|Magna Entertainment Corp plans to revitalize US horse racing by a combination of the creation of a “global media wagering platform” and by turning its racetrack into “destination entertainment centers”.|
Magna recently agreed to buy the Pimlico Race Course and Laurel Park racetrack in Maryland, with plans to upgrade the properties with gourmet cafes, boutique shops and rock concerts.
The “Global media wagering platform” refers to beaming races from its 14 race tracks worldwide through a self-contained network of “new media”, facilitating betting from cell phones, laptops and televisions.
'It’s very aggressive,' says Jeff Rabin, an analyst with Dundee Securities in Toronto who follows Magna. 'By definition, this is the 'next big thing' in racing because nobody else is doing anything. This is an industry that has been sleeping for 30 years, since the invention of TV.'
Magna has invested more than $500 million into horse racing a sport that peaked in popularity in US in the 1940s. In less than four years it has purchased 14 tracks, a betting telephone service, started its own Internet betting system and is investing in an all-racing TV network - expected to be ready this fall. Magna is also developing a track in Austria.
Magna’s main rival, Churchill Downs Inc., is also trying to expand and develop its properties, but in a more cautious way. Churchill overhauled its Churchill Downs venue a decade ago, and recently announced a further $130 million investment in its signature racetrack.
Churchill has also sought wider distribution of its races, but unlike Magna, sells the race telecasts to other tracks, off-track betting parlors, Internet betting sites and a start-up racing channel, TVG, which is backed by the Fox network.
Magna prefers a do-it-yourself approach, and has been willing to out-bid Churchill for the tracks it needs to supply its own betting services.
'Magna has a great growth strategy and Churchill has a less risky one. In the long run, Magna may wind up the winner because they have paid more for the properties,' said Adam Steinberg, an equity research analyst with CIBC World Markets in New York.
The risk for Magna is that it may have paid too much for the properties, as some analysts believe, and may have to pull back, selling poorly performing tracks. Also, Magna’s plans hinge on continued growth in popularity of horse racing. Horse racing has grown in popularity in recent years in the US, but remains some way behind football, basketball and baseball.