Simulcasting
Pricing
Tom LaMarra on simulcasting fees and Churchill’s recent takeout hike:
I’m no math whiz, so correct me if I’m wrong. In the case of Churchill, if its host fee remains the same, a rebate shop and its customers get to keep the extra 3 percentage points when the exacta takeout goes from 19% to 22%.
If you operate a rebate shop or are a large importer of simulcast signals, higher takeout is money. That may explain why racetracks, rebate shops, and [ADWs] don’t complain about 30% trifecta rakes: If they pay the sender 3% for the signal, there’s 27 cents per dollar to play with before taxes.
Matt Hegarty on how those cents might get shared:
If simulcast rates do not go up at the same rate as the takeouts, then some players may not feel the full impact of the hikes. Many account-wagering operations, including Churchill’s mammoth twinspires.com and an offshore site the company bought several years ago, offer rebates to players, and some sites may elect to forgo the additional revenue to increase the rebates to their players on the Churchill signal. Many rebated players, including those who use automated systems employing algorithms to determine their wagers, are highly sensitive to takeout rates.
What’s Next?
That’s the question for the Massachusetts racing community now. After days of intense discussions, and with time running out, a source reports that the NEHBPA board rejected the latest proposal from Suffolk Downs for the 2011 meet by a vote of 5-4, with one abstention, in a meeting on Thursday night.
Before the meeting, NEHBPA counsel Frank Frisoli told the Blood-Horse, “[Feb. 25] is the day for us to get back to them, and they said after that their position is likely to change. Ours would then change as well.”
What change there will be to their positions is uncertain. The horsemen have been seeking 100 days of racing, purses totaling up to $10.6 million, and an equal split of net simulcasting revenue. In its proposal of February 18, a copy of which was provided by a source, the track offered 75-80 days of racing, plus five additional days if a target for handle was hit by June 30, and total purses of $8.25 million. In later negotiations, Suffolk also reportedly agreed to the 50-50 simulcasting revenue split — a significant concession.
However, the track’s offer was made with the caveat that if blocked simulcasting signals were not restored by this weekend, days and purses could be cut — and the issue of days appears to be the cause of the scuppered deal. For the track to race fewer than 100 days, the state-mandated minimum for simulcasting, the legislature would have to pass a bill allowing a shorter meet. Suffolk’s offer was premised on the horsemen not opposing such a bill.
With the dispute now in its fifth week, and simulcasting handle at Suffolk down almost 45% this month due to the blocked signals, the situation — which seemed to be approaching a resolution — has taken a worrisome turn.
7:45 AM Update: Lynne Snierson has more on the days:
“We will let Suffolk petition the legislature to reduce the number of days of racing,” Frisoli said. “The one thing we won’t do is support their petition to race fewer than 100 days. If the legislature agrees to reduce the number of days, then we’ll race whatever days the state requires.”
Negotiations will continue today in an effort to reach an agreement.
10:45 AM Addendum: Coming back to a couple of points — the average daily purses Suffolk is offering range from $103,000 for 80 days to $110,000 for 75 days. The horsemen were given the option of choosing which structure they preferred. Either way, the average meets or exceeds the daily purses proposed by the horsemen to the track on February 10, in which purses were estimated at $95,000 to $100,000, based on an equal split of available revenue, assuming revenue remained level with 2010. That seemed a risky assumption, considering the downward trend in Suffolk’s handle, and it was on that basis that track management turned down the offer after calculating that purses would probably run $82,500 per day — not much more than the $79,000 daily that was being paid at the end of last year’s meet and an average for which the horsemen said they could not run this year. On that matter, all agreed.
Days are a trickier issue. In the offer made by Suffolk, management wrote, “our proposal requires that the NEHBPA not oppose the legislation and not oppose a request to the [Massachusetts Racing Commission] that the requirement be reduced to match the number of days set forth in our agreement.” In the quote Frisoli gave Snierson after Thursday’s meeting, he said, “The one thing we won’t do is support their petition to race fewer than 100 days. If the legislature agrees to reduce the number of days, then we’ll race whatever days the state requires.” This reads like very small matter of semantics — Suffolk does not ask the horsemen to support, it asks that they not oppose. It would seem that the horsemen’s counsel is saying that the NEHBPA won’t oppose a bill reducing days, which is the concession Suffolk seeks, but his statement does not indicate agreement. I’ve attempted to contact Frisoli for clarification and hope to have more on this point this afternoon.
