Churchill Downs buys intellectual property rights

In a transfer that will seemingly shake up horse racing’s Triple Crown, Churchill Downs Inc. (CDI), proprietor of the Kentucky Derby, has purchased the intellectual property rights to the Preakness Stakes, the second leg of the Triple Crown, for $85 million.

The transaction is predicted to close after the working of this yr’s Preakness on May 16. More particulars could also be obtainable on Thursday when CDI has its quarterly earnings call. The Derby can be run on May 2.

CDI plans to lease the rights back to the Maryland Jockey Club (MJC) for an undisclosed quantity in an association seemingly comparable to the current one that Maryland has with 1/ST Racing, also recognized as The Stronach Group (TSG), proprietor of Santa Anita. 1/ST Racing, which beforehand owned Pimlico, leased the rights to MJC for $5 million a yr after nearly giving the property to MJC.

The transaction created more questions than solutions about the future of the Triple Crown in specific and racing in normal. Among them:

• Will this change the spacing between the three Triple Crown races? The Preakness has not had the Kentucky Derby winner in two of its last 4 races, ostensibly because the turnaround time of two weeks between races was too short. People go to and watch the Preakness to see the Kentucky Derby winner. This may pressure a change in the spacing.
• Given the current rights quantity of $5 million a yr, does this transfer make financial sense or is there more to be announced, such as CDI making an investment in the rebuilding of Pimlico Race Course or some other racing investment? This yr’s Preakness can be held at close by Laurel Park to enormously decreased capability while Pimlico is being rebuilt. The state has dedicated $400 million to the project, but is that enough?
• Is this a signal that TSG is promoting off its racing business part-by-part? It has pushed for decoupling (separating the gaming and racing licenses) at Florida’s Gulfstream Park. And racing in California, despite some incremental good points, is struggling with discipline sizes and purses. The Santa Anita Handicap, which 10 years in the past was value $1 million, now has a purse of $300,000, the minimal required to be a Grade 1 race. TSG says it stays dedicated to racing in Florida and California.
• The Preakness’ tv contract with NBC ends after this yr and with the closure of FanDuel TV’s daily horse racing channel at the end of the yr, means that racing can be scrambling for new tv companions. Churchill Downs has a long relationship with NBC and FOX is a business associate with the New York Racing Assn., which runs the Belmont Stakes, the third leg of the Triple Crown. How will this acquisition play into it, if at all?

“The acquisition adds one of the most iconic brands in American sports to our portfolio and is consistent with our strategy of investing in premier thoroughbred racing assets with long-term growth potential,” said Bill Carstanjen, chief government at CDI. “In keeping ownership of the Preakness intellectual property in the racing industry, CDI will support efforts to fully realize the potential of a redeveloped Pimlico and Preakness Stakes within the Triple Crown and the broader sports and entertainment landscape.”

This sentiment was echoed by Belinda Stronach, chairman and chief government of 1/ST.

“Bringing together two prestigious racing brands, the Kentucky Derby and Preakness Stakes, is a significant step toward the successful longevity and growth of the American Triple Crown of thoroughbred racing,” Stronach said. “The agreement with [CDI] … closes our company’s thoroughbred racing chapter in Maryland. 1/ST is proud to have served as a steward of the Preakness Stakes, and we are grateful to the fans, industry stakeholders, the state of Maryland, the city of Baltimore and the community for their support. We remain focused on our core assets in California and Florida and supporting a strong and sustainable future for our sport.”

While the affect of this deal will take some time to kind itself out, one factor is clear: Churchill has an even better affect on the future of the Triple Crown and horse racing.