Phone Betting Isn’t Hurting

Told that newly legalized telephone betting in California had accounted for more than $13 million in horse bets in two months, one racing board member wondered if business was already tapering off, while another industry official speculated that there might be a windfall ahead.

What all industry leaders seemed to agree upon during the California Horse Racing Board’s meeting Thursday in Monrovia is that phone and Internet wagering has not adversely affected on-track business--one of the industry’s biggest fears.

One of the three companies licensed in January and February to take phone and Internet bets, XpressBet, reported to the racing board that it had signed up 7,900 horseplayers. A spokesman for the Television Games Network (TVG), another licensee, said that it had approved about 3,000 accounts, with the customer base increasing by 50% in the last month.

And TVG’s business, hamstrung until April because it has no contract with the two major winter tracks--Santa Anita and Gulfstream Park in Florida--is expected to grow dramatically when Hollywood Park opens on April 24. XpressBet, which is owned by Magna Entertainment, the Frank Stronach-led company that owns Santa Anita and Gulfstream, has no deal with Hollywood Park.

The third phone-betting license-holder, Youbet.com, was represented at Thursday’s meeting by David Marshall, who founded the company, left it and has recently returned as chief executive officer following the departure of Ron Luniewski, who has signed on with Magna and XpressBet. Marshall did not say how many customers Youbet has. The Los Angeles-based company has shown a deficit of more than $31 million in 2000-01. TVG, which also operates a 24-hour horse racing network on cable systems in California and other states, has lost even more money--an estimated $100 million in three years--but its corporate parent, Gemstar-TV Guide, despite recent heavy losses of its own, appears to be staying the course.

John Harris, one of California’s leading breeders and horse owners and a board member, remains cautious about the expansion of phone betting.

“I don’t think there’s been that much growth in the last few weeks, and that’s a concern,” Harris said.

Edward Hannah, a vice president for Magna, shared Harris’ apprehension.

“XpressBet’s business in California seems to have stabilized,” Hannah said. “I would like to see the early upward trend continue.”

John Van de Kamp, president of the Thoroughbred Owners of California, is more bullish about phone betting.

“We’re projecting that the handle will reach about $117 million by the end of the year,” Van de Kamp said in remarks made outside the meeting. “Well down the line, there’s the potential to grow this part of the business to where the annual handle could hit $500 million, or even $750 million. If the foreign audience can get involved, the sky’s the limit. As it is, I think we’ve just scratched the surface.”

Of the $13 million bet from Jan. 25 through March 17, XpressBet accounted for $9.25 million, TVG handled $3.3 million and Youbet took in about $500,000. The $13 million represents 3.4% of the total handle at all California tracks during this period. Of the total phone-bet handle, 85.6% was bet on thoroughbreds, 9.8% on standardbreds and 4.6% on quarter horses. The three phone-bet companies are also licensed to take bets on races at out-of-state tracks.

Jack Liebau, president of Magna’s three California tracks--Santa Anita, Golden Gate and Bay Meadows--said that on-track business at Santa Anita and Golden Gate was not impacted by the introduction of phone betting, and Rick Henson, speaking for Los Alamitos, echoed that observation. Earlier this month, Santa Anita raised purse money by 5% at its meet.

“I’d like to say that phone betting had something to do with our purse hike,” Liebau said. “But in truth I think it’s got more to do with the good weather we’ve had this winter and the great number of [pick-six] carryovers that have brought the bettors out.”

Alan Landsburg, a horse owner and chairman of the racing board, urged the phone-betting companies to emphasize the horses and the jockeys in their marketing.

“It’s important that we try to bring back the lapsed player and also develop new fans,” Landsburg said.

Customer criticism resulting from long phone delays was addressed by Hannah of XpressBet.

“We’re now handling the average customer in 136 seconds,” Hannah said. “Our goal is 120 seconds, or two minutes.”

Harris thinks XpressBet should aim even higher.

“Two minutes for a horseplayer is like an eternity,” Harris said.

State law requires that a phone-betting company be contracted with the Thoroughbred Owners of California, and such an agreement is not in place between TVG and the owners, with Hollywood Park’s opener less than a month away. Both Van de Kamp, speaking for the horse owners, and John Hindman, vice president for communications for TVG, expect to get together.

The Kentucky Derby at Hollywood Park’s parent track, Churchill Downs, is traditionally a big betting draw in California, and this year’s race will be run on May 4. Racing board officials said Thursday that they expect a big increase in new phone accounts as the Derby approaches.