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Kevin Smith

No Compromise for TVG, Magna in California

11 January 2002

IGN has learned that Magna Entertainment and the TVG Network, unwilling to reach a compromise, will go their separate ways in infiltrating the new account wagering system in California.

The two companies, which have exclusive content rights for different tracks, couldn't agree on the best way to carry racing from all the tracks on both companies' platforms. As a result both are forging ahead with plans to bring the service to California bettors. That means consumers won't be able to bet on action at both Santa Anita and Hollywood Park, for example, without having an account setup with both companies.

"There seems to be an impasse over some of TVG's exclusive track partners and Magna wanting to be able to take wagers on those tracks over its system."
- Chip Tuttle

Chip Tuttle, a spokesperson for TVG, said negotiations hit a major snag this week and both parties are moving forward on their own. He said anything was possible, but it appeared no resolution would be made in the near future.

"There seems to be an impasse over some of TVG's exclusive track partners and Magna wanting to be able to take wagers on those tracks over its system," he said. "You never say never, but right now, TVG is going to move ahead and continue to do what it has done so well over the last couple of years."

The Issue

The heart of the matter for the two companies is the content distribution. In its stable TVG has Churchill Downs, Del Mar, Belmont Park, Aqueduct and Saratoga. Magna, meanwhile, offers racing action from Gulfstream Park, Santa Anita and the Meadows among the facilities in its corner. Magna owns many of the tracks which it has distribution rights to. Both companies hold exclusive rights with the tracks.

In addition to having different tracks, the pair utilizes different methods in distributing races. TVG relies mainly on its televised racing network, which reaches more than 8 million homes. The station is part of the Dish Network satellite service as well as a few cable services around the country. Magna's main focus for utilizing its tracks is Call-A-Bet, a phone betting system that it has had in place since 1983. Both companies offer betting at their tracks via the Internet as well. TVG is currently in more than 500,000 homes in California.

Last fall California passed legislation allowing account wagering in the state. Bettors will be able to place bets via the telephone and Internet once the system is up and running. The California Horse Racing Board's next scheduled meeting is Jan. 24, at which time it will review the latest batch of potential licensees for the service. The board is awaiting feedback from an administrative body and hopes to get the thumbs up by its next meeting.

"I think the devil of the law will always be in the details and what they are able to accomplish."
- John Van de Kamp
Thoroughbred Owners of California

The Rift

Tuttle said TVG is willing to grant Magna a sub-license to distribute content from its tracks. The company has done this in the past, but he said Magna couldn't agree to terms of such a deal.

"Magna has been offered an opportunity to do that on exclusive or non-exclusive terms, TVG has both kinds of agreements, and has not wanted to do either," he said. "They basically want to trade their signal for the rights to show others." He added, "TVG is willing to license other operators to take wagers on its exclusive partners, which is what TVG has done with, but the two sides can't come to terms on what a licensing deal would look like."

Tuttle said the solution is no secret: Give the racing fan as much content access as possible via one account . The problem, he said, resides in determining how to achieve this. Could be a Good Bet

John Van de Kamp, president of the Thoroughbred Owners of California (TOC), said his group has been involved in negotiations with all parties. (Federal law requires all deals to be approved by area horsemen.) He said he was encouraged last week once the two sides were talking but realized there was a lot of ground that had to be made up for both sides to reach a compromise.

"One of the things that we believe the system needs in California is broad distribution," he said. " TVG has broader distribution than anybody else right now, but it is still probably not as much as we would like."

Tuttle feels that it isn't just the horsemen and the rights carriers who want to make sure they are getting the best deal. He said tracks want to make sure that they are getting the biggest bang for their buck as well and are getting the maximum return on their content. He said that, prior to California entering the fray, the system to make sure all parties had the best deal possible was "kind of willy-nilly." is one company that is in great position to capitalize on account wagering in California. The site has a strategic partnership with TVG, but also carries Magna content through an additional hub.

"The TVG content is available through our Oregon hub and the Magna content is available through the Pennsylvania hub," Co-CEO Ron Luniewski explained. "We have added a feature where, with the click of a mouse, the user can switch accounts, so it is almost transparent from our perspective."

Luniewski said plans to go before the board in the next month or two for licensing approval.

"We believe that, if you look at the California market specifically, we have the best interactive product on the market," he said. "We are the only place where you can go and get all the content and that is going to be valuable to the California customer, and customers across the nation."

