Magna Ent. jeopardizes ADW pact

Sep 2, 2008 7:01 PM

by Ray Poirier | A crack may be developing between North America’s two largest racetrack operators, Magna Entertainment Corp. (MECA) and Churchill Downs Inc. (CHDN).

The two companies appeared to be moving toward dominating the country’s advance deposit wagering systems by partnering in TrackNet Media Group which buys and sells simulcast signals.

One of the partners’ goals, as stated when TrackNet Media Group was formed, was to improve revenues generated by the ADWs for both the tracks and the horsemen. But, the horsemen became suspicious that the Group’s dominance would not be to their financial benefit.

Last December, a new group representing horsemen, the Thoroughbred Horsemen’s Group (THG), was formed to specifically insure that a proper share of the ADW revenues were spent on race purses.

Using a provision of the 1978 Interstate Horse Racing Act, the THG prohibited the simulcasting of the racing signal from Calder Race Course in Florida, a track owned by Churchill Downs. The latter group then filed a lawsuit charging the THG with price-fixing.

Struggling corporately, Magna Entertainment, which has failed to turn a profit since its founding by Chairman and CEO Frank Stronach nearly seven years ago, the company has been looking to develop a "new framework for pari-mutuel economics."

As such, Stronach said last week he is exploring a more equitable pricing and distribution model for advance deposit wagering, apparently placing himself at odds with his TrackNet Media Group partner.

THG says that advance deposit wagering generates about $100 million per year and that the number will grow to $800 million in the next 10 years. The horsemen believe that the current method of distributing income from the wagering source needs to be changed, especially at such places called non-Thoroughbred betting agencies which they described as Nevada casinos, OTB shops other facilities. These wagering centers pay as little as three percent for the privilege of wagering on the live product.

Stronach said last week that he is "hopeful that in the near future, we will develop a new framework, which will improve the economics of the horseracing industry for both racetracks and horse owners."