Advance Deposit Wagering and the Economics of RacingDavid Nathanson - Senior Vice President & General Manager,
The View from TVG
Television Games Network (TVG)
Alan Marzelli: David Nathanson has been at the helm of TVG for nearly two years. He knows the television business well and has held several executive positions at Cablevision, Comcast and other leading networks. David will tell us a little about TVG and how it views the present ADW landscape. David, welcome to the Round Table Conference.
David Nathanson: Thank you, Alan, and thank you, members of The Jockey Club, for inviting me to participate in this important discussion.
At the 1999 Jockey Club Round Table, Pete Boylan stood before you and stated that an outside media company, TV Guide, intended to finance and build a television network for horseracing - giving the sport the same production values and distribution of other similarly focused networks.
On that plan, the industry stood united.
It's fair to say, based on some of the comments today, times may have changed, but our commitment to horse racing has never wavered. We remain as committed today as we were that day in 1999.
I am proud to report to you that TVG reaches 50 million homes and is the most widely distributed network, not just in the United States dedicated to horse racing, but in the world. TVG's programming reaches more people worldwide than mainstream sports networks including Fox Soccer Channel, College Sports Television, NBA TV, and even the NFL Network.
So what have we learned in eight years? The conclusion can be stated simply: People will bet on what they can watch on television.
It's been proven all over the world that the combination of the highest television production quality and the broadest television distribution generates the most advance deposit wagering handle, regardless of the state, regardless of the country, regardless of the ADW provider. Period.
People will bet on what they can see.
TVG's television programming is distributed in all 50 states by every major cable, satellite and IPTV provider, which, by the way, are controlled by the cable and satellite providers.
For the majority of Americans, TVG is the only way that they can conveniently access horse racing on a daily basis.
These facts, more than anything else, help explain some of the trends that we are witnessing in the Thoroughbred racing industry today.
When TVG ended its relationship with Churchill Downs in March, we announced that we would reallocate our television and promotional resources to racetracks such as Belmont Park, Hollywood Park and Keeneland. And as Mr. Evans already stated, TVG wagering was up 35 percent on Hollywood, 36 percent on Belmont Park, and 37 percent on Keeneland.
But let's not talk about just TVG. Let's talk about what happened at those racetracks. Hollywood Park set a new record for average daily wagering despite the continued onslaught of competition by Native American casinos. Belmont Park's overall wagering grew at more than three times the national average, despite not having a Triple Crown hopeful in the Belmont Stakes. And Keeneland set a new wagering record for all-sources wagering despite what Nick would tell you is some of the worst weather in Keeneland's history.
Not only did TVG have the best second-quarter results without the Kentucky Derby in our history, but we also helped our track partners improve their overall business well ahead of industry norms. And in the process, in this last second quarter, in 2007, we returned $17.8 million back to you.
The same held true just last week when after 60 percent year-over-year increases on TVG wagering, Arlington Park went off of TVG's air. ADW racing on Saratoga and Monmouth Park immediately surged. Monmouth Park set a new wagering record for Haskell day, and NYRA made an already outstanding Saratoga meet better.
Those preceding facts, wagering on TVG, wagering on our track partners, are indisputable. People will bet on what they can see.
That explains why, in the states where we take wagers, TVG's handle is on average three times larger than its nearest competitor. If you look at the tracks that we carry and the states where we take wagers, that is where you will find the growth in this industry.
It seems like a lot of people today spoke about TVG's business, and in some cases, sitting there, it seems like they know it better than myself.
I agree with the sentiments made by Mr. Evans. It's not just about handle, it's about revenue back to you. When it comes to revenue sharing, we're an open book. We've returned $275 million in revenue to the racing industry today. $275 million to the people in this room.
We share publicly what we keep for ourselves: 5.5 percent. And what we return back to the racing industry: 14 percent. 14 percent to everyone. Returning less than 14 percent to each one of you on each dollar wagered is a pay cut no matter how you spin it. We are not aware of any ADW provider that keeps less from each dollar wagered, returns more revenue to racetracks and horsemen, or invests more in its products and services than TVG.
Consider, for example, that over the last five years, purse revenue at TVG's exclusive tracks in California increased by more than 10 percent - or more than twice the industry average - while purses at the other tracks in California are down 6.5 percent over the same period. Up 10 percent from one group of tracks and down 6.5 percent for another group of comparable tracks in the same state. That's a significant swing in revenue that directly impacts horsemen and tracks.
Any business seeks to earn a return on investment that it creates in the marketplace. In order for us to sustain and grow our television network, we require, like all television networks, unique content. Unlike many others, we've never restricted others from reaping the rewards of investment in high-quality television production, television distribution and ADW technology as long as we were able to participate in the value that we helped to create. And in this case, the value being created is wagering.
People will bet on what they can see and TVG brings horseracing home to more people - more existing and potential fans - than anyone else in the world. The combination of television and advance deposit wagering is racing's advantage to all other forms of gaming and in-home entertainment if we choose to embrace it.
I'd like to end with a brief video highlighting how TVG is working to broaden the reach and the
appeal of our sport. I thank you once again for the opportunity to speak with you today. We look
forward to continuing this vital partnership. Thank you.