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Churchill Downs to Bow Out of Online Casino & Sports Betting
By Jeff Osienya Feb 25, 2022 IndustryIn a surprise announcement, Churchill Downs Inc has disclosed that it will be winding down its iGaming and online sports betting business over the next 6 months. Join us as we try to understand how the company reached the decision.Churchill Downs Inc, the famed gaming company and horse racing leviathan, has announced that it will be shelving its online casino and sports betting operations. The bombshell was dropped on Thursday in a conference call when Chief Executive Officer William Carstanje was releasing the company’s Q4 2021 results.
The company CEO further disclosed that CDI’s departure from the said gaming verticals would gradually happen over the next six months. As we speak, the CDI has online sports betting operations in Arizona, Colorado, Indiana, Michigan, New Jersey, Pennsylvania, and Tennessee. Meanwhile, retail sportsbook operations in its casinos will stay intact, but the company will seek buyers for its market-access rights where possible.
In a statement that seemed to suggest the reason for this measure, Mr. Carstanjen said:
Quote“We have profitable retail sportsbooks in four of our casinos, however, the online sports betting and online casino space is highly competitive with an ever-increasing number of participants that the states have licensed. Many are pursuing maximum market share in every state with limited concern for short-term or even long-term profitability. Because we do not see—for us—a path in which this business model delivers predictable and acceptable margins for at least several years—if ever—we have decided to exit the B2C online sports betting and iGaming space over the next six months.”
The Writing Was on the Wall All Along
CDI’s decision has caught many by surprise. However, if we take a step back and keenly look at the trends in the gaming industry with a focus on what has been happening with Churchill Downs, the pieces of the puzzle will certainly fall into place. So, how did this well-established gaming and horse racing trailblazer get to this decision? The signs were there all along for anyone who took notice.
Let’s go back to four years ago when Bet America, the brand launched by Churchill Downs, hit the market. It’s fair to say that it hit the market in the wrong way, posting stifling strings of results with many users posting very negative reviews. As such, there were a string of measures to try and salvage the situation by Churchill Downs. First, there was the rebranding of Bet America to merge it with the more successful TwinSpires name. The gaming company also went further to change its tech operators, citing the negative consumer reviews it received.
Yet, here we are today, staring at the online bookmaker operations of Churchill Downs coming to an end. Carstanjen, in his speech, looked back at the landmark U.S Supreme Court decision in 2018 that allowed for sports wagering across the United States, citing that it was a period of great hope for the company. But unfortunately, things didn’t work out how CDI thought they would.
Numbers Don’t Lie
CDI posted a profit of $249.1 Million for the year 2021. This was a tremendous improvement from the previous year’s $81.9 million loss in 2020. However, it does not paint an accurate picture of the companies’ performance in the online casino and sports betting scene.
For instance, when we look at the TwinSpires Online sportsbook’s earnings before interest and taxes, they significantly went down from $112.9 Million in 2020 to $78 Million in 2021. Digging deeper into the numbers, if we take TwinSpires operations in Arizona as an example, the platform handled merely $1.5 million in November 2021 – a state where the total handle for that month was over $466 million! Such a dismal performance did not paint a rosy picture for the company’s future, at least in the online sports betting vertical.
The profit margins simply were not making sense, so to say. Further, per the CDI CEO statement, a steady push for maximum market share by many players in the online sports betting scene did not help the situation either. Sportsbook operators across the USA have been pumping millions in their bids to bring in extra customers and gain an edge in the rapidly expanding mark. This has notably affected the business of many online sportsbook operators, and it all boils down to the question. Is it really worth it? Well, to Churchill Downs, it seems like the answer to this question is plain simple: NO, it isn’t!
What Does the Future Hold for Churchill Downs?
All said and done, the future for CDI isn’t nearly as bleak as the company’s latest move might have led some onlookers to believe. Best known for hosting the Kentucky Derby, Churchill Downs continues to see great success in its online wagering on horse racing offerings. As such, it will still hold on to its TwinSpires ADW horse betting operations. In his briefing, the company CEO added that:
Quote“We remain absolutely committed and excited about TwinSpires horse racing. As its top line, bottom line, and margins continue to demonstrate that this is a special online business with a sustainable, scalable, and unique business model that delivers profitable growth today, just as it has when we started this business well over a decade ago.”
Additionally, CDI will continue offering retail sports betting services that it noted remain considerably profitable. In fact, the announcement comes hot on the heels of Churchill Downs announcing it would spend a whopping $2.49 Billion to acquire casinos in New York, Iowa, and Virginia. There are also plans underway to redevelop Turfway Park into a horse racing and racetrack project. So, there’s still very much to offer for Churchill Downs in the sports betting landscape even though its chapter with iGaming and online sports betting is coming to an end.
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