When the post parade begins Saturday for the 140th running of the Kentucky Derby and the crowd rises to solemnly sing “My Old Kentucky Home,” tears will well in the eyes of tens of thousands at Churchill Downs and millions more watching on TV around the country.
With the so-called Sport of Kings vastly diminished in the public consciousness since its heyday in the middle of the past century, these days, to many, the Kentucky Derby is horse racing. The iconic twin spires, the pageantry, the tradition and celebration make the race a classic fixture of Americana.
Yet for publicly traded Churchill Downs Inc., the enormous revenue generated by the "Run for the Roses" is pretty much the only reason to even be involved in horse racing anymore. Indifferent toward its own hallowed legacy, the company now has such a steely focus on casino gaming, it has begun to become a pariah in racing circles.
With multiple standalone physical and online casino and related properties, Churchill Downs Inc. has put heavy emphasis on slot machines and table games at its racetracks and is heavily lobbying the Kentucky legislature to allow slots at its premier Louisville track.
All signs these days point to racing being second string to Churchill Downs Inc.
Along with the Stronach Group, headed by 81-year-old auto parts magnate Frank Stronach, Churchill is one of the two largest—and most important—racing companies in the country. Along with its main track, Churchill owns Arlington Park outside of Chicago, Calder Casino and Race Course in Florida, and Fair Grounds Race Course & Slots in New Orleans.
“You have to look at it as where their loyalty lies,” Ray Paulick, who operates the online industry publication The Paulick Report, told Bleacher Report. “We in horse racing would like their loyalty to lie with us. But the bottom line for Churchill Downs and any publicly-traded company is with their shareholders. We may not like that, but that’s life. It makes for some very uncomfortable situations.”
Those uncomfortable situations have been rearing their head on the eve of the Derby, as Churchill Downs has been publicly accused of mistreating owners, fans and legends of the game.
In an open letter on his website that went viral, prominent racehorse owner Rick Porter lamented that he was unable to secure passes to watch his horse Normandy Invasion run in a $300,000 stakes race on Kentucky Oaks Day. Porter was offered tickets at $200 apiece.
Porter’s trainer, Chad Brown, also was not offered any passes into the track. Brown has another horse entered in a major stakes race on the Kentucky Oaks card and was offered a table for nine in the dining room for $42,000.
“I was so upset over the matter that I called the president of Churchill Downs, Kevin Flanery,” Porter wrote. “He called me back after I left a message and informed me that the information that was given to us was true. No seats were available and you had to pay your own way in. He said they were the facts. The facts, he made the facts. He is the president. I said, 'Kevin, do you think that is fair?' He said that they were the facts.”
Porter pointed out that if Churchill Downs gave out two tickets to each owner of a horse in a stakes race on Derby Day and Oaks Day, it would account for approximately 200 seats in a venue with a grandstand and clubhouse that seat 52,000.
After Porter’s outraged comments began to circulate throughout racing circles, Hall of Fame jockey Ron Turcotte, who rode Secretariat to the 1973 Triple Crown and the fastest Derby ever, saw them and responded with his own letter.
Turcotte, who is paralyzed from a racing accident in 1978 and uses a wheelchair, said, “In 2012, despite being the subject of a National Film Board of Canada documentary being filmed at Churchill Downs, I was denied any parking assistance by the track.”
He wrote that the film crew paid Churchill Downs $500 to allow him the “privilege” of on-site parking in a handicapped accessible spot.
Churchill Downs spokesman John Asher met with reporters and issued an apology, citing a "communication breakdown," but the damage was done and outrage spread quickly among racing fans throughout social media.
While participants in the races are upset, horseplayers are not immune. Before the spring race meet began at Churchill Downs this past Friday, the company announced an increase in the “takeout”—the amount the track takes off of all bets —in order to maintain existing race purse levels, via The Associated Press.
Horseplayers who were giving up 16 percent of all win, place and show wagers now are paying 17.5 percent. On exotic wagers like exactas and triples, the takeout was raised from 19 percent to 22 percent.
