CDI to Abandon Online Sports Betting

Bill Carstanjen, the chief executive officer of Churchill Downs, Inc. (CDI), said during a quarterly conference call with investors Feb. 24 that after only a brief foray into online sports betting, the gaming corporation plans to phase out operating in that sector by mid-2022.

“When the U.S. Supreme Court overturned the federal ban on sports betting in May of 2018, we had high hopes for the potential to build a profitable business in this space,” Carstanjen said. “Our initial strategy was to leverage a variable cost technology model and be disciplined in our marketing spend with a focus on bottom-line profitability as states legalized online sports wagering and iGaming.

“We have profitable retail sports books in four of our casinos,” Carstanjen said. “However, the online sports betting and online casino space is highly competitive with an ever-increasing number of participants that the states have licensed. Many are pursuing maximum market share in every state with limited regard for short-term or potentially even long-term profitability.

“Because we do not see for us a path in which this business model delivers predictable and acceptable margins for at least several years, if ever, we have decided to exit the business-to-customer online sports betting and iGaming space over the next six months…

“We are always committed to building long-term value for our shareholders. And consistent with this commitment, when we see that an investment is not progressing as we had planned, we will redeploy the resources and capital to other growth projects or return the capital to our shareholders,” Carstanjen said. “We have proven with our past decisions that we are willing to walk away from businesses where we do not see a secure enough path to consistent profitable growth with an acceptable return for our shareholders.”

The Thoroughbred industry is painfully aware of the gaming corporation's previous decisions to abandon aspects of its business. Under CDI's stewardship, horse racing has ceased over the past decade at Hollywood Park in California and Calder Race Course in Florida. A sale is in currently the works to turn historic Arlington International Racecourse near Chicago into a football stadium.

CDI currently owns four active Thoroughbred tracks (Churchill Downs, Turfway Park, Fair Grounds and Presque Isle Downs). Because of its recent history of shuttering racetracks, an announcement by CDI earlier this week that it intended to acquire Colonial Downs and its Virginia gaming properties drew widespread social media chatter among racing industry participants and fans, with skepticism and concerns for Colonial's future far outnumbering comments that considered the deal to be a positive one for the sport.

“This isn't the result we wanted when we started [online sports betting] back in late 2018, but it is the prudent next step forward for our company,” Carstanjen said. “We remain absolutely committed and excited about TwinSpires Horse Racing as its top line, bottom line, and margins continue to demonstrate that this is a special online business with a sustainable, scalable and unique business model that delivers profitable growth today just as it has since we started the business well over a decade ago.”

At a later point in the call when investment analysis were permitted to ask questions, Carstanjen responded this way to one query about the decision to exit online sports betting:

“[G]ambling ultimately is a margin-driven business, and you have to set up your teams and you have to set up your processes to guarantee that you can drive margins. We can do that with TwinSpires Horse Racing, but we just don't see that for us in the broader online segment. So, we'll keep watching that business over time. We'll watch the others that are in it. And we'll see where the future takes that space.”

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Richard Duchossois, Former Arlington Park Chairman, Passes At 100

Richard L. Duchossois, the former owner of Arlington Park in Arlington Heights, Ill., and known throughout the racing world as a tireless promoter of the sport and a gracious host at big events, died at the age of 100 Friday morning at his Barrington Hills home in suburban Chicago.

Born Oct 7, 1921, Duchossois graduated from Morgan Park Military Academy and was called in to active military service during World War II while attending Washington and Lee University in Virginia. He served in five European campaigns as a tank commander under Gen. George Patton and received numerous citations before being released from active duty as a Major in 1946.

From 1952-'80, Duchossois was CEO of Thrall Car Manufacturing Company, one of the nation's leading railcar manufacturers. In 1980, he purchased Chamberlain Manufacturing Corp. and became its chairman.

