Losses threaten TVG

Mar 26, 2002 6:26 AM

The announcement by Gemstar TVGuide Inc. (GMST) that it had incurred massive losses during the fiscal years 2000 and 2001 not only caused the stock to drop some 20% in one day of trading but it also caused concern about one of its divisions, Television Games Network (TVG).

For the past four years, TVG has been attempting to establish itself as the premiere online wagering system for the thoroughbred racing industry. Two year ago, the company was acquired by Gemstar, the well-financed media company that immediately announced that it was prepared to spend $100 million to grow the company.

Since its founding, TVG has failed to turn a profit although Mark Wilson, the company’s CEO, said recently that “we have just finished off our best quarter ever, our revenues continue to rise rapidly and our expenses are under control.”

Boosting the company’s revenues, certainly, has been the recent introduction of home betting in California. Still, it hasn’t been easy. TVG’s chief competitor, Magna Entertainment Corp. (MEIC), operates Santa Anita Park and was unsuccessful in negotiating an agreement with TVG to permit the races to be simulcast over the TVG system.

But soon, the action in southern California will swing over to Hollywood Park, a track owned by Churchill Downs Inc. (CHDN).  Churchill has an exclusive contract with TVG.

In a recent interview, Gemstar’s chairman and CEO Henry Yuen supported TVG’s operation saying it was an emerging business with a lot of interest and excitement.