ON ATR: Churchill-THG impasse not moving any time soon..

[Kasept]

Bob Reeves was my guest tonight on ATR, and was great as he took a couple questions from upset horseplayers. Churchill simply does not want the THG to survive, and despite the fact that negotiations have slowly started back up between the two groups, there isn't a lot to be expected in the way of a resolution... A fascinating recent development in the impasse however was Frank Stronach throwing his support BEHIND THE THG because as a horseman, he appreciates their platform.

Reeves' piece (below) at the KY HBPA website is very interesting and can help those that don't have a complete understanding of the situation come to grips with the issues...

http://www.kyhbpa.org/NewsDisplay.asp

What, Exactly, Is the Thoroughbred Horsemen's Group Doing?
by Bob Reeves, Thoroughbred Horsemen's Group President

The Horsemen's Journal
9/10/2008

When traveling down the road of history, it is often difficult to perceive the key landmarks that indicate significant changes lying ahead. Sometimes they might be small enough to evade immediate notice, and sometimes there is just so much else on the horizon that they escape detection. The huge warning signs on the path of horse racing’s future have become abundantly clear, however: without some change in the way revenue from account wagering is divided, live racing is threatened with a strangulation of funds for both racetracks and horsemen. Ever since the Thoroughbred Horsemen’s Group (THG) was formed in late 2007, we have been working diligently to ensure that racing’s leaders see and understand these signs.

With account wagering the only real growth sector in pari-mutuel racing, advance deposit wagering (ADW) companies and licensed offshore operations now handle about 25% of the $15 billion wagered on Thoroughbred racing annually. Yet these businesses, eager to keep as much of the money for themselves as they can, return to racing interests 80% less per wagering dollar than do on-track or inter-track betting outlets.

What is the solution? It is constructively changing what has long been referred to as the “broken simulcast model.” We believe the best way to do that is to set aside two-thirds of account wagering revenue for racetracks and horsemen.

While that proposal does not immediately appeal to the ADW companies, they should look at the corresponding opportunity to gain unlimited and simultaneous access to all North American racing content.

The way to increase handle—and thus revenue to all parties—is to increase opportunities for betting. Ideally, racing would have an automated teller machine at every convenience store to reach the widest possible audience. Since that is not possible in this highly regulated world, ADW represents an excellent way to make our racing product available to the public.

We need to end the content wars. Part of THG’s aim through licensing negotiations on behalf of horsemen’s organizations is to help account wagering companies obtain racing content. If the ADW operations are ensured a steady supply of quality content, their customers will be able to depend on them and become more loyal—thus likely betting more.

We also need to stabilize access to racing content for the wagering public. There should be no need for someone to have accounts with three different ADW companies in order to bet on all the tracks they want to play.

Supplying content and guaranteeing a proper flow of revenue are the key factors in our efforts to enhance the account wagering system while supporting live racing.

We all must ask ourselves the question: do racetracks and horsemen exist to support betting companies, or do the betting companies exist in order to support horse racing? Horsemen and racetracks should not be spending the vast sums of money necessary to run our businesses just to make betting companies profitable.

It’s time to stop subsidizing the ADW companies. Rather than make a patchwork quilt of pricing, we should charge reasonable prices for our racing products and sell them to all the ADW operators and then let the ADWs compete. The point is we need to create a level playing field and let the ADW companies compete for customers based on the quality of their service.

Horse racing needs to wake up and smell the roses and declare that the reason these betting outlets exist is because of live racing. Without live racing, they have no product, and thus it is in everyone’s interests to keep live racing healthy through a proper supply of revenue from wagering. In addition to representing the horsemen in negotiating for licensing agreements with the ADW companies, THG also can help racetrack owners by offering a multi-jurisdictional conduit to horsemen’s groups, greatly simplifying the task of negotiating for simulcast rights. THG now has 19 members with the recent addition of the Oregon Horsemen’s Benevolent and Protective Association.

THG leaders continue to meet with horsemen’s groups around the continent in order to receive input, as well as keep them informed, on various issues, including the ADW question. In August, we traveled to Saratoga Springs and Del Mar for some of those meetings, and we continue to consider a variety of ways to strengthen live racing.

