Having opted to quit the sports-betting business as a first-party operator, Churchill Downs [ticker symbol: CHDN] has cut a multi-year deal with FanDuel Group whereby the latter will obtain rights to Churchill Downs’ sports-betting business and advance-deposit wagering (ADW), as well as its TV business.
In a Churchill Downs statement, it said the horse racing giant “will provide certain technology and services to enable FanDuel’s customers to place pari-mutuel wagers on horse racing via FanDuel’s sports wagering and ADW platforms. [Churchill Downs Inc.] will also authorize wagering on CDI’s owned or controlled horse racing content via FanDuel’s platforms in the United States and grant FanDuel certain television and media rights to broadcast CDI-owned racing content on FanDuel’s television network(s).” FanDuel also gets non-exclusive sponsorship rights to the Kentucky Derby pursuant to sports betting.
The agreement is set to take effect in January, when FanDuel begins paying for Churchill Downs’ technology and services, courtesy of United Tote Co., “to facilitate pari-mutuel wagering on FanDuel’s platforms in the United States, including FanDuel Sportsbook and TVG.” Another potential beneficiary of this arrangement is the New York Racing Association, which is set to obtain 49 percent of United Tote by year’s end.
FanDuel obtains wagering to Churchill Downs-controlled horse racing content, including the lucrative Run for the Roses, as well as “customary content fees” for bets on Churchill Downs-owned intellectual property. FanDuel also gets exclusive TV rights to all racing content from Churchill Downs’ thoroughbred tracks as soon as non-Kentucky Derby media rights arrangement expire next year. “We are confident that FanDuel’s market approach teamed with our expertise and technology will seamlessly deliver horse racing content and pari-mutuel wagering solutions to a significant number of new fans,” said Churchill Downs CEO William Carstanjen.
“With the launch of FanDuel TV last week and the upcoming integration of premier racing content into our market-leading sports book, we believe this is an inflection point in our ability to offer our customers a seamless wagering experience with a single wallet,” added FanDuel CEO Amy Howe
The initial reaction from Wall Street was positive. Jefferies Equity Research analyst David Katz called it “The deal we’ve been waiting for.” He elaborated that it “provides CHDN with positives at little cost, in our view. It aligns CHDN with the market leading digital player in the US and provides a range of fee streams on its existing assets, with the only prospective negative being potential cannibalization of existing TwinSpires [online wagering service], which Mgt. expects to be modest.”
Katz liked the fact that Churchill Downs “will receive customary content fees. In addition, FanDuel will also be able to broadcast certain races on FanDuel TV.” He did have one qualm: “What remain open questions are how TVG, which is owned by the same parent company [Flutter Entertainment], may or may not benefit from FanDuel’s involvement in horseracing and how that cannibalizes TwinSpires as well as the scale of the current deal and potential other similar deals. Ultimately, quantifying the net earnings impact from the announcement is unclear.”
