Churchill Downs Makes Deal to Acquire Youbet

Churchill Downs Incorporated (CDI) has agreed to acquire Youbet, one of the leading ADWs in the nation. CDI has obviously decided that the future of horse racing wagering lies with the Internet.
However, what is good for CDI may be bad for the rest of the racing industry.

With the acquisition of Youbet, the combination of TwinSpires ADW and Youbet will mean that CDI will be in control of 40% of the account wagering in the United States. With this much of the market, CDI will have stronger negotiating power with race tracks when it comes to the pricing of simulcast signals to be carried on the TwinSpires/Youbet platform. This means horsemen’s purse accounts at sending tracks may suffer; causing an exodus of horses from various race tracks to CDI properties (Arlington Park, Calder Race Track, Churchill Downs, Fairgrounds Race Course, and Kentucky Downs). What if there is a track looking to heed the call of gamblers to cut their takeout? If the reduction of commissions paid by CDI does not kill the idea, the fear of not being carried on the TwinSpires/Youbet ADW network should cool any thoughts of this by a progressive track operator.

Churchill Downs also owns some other companies besides their race tracks. Let’s look at some of these companies. HRTV (CDI has a 50% interest in this company) which carries racing from thoroughbred, standardbred, and quarter horse tracks. With the size of CDI’s ADW business, will they have an undue advantage to acquire exclusive signals for HRTV? TrackNet Media Group LLC (again a 50% interest) sells CDI’s and the bankrupt Magna Entertainment’s signals to potential simulcast partners including ADWs. It seems every year, the Mid-Atlantic Cooperative, which negotiates in-bound simulcast contracts for race tracks in the Mid-Atlantic region comes to an impasse with TrackNet Media Group which results in the signal from Magna and Churchill Downs tracks being withheld. Will Churchill Downs get more aggressive in the pricing of their signal at the same time they demand cheaper rates from others?

Standardbred interests should be as concerned as thoroughbred interests. This will put more pressure on the Meadowlands and other harness tracks’ purse accounts as not only may harness tracks be forced to sell their signal at a discount, but the revenue they make from importing signals from TrackNet Media Group may be cut as CDI may demand a higher commission for their signals or withhold their signal in the interests of providing exclusive content to the Twin Spires ADW network. The may be the perfect storm, tracks being squeezed on both ends of the revenue stream.

Standardbred interests have another reason to fear this merger.  As press reports indicate, the merger will leave Churchill Downs with plenty of money for future acquisitions.  My guess is the NJSEA racing properties will be going up for sale within the next two years.  I see Churchill Downs as a logical bidder for their properties as Monmouth Park would be a perfect fit for their thoroughbred program and the Meadowlands would be an opportunity to make a grand entrance into the standardbred game.  Imagine what would happen to the other harness tracks if they can't get access to the Meadowland's signal?

We are not saying regulators should or should not approve this deal, but they need to take a good look at this deal.