Online Wagering Brings Tension to Racing Industry

by scrosby on June 6, 2008

When the world turns its eyes to Belmont Park tomorrow to watch Big Brown try to win thoroughbred racing’s Triple Crown, it’s a chance for the racing industry to try to win over new fans. But, as WFPL’s Stephanie Sanders reports, a dispute between horsemen – the people who own and train the thoroughbreds – and track owners may alienate some of the sport’s fan base.

Remember when we couldn’t watch new episodes of Grey’s Anatomy and the Daily Show suddenly got a lot less funny? The Hollywood writers strike was all about getting a bigger piece of the internet-distribution pie. It’s the same growing pain being felt by many companies that sell or show their wares on the internet…and Kentucky’s signature industry is no exception.

In fact, it may be the last hope for the horse industry.

“The one thing that’s growing in market share is the online wagering business.”

Churchill Downs Incorporated is one of the groups involved in the dispute. Senior Vice President Kevin Flanery says the company got into the online betting business early last year when it launched its own advance deposit wagering, or ADW, company called twinspires.com – at a cost of 100-million dollars. It differs from other forms of betting in that participants must pre-deposit money into an account and then use an online ADW company to place the bet. It’s growing in popularity for the same reasons iTunes has: convenience and interactivity.

“The online business is not just a good thing for Churchill Downs. It’s a necessity for the business.”

The problem is that horsemen say they aren’t getting their fair share. They’re trying to learn from mistakes made during the off-track betting boom. Betting was originally only available at the racetrack, and only on races at that track. When off-track-betting was introduced, tracks and horsemen negotiated a smaller percentage of betting revenue for themselves because they assumed those bets would be new money. But it wasn’t. Betting just shifted from on-track to off-track sites where simulcasting was available.

Martin Maline of the Kentucky Horsemen’s Benevolent and Protective Association says they have to get it right this time.

“We just feel that, look, we can’t do another situation like we did with simulcasting, we need a larger share of that revenue.”

So they asked Churchill Downs for a bigger cut of the internet betting revenue and were rejected. horse_racing.jpgThey then pulled permission to have races at Churchill Downs simulcast on advance deposit wagering websites – which is their right under federal law. Shortly after that, Churchill Downs cut purses by 20-percent.

The horsemen contend it was a retaliatory move, but Churchill Downs claims it’s pure economics.

Churchill Downs’s Kevin Flanery says if the requests of the horsemen were met, twinspires.com wouldn’t be able to make money.

“We can’t get into a position where two businesses that are losing money are taking money from one another. Because ultimately that’s a recipe for failure.”

Federal anti-trust laws prohibit Flanery from disclosing the exact amounts – or even percentages – horsemen, the track, and the ADW company split in betting revenue.

While the two sides continue negotiations, they may be losing their customer base.

“Right now, there are no winners.”

Ed DeRosa is the News Editor at the Thoroughbred Times.

“The fans are the ones who feel most shut out by this, and I think long-term, that is going to effect both parties more than either one is affecting each other right now.”

As the dispute enters its third month, Churchill races are still blacked out on advanced deposit wagering sites, online betting is down, and as a result, purses are down, which means fewer horsemen are entering their horses in races at the Downs. And DeRosa says it could go on much longer.

“Churchill’s going to ride this out. I think the horsemen have to play its hand before Churchill does.”

New York horsemen so far aren’t engaged in this dispute, so betting on tomorrow’s Belmont Stakes will take place on-track, off-track and online.

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