Showing posts from 2008


First it was record companies suing Napster and peer-to-peer file sharers, and then it was media companies such as Viacom, Universal Music Group, and Agence France Presse suiting Google, YouTube, and Facebook for distributing content whose rights they owned. Now GateHouse Media has filed suit against another newspaper firm, the New York Times Co., for publishing content from its websites and papers on

That media companies are suing each other is a sure sign of the maturation of online distribution and that money is starting to flow—albeit slowly and at levels far below that of traditional media, which still account for more than two-thirds of all consumer and advertiser expenditures

But the lawsuits really point out the weakness of revenue distribution for use of intellectual property online. In publishing, well-developed systems for trading rights and collecting payments exist. In radio, systems for tracking songs played and ensuring artists, composers, arrangers, and music…

Why Isn't Racing in Line for a bailout?

Let's see.  Thieves on Wall Street are getting $700 billion, apparently without having to make any promises at all on how they'll use the money. (Well, all right, they probably can't use it for lavish spa getaways, though they can pay out dividends, obscenely huge salaries and bonuses.)  And the auto companies, after three decades of making the wrong cars for the wrong market, are getting at least $14 billion to put off their inevitable trip to bankruptcy court.
So, why shouldn't racing get a piece of the pie? I'm really disappointed that Mitch McConnell, the Senator from racing (oops, make that Kentucky), hasn't yet made sure that his constituency gets its place at the trough.  Just in case ole Mitch is paying attention to what we say here, I've come up with a plan that'll hardly cost the government anything at all. In fact, we could do a very nice bailout package for well under $5 billion over a three-year period.  That's hardly a rounding error in…

Black Friday

We've been watching as handle has declined and sales receipts have fallen through the floor for the past few months.  But today seems to be when those ongoing causes caught up with racing in a way that none of us in the game could avoid noticing.
Not necessarily in chronological order: The Breeders Cup announced that it's canceling its national stakes program, which provided supplemental financing for 121 races around the country this year;Calder canceled three graded stakes from the current Tropical Park meeting and announced another cut in overnight purses;The Blood-Horse announced plans to lay off 10% of its staff; andThe Washington Post, formerly home of Andy Beyer, fired its racing reporter and will drop daily racing coverage.The elimination of the Breeders Cup National Stakes program probably has the biggest impact of today's events.  According to the Blood-Horse, Breeders Cup staff expects their revenue -- which comes primarily from stallion and foal nomination fees, …

Downturn Continues as Handle, Purses Drop

Unlike the 1930's, when racing was a relatively bright spot in an otherwise very dreary economy, thoroughbred racing in 2008 is not immune to the general economic malaise.
The latest figures from Equibase, reported yesterday in the San Diego Union-Tribune, show that nationwide handle was off 9.7% in November, compared to the same month last year, even though the total number of racing days at tracks across the country was up by more than 5%, from 440 in 2007 to 465 this year.
For the first 11 months of the year, through November 30th, total nationwide handle (on-track, at OTB's, and through ADW outlets) was down 6.17%, to $12.8 billion. purses were down 0.6% to $1.1 billion, and the number of race days was down 0.67%, to 5,764.
In some ways, these numbers are good news.  Most US industries are doing a lot worse than racing.  Auto sales, for example, are down 30-40% compared to last year, so perhaps we should be grateful that racing is down only in the single digits.  And for thos…

Why Won't Churchill Do the Right Thing?

Thanks to Terry Bjork on the Derby List for alerting me to how far Churchill Downs, Inc. and the Churchill horsemen are from agreement on sharing the revenue from internet betting.  As reported in the Louisville Courier-Journal, Churchill's last offer to the horsemen was to give 5.5% of internet (ADW) handle to purses, while at the same time eliminating any "source market" fees that would otherwise have gone to purses. (Don't ask me to explain source-market fees, but they compensate tracks for bets made online from locations near a track).
In contrast, the recent settlements with horsemen in California and Louisiana apparently give horsemen 7% of the internet/phone wagering handle, in a combination of source-market fees plus a percentage of the takeout.  That's in line with the goal set by the Thoroughbred Horsemen's Group for an equal one-third division of ADW revenue between tracks, ADW companies and purses.
Comparing Churchill's 5.5% offer to the 7% goal…

