TVG's Wilson Responds to Comments by Magna's McAlpine

Mark Wilson, president and CEO of TVG, has issued a lengthy statement in response to widely-reported comments made by Jim McAlpine, President and CEO of Magna Entertainment Corporation, at the University of Arizona's Race Track Industry Program's "Symposium on Racing." (Go to McAlpine Challenges Industry, TVG to Embrace Free Enterprise to see story about McAlpine's comments).

Here is Wilson's statement:

"We have read reports of Jim McAlpine's comments regarding TVG at the Symposium and frankly find them to be amazing given the true facts of the situation.

No entity is better positioned than TVG to realize the industry's goal of getting this sport on television around the world and creating new fans. We have invested over $100 million in television and account wagering and we have performed. Racing reaches nearly 8 million households on television 12 hours a day, every day because of TVG, which is a huge advance for racing and benefits every participant in the industry directly or indirectly. And we have also set the bar for quality television production of racing not only in our daily studio show, but also through special programming such as "The Works," coverage of the yearling sales and on-location special events from our partner racetracks – all of which require significant resources and add create interest in racing's important events.

Wagering through TVG for the third quarter more than tripled year over year and our rapid rate of growth continues in advance of launching in the California marketplace. Together with our content and patent licensee Youbet.com, TVG will produce substantial wagering handle for partner racetracks this year. Our source market fee revenue sharing plan ensures that we return a much higher percentage of wagering dollars to support live racing than other account wagering operators. Additionally, TVG has carriage agreements in place with most of California's largest cable and satellite television operators including AT&T, Dish Network, and Adelphia Communications and we are positioned to aggressively market racing in California next year.

As a division of Gemstar – TV Guide International, Inc. ($14 billion market capitalization), TVG enjoys tremendous access to their powerful patented Interactive Program Guide technology, TV Guide Magazine, TV Guide Channel, etc. Further, Rupert Murdoch's News Corporation is Gemstar's largest shareholder. News Corporation owns powerful media properties like FOX Sports, FOX News and FOX Television Network.

Even when horseracing is widely distributed on television, we still must compete for the consumer's attention. The average digital cable or satellite system today offers over 250 channels as viewing choices. How will the racing industry get consumers to notice one new channel? The answer is simple – through marketing, promotion, advertising, and a relationship with the interactive program guide that helps users navigate through all of these channel choices. Gemstar – TV Guide International can help TVG, and the racing industry, in all of these areas.

Gemstar – TV Guide International and TVG also clearly understand that technology is essential to the future of this sport in an increasingly complex media and entertainment industry. TVG has invested in R&D over the last seven years and spent millions of dollars developing patented technologies to enable consumers to wager on racing via the Internet, personal computers, interactive television, wireless handheld devices, IVR telephone and mobile telephone systems.

Magna's position that racing can still have a broadly distributed presence on television without content exclusivity means one of two things: it either demonstrates a clear lack of understanding of the television and entertainment industries or, to the contrary, it demonstrates Magna's understanding that as the global media and entertainment industry continues to consolidate, it is unlikely that Magna will be able to compete successfully in this market and is only trying to keep TVG, which has already demonstrated the ability to do so, from succeeding.

Content exclusivity. Without it, you cannot get this sport on television. Simply look at the NBA, NFL, NHL, MLB, PGA, NASCAR, the Olympics, etc. Content exclusivity is essential for any meaningful television distribution. The point is as simple as this – would NBC still devote airtime to the Triple Crown and Breeders' Cup races if every television network could show the races live? Would CBS or FOX show NFL games on Sunday if they could be viewed on other networks? Without exclusivity, the content would hold no value to distributors and, therefore, no appeal – as one would not have any assurance of a value return on investment.

Fortunately, our track partners have a better understanding of the media and entertainment industry. They realize that without granting exclusive television rights, their races will never make it to television. They also realize that without marketing and promotion, consumers will never notice racing and that patented technology is essential for giving consumers choice and convenience. They understand the "big picture" and realize that TVG, with the backing of Gemstar – TV Guide International, can, and does, get this industry a sustained television presence.

We view Magna's stance as nothing more than an attempt to deflect attention away from the real issues at hand and from the questions that they have repeatedly shown that they cannot answer. What are Magna's plans for patent-protected interactive wagering, premium television production, broad-based television distribution and marketing to mainstream audiences? How does Magna plan to attract new fans and create incremental growth for the industry? Is Magna going to offer source market fees to support live racing? TVG answered all of these questions long ago.

If Magna's plan is simply to do interactive wagering through a website and video streaming, the industry should reject that plan. It will signal that Magna only wants control of as much of the existing market as possible and that they have little regard for growing the market for racing beyond what it is today. Absent television, this strategy will simply provide a convenient alternative for existing racing fans that will cannibalize the economics of racing for everyone but Magna.

We regret that we are forced to respond to Jim's statements and certainly hope that we don't have to negotiate through the media. Magna has been afforded every opportunity to have their content on TVG either exclusively or non-exclusively at terms similar to our other racetrack partners. They have also had the opportunity to enter into a Content Agreement and Patent License with TVG, which incorporates Magna's idea of "reciprocal rights."

TVG has been engaged and responsive throughout this rather lengthy negotiating process with Magna. We remain willing to negotiate a mutually beneficial deal with Magna if one is possible. The true supporters of this industry, the fans, deserve no less."