Price Wars

If you follow horse racing closely, you are no doubt aware that a large number of Mid-Atlantic racetracks and OTBs are being denied the right to offer simulcast wagering on races run at Gulfstream Park in South Florida, Fair Grounds in New Orleans and Santa Anita Park in Southern California -- three prime winter racetracks.  Basically, the two sides have failed to reach agreement concerning the rate to be paid to the three tracks for wagers placed on their races at certain facilities located on the Eastern Seaboard.  The dispute is a familiar one to tracks and horsemen.   It also is familiar—and maddening—to our fans.

Frequently, I hear from horseplayers who are infuriated by their inability to bet on certain racetracks due to these disagreements between industry players.  Some fans clearly believe it is my job as the head of the NTRA to force or negotiate a resolution of these disputes so that wagering can continue unabated.  It is occasionally suggested by fans that I have neither the backbone nor the intellect to fix the problem.   You can debate whether I possess the necessary guts or brains for my job but one thing is for sure – the economic forces driving these disputes defy quick resolutions or easy answers.   

You see, the reason for these disputes is almost always the same.  Racetracks, because they spend millions to operate live racing venues, and horsemen, because they understandably need higher purses to cover at least a portion of the costs associated with owning, training and racing their horses, all want a larger share of the fees derived from wagering at remote distribution outlets such as other tracks, ADWs and OTBs.   But distributor tracks, OTBs and ADWs likewise have costs associated with their operations leading to their desire for a significant share of the fees.   In the end, these are market-driven decisions that only the affected parties can resolve for themselves and external threats or attempts at coercion are unlikely to achieve a different or more timely result. 

Racing is not alone in its struggle to adequately price its product.  The news media is full of stories about price battles between TV channels like the Food Network and Home and Garden TV (HGTV) and cable service providers like Cablevision.  Just this week, 3.1 million Cablevision subscribers in New York, New Jersey and Connecticut have been denied access to celebrity Chef and noted Thoroughbred owner Bobby Flay and “Design Star.”  At issue is the price Cablevision will pay to Scripps (owner of the Food Network and HGTV) for the right to distribute those channels.  Scripps says it costs money to produce these channels (sound familiar?), and it is demanding an undisclosed increase in fees.  Cablevision says they are demanding too much.  Scripps even took out a full page ad in the New York Times apologizing for the interruption but also urging fans to contact Cablevision and let their views be heard.

Similar disputes have erupted between networks like Fox and cable service providers such as Time Warner Cable with price being central to the dispute.  Networks that traditionally relied primarily on ad sales to cover production costs are jealous of the cable TV industry revenue model which allows cable service providers to derive revenue from subscriber fees in addition to ad sales.  As ad sales decline, networks and their local affiliates are no longer willing to provide their content to cable companies for free and instead are now demanding a share of the subscriber fees.  Look for these media battles to continue and to grow in intensity as Internet distribution platforms expand and offer yet another form of competition. 

So, if you’re a fan, you’re probably thinking to yourself, “I don’t care about revenue models or costs of production.  I just want to bet Gulfstream Park.”  And you’re right.   Industry problems should never be shouldered by our customers.   Yes, it’s true that it is a very difficult marketplace right now.  And in this environment, it is not easy for content providers and distributors to find common ground on pricing issues.  Nonetheless, we need to resolve our pricing disputes as quickly as possible or be prepared to suffer the consequences when customers look elsewhere for new content or different ways to spend their money.

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