HANA has learned that an RFP (Request For Proposal) in the form of a .PDF Doc has been sent out by Monarch Content Management to just about every ADW (except TwinSpires and ExpressBet.) In case you were not aware, Monarch negotiates track signals on behalf of the following entities: CARF, Del Mar, Fairplex, Gulfstream Park, Golden Gate Fields, Hollywood Park, Laurel Park, Lone Star Park, Pimlico Race Course, Preakness Stakes, Black Eyed Susan, Portland Meadows, Santa Anita Park, Tampa Bay Downs, and Timonium.
The following paragraphs are a direct quote from the RFP:
Monarch Content Management serves as simulcast agent for twelve racetracks (the “Monarch Content”), and in that capacity, enters into contracts with national advanced deposit wagering sites (“ADWs”) who desire to facilitate wagers from their customers on the Monarch Content. The national ADWs fall generally into two categories: the historic ADWs and the Micro ADWs. The historic ADWs have been a part of the racing industry for many years, trace their roots to well-regulated, publicly-traded companies, and handle hundreds of millions of dollars annually. The Micro ADWs are typically newer entrants to the ADW business, handling much smaller sums of money.
The number of Micro ADWs has significantly increased in recent years; at the same time, the incremental benefit to our racetracks of each additional Micro ADW is subject to diminishing returns. Many of the new Micro ADWs do not bring significant new handle to the Monarch racetracks. Yet each new Micro ADW must be reviewed, approved and then continually monitored by Monarch and its member tracks to ensure regulatory compliance and wagering integrity. The need for monitoring is not just theoretical, as it has recently been discovered that several Micro ADWs were not in compliance with important regulatory requirements.
Accordingly, Monarch and its member tracks have decided to issue this Request for Proposal to identify those Micro ADWs that can most effectively deliver the Monarch Content to the national ADW market. Monarch anticipates selecting five (5) Micro ADWs to receive a contract offer, although it reserves the right to increase or decrease that number based upon the responses to the RFP. The contract offered to the selected Micro ADWs will cover Monarch Content for the 2012 racing season, which begins with the opening of Gulfstream Park and Tampa Bay Downs on December 3, 2011.
In selecting the Micro ADWs which will receive a contract offer, Monarch seeks expansion of wagering on its member tracks and improvement of the customer experience, while also maintaining the integrity of the wagering pools. The following is a non-exhaustive list of criteria that Monarch has identified as relevant to its decision:
*Distribution – does the Micro ADW present an opportunity to bring new customers to wager on the Monarch Content?
*Compliance – what jurisdictions is the Micro ADW currently licensed in? Does it have a track record of compliance with state laws and regulations and contractual requirements?
Has it undergone a due diligence review by the Thorougbred Racing Protective Bureau or similar entity?
*Innovation – does the Micro ADW offer innovations, wagering or otherwise, that could expand distribution of the Monarch Content, enhance the customer experience, or otherwise be of benefit to the industry?
*Source Market Fees – what source market fee agreements does the Micro ADW have with Monarch and non-Monarch tracks?
*Price – what host fees is the Micro ADW willing to pay the Monarch tracks?
It appears ADW operators are being asked to enter into a bidding war over Monarch track content.
Needless to say, I’ve spent a lot of time on the phone over the past week. I’ve spoken with many ADW operators as well as a handful of people in track management. None of the ADW operators are happy about this. None of them are optimistic about being chosen as one of the 5 who will be awarded a signal contract.
A source who I consider to be reliable told me that signal contracts between Monarch and the non Magna tracks are not exclusive. That means independent tracks such as Hollywood Park, Del Mar, and Tampa Bay Downs have the ability to negotiate signal contracts with ADWs and OTBs independently of Monarch if they so choose.
Is that a real possibility? Hopefully it is. But right now it’s too early to tell.
I am a horseplayer advocate. I can’t sugar coat this for you. It is my opinion that if this goes through, and Monarch pulls track signals from ADWs, the result is nothing short of a knife in the back for horseplayers everywhere.
