Revenue fight costs Hollywood Park
A major battle over horse racing revenue, one that has reportedly cost Hollywood Park an estimated $8.5 million in the first 17 days of its current autumn meeting, may be coming to an end.
“I think it [a settlement] is imminent,” said Jack Liebau, president of Hollywood Park.
At issue is the loss of revenue at the Inglewood track from television and Internet betting sites. There are currently four so-called advance deposit wagering companies (ADW) -- television cable site TVG and Internet sites Xpressbet.com, TwinSpires.com and Youbet.com.
For about eight years, these sites have returned between 5% and 7% of the revenue bet with them to the host race tracks all over the country.
These fees, which vary from track to track and with local and state laws, are based on the right to use the products of the track -- the racing and the signals that broadcast that racing. As racing attendance and betting handles at tracks declined in the last few years, ADW became one of the few growing revenue sources in the sport.
But as various contracts at tracks around the country began to run out, racing groups began to question the amount the ADW companies was returning, especially because their investment in the product, as well as their overhead, was smaller than that of the horsemen and the tracks.
The ADW contracts were not with the tracks, but with the various horsemen’s groups in each state that had been given the right, by the Federal Interstate Horse Racing Act, to control the broadcast signals of the tracks using their horses to do business.
In California, that group is the Thoroughbred Owners of California (TOC) and its paid executive director and spokesman is Drew Couto, a horse owner from North County San Diego.
When Hollywood Park’s current meeting began Oct. 29, the TOC contracts with the ADW companies had run out and, much to the dismay of Liebau, TOC did not allow Hollywood Park’s signal to go to the ADW’s. That meant no bettors outside of the state of California could bet on Hollywood Park races via TVG or on the three Internet sites, and Hollywood Park would lose that extra revenue.
Liebau was furious and called the ADW conflict “a cesspool.”
Couto was steadfast. He and the TOC felt it was time to make the ADW companies return a larger share of their revenues to the tracks, which would then trickle down to owners in the form of larger purses on races.
Liebau said he and Hollywood Park had been made “sacrificial lambs” and were being “held as hostages for leverage.”
Couto, initially interviewed last week, said he didn’t really disagree, saying that TOC’s stance is for the long term and the greater good.
“This isn’t just Jack’s loss,” Couto said, “but a loss for the owners, trainers, jockeys and fans.”
The TOC even has some strange bedfellows in this dispute.
Veteran trainer Vladimir Cerin said, “Drew Couto and the horsemen never agree on anything. On this one, we support him. We are all fighting for a piece of the shrinking pie.”
As Hollywood Park lost roughly $500,000 a day in ADW revenue, the multi-headed monster that runs racing and consists of horse owners, track owners, jockey groups, trainers groups, state boards and unions wrestled over an agreement.
Then, earlier this week, the California Horse Racing Board and its state-appointed chairman, Richard Shapiro, used some leverage of its own. The CHRB told the ADW companies that it would decline to renew their licenses for 2009 to do business in California.
Those licenses are separate from any TOC contract on the rights to signals from California tracks and are normally a rubber stamp. The message from Shapiro and the CHRB seemed clear: Settle your dispute with the TOC and the licensing issue will be revisited.
So now, the ADW companies are not only facing pressure from the TOC to increase their payback to the tracks, but to even be able to do business in a state that is a huge revenue-producer for each.
Liebau was clearly happy with the apparent progress.
“Richard Shapiro is my new best friend,” he said.
The most prestigious and profitable races of the current meeting are coming up over the Thanksgiving weekend in Hollywood Park’s Turf Festival, which runs on the three days after Thanksgiving and offers three Grade I stakes with a total of $1.4 million in purses. Liebau said that makes a quick settlement of the ADW conflict even more vital.
Couto, when reached Thursday, declined to comment on the current progress of the dispute.