We have also been holding extensive discussions with executives at Magna Entertainment Corp. (MEC), who have been very receptive to working with horsemen. MEC Chairman and leading North American breeder Frank Stronach has told us that he views himself as a horseman and supports horsemen, and we’re working with him to come up with a solution to this ADW problem. A cooperative arrangement with MEC could be very significant. Not only does the company own such major racing venues as Santa Anita Park and Gulfstream Park, it also is a partner with Churchill Downs Inc. (CDI) in TrackNet Media Group, which buys and sells simulcast signals that account for 35% to 40% of total handle in the United States.

CDI, however, has sued the THG, its officers, the Kentucky HBPA, and the Kentucky Thoroughbred Association, alleging that our efforts to work on a solution to the ADW issue violate anti-trust laws.

In late July, attorneys for THG and the Kentucky groups filed a motion to dismiss the suit. We believe the Interstate Horseracing Act gives horsemen the right—and indeed requires them—to negotiate the percentage of off-track wagering revenues targeted for purses.

“Horsemen must protect themselves,” the motion states. “And they do so through their collective negotiations with entities like CDI. When those negotiations do not reach a mutually agreeable conclusion, the (Interstate Horseracing Act) is very clear: the horsemen have an absolute ‘veto’ right to withhold their consent, and that means there can be no interstate wagering on the affected races.”

CDI nonetheless claims that horsemen violate the law if they work together to negotiate new account wagering revenue distribution models. But our motion points out that “courts have consistently recognized that it would be nonsensical and would undermine statutory intent to preclude multiple groups from collectively engaging in the same conduct, to accomplish the same objectives that each group has a statutory right to engage in on its own.”

Meanwhile, the experience of Ellis Park has provided an intriguing insight into what can happen when racetracks and horsemen agree on how account wagering revenue should be distributed.

Before Ellis’ meet began this summer, Kentucky horsemen held firm on receiving a greater share of revenue from wagering. Ellis Park owner Ron Geary at first objected and said he might close the track, sparking Thoroughbred Racing Association (TRA)’s Executive Vice President Chris Scherf to criticize the THG and other horsemen for their efforts.

Scherf said, “Unfortunately, some horsemen’s groups believe their share can be increased beyond prevailing market rates by forcing the tracks to agree to a minimum pricing structure set forth by a new, third-party organization.

Tracks have been unwilling to pursue this approach because of legitimate business and legal concerns. Before additional damage is done to the racing industry, horsemen and racetracks must see the difference between short-term gains and a long-term strategy to be developed jointly. One side dictating to the other clearly will not work.”

Misunderstandings created by statements like these are unfortunate and place obstacles in the path of reaching constructive solutions. We responded to Mr. Scherf that we very much want to work with racetracks and would like to meet and discuss our strategies to increase the revenue distribution from account wagering for both tracks and horsemen, and we are pleased that he has invited THG to make a presentation as part of a panel at the International Simulcast Conference, which the TRA co-sponsors, on September 29.

Kentucky horsemen and Ellis Park eventually came together and agreed on a model similar to what we have been advocating and under which Ellis’ signal would be widely distributed among ADW companies for maximum wagering opportunities. This model has worked so well that the track implemented a 5% purse increase beginning on August 13 and extending through the rest of the meet.

“We are very excited about the partnership we have with the Kentucky HBPA,” Geary said in announcing the purse increase. “We hope our agreement with the Kentucky HBPA will positively impact the entire Thoroughbred racing industry. The innovative agreement Ellis Park leadership reached with Kentucky HBPA has allowed us to not only keep our doors open, but to buck an industry trend of declining purses.”

We appreciate Ron Geary stepping up to address the problem. Now he’s making money and horsemen are benefiting, too. It’s obviously working. The Ellis Park experience shows what broad, non-exclusive distribution can accomplish.

All of us in racing need to take a similar approach and be brave enough to take that step to ensure that live racing, both through purses and racetrack operations, is properly supported.

While we represent horsemen, our stand also is very racetrack friendly because we’re here to preserve racing. We want to keep the racetracks and the horsemen that provide the sport at those racetracks strong and healthy as far down the road to the future as we can foresee—and even further.