Churchill Downs, which owns the Kentucky Derby, is changing its sports betting strategy.
The company is doubling down on horse racing and phasing out online sports betting and iGaming digital casino games, CEO Bill Carstangen told CNBC.
“We saw an environment for our company where we didn’t see positive profits on the horizon. So we’ve changed the strategies we’re focused on running our horse racing business,” Karstanjen told CNBC.
In a decision of the Supreme Court in 2018 allowing states to legalize sports betting, Churchill Downs entered a crowded and competitive field. Carstanjen said the company has found unattractively small profits from online sports betting. The costs are too high, according to the CEO, especially the huge costs of technical infrastructure and the costs of attracting and retaining players. Similar problems are solved by other bookmakers.
Churchill Downs, which is located behind Twinspires Racing is looking for potential partners for its iGaming content and client database, Karstanjen said.
“Our approach is to be able to partner with those long-term winners who are willing to spend hundreds of millions of dollars on losing this business in the short to medium term,” he said.
Karstanjen said betting on horse racing online has been a great business for his company, with historical margins of around 30%. “We remain determined and delighted with TwinSpires Horse Racing as its top line, bottom line and margin to continue to demonstrate that it is a distinct online business with a sustainable, scalable and unique business model,” he said in a statement. time of the company’s recent earnings report. .
Zendon during morning practice ahead of the Kentucky Derby at Churchill Downs on May 4, 2022 in Louisville, Kentucky.
Andy Lyons | Getty Images
However, the pandemic has taken its toll on the horse racing industry. exacerbating the recent decline. This year’s “Run for the Roses” will be the first regular derby with a full crowd since 2019. Karstanjen said they expect a record derby result based on reserve ticket advance sales.
He expects this year’s Derby, which is scheduled for Saturday, to break records when it comes to total stakes, also known as the handle, as long as the weather stays dry. Rainy weather often means horses get scratched at the races and bets are bounced back.
The Churchill Downs boss also shared with CNBC his strategy for international growth, helped in part by Japan’s Crown Pride horse in this year’s Derby.
Traditionally, Japanese law forbids locals from betting on the Derby, but this year betting is allowed because a Japanese-bred horse is involved in the race.
“The horse racing business in Japan is huge. It’s about three times larger than in the United States,” Karstanjen says.
He said connecting with the racing communities internationally is helping Churchill Downs create new revenue streams through gambling, ticket sales, sponsorships and content deals.
“It’s just about creating a concrete connection with our race and our brand and giving them access to our event,” the CEO said.