[Kasept]

Much more detail from Hegarty..

TVG acquires lone television competitor HRTV
By Matt Hegarty

Television Games Network, the most widely distributed live-racing broadcast channel in the U.S., has acquired its only television broadcast competitor, HRTV, and will gain the exclusive broadcast rights for the racetracks owned by the Stronach Group for seven years, the companies announced Wednesday.

The acquisition is likely to be greeted warmly by TVG’s existing customers, allowing for live television broadcasts of races from Santa Anita in Southern California and Gulfstream Park in Florida for the first time in a decade. TVG, owned by the British-based exchange-wagering company Betfair, is currently available in 35 million households, and it typically broadcasts six to eight live races an hour from racetracks across the country.

Scott Daruty, the president of HRTV, said that both networks will continue to operate, but that the networks will be coordinated out of TVG’s Los Angeles headquarters and will no longer carry the same programming. Daruty likened the arrangement to ESPN and ESPN2.

“I think this is a very good thing for the racing industry,” Daruty said. “We’ll no longer be showing the same thing on both channels, and the best content will be available to everyone.”

However, Daruty acknowledged that TVG does not yet have any agreements with satellite or cable networks guaranteeing the addition of a new channel. HRTV has limited distribution compared with TVG, which is available in sports packages on both DirecTV and Dish Network and many national cable providers. Though Daruty said details have not yet been worked out on which tracks will be broadcast on which network, it’s likely that TVG will carry the most popular signals due to its much wider distribution.

TVG and HRTV both use live broadcasts of races to drive betting to their associated account-wagering platforms. While TVG’s account-wagering operation carries the same name, HRTV promoted the account-wagering operation XpressBet, owned by the Stronach Group. XpressBet, which provides account-wagering services to Daily Racing Form, is not a part of the transaction.

In a letter to its employees obtained by DRF, HRTV officials said they began exploring a “merger” with TVG because of concerns over HRTV’s ability to secure broader television distribution for the Stronach Group’s racing signals.

“Satellite and cable networks have continued to consolidate, making it harder to persuade them to carry and show two separate horse-racing networks,” the letter said. “This consolidation of carriers looks to be an accelerating trend. Therefore, we felt that the best way to assure continued, and even expanded, viewership of our horse race tracks was to enter discussions with TVG to seek to combine our respective networks.”

TVG will pay the Stronach Group $25 million initially for HRTV’s assets, according to a release from Betfair, a publicly traded company. The deal also will require TVG to pay ongoing fees to the Stronach Group for the broadcast rights to its racetracks, which Betfair estimated at $48 million over the next seven years.

Officials for both companies stressed that TVG’s effort to obtain high-definition slots with satellite and cable providers was an important component of the deal to merge. TVG has built an HD studio at its headquarters in Los Angeles and has urged racetrack partners to upgrade to HD equipment, though it has not yet been successful in gaining an HD slot on either major satellite provider or outside of several small local cable markets.

“I have to say that I’m extremely impressed with their state-of-the-art studio,” Keith Brackpool, chairman of the Stronach Group’s West Coast operations, told the California Horse Racing Commission at a meeting Wednesday. “At The Stronach Group, we’ve spent a lot of money for facilities for live racing. It was starting to become a fairly obvious marriage here. The last three months of putting this together have been extraordinarily complicated. We’re excited about it.”

HRTV was started in 2003 as a competitor to TVG, which was then the only horse-racing network on television. At the time, HRTV was owned by Magna Entertainment, a publicly traded company controlled by owner-breeder Frank Stronach that later went bankrupt. The Stronach Group acquired the company as part of an acquisition by Stronach of the assets of Magna Entertainment’s successor, MID, which also went bankrupt.

In 2013, according to Betfair, HRTV had revenue of $9.5 million from rights fees and advertising and a pretax loss of $3 million, with assets valued at $2.5 million. One of HRTV’s largest revenue sources was TVG, which paid HRTV $4.3 million a year for the rights to broadcast signals controlled by HRTV on its account-wagering platform.

“This deal strengthens TVG’s position as a significant player in the U.S. horse-racing industry, bringing together the U.S.’s leading racetracks under a single TV network for the first time,” said Breon Corcoran, Betfair’s chief executive, in the release announcing the transaction. The release said that Betfair believed the deal would be “revenue neutral” for the company based on higher handle on the Stronach Group signals.

Churchill Downs Inc. acquired a 50 percent share in HRTV in 2007 when it began building its account-wagering company, twinspires.com. Churchill sold its half-share back to the Stronach Group last year as part of a deal giving the Stronach Group the rights to operate Calder Race Course’s racing operations for the next six years. Twinspires.com has gone on to become the U.S.’s largest account-wagering company.

Churchill Downs Inc. also owns Churchill Downs in Louisville, Ky., Arlington Park in Chicago, and Fair Grounds in New Orleans. Officials of Churchill Downs did not immediately respond to requests for comment.

Santa Anita and Gulfstream have always been two of the most popular signals in the country among bettors, but the two tracks’ importance on the national racing scene had expanded over the last year due to upheavals on each track’s racing circuit. In 2013, Hollywood Park closed, allowing Santa Anita to pick up an additional two months of racing dates each year. In Florida, the deal between the Stronach Group and Churchill Downs Inc. has resulted in Gulfstream expanding its meet from four months a year to 10 months.

In its letter to employees, HRTV said some of its current employees would be offered positions at the combined network or other jobs at the Stronach Group, though others will be let go “where the right role is not available.”

In contrast to TVG, which devoted almost all of its airtime to live racing broadcasts and commentary, HRTV broadcast numerous pre-produced features on racing topics and the sport’s history. The network won three Eclipse Awards for programs produced by the network’s staff and an additional two Eclipse Awards for independently produced broadcasts that aired on the network.

Betfair acquired TVG in 2009 as part of a strategy to gain a foothold in the U.S. in case exchange wagering or other forms of gambling were legalized. The acquisition has allowed Betfair to lobby state legislatures for bills approving exchange wagering, efforts that have been successful in California and New Jersey.

Despite the passage of those bills, Betfair has not been able to launch exchange wagering in California due to a lack of agreement between all racing constituencies in the state, while its effort in New Jersey has been stalled by a delay in approving rules to govern exchange wagering. In addition, many legal experts have questioned whether exchange wagering runs afoul of federal regulations prohibiting bookmaking.

Exchange-wagering platforms allow customers to accept wagers from other customers on sporting events, including horse racing. Because customers can bet on horses to lose, the platforms have raised concerns about race fixing, though Betfair has countered that it voluntarily alerts regulators to suspicious betting patterns.