This is by no means outside the industry norm, but it angered fans and raised calls from the president of the advocacy group called Horseplayers Association of North America for a boycott. In California, the win, place and show takeout is 15.43 percent and 23.68 percent for exotic bets. In New York, it’s 14 percent for win, place and show, 17.5 percent for exactas and 25 percent for triples.
There is more. This past winter, Churchill Downs Inc. came under heavy criticism from horsemen, owners, fans and authorities for the poor state of facilities at the Fair Grounds racetrack in New Orleans, which has operated since 1872 and was purchased by CDI for $47 million out of bankruptcy in 2004.
The Louisiana Racing Commission recently took aim at the company for poor conditions on the backstretch, where horses and track workers live, as well as improper drainage on the turf course, causing the cancellation of many grass races, as well as subpar customer service.
The government didn’t like what it saw either. A House of Representatives bill mandating improvements at the track sailed through by a 94-0 vote.
“I think they know we mean business about this,” Rep. Patrick Connick told The New Orleans Advocate.
This week, the state racing commission granted a conditional one-year provisional license for CDI to continue operating the Fair Grounds based on promised upgrades.
Still, fixing the turf course has been estimated to cost $690,000, and CDI has already pledged $200,000 to the job last year.
The company also pledged improvements to facilities and to better promote racing along with slots.
Fair Grounds President Tim Bryant told The New Orleans Advocate, “We appreciate the commission working through this with us, and we’re confident we will diligently work on the conditions.”
However, the long-term commitment of the company can be fairly questioned. Churchill Downs bought Hollywood Park, one of two major tracks in Southern California, in 1999 for $140 million, and sold it to a developer in 2005 for $257.5 million. The track, which opened in 1938, closed at the end of 2013. A poker room remains open while the property is slated for development.
From 2001-05, Churchill renovated its namesake track for $121 million, building in 79 luxury suites to maximize revenue during the Derby and Oaks, as well as cavernous spaces that are awaiting approval for slot machines.
On Saturday, more than 150,000 fans will pour into the facility and the all-source handle—the amount bet on the Kentucky Derby card around the world—might shatter the record of $187 million set in 2012.
Churchill Downs Inc. casino revenue in the first quarter this year rose 20 percent for the company at $86.6 million. Racing revenue ($30.6 million) was up 10 percent. The big money from racing comes during this weekend, and the rest is just maintaining tracks Churchill doesn’t appear to have strong interest in growing.
“I think we might be at a tipping point because there are so many complaints from so many constituency groups—racing commissions, politicians, horseplayers and horsemen,” Paulick said. “Who else is left? Who haven’t they made mad, other than shareholders?
“The racing revenue comes from two days of the year, and they do not want to make an investment in the other 51 weeks of the year. They don’t believe it’s a wise investment for their shareholders. I think you can look at all their properties and say they have given up on traditional horse racing.
“I think probably the best solution for them is to get out of the horse racing business and lease their tracks to nonprofit organizations that can do a better job with the racing side—horsemen’s groups. If you are not constantly under the gun to squeeze every possible nickel...and you can make some investments that are good for the game, you do them. And CDI, under its current philosophy, I don’t think they’re going to make those investments.”
The Kentucky Derby likely will be another smash at the betting windows this year. The most important and recognized horse race in the world stands immune to any calls for a boycott from an organization few even in racing know exists. But, going forward, Churchill Downs will remain a target of wide-ranging criticism if it continues to appear not to be acting in the best interests of the game.
That criticism will be loudest, as it is this year, when the eyes of even the most casual fans are on the action under the Twin Spires.
A true tipping point for Churchill Downs, however, almost certainly only could be reached if Kentucky Derby revenue growth stagnated and contracted. That would strike true fear in the boardroom.
John Scheinman covered racing for eight years at the Washington Post, co-founded and edited Kentucky Confidential and contributes to the Blood-Horse. He lives in Baltimore.
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