Mixed Signals in Arizona Simulcasting Dispute

The simulcasting stand-off between an arm of The Stronach Group (TSG) tasked with distributing the company's signal and the Arizona Department of Gaming has nearly reached the two-week mark, and the affected stakeholders are sending out mixed signals of their own as to its impact.

The issue surrounds a state law passed last year requiring all simulcast providers that send their races into Arizona to offer the products uniformly among all tracks and all their Off-Track Betting parlors (OTB). On Jan. 24 of this year, the Arizona Racing Commission passed a motion requiring the three racetracks in the state—Turf Paradise, Arizona Downs and Rillito Park—to comply with that law.

The same day, the commission also sent a letter to Monarch to “stop sending any simulcast signals to Arizona permittees racetracks and/or their additional wagering facilities.”

TSG's Monarch argues that the law is unconstitutional, and that it is preempted by the federal Interstate Horseracing Act. Monarch has also filed an appeal of the ruling with the ninth circuit. Monarch's signal comprises Santa Anita Park, Golden Gate Fields, Laurel Park and Tampa Bay Downs, along with certain international races. The Arizona Racing Commission has scheduled a special meeting this Friday, Feb. 7, for a public discussion on its decision last month to enforce the state law.

Vince Franzia, Turf Paradise general manager, said that the Monarch signal comprises 42 percent of its simulcast wagering, and 11 days of the dispute has resulted in a $948,512 decline in on-track, in-state and OTB live and simulcast handles.

“That's what's down,” he said. “How that translates for the horsemen after 11 days is, they've lost about $77,726 in purses.”

Indeed, in an earlier email blast to its OTB partners, Turf Paradise urged them to email and write the Arizona Racing Commission before this Friday's meeting to explain how “economically damaging” the January decision has been.

“We're certainly feeling the effects of this,” said Franzia, who added that, should the commission uphold its earlier decision, Turf Paradise might have to cut a race day to offset the lost revenue.
According to Bob Hutton, president of the Arizona Horsemen's Benevolent and Protective Association (HBPA), however, “there seems to be discrepancy between Turf Paradise and the HBPA in how this is going to effect the purse accounts.” He added that the organization has put in a document request for the Tote reports from the state of Arizona. “I don't think we're in trouble.”

Leroy Gessmann, the HBPA president, further elaborated, and said that while handle was down during the first week of the dispute, revenues from the signal going out of state this past week have offset the money lost on the Monarch signal.

“When you look at the last week, we have more money going into the purse account than a year ago,” he said, adding that it appears the bettors are adapting to the new marketplace. “We're even getting a higher attendance at the track than a year ago the last couple days.”

The genesis of the dispute appears to revolve around Arizona Downs, formerly known as Yavapai Downs. When Arizona Downs reopened for live racing in 2019, Monarch had sent its signal to the track itself but not to the track's network of OTB's. In contrast, Monarch distributed its signal to Turf Paradise and its network of some 60 OTB's.
When asked if Monarch should send its signal uniformly across Arizona until the ninth circuit appeal has been adjudicated–if indeed the Arizona Racing Commission this Friday upholds its earlier decision–Franzia said that “I feel very strongly that Monarch is its own independent business, and, they are entitled to make decisions about that business.”

When asked the same question, Monarch's president, Scott Daruty, said that Arizona Downs has been “consistently delinquent in its payments to our racetracks.” Daruty added: “They have publicly stated at an Arizona Racing Commission meeting that they're out of money. They were unable to run the live race meet they were scheduled to run last summer. It was apparent very early on in this process they had a failed business model, and I think this is playing out now.”

However, he added, “at this moment, they are current” in their payments.

Tom Auther, an Arizona Downs owner and partner, confirmed that any outstanding debts to Monarch have been satisfied, and insisted that his track's shaky financial footing could have been avoided had Monarch distributed its signal to the track's broader OTB network from the start.

“The problem was, a guy would walk into our OTB's and say, 'where's Santa Anita?' We'd say we don't get it and he's gone,” said Auther, who added that, while Arizona Downs and one more OTB are currently operational, five of the track's other OTB's have been temporarily shuttered. “It's remarkable we've been able to stay afloat this long.”
More broadly, Auther said that he believes Monarch's selective approach to its signal belies an ultimate objective: “Their goal is to shut us down,” he said. “That's our opinion. There's a way out of this, but Turf [Paradise] and their partner won't play ball.”

In court filings related to last year's lawsuit, Monarch argued that sending a signal to Arizona Downs' broad network of OTB's would “create dilution of the wagering product, and depress the overall consumption of content.”
Daruty told the TDN that part of the problem concerned the proximity of the Arizona Downs OTB network to Turf Paradise's. “When I say a short distance, some of them were less than a mile away,” he said.

According to Auther, figures from the Arizona Racing Commission show that a broader OTB network correlates to overall higher revenues–even when the OTB's are in close proximity.

Auther said that Arizona Downs and Turf Paradise have three OTB's within 1.5 miles of one another. Two of Turf Paradise's facilities showed increased revenues when the Arizona Downs OTB's opened up, said Autner, and while the third–Turf Paradise OTB–saw diminished returns when in open competition.

“It has not been a particularly good location for them and has had a diminishing handle for a while,” he said.
“In our opinion and based upon our research, the Turf [Paradise]/Monarch partnership's narrative simply is not supported by the facts,” Auther wrote in an email. “This is a big state with a long horse racing history. For many decades it supported at least two tracks and can continue to do so.”

As for California, “the economic impact on our tracks is minimal,” said Daruty. “Arizona is a relatively small market for us. That doesn't mean it's unimportant. It is important.”

According to Greg Avioli, president and CEO of the Thoroughbred Owners of California, the signal dispute is costing the horseman's purse account in California about $10,000 a week. When asked if he's concerned the dispute might foster ill-will among the Arizona horsemen and horseplayers towards California at a time when the state is struggling with small fields and shrinking handle, Avioli said that the issue is “primarily” a business dispute between Monarch and Arizona Downs.

“Secondly, we share the point of Monarch that the law that was passed in Arizona violates the Horseracing State Act and we oppose it,” Avioli said. “We think it puts a constraint on horseman's approval rights that is not in the federal law, and therefore it should be struck down.”