Calder's Share of Host-Track Market Declines

Is Calder going to survive?

Calder's Share of Host-Track Market Declines
By Jim Freer
Bloodhorse


Two recent reports show that Tampa Bay Downs and Gulfstream Park are making big inroads into Florida's lucrative host-track simulcast market, while host revenue for Calder Casino & Race Course fell by $5.1 million in this year's second quarter.

In June Tampa Bay and Gulfstream combined to collect 54% of host-track revenue, while Calder had 46% of the $21.9 million that was bet at guest tracks around Florida. That's according to data the Florida Division of Pari-Mutuel Wagering released Aug. 6.

That customer base in June of previous years had been entirely Calder's, including last year when simulcast betting was $29.1 million.

This year the three tracks are battling over a business in which a host, while conducting a race meet, purchases the signals of Thoroughbred tracks outside Florida and then sells and transmits them to other Florida pari-mutuel outlets that are known as guest tracks.

Calder has dominated that market for more than 20 years because it was the only Florida Thoroughbred track with live racing from June through November, and thus the only track eligible to be a host.

But July 31, Calder's parent company, Churchill Downs Inc., reported that Calder revenue and earnings before interest, taxes, depreciation, and amortization declined $5.1 million in this year's second quarter compared with the same period in 2012 "due to the impact of multiple host racetracks."

The precise numbers for the host track-related share of Calder's revenue were not readily available.

"At this point, we do not know to what extent the continuation of multiple hosting racetracks could have on our business, financial condition, and results of operations," CDI said in its second-quarter earnings release.

There is a widespread view among Florida racing officials that the battle for host-track business could be as important as the head-to-head weekend racing between Gulfstream and Calder in shaping the future of the state's Thoroughbred tracks. Since the middle of May, all three Thoroughbred tracks have been operating as year-round host track; June was the first full month of competition.

According to the Florida DPMW, during last year's second quarter Calder took in $75 million of the $87 million of what is officially known in Florida as interstate simulcast wagering. In the second quarter of 2013, Calder's share fell to $43 million of a $78 million market, which led to a drop of $5.1 million in revenue.

Guest-track wagering was $270 million during Florida's 2011-12 fiscal year that ended June 30, 2012. It declined to $262 million in 2012-13.

Host tracks contractually receive a sales fee from each guest track and generally one-third of the pari-mutuel takeout on races. A review of Florida DPMW and Calder numbers indicates total host-track revenue might be between $30 million and $40 million.

Florida has 32 pari-mutuel facilities including the three Thoroughbred tracks. Betting on simulcasts of races from tracks such as Saratoga Race Course, Belmont Park, Santa Anita Park, and Churchill Downs has longstanding popularity at Florida Greyhound tracks, horse tracks, and jai-alai frontons; that is why the three tracks are fighting over the market.

Calder officials point to the longstanding interpretation of Florida law that requires a track to be holding a race meet of at least three days a week to be eligible to be a host track. But Tampa Bay, which will not resume racing until early December, and Gulfstream are using new Florida DPMW-approved interpretations of Florida laws and rules to join Calder as year-round host tracks.

Calder vice president and general manager for racing John Marshall is among those who believe the issue is as significant as the Calder-Gulfstream head-to-head battle.

Through five weekends of overlap, Gulfstream has averaged $2.6 million in all-sources handle per day, double the $1.3 million for Calder. The track is losing money on those weekend days, Marshall said, but it plans to continue its Friday-through-Sunday racing schedule through June 2014 in large part to keep its host-track eligibility.

Host-track handle for the past two Florida fiscal years (July 1-June 30) are as follows:

For 2011-12, Calder had $191 million, Gulfstream $49 million, and Tampa Bay $30 million for a total of $270 million. For 2012-13, Calder had $169 million, Tampa Bay $53 million, and Gulfstream $40 million for a total of $262 million.

Calder's market share fell from 71% in fiscal 2011-12 to 65% in 2012-13.

State law requires that the guest track receive at least one-third of takeout, with the remainder divided evenly between the host track and the horsemen's association with which it has a purse contract. The expenses for host tracks are for paying a non-Florida track to take its signal and for ongoing operations.

The tracks do not disclose their revenue and profitability for their host-track business. But it is known to be profitable and sometimes referred to as a cash cow, partly because of the relatively low cost of ongoing operations.

The recent Florida DPMW report put hard numbers on host-track activity that is being widely followed in the racing industry.

Tampa Bay and Gulfstream reportedly are aggressive in seeking agreements with Thoroughbred signal providers and with Florida guest tracks that have been Calder customers in the summer and fall. Several industry sources have said the Palm Beach Kennel Club, one of Florida's most active sites for simulcast betting, is among the guest tracks Gulfstream has taken away from Calder.

Gulfstream maintains that racing two days a week is sufficient to be a host track. It is racing two days a week through Nov. 30, when it will begin its traditional five-day meet.

Gulfstream is joining Tampa Bay in this interpretation of Florida law: If a track has racing July 1 and the following June 30, it can be a host track the entire 12 months no matter how many racing days it has within those months.

On May 7 Gulfstream received Florida DPMW permission to race June 25. Several days after, it resumed serving as a host track. Tampa Bay held a two-day meet June 30 and July 1 to give it year-round status for 2012-13 and for 2013-14.

Calder has filed a petition with the Florida Division of Administrative Hearings asking it to determine whether the Florida DPMW violated Florida laws and rules by allowing Gulfstream and Tampa Bay to be host tracks during periods other than their traditional race meets. The Division of Administrative Hearings has told the Florida DPMW to conduct the review, but there is no timetable for a decision.

Marshall said Calder hopes the Florida DPMW will revoke the year-round host-track status of Tampa Bay and Gulfstream or not grant it for 2014-15.

Meanwhile, the recent Florida DPMW report showed the following changes in live on-track handle from fiscal 2011-12 to fiscal 2012-13:

Combined live handle at the three tracks increased 8% from $91 million to $98.5 million. Gulfstream was up 25%, from $50.5 million to $63.2 million; Tampa Bay was down 7%, from $20.2 million to $18.8 million; and Calder was down 19%, from $20.3 million to $16.5 million.