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Magna drawing heat over account wagering

THE BALTIMORE SUN

Bettors considered it a great leap forward, and the horse racing industry considered it the next source for growth. But now, the promising world of telephone and Internet wagering has become racing's latest battleground.

At the center of combat is Magna Entertainment Corp., majority owner of Pimlico and Laurel Park. Based in Canada, Magna owns 12 other tracks and a 24-hour television network devoted to racing and a betting service for account wagering.

It's called account wagering because bettors establish an account with a company and then bet on races by drawing down the account via the telephone and Internet.

In the past six weeks, Magna has pulled its tracks' races from most competing account-wagering systems and prohibited them from accepting bets on races from Magna tracks.

Bettors have been forced to sign up with Magna's Xpress- Bet, its wagering system, and HorseRacing TV, its TV network, if they want to continue betting and watching races in their living rooms from Laurel and tracks such as Gulfstream Park in Florida and Santa Anita Park in California.

The result has been an outcry and a movement to boycott betting on races from Magna tracks. A gambler in California who started a Web site, www.boycottmagna.com, has attracted more than 500 signatures on a boycott roster, and the angry bettors seem to be making an impact.

Betting from off-track sources has decreased more than 10 percent at Gulfstream and Santa Anita, the premier winter meets that attract the best horses and usually the most bettors. Because of betting declines, Santa Anita on Saturday slashed purses, the money paid to the owners of top-finishing horses.

At Laurel, the impact is unclear. Overall betting is down slightly for the year, but that could be the result of bad weather. At the same time, betting with some of XpressBet's competitors has soared.

Caught in the middle of this battle for bettors are the bettors themselves. Since account wagering began on a limited basis in the 1970s and started reaching beyond the hard-core gambler in the late 1990s, no single system has offered all tracks.

Bettors could watch and wager on Churchill Downs, home of the Kentucky Derby, on certain systems, but they would have to change systems to view and bet on races from Pimlico, home of the Preakness. Now, the maze-like world of account wagering has become more perplexing.

"We frustrate our fans," said Alan Foreman, a Baltimore lawyer active in various racing organizations. "As an industry we're suffering as a result of this battle."

Bettors must set up accounts with multiple companies if they want to see and wager on races at various tracks. For some systems, they need a satellite dish. For others, they need to live in a county whose cable company offers a horse-racing channel.

For still others, all they need is a computer and Internet access. This is complicated by the fact that laws governing account wagering differ from state to state.

"It's pretty nightmarish if you're a bettor," said Chris Scherf, executive vice president of Thoroughbred Racing Associations, a trade group of 43 North American tracks. "It's a little bit like, if it's Tuesday, it must be Belgium."

Scherf and others said actions like Magna's were inevitable in the highly competitive, fast-growing business of account wagering. An estimated two dozen companies in the United States and numerous others in the Caribbean legally accept bets on horse races.

Competition is intense for what is the fastest-growing segment of horse-race betting. Of the $15.2 billion wagered last year on racing in North America, 10 percent to 15 percent was bet through account-wagering systems, said Greg Avioli, deputy commissioner of the National Thoroughbred Racing Association, the sport's so-called league office.

While overall betting on racing is stagnant, account wagering is growing about 20 percent per year, he said.

Ron Luniewski, president of XpressBet, declined to discuss the size of its customer base or its growth. All he would say was: "Business is very good."

In regard to Magna's aggressive tactics, he replied, "We didn't start this." He was referring to the exclusive agreements that Television Games Network has with racetracks.

Although Magna's moves struck nearly every account-wagering firm, they were aimed at TVG, the Los Angeles-based television channel and betting system. It broadcasts races from 60 thoroughbred and harness tracks around the country, including Pimlico and Laurel Park, and reaches 17 million households in all 50 states.

Because of state laws and other regulations, it accepts bets from residents in only 12 states, Maryland being one.

TVG is available in 300,000 homes in Maryland by cable - Comcast in eight counties and Baltimore - or satellite dish. Customers watch races on TV, usually six to eight per hour, and, if they have a TVG betting account, place bets by telephone or computer.

