Racetracks To Stop Thoroughbred Horse Racing Simulcast Thieves

Posted on Monday, March 19th, 2007

Tracks out to thwart simulcast thieves

By Janet Patton
Kentucky.com

Pirates of the Caribbean, South America, Europe, the United States, and perhaps around the world steal millions of dollars every year from North American racetracks and horsemen.

“Signal pirates” hack into the live racing electronic feed, in some cases using little more than a cheap satellite dish, and set up everything from mom-and-pop bet shops to elaborate operations worthy of The Sting.

Bob Evans, president and CEO of Churchill Downs Inc., said no one knows for sure how much the illicit operations cost the racing industry, but “at least hundreds of millions” are wagered with them every year, much of it outside the United States.

“They conduct betting operations in a way that doesn’t put any money in the industry,” Evans said in an interview. “If we don’t get any payment for it, the horsemen don’t either.”

Churchill Downs and its largest racetrack rival, Magna Entertainment, announced a joint venture earlier this month to package the racing at all Churchill and Magna tracks into one simulcast signal to sell and distribute. The move, they said, is an effort to keep tighter control over the simulcast signal and keep it out of unauthorized hands.

TrackNet Media “will invest significant resources to better monitor the entities that have access to the companies’ racing content and wagering pools,” according to the announcement.

“You never stop the stuff,” said Evans, who came to Churchill Downs last year from the software industry. “The goal is to try to make it harder to do it to us, so they go do it with something else.”

That kind of defense made little headway with racetracks acting individually, said Mike Neuman, CEO of Magna. An unauthorized betting operation would just pirate another track to feed customers’ appetites for wagering.

But working together, the tracks plan to stop sub-licensing; instead they will sell the signal direct to TrackNet Media customers, and not allow the signal to be resold by those customers to third parties.

Every track depends on people betting somewhere else. According to The Jockey Club, only 11 percent of the $15.6 billion wagered on North American racing in 2006 came from people betting on races they watched live at the track.

The rest comes from various forms of simulcasting, which has become the lifeblood of the racing industry since it exploded in the 1980s. People can watch and bet on races all over the country, and sometimes around the world, at their hometown tracks, at off-track betting parlors and, increasingly, online through account wagering.

Horse racing got a crucial exemption from Congress last year when lawmakers voted to ban Internet wagering. Churchill announced that it will open an account-wagering Web site this spring. Magna already has one. With their own sites, they will be taking the bets themselves, instead of sending the money through a middleman, and they will let their customers bet on the competition.

The racing industry has been fighting piracy as long as simulcasting has existed. The Interstate Horseracing Act of 1978, which regulates simulcasting, was enacted after off-track betting parlors in New York City took bets on the 1974 Kentucky Derby without the permission of Churchill Downs.

This federal law requires that an off-track location cannot legally receive a simulcasting signal without the permission of those who own racing — racetracks, trainers and horse owners. That means tracks cannot simulcast their signal without the approval of those who actually run the horses. Each track negotiates a contract with horsemen for a percentage of racing revenue.

So if Magna and Churchill are successful in curtailing signal theft, it could increase revenue to horsemen as well.

That’s something the National Horsemen’s Benevolent and Protective Association (HBPA) has been concerned about for years now, according to Remi Bellocq, the organization’s CEO. But Bellocq stressed that blatant piracy is not the only problem.

“As bad as that is, we’ve got bigger fish to fry,” Bellocq said. The industry is also suffering from a pricing system that hurts business, he said.

Tracks and horsemen get a much smaller percentage of off-track betting than on-track wagering. And large-scale wagering “hubs” in Oregon and off-shore “rebate shops” can siphon off big-time gamblers by offering them a better potential return. That kind of incentive can encourage new bettors, but much of the revenue never makes its way to those who bear the costs of putting on the show.

An updated 2005 HBPA report on such wagering estimated that horsemen had lost $196 million to hubs, off-shore shops and other forms of discounted wagering. Tracks had lost an additional $208 million.

Bellocq said the Churchill-Magna agreement, particularly with its emphasis on account wagering platforms, could be a big benefit if it addresses the more subtle pricing issues as well as signal piracy.

“I sense a cautious optimism among horsemen,” Bellocq said. “We as horsemen are much more aware of what the stakes are … than we were five years ago.”

"Racetracks To Stop Thoroughbred Horse Racing Simulcast Thieves" was posted on Monday, March 19th, 2007 at 1:41 pm and is filed under Churchill Downs, Horse Racing Industry, USA Horse Racing. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.

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