Jan 23 2008
4. Exclusivity
This is one of the most complex issues the industry is currently facing, make no mistake about it. Exclusivity means many things to many people involved in the racing industry, and most of it isn’t good. Having said that, I don’t believe the “Exclusivity” period the racing industry has gone through is all bad. Without it, there would not be nearly as much racing being shown on television now.
Having run an ADW company that was forced (basically) at gunpoint to sign a deal with TVG, and was denied signals from Magna for a year because of it, I know a lot about how exclusivity impacts the racing industry, especially it’s customers.
For any track contemplating signing an exclusive deal with anyone, let me relay this. In BOTH cases that I cited above, when a product was removed from AmericaTab’s offerings through no fault of its own, the SAME THING ALWAYS HAPPENED. The customers got mad at the track that signed the exclusive deal, not the ADW …. very mad in fact. E-mails and phone calls were overwhelmingly along the lines of “tell ‘insert track here’ they can go ’insert colorful language here’ themselves, I’ll just bet something else.”
Note to racetracks … the customers are more loyal to their betting outlet than they are to your track. Remember that, because once you’ve forced them to move to another track, they may never come back. If you don’t believe me, check out the various racing message boards and it won’t take long to figure out how your customers feel about not being able to bet their favorite track through the ADW of their choice.
So, lets have a frank discussion about exclusivity.
First, there are really two kinds of exclusivity we are talking about. Broadcast exclusivity and Wagering exclusivity. It’s important to remember this, because one does have some necessity, while the other clearly does not.
I can make an argument for broadcast exclusivity. All major sports have it. Want to watch the Super Bowl? In the U.S. you are going to have to do it on the Fox network this year. Fox paid the NFL a large amount of cash for the privilege, and they will sell a lot of commercials to help recoup the money. If the game was on every other network too, the economics just wouldn’t work. OK, maybe it would for the Super Bowl, but we are discussing racing.
Wagering exclusivity on the other hand has no place in racing because it harms THE CUSTOMER. TVG and TrackNet will tell the world that they need wagering exclusivity because the extra fees they can extort receive from the remaining ADW’s is what allows them to keep their respective TV networks on-air, and that the majority of customers playing through an ADW are watching their networks but betting through someone else.
In my opinion, it is absolutely necessary for the racing industry to keep these two channels operating. We need to have as much racing available on television as possible, so they need to be funded. But who should be doing the funding?
TVG and TrackNet will (rightfully so) make the argument that more money gets wagered on races that are shown on their respective channels than on races that are not. This makes logical sense to me. What also makes logical sense to me is that if wagering increases on those races, then the host track is going to get more in host fees from any and all sources that rely on those broadcasts to service customers. Yet the host track is not being charged for the privilege of being on the network, but in many cases they are also charging the same ADW’s a higher host fee which could be used to support the networks.
If we assume that the networks can’t survive on their own, and the tracks cannot afford to support them even though they are the prime beneficiaries of having their races on TV, then how do we fund putting racing on TV?
Since I have been spending money in this exercise, then let’s keep going with the .25% of handle model and give it to the industry to support broadcasting of racing. So you don’t have to go back to my previous posts, that number comes to about $32,742,500 based on 2006 simulcast handle. This money can be used by the industry to support TVG, HRTV, and to pay for racing events to be shown on ESPN or the major networks.
Now the takeout split looks like this: Host Track-4.8125%; Athletes-4.8125%; Outlet-4.8125%; Customer 4.8125%. That would make the equivalent host fee 9.625%, which is still a healthy increase from what is currently out there for rates.