04/21/2008 11:00PM

Churchill signals locked in negotiations


Churchill Downs Inc. and its simulcast-marketing company remain locked in stalemates with Florida horsemen and a company that is negotiating contracts on behalf of horsemen for the rights to provide signals to account-wagering companies, officials on both sides of the dispute said on Tuesday.

The ongoing dispute has already resulted in the blackout of the signal from Churchill's Calder Race Course at nearly all interstate betting locations and account-wagering operations. Calder opened on Monday, and its next scheduled live racing day is Friday.

In addition, the stalemate continues to keep account-wagering customers from betting on races from Lone Star Park in Texas, which opened on April 12, and it is beginning to threaten the availability of the signal from Churchill Downs on telephone and Internet wagering platforms. Churchill starts its spring meet on Saturday, and the Kentucky Derby is one week from the opening date.

In Florida, Churchill has failed to reach an agreement with the Florida Horsemen's Benevolent and Protective Association on purses and the splits of anticipated revenue from slot machines at Calder, despite two weeks of negotiations. As a result, the horsemen have refused to give their consent to send Calder's signal to out-of-state locations, including account-wagering companies. The one exception has been New York City Off-Track Betting Corporation, the largest single bet-taker in the United States, which was covered by a previous contract, according to officials for both sides.

On Tuesday afternoon, Churchill announced that it would cut purses at Calder by 30 percent across the board beginning on Sunday if the dispute was not resolved.

On the account-wagering front, the two sides in the dispute are the Thoroughbred Horsemen's Group, a company formed late last year to collect licensing fees for simulcast signals on behalf of horsemen, and TrackNet Media, a simulcast-marketing company formed by Churchill Downs and Magna Entertainment early in 2007. A number of horsemen's groups have assigned their account-wagering rights to the Thoroughbred Horsemen's Group, including groups in Kentucky, Texas, Florida, Ohio, Pennsylvania.

So far, the horsemen's group and TrackNet have not come to terms on one contract for the rights to any signal controlled by TrackNet, which includes all the racetracks owned by Churchill and Magna. The horsemen's group has been pressing TrackNet to grant horsemen one-third of the revenue from account wagering on TrackNet's signals as a license fee. Currently, horsemen receive approximately one-fourth of the revenue, according to officials, though those percentages can vary widely depending on the track and the account-wagering provider.

Scott Daruty, the chief executive of TrackNet, said Tuesday that the negotiations have failed to produce any movement in the position of the Thoroughbred Horsemen's Group.

"We've sent proposals to them, and all I get in return is the one-third model," he said. Daruty said that the model sought by horsemen is not feasible considering the racing industry's tenuous economic position.

The situation regarding the Churchill signal is the most complex. According to Churchill Downs and officials who represent horsemen in Kentucky, the individual simulcast rights to the Kentucky Derby, Kentucky Oaks, and Woodford Reserve Turf Classic are already exclusively held by Churchill Downs, through a simulcast agreement signed with horsemen in 2006.

As a result, the Derby, Oaks, and Turf Classic will almost certainly be available on two account-wagering sites - twinspires.com, which is owned by Churchill, and XpressBet, which is owned by Magna - regardless of how the negotiations proceed. The availability of the other undercard races on May 3, the date of the Kentucky Derby, and May 2, the date of Oaks, has not been resolved.

David Switzer, the executive director of the Kentucky Thoroughbred Association, which represents owners in Kentucky, said that his group intended to honor the 2006 contract granting Churchill Downs the exclusive distribution rights to the three races. Switzer said, however, that the owners' group is adamant that horsemen in Kentucky receive one-third of the revenue from telephone and Internet betting on all the other races from Churchill Downs.

Bob Reeves, the executive vice president of the Thoroughbred Horsemen's Group, said that Churchill could afford to adopt the one-third model on Derby and Oaks days because Churchill charges simulcasting sites half the revenue on all wagers on those two days. Horsemen typically receive half of the fee charged for a simulcasting signal.

"They're already almost there," Reeves said. "You throw in a couple of points for a source-market fee, and it's done."

Source-market fees are distributions made to horsemen in the markets where an account-wagering customer is physically located.

Last year, TrackNet failed to come to an agreement with two major account-wagering companies, Television Games Network and Youbet.com, on the signals from Churchill on Oaks and Derby days, leading to a torrent of complaints from customers of the two operations - the largest domestic account-wagering companies in the country.

TVG and Youbet have still failed to reach broad agreements to take the signals controlled by Churchill and Magna, and so it is likely that in-home and telephone betting on the Derby and Oaks will be limited again this year to twinspires.com and XpressBet, even if negotiations with the Thoroughbred Horsemen's Group are successful.