Churchill Downs seeks to add historical horse racing in Louisville

CDRT Trackside

The long-discussed rumor, turned publicly discussed possibility, is about to become a confirmed reality. Churchill Downs Inc.’s flagship racetrack is on the agenda of the Kentucky Horse Racing Commission for approval to install the slot-like historical horse racing machines in Louisville.

Details of the proposal were not on the commission’s published agenda for June 20, and staff reports for agenda items were not on the KHRC website as of Monday evening. However, the proposal is expected to be for a parlor at Churchill’s Poplar Level Road training facility (the former Louisville Downs harness track site also known as Sports Spectrum when it was simulcasting site and now Trackside), not at its Central Avenue track where the Kentucky Derby is run.

The proposal also is expected to involve a new brand of historical horse racing machines developed by Churchill Downs Inc. (CDI), which has had a division at its Louisville-headquarters developing an online casino for any state that would allow it and where CDI could get a license. The company also is moving the California offices of the team that developed the TwinSpires wagering site to Kentucky.

Churchill’s would be the third historical horse racing brand on the market. RaceTech, the original, pioneered the concept with Instant Racing at Oaklawn Park before being bought last year by The Stronach Group subsidiary PariMAX. Those machines are in use at the Lexington historical horse racing parlor operated by Keeneland Association and The Red Mile at the Red Mile harness track. Another brand, Exacta Systems, in use in Kentucky at Kentucky Downs and Ellis Park, was founded by Ray Reid, who is an owner of Kentucky Downs.

The operating systems for the machines are proprietary — meaning any user can be forced to pay usage rights to the developer. By developing its own system, Churchill theoretically will get to keep that share of the revenue.

Proponents of the machines say they are pari-mutuel wagers on old horse races in a machine that, to the player, resembles a slot machine and operates with similar speed — as opposed to waiting a half hour between live races for the horses to get from the stables to the starting gate. Opponents, the Family Foundation of Kentucky, say the machines are not pari-mutuel and are illegal gambling. The matter remains in the courts.

In the meantime, revenues from historical horse racing have made the purses at the all-grass Kentucky Downs in Franklin (which races a handful of days each year) the richest in the United States and have improved purses at other tracks where they’re used.

Churchill, which long supported casino gambling in Kentucky, initially showed little if any interest in the historical horse racing games, with its top brass saying historical horse racing wouldn’t be competitive with slot machines at casinos in neighboring states, namely Indiana. A Harrison County, Ind., casino has long been a thorn in the side for Churchill officials who have argued that their Central Avenue track’s business was being siphoned across the Ohio River.

In recent months, Churchill’s stance softened as the company acknowledged it was considering historical horse racing.

In a March phone conference with investors and analysts, Churchill Chief Operating Officer Bill Mudd said the company believes historical horse racing will survive the scrutiny of the courts. He also gave clues about Churchill’s efforts to develop its own machines.

Mudd said historical horse racing machines:

“… are not competitive with (casino games) as they exist today. There are two manufacturers out there, neither of which have had a basis or history in machine development or math modeling and games that people like to play and have fun with. So as you know in Louisville, it works okay if you’re insulated from competition.

But in Louisville, we have a competitor across the bridge in southern Indiana, the Horseshoe, which is actually a very formidable competitor that knows what they’re doing. So we’ve been following it very closely. At the same time, we’ve been watching what the legislature is going to do. Legislature is very unlikely to pass gaming anytime in the near future.

They’ve been very clear about this and that makes our decision about how to proceed a little bit easier from that perspective. I would say that, that kind of leaves us with two choices. One is we can do nothing. We can continue to push for casino gaming which we know is not going to happen any time in the near future or we can build a better HRM machine that can better compete with (casino) gaming over in Southern Indiana. So really, that’s where our whole focus has been on the last few months is how do we make a better product and beyond that, I can’t really say much more.”

The challenge for Churchill in competing with the Harrison County casino, now operating under the Horseshoe brand, will be whether it can use one of the “given” advantages among gambling competitors — being the closest location for the most people — to trump the better mousetrap it says Indiana casinos have had.




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