TVG network is shut out of the Preakness

The horse racing world Saturday will be focused on Baltimore’s Pimlico Race Course for the Preakness, the second leg of the Triple Crown. With one notable exception: TVG.

The horse racing and wagering network is prohibited from taking bets for Pimlico because of a dispute over exclusivity. And it will prove costly.

For the Kentucky Derby, where the same thing happened to TVG, the results were stark.

Last year, $2,937,067 was bet on the Derby through TVG’s website, leading to a one-day handle of more $7.5 million, a record for the network. Without races from Churchill Downs, this year its handle on Derby Day was $2.1 million.

However, TVG, which said it is able to endure the loss, will be taking bets on the Belmont on June 9 -- the final leg of the Triple Crown -- because it has an exclusive contract with the New York Racing Assn., which includes Belmont Park.

What’s going on here is a race for viewers who double as bettors and wager billions of dollars.

TVG, launched in 1999, was out of the starting gate first. Owned by Gemstar-TV Guide International, the network takes wagers through TVG.com. In addition, Youbet.com, headquartered in Woodland Hills, is aligned with TVG, which moved quickly to sign a series of exclusive deals with U.S. tracks.

David Nathanson, TVG’s president, isn’t about to give that up. “It just doesn’t make sense for two networks to be showcasing the exact same content,” he said. “There is plenty of content to go around.”

While TVG televises races and takes bets on them, rival HRTV -- owned since March by two major racetrack operators, Churchill Downs Inc., or CDI, and Magna Entertainment Corp. -- is strictly a horse-racing network. However, HRTV is affiliated with two wagering websites, XpressBet.com, which is owned by Magna, and CDI’s upstart twinspires.com.

There is no contest when it comes to which network reaches more people, however. TVG is in more than 27 million homes nationally and 20 million more internationally. HRTV reaches about 13 million U.S. homes.

Because TVG’s contracts extend to online betting, CDI and Magna have made the content from their 16 tracks proprietary.

This factious aspect has not been good for the sport.

Without TVG and Youbet taking wagers on the Kentucky Derby, the total handle for the race dipped from 2006 -- $118.3 million from $118.4 million -- but advance deposit wagering plummeted from $11.8 million to about $8 million.

Advance deposit wagering, which has been around since 2002, allows customers to deposit funds into accounts to wager online or over the telephone. Of the $4.2 billion bet on horse racing in California during the last fiscal year, 12% came from these accounts.

Yet, many racetrack officials and horse owners contend they are not getting their fair share from TVG and Youbet.

That was a driving force behind CDI’s decision to buy 50% of HRTV, then owned outright by Magna. Another joint venture is TrackNet Media Group, which oversees advance deposit wagering at all CDI and Magna tracks, including Santa Anita.

In talking about a “fair share,” TrackNet Chief Executive Scott Daruty points to the numbers. Last year, the two-day total for advance deposit wagering at Churchill Downs for the Kentucky Oaks and Kentucky Derby was $14.5 million. This year, without TVG, it was $9.5 million.

“That’s a $5-million difference, but the revenue that went to the track and the horsemen was basically flat -- about $20,000 less,” he said.

In general, of every $100 bet, $20 is set aside and used for such purposes as purses, racetrack operations, taxes and fees and TV distribution. The racetracks, and indirectly the horse owners, get their cut in two ways.

One is a source fee, which goes to the track in the area where the bet was made. This is designed to make up for fans staying home to bet.

The other is a host fee, which goes to the track playing host to the race being bet. And it is TVG’s 3.5% host fee that is at issue.

“We think it should be double that,” Daruty said.

But a more contentious battle is over the deals TVG was able to work out that give it exclusive rights to about 20 thoroughbred tracks in the U.S., including Hollywood Park and Del Mar.

TrackNet is out to end this and playing hardball to do it, even though Nathanson downplays the loss of the CDI and Magna tracks.

“That represents only 13% of our entire business,” he said.

Daruty said TrackNet’s goal, however, is for “everyone to have everything.”

“We would like all regulated and responsible account wagering companies to have access to all racing content on terms negotiated directly with the racetrack and horsemen producing that content,” he said.

Daruty points to a good-faith deal TrackNet made with the NYRA, which launched its own wagering website Wednesday.

Despite its exclusive contract with TVG, which expires at the end of the year, the NYRA asked for -- and now has -- CDI and Magna content. However, such proprietary content would be off-limits again should the NYRA renew its contract with TVG.

For now, Jim Bates, HRTV’s top executive, relishes having Churchill Downs.

“In baseball you have major league product, triple-A product and so on,” he said. “In horse racing, we have A product, B product, C product. Churchill Downs is A product and that strengthens our hand.”

*

larry.stewart@latimes.com