Magna's Latest Scam

Frank Stronach may have thought that he'd avoid too much press comment by putting out a press release on his latest chimerical reorganization plan the day before Thanksgiving, but, unfortunately for him, the media and the markets were still wide awake.
The plan, in the unlikely event it's actually completed, would leave Stronach firmly in control of the race track company Magna Entertainment, and would take another Stronach entity, MI Developments, and its unhappy minority shareholders, out of the business of sinking ever more money into Frank's flawed vision. But it's a long way from putting out a press release to realizing the plan in practice.
Even though the press release only appeared online at 11:26 this morning, it's already been well reported by, among other, Ray Paulick, the New York Times,the Thoroughbred Times and the Toronto Globe and Mail.  Generally, the story has been presented as a way for the minority shareholders in MI Developments, who have been mi…

Dead Heat at Aqueduct - But Everyone Gets the Same Payoff in the Exotics

Nothing all that unusual about a dead heat in racing. But I suspect there were a lot of Pick 4 and Pick 6 winners at Aqueduct today who were thinking that something was a bit amiss when they saw the payoffs.
Here's what happened: Yield Bogey, at 6-1, and Blues Street, at 15-1, dead-heated for the win in the ninth and final race at the Big A.  The win payoffs were a predictable $7.80 for Yield Bigey and $15.00 for Blues Street; remember, the payoffs are calculated by first subtracting the takeout, then setting aside enough to repay the amounts bet on the winners, then dividing what's left into two equal pots which are then allocated among the winning tickets for each horse, so bets on the horse going off at higher odds will get a higher payout. Similarly, there were two different payoffs for the exacta, tri, superfecta, late daily double and Pick 3, in each case reflecting the different amounts bet.
But when it came to the Pick 4 and the Pick 6, there was only a single payoff.  I…

Magna Update: A Shorter Leash

In yet another sign that time is running out for Magna Entertainment, the company announced today that it had secured one more extension of its $40 million revolving credit loan from the Bank of Montreal.  But the real news was that, instead of the one-month extensions that Magna had been able to get the past few months, this one was for only 11 days, until next Friday, November 28th.
For those few days of grace, Magna had to pay another $250,000 in fees, as they have each time the loan has been extended recently. Looking at their balance sheet, I'm not sure where they were able to find even that much spare cash.
Everyone knows that Magna doesn't have the cash to pay off the loan, to say nothing of the $200 million-plus that Magna Entertainment -- the race track company -- owes to its parent, MI Developments.  My guess, and it's only a guess, is that Magna Entertainment's new bankruptcy advisors, Miller Buckfire & Co., have found some asset that they think they can s…

Churchill Downs Inc. v. Magna -- By the Numbers

I'm not particularly a fan of Churchill Downs Inc.; their take-no-prisoners war with the owners and trainers over the division of online wagering revenue hurts horsemen and chases away potential bettors.
But, in contrast to the other major players in racing, one has to give Churchill credit for knowing how to run a business.  Compared to NYRA, just emerging from bankruptcy, and Magna, whose every financial report brings it closer to collapse, Churchill has a solid balance sheet, enough cash on hand so that not only can it be sure of opening the doors every day, but, mirabile dictu, there's even a profit for the shareholders. However, the way that Churchill earns its profit makes an important statement about the state of racing today.  Increasingly, Churchill's profits are coming not from live racing but from internet wagering and slot machines.
To see how profits are shifting, we need to loook at some numbers from Churchill's latest quarterly financial report, filed with…

Magna: the Gory Details

As I noted last night, Frank Stronach's Magna Entertainment Corp. has posted another large quarterly loss.  For the quarter that ended on September 30th, Magna lost $48.4 million, bringing its accumulated losses over the last decade to a staggering $626 million total (over $300 million of those losses incurred just in the past three years).
Now that I've had a few hours to analyze the latest quarterly report, it's more apparent than ever that this is an enterprise on serious life support.  The distressing outlook for Magna that I discussed when their mid-year report came out in August has, if anything, become even worse.
In a sign of increasing desperation, Magna announced that it had hired the investment banking firm Miller, Buckfire & Co. to advise on restructuring, sales of assets and possible joint venture options.  Miller, Buckfire isn't your ordinary investment banker, doing whatever kind of deals it can put together.  No, these guys specialize in salvaging fai…

