Gulfstream Park. Likewise, they know that keeping Magna races off TVG will hurt the network's chances to expand.

TVG isn't the only one getting hurt in this. The California racing industry will suffer financially if it doesn't take full advantage of the legislation it sought and received last year. But the people suffering the most from this impasse between Magna and TVG are racing fans across the country who are being deprived of watching and wagering on some of the year's best races. The infighting is turning them off in a big way.

Magna officials may think content is king. But it's going to take much more than mere content to make account wagering a success in California.