04/14/2011 2:00PM

Smartphone apps for betting starting to catch on

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Mobile-phone applications that allow users to watch and bet on horse races are creating fresh challenges for an industry that has historically trailed behind the curve on technology and still struggles with the distribution of revenue from off-course wagering.

The applications, some of which have been in use for several years, are being embraced by many racetracks and betting companies. To supporters, smart-phone applications promise to make betting more convenient by enabling customers to wager from anywhere through simple interfaces. Of course, racing is not alone in that regard: Every major industry is busy developing apps in the rapidly expanding, ultra-competitive mobile marketplace.

But the promise of the devices is also creating concern within some corners of the industry. Horsemen and tracks are united in their belief that features-laden mobile devices represent the future of betting. There is a concern, however, that use of mobile wagering applications will further cut into the shares of betting revenue that have flowed to horsemen and racetracks at a time when most segments of the industry are struggling from a precipitous decline in handle over the last three years.

By and large, bets placed on a track’s live races through a mobile device return far less to the track and horsemen putting on the race than if the customer made the bet through the track’s mutuel windows. Typically, the bet on the mobile device might net the host track and its horsemen 5 percent, whereas the bet through the mutuel window would net 15 to 20 percent.

That problem, to be sure, is not new. Racetracks in most jurisdictions have had to deal with cannibalized revenue from players using telephone accounts to make bets from the grandstands for more than a decade. The difference with mobile devices, critics contend, is that they are expected to be far more ubiquitous in the coming years as wagering platforms than telephones ever were, especially among a younger demographic that racing is desperate to hook. That is raising the stakes for tracks and horsemen to address the imbalances now before it’s too late.

“The industry, the track operators, the content distributors, the horsemen, we all need to sit down and have a serious discussion about how these [revenue] splits are going to be broken out in the years to come,” said Remi Bellocq, the executive director of the National Horsemen’s Benevolent and Protective Association, an umbrella group for dozens of local horsemen’s organizations. “We’ve been telling all our affiliates lately that when your purse negotiations come up, you’ve got to put this issue on the table and deal with it.”

The three largest account-wagering companies in the United States – Twinspires.com, Television Games Network, and XpressBet.com – already offer betting applications on a wide variety of mobile devices. Under those applications, splits from the bets are determined by the contract that the account-wagering company has with the track and its horsemen. Under those deals, the track and its horsemen usually share approximately 5 percent of the bet, though the percentage can range lower or higher, depending on the track.

The contracts also typically include so-called source-market fees, which are paid by the account-wagering companies to tracks and horsemen that are within a certain radius of a customer’s listed residence. Under the system, when a bettor whose primary residence is two miles from, say, Fair Grounds in New Orleans places a wager through an account-wagering operation on a race from a California track, Fair Grounds and its horsemen are also cut in on a portion of the bet, and the California track and its horsemen get the commission provided in their contract.

Those contractual terms remain in effect regardless of the bettor’s actual location, according to officials of the account-wagering companies, complicating matters when mobile devices are involved. For example, if the New Orleans resident is on vacation in California and is using his mobile device to play a race at Santa Anita while in Santa Anita’s grandstand, the California racing interests would get approximately 5 percent, and the Louisiana interests would still get a cut.

Alternatively, if the bettor waited in line for a mutuel teller or self-service machine, the California racing interests would get all the revenue from the bet, up to 20 percent.

“I can understand the sensitivity of that situation,” said Rohit Thukral, the president of Twinspires.com, the market-leading account-wagering company owned by Churchill Downs Inc. that recently launched the industry’s most advanced mobile betting application. “Our policy is that we would encourage the customer to use the ontrack facilities if they are at a racetrack.”

Already, one racetrack, Keeneland in Lexington, Ky., is attempting to push back against the spread of non-affiliated mobile devices in its grandstand. The track is beta-testing its own betting application that can be accessed only when the user is connected to Keeneland’s ontrack wireless network. The trial was launched Wednesday, available to the first 30 customers who sign up to use the app after walking into the grandstand.

Track officials hope customers who don’t already have Internet- or phone-betting accounts will try out the application. For customers who already have accounts, the hope is that they choose to use the Keeneland application instead of their existing account, even if developers concede the track’s program, as designed so far, won’t be able to offer any extra bells or whistles and may not be able to match rebate rewards that are available to most account-wagering customers.

“We’re excited about it,” said Brad Lovell, the vice president of technology for Keeneland. “We think it has a lot of promise.”

The Keeneland application was developed by United Tote, the bet-processing company that is now owned by Churchill Downs Inc. following its merger last year with United Tote’s parent company, Youbet.com. In effect, a Churchill-owned company is creating a competing product to the company’s own Twinspires application.

Ben Murr, the president of United Tote, said many other tracks have expressed interest in using the platform that was developed for Keeneland. Murr said the attraction is obvious: Not only do mobile devices allow the track to connect with young, tech-savvy fans, but they can also lead to lower operational costs for tracks and a better experience for fans by steering customers away from mutuel lines, a particular hassle for a small track that gets big crowds, like Keeneland.

Whatever the outcome of the Keeneland test, Thukral, the Twinspires.com president, said that use of mobile devices will continue to swell, for all manner of applications, including wagering. He said racing would be smart to tie its future to the devices or risk getting left behind once again.

“Horse racing is not immune to the general march of technology around us,” Thukral said. “And there is no mystery why these devices are so popular. They’re full-blown computers that fit into your pocket. It’s a laptop you can carry around with you.

“Oh, and you can make calls on them.”