Magna - Another Day, Another Loss

Magna Entertainment Corp., Frank Stronach's vehicle for running racetracks, has just posted its third quarter results (cleverly released at 10 pm, so as, I suppose, to minimize public attention).
The good news, such as it is, is that the level of quarterly losses has more or less stabilized. Magna lost $48.4 million in the quarter ending September 30, 2008, compared to $49.8 million in the same quarter last year.  I guess that's progress.  For 2008 to date, though, through September 30, Magna's total loss is $116.1 million, compared to $70.8 million for the first nine months of 2007.
The quarterly report is filled with lots of detail, shedding some light on how long Magna can hold out without giving up its "crown jewels at Gulfstream, Santa Anita and Maryland. It's too late in the evening for me to decipher the teeny tiny print on my screen right now, but I'll take a longer look at the numbers tomorrow.

Belmont Trend Continues on Downward Path

The New York Racing Association has just released the final numbers for the recently concluded Belmont meet.  As one would expect, they're  all down from the same meet last year, at least when calculated on a per-day basis. This year's meet had four more racing days than in 2007, so some of the aggregates are higher, but that doesnt hide the negative trend.
According to the NYRA press release, the average all-sources daily handle for the Belmont meet was 8.3% below last year's figure, coming in at $9.63 million per day.  NYRA did not say how much of that handle was bet on-track or through NYRA's own phone and internet account system; those are the bets that contribute the most to NYRA and to horsemen's purses. Off-track bets, whether through OTBs, other tracks, internet sites, etc., pay much less of the takeout to NYRA.  Trends around the country suggest that on-track wagering is falling at a faster rate than total handle, so the hit to NYRA's bottom line could …


The churning flood of economic developments and the desperate measures of governments to lay financial sandbags to control the torrent present not one, but three calamities for media managers. Those that escape one may well be swept away by another.

Most media can survive the collapse of credit markets because media firms have high cash flows are typically require less short term credit than manufacturing and retail firms. Because most can acquire their most important resources without accessing credit lines or issuing commercial paper, banks struggling to keep their heads above water are not a major short-term concern. However, those media firms with large debts due in the short-term that were hoping to refinance face significant hurdles. Some will be rapidly shedding media properties in order to stay afloat.

The more immediate problem for some publicly owned firms is the financial damage caused by the dramatic drop in share prices following the credit market collapse. Because a number…

So Long Breeders Cup, Hello Aqueduct

The Breeders Cup is over. So let’s get on to the important stuff.Which is that racing returns to Aqueduct on Wednesday.Well, OK, perhaps Aqueduct isn’t the center of the racing world any more – though it did host the Breeders Cup in 1985 – but for some of us in the game, it can be the center of our economic, if not aesthetic, lives.And for the New York Racing Association (NYRA), which operates the rusting old track on the fringes of JFKAirport, Aqueduct is, bizarrely, its most reliable profit center.Sure, Belmont and Saratoga have the famous races and, occasionally, draw the big crowds, but it’s Aqueduct that actually generates the cash.For those who haven’t had the pleasure of spending quality time at the Big A, here’s a video clip that can give you a bit of a feel for the ambience. True, the clip is 40 years old, and the crowds are a lot smaller these days, but some things never change.The original Aqueduct track opened in September 1894. At the time, long before there was an airpor…

New York Moves Toward Uncoupled Entries

The New York State Racing and Wagering Board – the state agency responsible for regulating thoroughbred racing – has proposed a rule that would allow trainers to enter a maximum of two horses per race as uncoupled entries, i.e., separate betting interests.The rule, which was announced by the Board on October 10th, could be adopted any time after the public comment period ends on October 29th.Coupling of entries has always been a hot-button issue for bettors.When a trainer’s horses run uncoupled, and the 20-1 longshot wins, while the 8-5 favorite runs up the track, many handicappers are quick to suspect chicanery. And who knows, in some cases they may be right.So the pressure for requiring a trainer to couple entries has always come from bettors and those in the press who say they’re representing the bettors.Uncoupled entries are already permitted in New York in stakes races. The proposed rule would allow them in all races.Coupling of entries as a single betting interest would still be…