2:45 PM Update: Clarified! In a conversation this afternoon, Frisoli said that the NEHBPA board has unanimously agreed to accept Suffolk’s proposal, with one change. Steve Myrick of the Thoroughbred Times has the story.
It’s Not Critical
But there is some urgency to ending the Suffolk Downs dispute:
“We hope to get this resolved soon because the options moving forward become less and less attractive,” said Tuttle. “The loss of these simulcast signals is devastating to business. The longer it goes, the less likely we are to be able to conduct a live meet of any quality or duration.”
The NEHBPA board meets tonight to continue its discussions.
Suffolk Responds
It’s not a break in the lengthy impasse, but it is communication between Suffolk Downs and the horsemen — in a letter sent today to the NEHBPA (PDF), the track requests that the blocked NYRA simulcasting signal be restored (and that the NEHBPA ask other horsemen’s groups to restore their signals), and attempts to clarify several issues in the dispute with the horsemen over the 2011 meet. The letter is not a formal response to the proposal submitted by the NEHBPA to the track last week, which management is still considering.
A few points from the letter of particular interest to Massachusetts racing fans:
1) Regarding the blocked signals, which have sent local bettors to nearby simulcasting parlors with all tracks available, costing the track simulcasting revenue (and horsemen the portion that would have gone to purses), Suffolk Downs COO Chip Tuttle notes, “… the most troubling aspect of the conduct of the NEHBPA and other HBPA chapters is the complete lack of respect it shows to our customers…. In all the back and forth of the last month, the HBPA’s disregard for bettors has been most stunning.” Again, track management shows that it’s keenly attuned to how the impasse looks to horseplayers — in a way that the horsemen have not so far — and to the very real risk that some bettors won’t come back when the dispute is resolved. That’s money and support the Massachusetts racing industry can ill afford to lose.
2) The horsemen are arguing for an equal simulcasting split. “We have simply asked Suffolk to share the net profit from simulcasting in the same manner as it is shared in virtually every other racing jurisdiction in the United States,” NEHBPA lawyer Frank Frisoli said last week, pointing to a split over the last three years that has declined from 60-40 to 65-35 according to the horsemen’s numbers. Tuttle puts the split at 62-38 and questions the prevalence of 50-50 simulcasting splits in the industry:
We have anecdotal evidence from other jurisdictions that contradicts your claim and indicates many jurisdictions use similar percentages as we have in our most recent contracts (e.g., Penn National 33% to purse from simulcast revenue; Parx Casino 31% to purse from simulcast revenue; Lone Star Park 40% to purse from simulcast revenue).
It seems noteworthy that the two tracks with slots have a less equitable split. And if the sample splits are representative, it’s another indication that Suffolk has acted in good faith since 2007, despite a significant drop in total handle.
3) Raynham/Taunton owner George Carney has said that he’s interested in picking up racing days for his Brockton Fair track (closed since 2001) if fewer than 100 days were run at Suffolk this year. Noting concerns about purse inequities and safety, Tuttle suggests the track could work with that:
We remain open to any discussions that would give your members additional opportunities to race locally, especially if such opportunities could offset our current schedule and reduce the duration of keeping our barn area and training facilities open.
A two-track Massachusetts racing circuit in 2011? That would be a twist in this drama, and one that would suit Suffolk, which has proposed a shorter meet of 67-76 days. A reduced calendar would better fit the current market, but the horsemen are reluctant to agree to anything less than the state-mandated minimum of 100 days, fearful the cut would become permanent.
10:00 PM Addendum: More from Lynne Snierson in the Blood-Horse:
Frank Frisoli, the attorney for the NEHBPA, said that he had received the letter Feb. 15 and sent a reply to Tuttle the same afternoon. He did not discuss the details of the horsemen’s response but did say, “This appears to be heating up. I don’t know if we’re headed to court or to a resolution.”
Let’s hope things are moving toward resolution.
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Jessica Chapel writes and edits in Massachusetts. Railbird is a Thoroughbred horse racing blog published from June 2004 to July 2019. More / Contact
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