Monarch-MidAtlantic Simulcast Dispute: Fees Should Reward Live Racing - Horse Racing News | Paulick Report

Monarch-MidAtlantic Simulcast Dispute: Fees Should Reward Live Racing

The impasse between the MidAtlantic Cooperative and Monarch Content Management, a company that negotiates simulcast agreements for The Stronach Group and several other racetracks, has continued into its second month with no end in sight.

The dispute means horseplayers who attend numerous tracks and simulcast locations in the northeast are unable to wager on Gulfstream Park, Laurel, Santa Anita Park, and Tampa Bay Downs. The stalemate does not affect Advance Deposit Wagering.

Monarch issued a Dec. 5 statement outlining their position, with the MidAtlantic Cooperative responding with a statement on Dec. 17. Neither side has said much since then.

Simulcast agreements are kept private, but it's believed most tracks pay between 3 and 6 percent for the right to import a signal for wagering purposes, with premium tracks like Santa Anita and Gulfstream at the high end of that scale and smaller tracks like Portland Meadows on the low end.

That host fee is generally divided 50/50 between the track and horsemen presenting the live races, which means between 1.5 percent and 3 percent of every simulcast dollar wagered goes to purses at that track (the same amount helps the track owner presenting live racing pay operating expenses). The remaining 14 to 17 percent of the takeout (minus expenses) stays at the simulcast location (based on a blended takeout rate of 20 percent). If that track offers live racing, half of the retained takeout goes to purses. So that's 7 to 8.5 percent for purses at the simulcast receiver and 7 to 8.5 percent for the simulcast facility. That is IF the simulcast facility operates live racing.

And that is the biggest stumbling block in the Monarch-MidAtlantic Cooperative negotiations. Monarch says too many members of the Coop either do not present live racing or they are a Standardbred racetrack.

For example, one of the members of the MidAtlantic Cooperative is Rockingham Park, which has not had live Thoroughbred racing since 2002. Based on the negotiating position of the MidAtlantic Cooperative, Rockingham would pay the same amount for a simulcast signal as Penn National, which operates a year-round Thoroughbred meeting. The Rockingham Park owners would retain 14 to 17 percent of the takeout compared to 7 to 8.5 percent by Penn National (the other 7 to 8.5 percent goes to Penn National purses).

At least three other tracks in the 23-member coop – Atlantic City, Colonial Downs and Suffolk Downs – are not currently scheduled to race in 2015. Should those tracks be rewarded with lower host fees negotiated through a cooperative?

I have long contended host fees are too small in general. The business model evolved a quarter century ago from the mistaken belief that simulcast wagering was “found money” for a track putting on live racing. Three percent to the producer (live track) and 17 percent to the retailer (simulcast location) is a formula that is out of whack.

ADW contracts that currently charge between 8 and 9 percent for the signal should be the model for what live tracks receive from simulcast outlets. ADW operators, many of whom have to also a pay a source-market fee of up to 5%, are still able to maintain a profitable business at that level. The same should be true for simulcast locations, even though sources say Monarch is seeking nowhere near 8 or 9 percent for any signals.

Despite the impasse, handle at Gulfstream Park and Santa Anita Park has increased from one year ago, when the MidAtlantic Cooperative tracks were taking their signals. Maryland's off-track betting outlets (owned by The Stronach Group and able to show the Monarch tracks) are also up, suggesting some horseplayers in the region are driving to Maryland to wager.

Some of the MidAtlantic Cooperative tracks are struggling and down “significantly” in handle, said Philip T. O'Hara Jr., who was hired as executive director to lead the coop in July 2013.

“It's commerce that should be taking place,” said O'Hara. “We've responded promptly to every discussion, to every counter-proposal, and we'll continue to do so.”

But breaking up the MidAtlantic Cooperative into groups that reflect reality – tracks that offer live Thoroughbred racing, 10 Standardbred tracks, and four non-live racing facilities – is something O'Hara has been unwilling to do.

“A coop is a coop,” he said, “and that's important to us.”

What should be important to both sides in this dispute are the customers, who are growing increasingly frustrated over the inability to bet on the best races in the country at this time of year.

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