Odds On Racing - Harness Racing

Horse Industry Urged to Get Along

January 16, 2010

Shortly after reaching a deal that could allow his company to maintain control of three racetracks, Magna Entertainment Corp. Chairman Frank Stronach said the thoroughbred industry's major players must work together to strengthen the business.

“Racing's got a problem, right, and when you've got a problem you should know you've got a problem,” Stronach said last week during the Keeneland January Horses of All Ages Sale, where his Adena Springs breeding operation paid $1.085 million for Miss Isella, a stakes winner at Churchill Downs.

“I think the key players, we've got to sit down and say, ‘Look, those are our problems. What are we going to do to get the industry back on a healthy basis?'”

The economics of racetracks have become more difficult with many of them operating large, old physical plants that were constructed for larger crowds during racing's heyday. Betting revenue declines and competition from casinos have also taken a toll.

Debt-ridden Magna Entertainment filed for bankruptcy protection in March, and its creditors committee claimed in July that Magna's parent, MI Developments, engaged in sham transactions to keep Magna going. MI Developments, which is Magna's largest shareholder, denied the allegations.

The bankruptcy case deal announced last week would have MI Developments take over Gulfstream Park in Hallandale Beach, Fla., and two California tracks — Golden Gate Fields and Santa Anita Park, the Arcadia track that hosted the last two Breeders' Cups and is the home of the Santa Anita Derby, a major Kentucky Derby prep race.

The deal would leave Stronach in control of those tracks, with his Stronach Trust being the controlling shareholder of MI Developments.

MI Developments, of which Stronach also is chairman, would assume Magna Entertainment's interest in two joint ventures with Louisville-based Churchill Downs Inc., one of which is the HRTV racing cable television channel. The other company buys and sells racing signals for simulcasting. Stronach said Churchill CEO Bob Evans is among those with whom he needs to talk, adding that he's been pleased with their relationship.

““I think we have to sit down one more time and see what can we do,” along with other industry players, he said, citing the New York Racing Association, the Del Mar Thoroughbred Club and Keeneland.

A spokeswoman for Evans declined to comment on specific points made by Stronach.

“We value our relationship with Magna and look forward to working with them in the future,” Churchill spokeswoman Liz Harris said.

Stronach also suggested there should be one horse racing channel for the industry. The other major cable channel besides Churchill and Magna's HRTV is TVG, which is owned by the British-based Betfair Group Ltd.

“All the tracks should be involved, not only Churchill and Magna,” Stronach said. “We carried the load. … We should use that as a marketing vehicle.”

The HRTV agreement gave Churchill the opportunity to opt out of the joint venture if HRTV had an actual cash flow deficiency for 2009. Notice would have to be given by Feb. 15.

However, Evans said in an interview last fall that he was pleased with HRTV. Churchill has invested in both people and equipment for the channel, Evans said then, “and I think we'll keep pushing that forward.”

One area where both Stronach and Evans have expressed an interest in industry collaboration is with the tote companies that handle bets at tracks and simulcasting sites.

Magna owns AmTote and Churchill agreed last year to buy the online wagering company Youbet.com Inc., with Youbet's United Tote part of the deal. The deal is expected to close this year.

Evans said then that he'd like to see the tote company operated like a utility, with other racetracks possibly buying in as an ownership syndicate. Keeneland Race Course President Nick Nicholson has said the Lexington, Ky., track would be interested in that approach.

Stronach echoed the need for an industry approach last week.

“It would be a service to all the racetracks,” Stronach said, “because if there's no racetracks, right, there won't be no racing and all the racetracks basically lose monies.”

Stronach also suggested having one online betting platform, something that likely would meet more resistance than the tote company idea.
Online betting is the growth sector of a declining pari-mutuel market.

Churchill has invested heavily in online wagering, starting its own TwinSpires.com and then buying AmericaTAB in 2007, before announcing plans for the Youbet acquisition last year. Evans has pegged online growth as one of the major goals for Churchill.