In 1983, as chairman of The Duchossois Group, he purchased Arlington Park from partners and led its rebuilding after a disastrous fire in 1985. Though he did not create the Arlington Million (that distinction belongs to the late Joseph Joyce Jr., who came up with the idea for the world's first million-dollar horse race when the track was owned by Madison Square Garden), Duchossois promoted it as only he could. He also conceived a special event in 1996 for Cigar's attempt to win his 16th consecutive race, equalling Citation's win streak. An earlier attempt to card a special race that would bring rivals Easy Goer and Sunday Silence to Arlington in 1990 failed to materialize when both horses suffered career ending injuries.

In 2000, Arlington Park merged with Churchill Downs, Inc. Duchossois became the single largest shareholder in Churchill Downs Inc. and still maintained a firm hold on Arlington Park's activities well into his 90s.

His ownership of Arlington was not without controversy. He closed the track down for two years in 1998-'99, upset that Illinois legislators would not budge on granting additional gaming to racetracks in order to compete with casino riverboats. Ironically, when legislators were persuaded to grant casino gambling to racetracks a few years ago, Churchill Downs leadership opted not to seek a casino license for Arlington Park. Instead the property was put up for sale and a deal was reached last year to sell Arlington to the Chicago Bears of the NFL for the construction of a football stadium.

Arlington likely ran its last race in 2021, with the Arlington Million's purse reduced and its name changed to the Mr. D. Stakes to honor Duchossois.

In addition to his ownership of Arlington, Duchossois at one time was an active Thoroughbred owner and breeder, basing his operations at his Hill 'n Dale in Barrington Hills.

Duchossois was a philanthropist throughout his life. His largest known donation was a $21 million gift to the University of Chicago for an outpatient medical center. His first wife, Beverly, for whom the Beverly D Stakes was named, succumbed to cancer after care and treatment at that facility.

Duchossois is survived by his second wife Mary Judith; son Craig; daughters Dayle (Fortino) and Kimberly; and numerous grandchildren and great-grandchildren. In addition to his first wife Beverly, he was preceded in death by a son, Bruce.

There will be no visitation because of COVID-19 and services and burial will be private.

Reactions on the passing of Richard Duchossois

“We are profoundly saddened today by the loss of Richard Duchossois. He was a tireless champion of Churchill Downs and thoroughbred racing. His impact on those of us involved in this industry was simply immeasurable. He was a mentor and friend to so many in Churchill Downs, most especially me, and we will all miss his grace, wisdom and humor. His contributions to Churchill Downs and thoroughbred racing were merely a small part of his extraordinary life. They call his generation 'America's Greatest' and to be fortunate to spend time with this man was to be in the presence of a truly special individual who led a full life of sacrifice, commitment and service to others. We will mourn him, miss him and wonder if there could ever be another like Richard Duchossois.”  – Bill Carstanjen, CEO of Churchill Downs Inc.

“Richard L. Duchossois was a great American who served his country valiantly during World War II, and later served the Thoroughbred industry with great honor and distinction. Very few individuals exhibited the drive and determination of Mr. Duchossois in his very full and successful life. Following a devastating fire that destroyed the Arlington Park grandstand in 1985, he conducted the Arlington Million under tents, and it was dubbed as the 'Miracle Million.' He then rebuilt Arlington Park into one of the shining jewels of all racetracks. Mr. Duchossois propelled the Arlington Million into a top international showcase and paved the way for further interest in global competition among the world's top Thoroughbreds. It was our great pleasure to bring the 2002 Breeders' Cup to Arlington Park with Mr. Duchossois at the helm. We cherish his legacy and extend our deepest condolences to the Duchossois family.”  – Breeders' Cup

“On behalf of Illinois thoroughbred owners and trainers, we extend our deepest condolences to the family and friends of Dick Duchossois.

“Mr. D served our nation with distinction and thereafter brought his enduring tenacity and exceptional work ethic to the helm of Arlington Park — a track he worked to build into a world-class destination for thoroughbred horse racing.

