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CDI Thinking Long-Term in Sports Wagering Rollout

Dollars and Sense examines industry business trends

TwinSpires.com markets the brand on Kentucky Derby Day at Churchill Downs

TwinSpires.com markets the brand on Kentucky Derby Day at Churchill Downs

Coady Photography

While other companies have made a bigger initial splash in sports wagering, Churchill Downs Inc. has taken a more patient approach  aimed at long-term success, making 2021 a key year.

Under a strategy it believes will save on marketing costs compared with other companies in the emerging sports wagering market, CDI plans to leverage the success of its advance-deposit wagering platform, TwinSpires.com, to attract sports bettors. There has never been a better time for that approach as TwinSpires enjoyed massive growth in 2020 as the pandemic forced horseplayers from on-track and simulcast outlets to the mobile and Internet platforms offered by their ADWs.

To close out 2020, TwinSpires.com saw three straight quarters of double-digit percentage growth in handle. In the fourth quarter, compared with the fourth quarter of 2019, handle increased 45% and the number of active players spiked by 50%. It's a trend that Churchill Downs Inc. CEO Bill Carstanjen noted has continued into 2021.

In a late February conference call with investors and analysts, Carstanjen outlined how marketing its sports wagering through TwinSpires can pay big dividends over the long haul. And, in banking on TwinSpires, CDI also is leveraging its premier racing property: the Kentucky Derby Presented by Woodford Reserve (G1). That approach will make the weeks ahead very important for the TwinSpires ADW platform—as has always been the case; but also CDI's emerging sports wagering platform.

"Our strategy is based on our experience building a successful and profitable online horse racing betting platform: Keep acquisition costs low, leverage our online horse racing database, and the Kentucky Derby returning customers over the long term with economically viable player reinvestment and exceptional service, and be willing to walk away quickly when the model doesn't work," Carstanjen said. "We have a lot to prove in this space and we believe we will start doing that in 2021."

Photo: Anne M. Eberhardt
A TwinSpires.com hanner hangs above a vehicle entrance at Churchill Downs

CDI completely committed to this approach in January when it announced that its online wagering segment would move to a single brand strategy under the TwinSpires banner, scrapping use of BetAmerica. Company executives outlined positive trends in Michigan, the first state to see this transition. Tennessee launched in late March, and plans are in place to transition in the first half of this year in five other states the company offers sports wagering: Colorado, Indiana, Mississippi, New Jersey, and Pennsylvania.

In that February conference call, Carstanjen questioned the massive marketing efforts sports wagering competitors are committing to customer acquisition; suggesting it may not be the best long-term approach.

"We will stay focused on building a profitable online sports betting and casino business operates efficiently with a variable cost technology model that grows based on disciplined marketing spend and bottom line profitability goals," Carstanjen said. "This industry is still in the early stages, with many participants pursuing maximum market share and top-line revenue in every state with limited regard for short-term, or potentially even long-term profitability. We don't want to do that. This space is one in which the mature business model—and its related margins—will not be settled for several years as opposed to a number of quarters."

On the racing side of things, this approach by CDI should serve as the latest reminder that betting on horses is going to exist side by side with betting on sports in the years ahead. For racing it's both an opportunity—racing has more content and as sports bettors come online to wager on games they'll have a chance of seeing the races getting close to post; and a challenge—sports wagers are offered at about half the takeout of pari-mutuel betting and may prove more attractive for current horseplayers. 

To seize the opportunity rather than fall behind in this new reality, experts have called on racing to move toward more optimal takeout and offer fixed-odds wagering—the type of betting that sports bettors are more accustomed.