As TVG prepared for the 1999 nationwide launch of its network, it signed tracks to exclusivity agreements in exchange for what it claims to be the highest return to the industry of any account-wagering system. TVG returns about 13.5 cents from every dollar wagered to the tracks, which share proceeds with horsemen for purses.

TVG wanted to be the sole broadcaster of each track's races in order to increase its value. The Maryland Jockey Club signed on. When Magna bought a majority interest in the jockey club in November 2002, a showdown over account wagering seemed assured.

Eight months later, the jockey club filed suit against TVG's parent, ODS Technologies, a subsidiary of Gemstar-TV Guide International Inc., which is owned by media mogul Rupert Murdoch.

The intent was to end their agreement tomorrow, meaning races from Pimlico and Laurel would no longer be shown. ODS fought back, trying to persuade a judge to preserve the deal.

The legal battle continues in U.S. District Court in Baltimore, at which another hearing is scheduled Friday. The jockey club has agreed to continue supplying its signal to TVG through Friday's hearing.

Ever since Magna launched HorseRacing TV and XpressBet in 2002, it has been at odds with TVG because of their head-to-head competition. Their leaders have tried to negotiate deals to share their exclusive content, but only public haggling resulted.

"We're willing to do business on reasonable terms with anybody in the racing industry," said John Hindman, TVG's general counsel and vice president of communications. "It's unfortunate for the racing fans and the Maryland racing industry that something that provides broad TV exposure and contribution to purses is at issue here."

Although Magna is seen by some as the heavy now, others point out Magna is merely following the model established by TVG with its exclusivity deals. Luniewski, the president of XpressBet, said Magna wants to level the playing field so that it can compete in a free-market, may-the-best-man-win environment.

Some see Magna's strategy of withholding races to open up the marketplace as contradictory. But observers within the industry say it may be Magna's best chance in the long run to strengthen its account-wagering system.

In the short run, however, Magna's eye has been blackened. Richard Bauer, the California bettor who started the boycott Web site, said he has been surprised at the animosity toward Magna. He said the company and its chairman, Frank Stronach, are seen as wealthy bullies who have yet to figure out how to run racetracks.

"I see all this frustration coming out of the woodwork from all these folks joining the boycott," said Bauer, 60, a semi-retired information-technology consultant who has bet on horse races for 40 years. "I hate XpressBet. I resent getting it jammed down my throat."

One boycotting Marylander, Ted Mudge, worked for Magna as vice president of business development for 1 1/2 years. For six years previously, he was president and part-owner of AmTote, which provides totalizator service to tracks and account-wagering companies.

Mudge said he believes Magna, by forcing people to sign up for XpressBet, is trying to prop up a betting system that hasn't met company expectations. Instead of cutting off its signal to competitors, Mudge said, Magna should upgrade XpressBet until it's the best system available.

"If you do that, people will come to you because they want to," Mudge said.

Key account wagering operators

AmericaTab: Ohio-based collection of several Internet betting sites; its president, Charlie Ruma, who owns Beulah Park, has fought Magna's cutoff by offering bettors 7 percent rebates when betting certain tracks on certain days; "It's hardball, and I'm playing it," Ruma said.

Phonebet: Operated by Philadelphia Park since the mid-1980s, Phonebet is one of the oldest account wagering services and prides itself on user-friendly service.

Racing and Gaming Services: Based on the Caribbean island of St. Kitts, this specialty shop for high rollers claims to be the largest single off-track betting site in the world; one of several legal offshore wagering services that offers bettors rebates (a percentage of what they bet is credited to their account).

Television Games Network: Launched nationally in 1999, the California-based horse-racing TV network and its betting platform are the country's largest account-wagering service; immersed in legal battle with the Maryland Jockey Club over broadcasting rights to Laurel Park races.

Youbet.com: Claims to be the largest Internet provider of horse racing in the United States; lineup of tracks has been depleted by Magna's actions; lost the right Jan. 17 to accept bets on or show races from Laurel Park.

XpressBet and HorseRacing TV: Late to the party, not launching until 2002, Magna Entertainment Corp.'s betting service and TV network have pulled Magna's races and cut ties with most competitors; angry gamblers responded by boycotting.

Tom Keyser

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