Account wagers prove to be a rough road for Churchill Downs

[clevfan]

April 30, 2008


Account wagers prove to be a rough road for Churchill Downs

Churchill CEO admits problems hard to solve

By Gregory A. Hall
courier-journal.com

Account wagering by telephone or online represents the growth area of the stagnant $15 billion pari-mutuel market.

Louisville's Churchill Downs Inc. entered that market a year ago, starting its own TwinSpires.com and later purchasing other account-wagering sites.

That helped trigger a dispute between account-wagering companies that forces many advance-deposit account bettors to have multiple accounts to bet all the tracks available to them.

At the time, Churchill President and CEO Bob Evans apologized to horseplayers who would be frustrated as account-wagering companies dueled.

But he said he thought the market could resolve those issues in a year.

Almost to the end of that year, Evans concedes he likely was wrong.

The latest account-wagering dispute means customers can't even bet races from Churchill Downs on the company's TwinSpires.com service because horsemen want a bigger share of those account-wagering dollars for purses.

"It may take me a little longer than I thought, but we'll get there," he said.

Evans said he remains convinced that Churchill's approach to account wagering is better than what existed before the company entered the market and the issues will be resolved.

He said Churchill's efforts have been successful already with New York and California races being available to account-wagering platforms.

But tracks like Keeneland Race Course and Turfway Park have arrangements with TVG and aren't available on TwinSpires.

Similarly, Churchill hasn't been available on the Television Games Network, or TVG, its former account-wagering partner.

But new disputes with horsemen over account-wagering revenues dominate the landscape this week as Saturday's 134th Kentucky Derby approaches.

Horsemen in Kentucky and Florida have blocked racing signals from being sent to account-wagering companies, something they can do under federal law.

The Thoroughbred Horsemen's Group is representing horsemen in several states, including Kentucky and Florida, where Churchill has tracks, saying that one-third of account-wagering revenue should go to purses.

In on-track betting, tracks and -- through the purses -- horsemen split revenues evenly.

But in account wagering, tracks and horsemen split a smaller share of the takeout, which Rick Hiles, the Kentucky Horsemen's Benevolent and Protective Association president, said amounts to about 3.25 percent each.

The account-wagering companies can keep the bulk of the takeout, he said.

"I love it because it's simple," Evans said of the one-third proposal. "… Problem is, it's economically unviable."

He said the one-third proposal would make an account-wagering company pay more for the races "to a number that just makes the whole business go unprofitable."

The other option would be for tracks to eat the cost, but Evans said: "We could do that. We could put the racetracks out of business, but then where are the races going to come from?"

Account-wagering companies or their affiliates pay for television, Evans said, a bill that he estimated industrywide at $20 million or more.

Competitor TVG is both an account-wagering and television company.

Churchill and Magna Entertainment Corp. jointly own the HRTV network and separately operate their own account-wagering sites.

"It's the ADWs (advance-deposit-wagering companies) that are paying that bill," Evans said. "At some point, maybe the Internet or Internet protocol TV can reduce that cost. … But for right now, right now the reality is HRTV and TVG are out there, and they're very expensive properties to produce."

The Thoroughbred Owners and Breeders Association endorsed the horsemen's efforts this week.

A statement from Chairman Bill Casner and President Dan Metzger said: "Racetrack companies that own ADW companies are incentivized to redirect wagering from on track to their ADW company by the current pricing model, as they are able to retain more revenue from an account wager and pay less to purse accounts than when the same bet is made at their track."

They estimated that owners invested $3.3 billion last year with $1.1 billion in purses.

Evans, who lives on a Woodford County breeding farm, acknowledges that the horse owners are losing money, as are the breeders and some tracks, he said.

"A framework of change that says, 'Ah, here's our solution. Let's take money away from that money-losing group and give it to this money-losing group,' " he said. "That's not progress."