04/17/2008 11:00PM

Horsemen press for a bigger share


A company set up by horsemen to negotiate contracts on signal rights for account-wagering operations is beginning to influence the shape of the in-home betting market.

The company, Thoroughbred Horsemen's Group, has so far failed to reach an agreement with TrackNet, a simulcast marketing partnership owned by publicly traded heavyweights Churchill Downs Inc. and Magna Entertainment Corp., on the in-home wagering rights to the signal from Lone Star Park, a Texas track Magna operates that opened last Friday. As a result, the signal from Lone Star has not been available to any in-home wagering operation for the first week of the meet.

In addition, THG is negotiating with TrackNet on the signal rights to the Calder Race Course meet in Florida that starts Monday. THG officials said on Friday that they have made "no progress" in settling the issue, which could put the availability of the Calder signal in jeopardy as well. Calder is owned by Churchill.

The THG was formed late in 2007 by several horsemen's groups. The company has taken a hard line on its negotiations with TrackNet over the past several weeks, insisting that revenues from account-wagering operations be split equally among three parties: the horsemen, the host track, and the account-wagering operator.

"We're all about two things," said Bob Reeves, THG's executive vice president, who conducts the negotiations on behalf of the company with Wilson Shirley, a Lexington-based racing consultant. "We want open access to all account-wagering operations, and we want a fair share of the betting revenues. Those are our two tenets."

Account-wagering handle has been the only growing segment of the pari-mutuel market for most of the past decade. Domestically, handle through account-wagering operations likely tops $2 billion annually; another $1 billion or more is estimated to flow through offshore rebate shops, though figures are hard to come by.

Racetrack signals have typically been sold to account-wagering operations at a rate ranging from 2 percent to 8 percent of handle. That revenue is usually split between the host track and the horsemen at the track. In addition, some account-wagering operators pay source-market fees to horsemen and racetracks within a specified geographic radius of the customer making the bet, though those fees vary widely. After those fees are paid, the account-wagering operation retains the rest of the revenue, which is the difference between the takeout - approximately 20 percent - and the fees paid.

THG officials say that on average, horsemen are receiving about 4.5 percent of each wager that flows through an account-wagering operation, and that they believe horsemen should receive approximately 7 percent.

Critics of THG have said that the model that the organization supports does not fit the economic reality of the racing industry. Scott Daruty, the chief executive of TrackNet, has called the model "unrealistic," and said that few account-wagering operations would agree to buy signals at the rates that would be necessary to give horsemen a 7 percent share.

TrackNet's entry into the market last year was one impetus behind the formation of THG. TrackNet's owners each control account-wagering operations - Churchill's is called twinspires.com, and Magna's is called XpressBet - and horsemen believe that the companies can afford to cut horsemen in on a larger share of the revenue because Churchill and Magna, in many cases, are collecting revenues as both the host track and the account-wagering operator.

Lone Star Park's absence on an account-wagering platform has already upset many horseplayers, but a much larger problem is looming. The Kentucky Horsemen's Benevolent and Protective Association is a member of the THG, and the group could take a hard line on the signal rights to the upcoming Churchill Downs meet, which begins on April 26. The Kentucky Derby - which attracts more wagers than any other race on the U.S. calendar - is scheduled for May 3 at Churchill Downs.

Reeves would not comment on whether the THG is already negotiating on behalf of the Kentucky horsemen for the in-home rights to the Churchill signal, and officials for the horsemen's group did not return phone calls on Friday.