“As we mourn his loss, we are reminded of his immense contributions to thoroughbred racing in North America, most especially here in Illinois. His imprint on the sport and industry was vast and will not be forgotten.” – Illinois Thoroughbred Horsemen's Association

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Fair Grounds Not Definite on Dates Reduction

Jason Boulet, the Fair Grounds director of racing, was repeatedly pressed by Louisiana State Racing Commission (LSRC) member Tom Calvert Tuesday about whether or not his track would once again seek a statutory change to reduce its required number of race dates from 80 to 75 when the state legislature convenes its 2022 session Mar. 14.

The exchange did not yield a definitive answer beyond Boulet's disclosure that the Fair Grounds and its corporate parent, the gaming firm Churchill Downs, Inc. (CDI), would be in favor of participating in discussions among stakeholders that might reduce race dates in Louisiana with the goal of making it easier to fill entries at the state's four Thoroughbred tracks.

The dates statute wasn't on the agenda for the Jan. 18 LSRC meeting. But Calvert brought it up after Boulet reported that so far through the November-through-March meet, the number of starters per Fair Grounds race has dipped from 8.3 to 7.6 in a year-over-year comparison, a decrease Boulet termed “alarming.”

“The struggle for entries is a reality for us,” Boulet said, noting that the Fair Grounds has already had to obtain permission from Louisiana Horsemen's Benevolent and Protective Association (LHBPA) on three occasions during the current meet to card eight-race programs instead of the required nine.

“The [handle] numbers so far after 34 days–not a good, positive thing so far at 11.9% down year-to year,” Boulet said.

But Boulet also noted that year-to-year comparisons are difficult nationwide because the COVID-19 pandemic has skewed the industry's metrics.

Boulet did manage to make the handle numbers sound rosier by offering a pre-pandemic comparison that stated the Fair Grounds handle is “actually trending up 7%” from the 2019-20 meet.

“Overall handle has been a struggle,” Boulet explained. “That being said, even with that, we've had positive video poker and slots revenues over the year. That's been good for us. And it allowed us to actually do a purse increase for 15%.”

Calvert then wanted to know if Fair Grounds or CDI has legislation either pending or planned to reduce the dates requirement.

“I'm not aware of that, sir,” Boulet answered.

“Wouldn't that be a good thing for you?” Calvert asked.

“I think that, in front of this commission, yeah, I mean, that's always been a very sensitive subject about touching that 80-day minimum statute,” Boulet said. “Again, the Fair Grounds is a proponent of trying to move forward with talking about overlap, and we hope that the conversation is brought forth to this commission. Of course, the HBPA has all the rights to be concerned about moving forward with allowing us to go below the 80 days…”

Calvert then pointed out that last year, the Fair Grounds and CDI advocated for just such a five-date reduction. He noted the provision was included in 2021 racing legislation, “but at the last minute it was pulled out of the bill.”

Boulet then said he has not recently met with the legal counsel or lobbyists the Fair Grounds employs, so he allegedly wasn't sure what might be in the legislative pipeline.

“What I'm saying, I think the commission would be receptive to it,” Calvert said. “We understand that most of the successful models around America have less days than the Fair Grounds has. I just think that you guys can't drag your feet on it. You've got to move it. And sometimes I know it's like swimming against the current, but you've still got to put it out there.”

Boulet said, “I appreciate the way you put it, because I know that in the long run [that] once we are given that door to open, then all the tracks, including Churchill Downs [Inc.], would take advantage and try to move toward these boutique meets and whatever…” Boulet said. “Basically, it comes down to we hope that the commission can consider it case by case, track by track, and the HBPA has to have the final approval…”

LHBPA president Benard Chatters wasn't about to let this back-and-forth between Calvert and Boulet go without getting on the record how his organization's membership felt.

“The horsemen absolutely oppose a reduction in racing dates,” Chatter said. “The Fair Grounds runs 80 days per year. The other three tracks run 84 days, so [Fair Grounds] has a reduction in days that other tracks don't.”

Chatters noted that for some portions of the current meet, the Fair Grounds chose to run five-date race weeks instead of four, compounding race-filling difficulties.

