Technology

Betting On the Horses

3/09/2007 7:06 PM Eastern

As the second horse in a two-horse match race, HorseRacing TV is hoping to gain ground after partnering with a famed track that used to have an exclusive arrangement with rival TVG Network.

Churchill Downs Inc. — which hosts thoroughbred racing’s biggest U.S. event, the Kentucky Derby, in just a few weeks (May 5) — has teamed up with HRTV parent Magna Entertainment Corp. in a deal that will deliver the Louisville, Ky., track’s television signal solely to HRTV when the new Churchill season opens in late April.

TVG said it will overcome the loss and, tellingly, said Churchill Downs races contributed just 13% of the overall betting “handle” (wagers placed) last year on tracks whose races were shown exclusively on the Gemstar-TV Guide International service.

“Churchill today represents a very small percentage of our total,” TVG senior vice president general manager David Nathanson said. “Any track we show on television, we’re able to drive handle to.”

That’s important to DirecTV, Dish Network, Comcast and other TVG distributors because their affiliation deals give them a small slice of that betting handle — which continues to grow on both services, despite the stagnant overall state of bets on horse racing in this country. TVG said its handle rose about 9% last year, to $433 million from $397 million in 2005. HRTV said its handle rose by 11%, or $15 million, which would put last year’s total at about $152 million.

Snapshot
HRTV: Horse Racing TV
* Betting handle refers to total amount bet on races run at affiliated tracks; a portion of that handle is paid to the TV carrier.
SOURCES: The companies, Multichannel News research
Date launched: January 2003
Owner: Magna Entertainment 50%, Churchill Downs (acquisition pending) 50%.
Top executive: Jim Bates, executive VP and general manager
Distribution: 13 million homes
Key affiliates: Dish Network, Comcast, Charter, Cox, Insight, RCN, Time Warner, AT&T and Verizon.
Betting handle* (2006): $152 million (est.)
TVG Network
Date launched: July 1999
Owner: Gemstar TV Guide International
Top executive: David Nathanson, senior VP and general manager
Distribution: 18.8 million homes
Key affiliates: DirecTV, Dish Network, Comcast, Cable One, Cablevision, Charter, Cox, Insight, Mediacom, RCN, Time Warner, AT&T and Verizon.
Betting handle (2006): $433 million

A 'SLIVER OF A SLIVER’

Neither network would talk about what slice of that wagering pie goes to the affiliates.

In general, TVG said, $20 out of each $100 bet on races at TVG-aligned tracks are taken off the top and divided among such entities as the tracks themselves, the winning horses’ owners, the government, the TV distributors and wagering providers.

The part TVG won’t confirm, but which two cable programming executives described, is that TVG gets 5.5% of the $100, or $5.50. Of that $5.50, affiliates are paid 15%, or 82.5 cents.

HRTV is believed to be paying its affiliates, too. But Magna Entertainment’s recently hired CEO, Michael Neuman, a former Dish Network president, wouldn’t confirm that point. He said HRTV — which trails TVG in the distribution race by more than 5 million homes — sees itself as a customer acquisition and retention tool for affiliates, not as a direct revenue source.

He also said HRTV is using the Churchill Downs arrangement to pitch potential affiliates on the network’s value in keeping subscribers from defecting to satellite.

“If you look at the carriage of [cable] and the distribution of the wagering handle, it starts to give you not absolutes, but some pointers where [horse racing] content is important and where cable operators have seen fit to ensure that they carry it,” Neuman said in an interview. “Those pointers suggest to us the inclusion of Churchill Downs’s content is going to be very important to our channel in terms of subscriber acquisition and so important to our [cable] carriers in terms of subscriber acquisition.

“The battle between cable and satellite is fought at the margins,” Neuman said in explaining why operators should care about a niche as small as horse racing. While its hard-core aficionados represent a relatively small group of fans, generally estimated at fewer than 10 million people by racing-industry trade groups, their TV choices are influenced heavily by the amount of racing available to them.

BEYOND BETTORS

In a recent poll on the racing-related Web site Paceadvantage.com, 76% of 158 respondents said they would spend $5 month for a stand-alone racing channel and 88% said they would spend $5 a month for a racing channel that was part of a sports tier.

Leaning heavily on the Kentucky Derby connection, Magna said HRTV would add a new half-hour show, Target Louisville, highlighting Derby contenders and running every day during the week leading up to the race. (The Derby and later Triple Crown races Preakness Stakes and Belmont Stakes are shown on broadcast networks; HRTV and TVG get to air related programming as part of their track affiliations.)

Magna also said it and CDI will “actively explore how the television medium can be used to more effectively serve horse racing customers — and the industry as a marketing vehicle.”

TVG’s Nathanson said his channel is doing all it can to broaden the sport’s appeal beyond bettors and current fans.

“We’re constantly exploring new ways to make horse racing more presentable, to use tools used in other sports, to apply them to horse racing to widen the appeal of the sport,” he said during an interview at TV Guide’s offices in New York City.

TVG has already introduced such enhancements as tiny microphones that bring viewers the sounds from the track itself (as opposed to the grandstand) and satellite chips that help virtually display the horses’ positioning on the track, as well as their changing speeds. Isolated cameras will be focused on lead racehorses during the Keeneland meet in Kentucky, he said.

TVG.com, the channel’s online wagering and content arm, has added race replay videos that help bettors make their handicapping decisions by watching how horses and jockeys performed under a variety of conditions over the past two years. Nathanson said that plays into cable operators’ strength because they provide high-speed Internet service.

“Race replays [are] going to be one of the most dynamic changes in handicapping, and is really meant for cable providers with their broadband usage,” he said.

And just as professional poker players such as Phil “The Unabomber” Laak have become television stars that fans follow from tournament to tournament, TVG hopes to make compelling stories out of racing’s star athletes — the horses.

“I learn a lot from what I see from poker on TV,” Nathanson said.

TRACKING EACH OTHER

Neuman said HRTV has plans to entice new fans to the sport by acquiring programming not directly tied to horse racing, such as shows on dressage, films like Phar Lap or biographies of people involved in all parts of the business, including horse breeders and owners.

HRTV has offered a limited menu of tracks with its strength confined to the winter. It carries such major meets as Gulfstream Park in southern Florida and in Santa Anita outside Los Angeles, tracks that MEC owns. HRTV also has exclusivity with smaller MEC-owned entities, including Laurel Park and Pimlico Racecourse near Baltimore.

In the other months, TVG is dominant. While TVG retains exclusive rights to most of the prestigious and top-quality tracks in the country (such as Keeneland and Saratoga in upstate New York), the Churchill Downs deal at least gives HRTV a seat at the table in the spring, summer and fall.

Besides Churchill Downs, HRTV gains exclusive rights to three CDI-owned tracks over the next year as their deals with TVG expire. They include: Fair Grounds in New Orleans; Arlington Park, outside Chicago; and Calder Race Course in Florida, which runs during the months Gulfstream is closed.

“It’s not good news for TVG and, of course, is good news for HRTV,” Eugene Christiansen, chairman of Christiansen Capital Advisors, a New Gloucester, Maine-based consultant to the racing industry, said of CDI’s shift. “How good the news is, time will tell.”