Churchill Downs Inc. announced Thursday (February 24) that it will exit the U.S. online sports betting and online casino space within the next six months, arguably the most high-profile departure from the market since the country’s sports-betting boom began in 2018.
CEO Bill Carstanjen told analysts on a quarterly earnings call that company executives do not see a path to deliver “predictable and acceptable margins for the next several years, if ever” in the highly competitive market.
“We are always committed to building long-term value for our shareholders,” Carstanjen said. “And consistent with this commitment, when we see that an investment is not progressing as we had planned, we will redeploy the resources and capital to other growth projects or returning the capital to our shareholders.”
Carstanjen said that although the company has profitable retail sportsbooks in four of its land-based casinos, the digital sports betting and iGaming markets had proven to be prohibitively competitive.
“Many are pursuing maximum market share in every state with limited regard for short-term or potentially even long-term profitability,” he said.
“This isn't the result we wanted when we started this business back in late 2018,” Carstanjen added. “But it is the prudent next step for our company.”
Carstanjen said Churchill Downs would continue to focus on its retail sportsbook operations, as well as monetizing its market-access portfolio, which includes access to more than a dozen states through its own casino properties or agreements with other operators.
“We consistently receive interest from other industry parties with respect to market access in states where we conduct operations or have the rights to do so,” he said.
He said the company will continue to track the industry as it progresses, but right now, its sees its digital opportunity in its TwinSpires horseracing operations.
“I'm not a person that likes to stay theoretical for very long, ultimately you put your team on the field and you see what your results are and you adjust to that and what we've found over time and it's been well over a decade, is that [TwinSpires] is an excellent business and even in this current environment is holding up extremely well and is just as promising as it's been over the more than a decade since we first started it,” he said.
Carstanjen added that the company could “potentially” be interested in partnerships that would leverage the customer database from TwinSpires and the company’s land-based offerings as a customer acquisition tool for other operators.
From the start, the company’s foray into sports betting was somewhat jumbled.
Churchill Downs initially launched its sports-betting product under the “BetAmerica” brand, which it went on to launch in six states.
The company also remained steadfast in its unwillingness to spend significantly on marketing costs to keep up with the heavy competition in the space.
In early 2021, the company began the process of rebranding its sports betting and online casino offerings to the more popular TwinSpires brand, but of the $433m in revenue produced by the TwinSpires brand in 2021, only about $34m came from the online sports betting and casino side.