10/23/2006 11:00PM

California set to review account-bet licenses


The California Horse Racing Board is scheduled on Thursday to review license applications for account-wagering companies amid debates over how much of the telephone and Internet betting revenue should be shared with horsemen and whether the account-wagering companies should be required to share their signals.

The board's review is expected to draw officials and lawyers of the three account-wagering companies whose licenses expire at the end of 2006: XpressBet, Youbet.com, and Television Games Network (known as TVG). The licenses were most recently renewed at the end of 2004 for a two-year period. The racing board would need to approve

licenses by the end of this year for account-wagering companies to operate in the state in 2007.

The license renewal process has been a contentious subject this year, largely because of complaints from the Thoroughbred Owners of California, which represents the state's horsemen, and some members of the state's racing board. The

owners' group has argued that horsemen deserve to receive a larger cut from account-wagering revenue, especially from TVG, and have pressed regulators to require the companies to share signals from California racetracks.

Richard Shapiro, the chairman of the California Horse Racing Board, said a host of issues regarding licensing will be on the table at Thursday's meeting, but he said he could not predict which issues might be approved by the board, which has seven members.

"It's going to be very complex and probably very controversial," Shapiro said, referring to the possible conditions for licensing, including a ban on exclusivity contracts and the establishment of rates for simulcast signals. "The bottom line is that many commissioners feel that we need to get more revenue going to the tracks and horsemen."

Drew Couto, the president of the Thoroughbred Owners of California, said Tuesday that the organization's complaints about TVG stem from late last year, after TVG declined in October to negotiate with horsemen over the fees the company pays to racetracks. Those fees are typically split between the tracks and horsemen.

TVG's legal counsel, John Hindman, said that TVG had decided not to negotiate with the horsemen because California law does not require the horsemen to be a party to negotiations with racetracks. Couto disputed that interpretation and said that the California Horse Racing Board had required the negotiations as a condition of licensing after legislation established account wagering in the state in 2002.

The issue of exclusivity has also been a sore point to racing fans in California and the account-wagering companies that compete with TVG. Because TVG has exclusive contracts with Del Mar Thoroughbred Club, Hollywood Park, and Oak Tree at Santa Anita, competitors to the company are required to negotiate a licensing agreement with TVG to offer wagering on those signals.

Couto said that the owners' group has been pressing TVG to allow its competitors to broadcast the races on their Internet sites but that TVG has resisted. Couto and TVG officials were scheduled to meet Wednesday afternoon to try to iron out the issues before the board meeting.

David Nathanson, the senior vice president of TVG, said that TVG continues to believe that exclusivity is the proper course for the company, arguing that the network would be unable to get broad distribution on cable and satellite systems without it.

"As far as broadcast television is concerned, [exclusivity] is the basis of the business," Nathanson said. "You don't see the [same NFL game] on multiple channels. The way you get carried is by having unique content."

Nathanson also said that TVG objected to the idea of mandated fees to racetracks and horsemen, contending that TVG's negotiations are based on a business model whose costs and expenses are vastly higher than its competitors' because of its focus on its network channel.

Because of the complexities, the issue may not be completely resolved on Thursday, officials said. After Thursday, the California racing board has one more scheduled meeting, on Nov. 30.

"I'd feel more confident betting on a 2-year-old race in March than giving you an opinion about what is going to happen at that meeting," Couto said.