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Spokane, Washington  Est. May 19, 1883
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Commentary: Churchill plan hurting live racing

Andrew Beyer Special to the Washington Post

As the thoroughbred industry struggles and the largest owner of U.S. racetracks has declared bankruptcy, Churchill Downs Inc. continues to make a profit for its shareholders. The company will receive its annual windfall Saturday when as many as 150,000 people pass through the turnstiles to watch the Kentucky Derby.

Churchill has always occupied an important place in the sport, but since the Magna Entertainment Corporation’s bankruptcy, Churchill Downs Inc. has become the major force in the industry. In addition to its flagship track, it owns Arlington Park in Chicago, the Fair Grounds in New Orleans and Calder Race Course in Miami, plus several important ancillary businesses. But others in the industry wonder if Churchill will be a good role model, and there exists sentiment that Churchill Downs cares about live racing only two days a year.

The company acknowledges that it has shifted its traditional focus. In a message to shareholders that preceded its 2007 annual report, it discussed the promise of slot machines at the Fair Grounds and Calder, and Churchill’s online betting operation, It made no mention of live racing.

Churchill has been aggressively developing, an enterprise that the industry calls an ADW – for advance deposit wagering. Customers have made it clear that they like the convenience of betting from home, and the company likes the fact that it’s a lot cheaper to process online wagers than to operate a high-overhead racetrack.

Churchill sees the profitability of ADWs as so important that last year it fought a bitter – and revealing – battle over them. It wanted horsemen to settle for a much smaller slice of revenue from an online wager than they get from a bet made at the track. The horsemen at Churchill and Calder resisted, and the fight grew ugly. The horsemen used their legal power to block simulcasts from the tracks, costing them millions of dollars in revenue from wagering. Churchill slashed purses. The racing deteriorated sharply. Customers were alienated.

The the issue went to the heart of the sport. Purse money is the lifeblood of horse racing. Owners already have little chance to break even, and if purses aren’t reasonably healthy, fewer will want to get involved in racing. Fewer horses lead to an inferior product that fewer people want to bet. At one time Churchill would have acknowledged this fact. But now the company appears willing to fight to the death to get more money at the expense of the owners and trainers who help put on the show at its own tracks.

Churchill’s lack of interest in live racing and slotless racetracks may become relevant to the rest of the industry in the wake of Magna’s bankruptcy, which has cast into doubt the future of tracks such as Gulfstream Park, Pimlico and Santa Anita. If nobody steps forward to buy and operate these tracks, and they are sold for real estate development, the impact on the whole industry could be devastating. Churchill won’t comment on possible future acquisitions. But if the major player in the industry has decided that it cares mostly about making money from ADW operations and slot machines, and if it doesn’t take any responsibility for the health of the sport, there may not be much of an industry left.

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