12/01/2014 6:02PM

Impasse over simulcast fees for Stronach tracks

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Major simulcast sites in Ohio, Pennsylvania, Texas, and several other states on Monday dropped the signals from tracks controlled by one of the U.S.’s largest racing companies due to an impasse over the terms of a new contract, officials for both sides of the talks have confirmed.

The impasse is pitting Monarch Content Management, which controls the simulcast rights to Santa Anita Park, Gulfstream Park, Tampa Bay Downs, and a handful of other major racing signals, against the MidAtlantic Cooperative, a collective of Thoroughbred and Standardbred racetracks that banded together more than a decade ago to increase their leverage in simulcast negotiations. Monarch Content Management is owned by the Stronach Group, the private racetrack company.

The impasse has yet to have a significant impact due to the paucity of Monarch tracks that held live race cards Monday, the first day of the blackout. However, Laurel Park in Maryland and Tampa Bay Downs in Florida resume racing Wednesday, while Golden Gate Fields in Northern California resumes racing Thursday. More significantly, Gulfstream Park in south Florida begins its highly popular winter meet Saturday, and Santa Anita begins its winter meet Dec. 26.

Though they would not provide specifics, officials for both sides said the impasse revolves around the rate that Monarch is seeking for the signals. So-called content providers like Monarch, Churchill Downs Inc., and the New York Racing Association have been aggressively seeking higher rates for simulcast signals over the past several years, with some success.

Scott Daruty, the president of Monarch, said on Monday that Monarch was seeking changes to the structure of the contract that would charge some sites in the cooperative a higher rate than other sites. The cooperative currently represents 23 racetracks, including nearly all of the tracks in Pennsylvania, Ohio, and Texas, along with a smattering of harness tracks along the Eastern seaboard.

“Some of those sites [in the cooperative] don’t even run live racing anymore, and they’re still insisting that they all pay the same price,” said Daruty. “We’ve questioned whether that one-size-fits-all model should continue to apply.”

Daruty said Monarch offered to allow the sites to continue to offer wagering on the signals while the two sides talked through December, but that the cooperative declined.

“It’s unfortunate racing customers are going to pay the price,” Daruty said.

Phil O’Hara, the executive director of the MidAtlantic Cooperative, confirmed that Monarch offered to allow simulcasting to continue on an interim basis. He said Monarch had not yet responded to a proposal the cooperative sent Oct. 30, and that agreeing to the short-term extension was not in the cooperative’s best interests.

“We figure it’s better to discuss this with a long-term resolution as the goal,” O’Hara said. “We’ve been waiting since Oct. 30 to get a proposal back from them, and we figured that was enough time.”

Content providers like Monarch and Churchill have been pushing up simulcast rates at a time when the racing industry is struggling to maintain its betting figures. Handle on U.S. races has declined nearly 30 percent from the high-water mark in the mid-2000s, and a sharp decline in the foal crop has begun to put additional pressure on the live racing product. At the same time, the industry has shown no indication that it is creating new fans or stopping its loss of market share to competitors in the gambling and entertainment businesses.

Like Churchill, the Stronach Group owns and operates a national account-wagering company, XpressBet.com, giving the company an enormous amount of leverage over simulcast sites that do not take the company’s signals. If the impasse results in a local blackout, customers who do not face state-based restrictions on ADWs can open accounts with the online companies that offer the signals, which, in most cases, are owned by the companies that own the blacked-out tracks.

The MidAtlantic Cooperative said customers of its members wagered $1 billion last year. The Thoroughbred members include Parx Racing, Penn National, Atlantic City Race Course, Delaware Park, Charles Town, Colonial Downs, Suffolk Downs, Sam Houston, Retama Park, ThistleDown, Mahoning Valley, and Belterra Park, along with about a dozen harness tracks.