In a move that will likely shake up horse racing’s Triple Crown, Churchill Downs Inc. (CDI), owner of the Kentucky Derby, has bought the intellectual property rights to the Preakness Stakes, the second leg of the Triple Crown, for $85 million.
The transaction is expected to close after the running of this year’s Preakness on May 16. More details may be available on Thursday when CDI has its quarterly earnings call. The Derby will be run on May 2.
CDI plans to lease the rights back to the Maryland Jockey Club (MJC) for an undisclosed amount in an arrangement likely similar to the current one that Maryland has with 1/ST Racing, also known as The Stronach Group (TSG), owner of Santa Anita. 1/ST Racing, which previously owned Pimlico, leased the rights to MJC for $5 million a year after virtually giving the property to MJC.
The transaction created more questions than answers about the future of the Triple Crown in particular and racing in general. 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 four 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 could force a change in the spacing.
- Given the current rights number of $5 million a year, does this move 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 year’s Preakness will be held at nearby Laurel Park to greatly reduced capacity while Pimlico is being rebuilt. The state has committed $400 million to the project, but is that enough?
- Is this a sign that TSG is selling 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 gains, is struggling with field sizes and purses. The Santa Anita Handicap, which 10 years ago was worth $1 million, now has a purse of $300,000, the minimum required to be a Grade 1 race. TSG says it remains committed to racing in Florida and California.
- The Preakness’ television contract with NBC ends after this year and with the closure of FanDuel TV’s daily horse racing channel at the end of the year, means that racing will be scrambling for new television partners. Churchill Downs has a long relationship with NBC and FOX is a business partner 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 executive 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 executive 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 impact of this deal will take some time to sort itself out, one thing is clear: Churchill has an even greater influence on the future of the Triple Crown and horse racing.
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