Let me count the ways:
1. Track Signal Availability
Track signals are about to be yanked from ADW lineups. This has some serious implications.
This is harmful to you the player because choices you currently have as a consumer are about to be permanently taken away from you. In my opinion, this is potentially far worse than previous signal wars. It appears people who do not have the best interests of the customer in mind are attempting to dictate who you can spend your money with as well as upping the wholesale cost of making a bet.
To us at HANA, this has the appearance of a thinly disguised attempt to crush retail competition by denying them product to sell.
I can’t help but wonder how the courts would view this in the event an ADW denied content turns around and sues Monarch and/or Tracks affiliated with Monarch under US Anti Trust Law.
I also can’t help but wonder how the US Dept. Of Justice would view this. Keep in mind that the DOJ interviewed many parties (including ADW customers) at the time of the TwinSpires – YouBet merger. Shortly after those interviews were conducted, TrackNet was quietly disbanded.
Monarch and its sister company TroutNet were formed shortly afterwards. Monarch negotiates signal contracts for Magna tracks. TroutNet negotiates signal contracts for CDI tracks. Monarch and TroutNet are managed by members of TrackNet’s former management team.
Note: If you as an ADW consumer believe your choices and the ADW market space itself are being impacted in a negative way by this, here is a link to a page at the DOJ website where you can report your concerns:
2. Hidden Takeout Increase
If you are a Micro ADW customer, signal fees on Monarch track content are about to go up (by as much as 33%.) Translation? Your rebates on Monarch track content are about to go down.
That means your effective takeout is about to go up.
As a result (and this will be true even for the best players) the number of good wagering opportunities (and your likelihood for showing a profit over any significant period of time) at a Monarch track is about to go down as well.
As a result, handle, pool size, and (eventually) purses will shrink. Ultimately, jobs for employees who work at Monarch tracks will be put at risk.
How do we know this?
Look no further than the recent takeout increase in California. Here we are, little more than 9 months into that increase. Year over year California thoroughbred handle is off more than a quarter Billion dollars. That’s right… I said Billion… with a B.
The TOC and the CHRB are trying their best to downplay those numbers. They have publicly denied just how bad things are and have said that the takeout increase just needs “more time” in order to work.
Try telling that to the more than 100 employees recently laid off by Santa Anita.
Ready or not here it comes.
A knife in the back for players everywhere.
Now I'm worried!
Seriously: Call the DOJ Jeff. There is no-way-in-hell they will let them get away with this.
Maybe (just for good measure) we can get them to fine the people responsible, too, so customers are never treated like this again.
Expanding on the DoJ viewpoint of Tracket:
Last year prior to the merger between Youbet and Twinspires, when Tracknet announced they disbanded, a stock analyst stated this:
"We don't know for sure, but we surmise this move might have been a DoJ requirement to get the Youbet.com deal through. That is, controlling a large amount of industry racing content through TrackNet that feeds into Churchill's various distribution channels -- with the inclusion of the Youbet.com business -- might have been perceived as anti-competitive and potentially harmful to customers. Hence, the DoJ might have strongly recommended the latest move."
I'm no corporate lawyer, but isn't this recent move by Monarch exactly what the DoJ was worried about?
Yes, this is scary, but what's the alternative? What we have now?
What we have now is tracks that can't afford to survive. And the existence of 40 little ADW's (tracks, OTB's, independent) that are scraping by or making a little money for doing nothing. And that brings everyone down.
What Magna is doing is exactly the right thing. They will lose less money. It will help TVG, Twin Spires and XpressBet. And it will help the 5 ADW's that are chosen.
So some of us will have to switch the ADW that we are getting a rebate from. Big deal. I find it hard to believe they will cut them all off.
The sooner the industry gets to a manageable number of ADW's (think 3-5 total), it will be better for everyone. It will be better for tracks, purses, innovation and yes, for players. We just need to make sure that the 3-5 that are left are competitive and innovative. That's the real issue. But I believe that's where the non-profits like NYRA, Keeneland, Del Mar and others come in. They will always keep the others honest to some extent.
(I am not associated with any of the groups mentioned above)
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