'Derby Day' Looks Promising

2 May 2003

The Kentucky Derby, unquestionably the most hyped event in U.S. horse racing, has become a major payday for companies operating online race wagering services.

While the Breeders' Cup and its nine championship races brings in more money for companies like Autotote Enterprises, the Derby is, as John Ponzio puts it, "by far the biggest single race of the year."

Ponzio is president of Connecticut-based Autotote, which operates 12 off-track wagering venues and is a subsidiary of Scientific Games Corporation.

With its extensive network of OTB facilities, Scientific Games predicts another successful Derby Day.

Ponzio said heavy favorite Empire Maker has garnered the most attention, but added that another half dozen or so horses could win the running of the roses.

"Whenever there are that many horses capable of winning, there will be a lot of action across the board," he said. "A lot of casual bettors will be drawn into it because of Empire Maker but I think this field could generate a record day of betting. It will be our best day of the year and if it isn't a record day, it will be very close."

The Internet will continue to play a key role in betting action for this year's Derby, the 129th.

A trio of companies licensed to conduct Internet race wagering in California, meanwhile, hope to cash in on the betting frenzy and the growing number of bettors using their PCs to place bets.

Youbet.com, which offers Internet subscribers not only betting options but also streaming video and audio of the races, is hoping to continue a yearly trend in which the Kentucky Derby brings in a lot of new customers. That trend was strengthened last year when the company became the official online wagering platform of Churchill Downs Incorporated and the Kentucky Derby. The deal gives Youbet users access to special coverage of the race. The site also gets promotional placement throughout Churchill Downs during the race.

In 2002, Youbet did over $100 million on Derby Day. Earlier this month the company announced that it had completed its most successful year in history and ended 2002 with its first quarter of positive cash flow ever.

The company's success is due in large part to its receiving an "advanced-deposit wagering" license in California in early 2002. The ADW license enables operators to take bets from California residents over the phone or via Internet.

Account wagering, North America's only legal form of betting via phone lines and the Internet, is quickly becoming a key revenue stream for the racing industry. It's

Another giant in the California account wagering industry, Gemstar-TV Guide International's TVG Online, is also banking on a big day of business. The group carries eight to 12 hours of horse racing each day from numerous tracks in North America. The network has 46,000 wagering subscribers in 12 states, including Kentucky, Indiana and Ohio.

TVG spokesperson Chip Tuttle said that in 2001, account wagering on the Derby through TVG and other home-betting services totaled $443,981.

The handle more than tripled to $1.6 million last year, said Karl Schmitt Jr., president of Churchill Downs Simulcasting Network.

The third California licensee, Magna Entertainment Corp., operates the XpressBet system, which facilitates advance-deposit wagering, as well as a new 24-hour racing channel called HorseRacing TV.

Following the passage of California's advanced-deposit wagering law, the three ADW-licensed companies launched new services based in the state in the first quarter of 2002, making this year's race the second Kentucky Derby since the new era of racing on the West Coast began.

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