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"It" Begins With Horsemen

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By Drew J. Couto

Since 2002, when advance deposit wagering (“ADW”) was first authorized in California, TOC has been open and consistent about what it saw as the two main shortcomings of the ADW business model: exclusive contracts and an inequitable distribution of related revenues. But horsemen were essentially stuck with that model until existing ADW contracts signed by our track partners expired, unless of course we opted to force our partners into lengthy and costly litigation with certain ADW providers, which everyone agreed was imprudent.

The first of the exclusive ADW contracts to expire occurred last October before the start of the2007 Hollywood Park Fall meet. Well in advance of its expiration, TOC stated that it would notagree to the extension of wagering exclusivities, and that our ADW partners – tracks and ADW providers – would have to participate in an “exchange of signals” that TOC fully expected to increase overall ADW handle and related revenues, at rates somewhat above the ridiculously low rates previously paid.What evolved from that articulated position was the so-called “experiment.”The experiment was predicated on a fictional exchange of “exclusive content” between TVG and Xpressbet. I describe it as “fictional” because the exclusive contract between TVG and Hollywood Park had expired, and thus TVG had no “exclusive” California Thoroughbred content to trade Xpressbet – Santa Anita and Golden Gate Fields – for a period of nine months. Instead of focusing on the fallacy of an “exchange,” what TOC and our track partners opted to initiate was a period of non-exclusivity coinciding with the period in which no California Thoroughbred racetrack was bound to a TVG exclusive contract. It was thought then that if this open business model performed as well as expected, chances were that it would be extended by the parties – ADW providers included – through to the last of the 2008 California TVG exclusive contract meets: Del Mar, Fairplex, and Oak Tree. Boy, were we wrong!

Oh the experiment worked alright; better than anyone expected! Yet, despite this tremendous goodwill effort in fostering the fictitious “exchange of content,” the primary beneficiary of the fallacy –TVG – demanded of its three remaining partner tracks that they abide by the terms of their original exclusive contracts and prohibit the other three licensed ADW providers – Xpressbet, Youbet,and Twin Spires – from taking wagers in California. Adding insult to injury, TVG prohibited itsthree remaining contract “partners” from authorizing TVG’s competitors to facilitate out-of-state ADW wagers on California Thoroughbred races, other than by phone, including in states in which TVG did not do business. Those limitations proved punitive to each of the three meets in terms ofpurses and track commission revenues, not to mention it cost TVG a pretty penny in that it would have benefited significantly from TV Broadcast Fees paid under the experiment.

Weary of “partnering” with ADW providers that put their own interests so far ahead of the industry they were meant to serve, TOC – and the vast majority of our track partners – have accepted the fact that these deals going forward must be satisfactory and fair to all, or there will be no deals whatsoever!

We are not alone in accepting this reality, as is evidenced by the formation of the Thoroughbred Horsemen’s Group (“THG”) – now representing 21 horsemen’s organizations – and garnering support among independent racetracks nationally as well. Future ADW contracts must not only ensure broad, non-exclusive distribution of our race signals, but must compensate stakeholders – tracks and horsemen – with a far more equitable share of related revenues beyond the untenably low rates paid under the distribution experiment earlier this year! It is this latter objective that has once again pushed ADW to the forefront in terms of industry challenges.

While ADW providers condemn horsemen for their uninvited effort to obtain a more equitable share of revenue, what is lost on those very same providers is the fact that federal law ensures horsemen a primary role in this process as it is horsemen whose duty and responsibility it is to protect live racing, not simply profit from it! In recent years, this duty has been recognized and cited by two federal judges sitting in the 6th Circuit in deciding in favor of horsemen acting to protect rights granted under the Interstate Horseracing Act (“IHA”). It is that Act that requires – as a “condition precedent” to any simulcast arrangement, including with an ADW provider – a California Thoroughbred track and TOC to first have a written agreement as to the terms and conditions under which the track may consent to the simulcast of our race signals. The notion that a track, or group of tracks, may first negotiate a deal with a simulcast recipient, then present it to horsemen to accept or reject is entirely inconsistent with the plain wording of the Act, and the two most recent federal cases interpreting that wording.

TOC, and its colleague horsemen around the country, have simply had enough! Future ADW arrangements will fairly serve everyone’s legitimate interests – tracks, ADW roviders, fans, regulators, and horsemen – or they will serve none. That is not an unreasonable or meritless objective!