DerbyWars Inks First Revenue-Sharing Deal

|

By T. D. Thornton

DerbyWars has inked an agreement with Hawthorne Race Course to share revenue from its online contests, a deal touted on Thursday as the first-ever industry partnership between a fantasy gaming company and a racetrack.

In exchange for sharing a portion of money that players put up to win jackpot-style prizes on the DerbyWars tourney site, DerbyWars gets explicit authorization from Hawthorne to use the track’s races.

In addition, Hawthorne is granting DerbyWars permission to show its video stream starting in the near future. The deal also includes “access to racing data,” which could lead to an eventual rollout of Hawthorne’s past performances on the DerbyWars website.

The DerbyWars-Hawthorne partnership could signal a precedent-setting shift in the 5-year-old but fast-growing tenure of contest gaming within the racing industry.

That’s because Louisville-based Horse Racing Labs, LLC, which owns DerbyWars, is currently the defendant in a federal lawsuit initiated by The Stronach Group (TSG) that alleges the unauthorized use of races from TSG tracks. The suit also includes accusations that pay-to-play contests are an illegal form of gambling.

The Stronach-vs.-DerbyWars court battle is being widely monitored within the industry as a test case that is expected to determine the legality of fantasy- and tournament-styled online gaming. In recent months, some tracks and horsemen have argued that online contest sites undermine traditional pari-mutuel betting revenue without contributing any form of payment back to the racing industry.

“This is a first for any of the contest sites,” Mark Midland, the founder of DerbyWars told TDN Thursday. “My understanding is that no other contest or tourney sites exchange money with tracks at any time. This agreement has made it very clear that we’re willing to work with tracks. We’re willing to contribute.”
Midland would not disclose the exact percentage of contest revenue that Hawthorne will receive. He acknowledged that DerbyWars is actively negotiating with other tracks for similar deals, but that pricing will be volume-based and worked out on a track-by-track basis.

As for how much of the DerbyWars payments actually end up in purse accounts, Midland said that sort of split is up to host tracks and their local horsemens’ groups.

“Our payment goes to the track, and my understanding is that a lot of tracks already have pre-defined splits with the horsemen,” that cover the brokering of race rights, Midland said.
Midland declined to comment on the active TSG lawsuit, part of which is awaiting a “motion to dismiss” initiated by DerbyWars Feb. 22.

“We think [sharing revenue with tracks] is the next step in the evolution of contests,” Midland said. “If that’s what The Stronach Group wants to do, we’ve made that clear months ago. I’m not sure what they’re waiting for.”

In 2015, DerbyWars and Hawthorne partnered on daily survivor contests. DerbyWars also sponsored Hawthorne’s National Handicapping Championship qualifying contests last November.

“Our players are excited about contests and our hope is that contests can become a vehicle for getting new fans into the sport,” John Walsh, Hawthorne’s general manager, said in a press release.

“We can see that DerbyWars is working to expose new fans through contests, and we want to be supportive of that innovation.” @thorntontd

Not a subscriber? Click here to sign up for the daily PDF or alerts.