Cashing in on Account Wagering

Should the racing industry be concerned that two of its major players can't agree on rights in what could be seen as a key state to the sport's survival? Van de Kamp doesn't think so. He feels all parties involved in the sport in California have made great strides in working together over the last couple of years to help revive the industry. His main concern is that horsemen get a fair shake in the process.

Van de Kamp said his group has been supportive of the account wagering initiative from the beginning because it has the potential to broaden the market base. He feels it could increase purse revenues by 10-20 percent, although that increase could take a couple of years.

Luniewski agrees that the potential windfall from account wagering for racing entities in the Golden State could be huge.

"From a customer point of few, competition is always welcome, but they are going to want ease of use."
- Chip Tuttle

"When interactive comes to California, I think we are going to significantly increase frequency," he said. "Then you have the casual fan in California. It is a highly computer- literate market, and a lot of people in California have been to the track once or twice a year, but they are a little intimidated. Now they can learn the game in a setting where they are comfortable with the Internet, and then we feel we can drive them to the track."

The TOC published an open letter to the horseracing industry last month expressing concern over potential licensing conflicts that have arisen between Magna and TVG.

Van de Kamp said the response to the letter has been positive. Potential bettors have contacted him saying they agree with his point and that they don't want to have two separate accounts just to bet at different tracks, and even the "principles" have agreed with his points.

"I think the devil of the law will always be in the details and what they are able to accomplish," he said. "Magna has gotten into this later than TVG and I think they are hustling to try and establish their own operation. At the same time they don't appear to have much by way of distribution beyond the Internet. "

Rumors continue to swirl that Magna may try to revive the old Racing Network, which ceased operations in the middle of last year--a move that could increase distribution possibilities for Magna.

Can Competing Groups Survive?

Fans of auto racing can certainly relate to the strife between Magna and TVG. Open wheel racing had a division in its ranks after the owner of the Indianapolis Motor Speedway decided to start his own league. To participate in the sport's crown jewel, the Indy 500, teams had to be a part of the Indy Racing League. A problem arose though when teams didn't want to have to race at the tracks where IRL officials said they did, so a competing CART division was formed. No racing fan or insider would argue that open wheel racing in America has ever been the same. Both leagues have struggled at times to enter full fields for races, TV ratings lag what they were when the sport raced under one flag.

Much the same, TVG welcomes the competition, although Tuttle realizes it may not be the best thing for the industry.

"From a customer point of few, competition is always welcome, but they are going to want ease of use," he said. "Right now there are some unhappy TVG customers. They aren't unhappy with TVG; they are just unhappy that they can't see the races at Gulfstream."

In offering Gulfstream and Santa Anita, Tuttle said Magna has two very desirable products. Even more than having desirable products, the two tracks offer action in the early part of the calendar year, a time when most tracks are closed. Tuttle admits Magna will have a leg up in the early months of the year.

"Other than the first quarter window, TVG is going to be able to offer ample product to the California racing fan," he said.

Van de Kamp said his group will not favor the interest of any company; it'll look at the merits of each option and will pick who will be the best for the industry.

"I am not sure they will get an agreement that is satisfactory for everyone," he said.

The Horseracing Board and its chairman have urged all parties involved in the negotiations to not use greed and to look at what will be best for the industry.

"It can be resolved if people think rationally and in the best interest of horseracing," he said. "What you don't want to do is to have this thing crater at the beginning and poison the industry."

The Future

TVG and say they'll be ready to go with their service as soon as the Board gives them the go-ahead.

Magna's president, Jack Leibau, told the San Francisco Chronicle this week that the company will be ready to unitize the Call-A-Bet system in California. The company has filed an application for licensing and is confident the board will approve them at its January meeting.

Magna is excited to be entering the market in California but Leibau isn't putting as much hope into it as Van de Kamp or Luniewski are.

"This is not the savior of racing, but certainly over time we would assume it would grow and be helpful," he said.

TVG is already test-marketing an Interactive TV platform right now that could be incorporated in California. The systems are the first generation of their kind and are being tested in Louisville, Ky.

Tuttle said that, while the racing market has been stagnate over the last couple of years and attendance at live venues has been down, most fail to realize that the over handle has gone up because of simulcasting.

"There will be some natural erosion because in the live racing days you only had nine chances a day to bet," he said. "Now you can go to some simulcasting facility and bet on 100 races if you wanted to."

No Compromise for TVG, Magna in California is republished from
Kevin Smith
Kevin Smith