TwinSpires, the online gaming arm of Churchill Downs Inc., will begin winding down over the next six months. The platform will transition from supporting sports betting and igaming to focus exclusively on horse racing. William Carstanjen, CEO of Churchill Downs Inc., said on today’s earnings call that while this isn’t the result the company wanted when it launched in the sports betting space, it doesn’t see a route to predictable positive margins.
This announcement came during an earnings call where the company announced a record-breaking year. The company saw net revenue of $1.59 billion, up 52% from the prior year. Additionally, adjusted EBITDA was $627 million, up from $286.5 million the previous year.
But according to Marcia Dall, EVP and CFO of Churchill Downs, TwinSpires’ online business contributed over a $30 million loss in Q4 as it faces thick competition in the sports betting industry. Direct competitors like DraftKings, FanDuel, and Caesars have been prioritizing claiming market share in the emerging space rather than profitability. While these sportsbooks look to 2023 and 2024 for profitability, Churchill Downs is making the call to focus on what it can do best: online horse betting.
TwinSpires Online Horse Betting
Carstanjen said the company sees opportunity in TwinSpires as an online route for horse race betting, adding, “the online space is a good environment and is holding up well in the current [economic] environment.”
The company is optimistic it can optimize TwinSpires in horse racing. Because Churchill Downs Inc. also owns the historic Churchill Downs racetrack, where the Kentucky Derby takes place each year, it has unique market positioning.
In 2019, TwinSpires held around 40% of the market share in online horse betting. During Covid, the share grew upwards of 60% and has since settled around 50%.
“This is the starting point from which we will build market share in the online horse racing space,” Carstanjen said of the decision to pivot away from sports and igaming.
The Future of TwinSpires Online Sports Betting
During the earnings call, Carstanjen was asked whether the company is considering working with any other sportsbooks or selling state-based licenses to other operators. He demurred, stating there wasn’t enough detail to discuss these future-facing questions. However, he said that there might be potential in these spaces.
While TwinSpires’ exit from sports betting is imminent, Carstanjen left open the possibility of one day getting back in. Leadership explained the company will continue to watch the space, including what the market in each state looks like, what the tax rates are, and how competition pans out.
Why Retail and Horse Racing?
CDI is making a play for a bigger retail presence in 2022. With the acquisition of Peninsula Pacific Entertainment LLC (P2E) for $2.5 billion, which was announced February 22, the company plans to expand its footprint.
While the acquisition likely won’t be finalized until the end of 2022, the purchase sets the company up for 2023. The acquisition includes a majority of P2E’s properties, including the Colonial Downs racetrack in Virginia, del Lago Resort & Casino in Waterloo, New York, and the HardRock Casino in Sioux City, Iowa. Churchill Downs also acquired the rights to build a Class 1 casino in Richmond, Virginia.
Churchill Downs’ 2022 outlook is bolstered by the return of a full-capacity Kentucky Derby on May 7. Traditional Derby events return this year, including the month-long lead-up of charity events. The company stated the demand for tickets is strong this year and all tickets will likely be gone by early April.
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