Horse-racing channel TV Games Network struck a deal last week with Web site Youbet.com that should expand the number of races on which cable subscribers can place their bets.
The agreement also gives TVG warrants that could allow the Gemstar-TV Guide International Inc. subsidiary to eventually acquire the majority of Youbet.com's shares.
Parlaying their resources, TVG and Youbet.com will be able to offer subscribers access to 81 racetracks in 39 states, executives said.
Although only about a dozen states currently allow consumers to place bets at home through TVG, network president Mark Wilson said that an amendment to the Interstate Horse Racing Act passed by Congress last year would allow subscribers from 43 states to legally place bets across state lines.
But distribution remains one of TVG's biggest challenges. The company lists just two affiliates on its Web site — EchoStar Communications Corp.'s Dish Network and Insight Communications Co.'s Lexington and Louisville, Ky. systems.
Wilson said the network also has affiliation deals with AT&T Broadband and Comcast Corp., and expects to sign additional distribution pacts soon.
"Hopefully, over the next 60 to 90 days, as we roll out into new markets, more cable operators will want to take advantage of a pretty exciting business opportunity, which is wagering on horse racing at home," Wilson said.
AT&T has an affiliation agreement with the network, but the MSO hasn't launched TVG on any of its cable systems, a spokeswoman said.
Wilson declined to comment on the network's distribution terms. He wouldn't say if operators would pay a straight license fee for the network or receive a cut of the "handle" TVG collects for processing each bet.
Under the terms of the deal, Youbet.com will issue a warrant to TVG to buy up to 19.9 percent of its common shares at an exercise price of 0.001 per share. If approved by shareholders, YouBet.com would issue a second warrant, allowing TVG to purchase up to 51 percent of Youbet.com common shares for $2.50 apiece.
The companies will continue to operate separate gambling Web sites (youbet.com and tvgnetwork.com), and it's too early to say whether TVG would exercise the warrant to acquire the 51 percent of YouBet.com shares, Wilson noted.
Gemstar isn't the only cable player increasing efforts to generate revenue from the gambling business. Earlier this month, Playboy Enterprises Inc.'s Playboy.com unit launched PlayboySportsBook.com, which allows users to bet on everything from the NBA playoffs to the winner of the next general election in the United Kingdom. But the Playboy site does not accept bets from U.S. residents.