“Everything in the horse world from the [horse] owner's perspective is on the rise,” Chatters said. “Expenses are on the rise. The one thing that's not on the rise is opportunities to race these horses. It is imperative that these owners have as many opportunities to race these horses as they can so that they stay in this business. If you look at the numbers, if you look at all of the positive things that we have coming into racing in the near future [like a cut from online sports betting], you'll be able to see that everything is in place to be able to draw more horses to the state, to bring more horses into the grounds…

“It is very, very critical that you never forget that the owners [of horses] put on this [show] and we're the ones that take all of these [negative financial consequences] by the seat of our own pants,” Chatters said, pointing out that revenues for track operators are “through the roof.”

Chatters continued: “I want to make sure that you're listening. Profits are up, betting is up, and all of this stuff. And so this 'difficulty' in getting horses is kind of far-fetched, I think…When you go to talk about cutting race days and that kind of thing [it] means that it makes it very, very difficult to not necessarily make a profit in the horse racing business as an owner, but just to keep your nose above water so that you're not drowning. When we run these [smaller outfits] out, we're in trouble.”

Calvert then asked, “How do you respond to the criticism of your position which says you want to have terrible horse racing? [That] you want to have races with four or five horses in [them] so that this low level of horsemanship, this low level of trainership, can pick up money and keep being in the business? I mean, I'm of the proposition that this should be sort Darwinistic and that [outfits that can't survive] should be eliminated from the world of horse racing. What do you think?”

Chatters responded by rattling off a sizable list of people and entities that all benefit from purse money trickling down into the economy, including all the way to farmers who grow hay and vehicle dealers who sell pickup trucks.

“So, the importance of as many people participating in horse racing as possible on the state economy is critical, or crucial,” Chatters said.

“I disagree with you when you say the owners are the bedrock of horse racing,” Calvert said. “I would say the racing fan is the bedrock of horse racing…How do you respond to those fans that say we have to eliminate this low level of horse racing to keep the fans interested? A four-horse field, a five-horse field with $5,000 claimers is not something the fans are going out to the racetrack to see. They're not even betting on those races. How do you respond to that?”

Chatters answered that those $5,000 claimers sometimes outhandle higher-quality races. Calvert didn't buy that idea. He said not with short fields, they don't.

“I have no problems, Mr. Chatters, with a $5,000 claiming race that has 12 horses,” Calvert said. “I do have a problem with four-horse races. And [CDI] has advised that the reason why [Fair Grounds has them] is because they have an 80-day meet. If they had a 75-day meet, they'd have greater purses, which would be a benefit to the horsemen…”

Chatters, in closing, said, “We're simply asking that opportunities to race is not touched [in the legislature]. We are asking this commission to stay the course with where we are with these types of issues.”

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Ben Murr Named President Of Twinspires, Online Gaming For Churchill Downs Incorporated

Churchill Downs Incorporated (“CDI” or the “Company”) announced today that Ben Murr has been named President of TwinSpires and Online Gaming. In this role, he will be responsible for the overall strategy and operations of these businesses.

Murr brings 24 years of leadership experience to the position. During his 14 years with CDI, he has served in multiple leadership roles including President of United Tote, Senior Vice President and Chief Technology Officer and, most recently, as interim President of TwinSpires and Online Gaming.

Prior to joining CDI, Murr worked in information technology leadership roles at General Electric. He holds a Bachelor's degree in Economics and a Master of Business Administration from Bellarmine University.

“During his tenure with CDI, Ben has been an important leader in the growth across our operations,” said Carstanjen. “He has been a key player throughout the extensive changes in our Company over the last 14 years and will continue to move our TwinSpires and Online businesses forward.”

“I've been heavily involved with TwinSpires and our Online Gaming operations throughout my tenure at CDI” said Murr. “I am passionate about these businesses and believe strongly in their future growth potential and strategic importance for CDI.”

Murr will remain a Senior Vice President of CDI in addition to his responsibilities as President of TwinSpires and Online Gaming.

Murr's promotion is effective immediately. The Company will move quickly to fill the Senior Vice President and Chief Technology Officer role.

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