Churchill Downs (CDI) is winding down its online sports betting and casino business.
The company announced the decision Thursday morning amid its Q4 earnings.
Churchill Downs CEO Bill Carstanjen said the company could not see a path to profit in a “highly competitive market.”
No ‘regard’ for profit?
As a result, Carstanjen said the online business including sports betting will be wound down over the next six months.
“When the Supreme Court overturned the ban on sports betting in 2018, we had high hopes for building a profitable business in this space,” Carstanjen said. “We have profitable retail books in four of our casinos.
“However, the online betting and casino space is highly competitive with an ever-increasing number of participants. Many are pursuing maximum market share in every state with little regard for short-term or potentially even long-term profitability.”
End of the road for CDI online sports betting
“We are always committed to building long term value for shareholders,” Carstanjen added.
“Consistent with this commitment, when we see an investment is not progressing as planned, we will redeploy the capital to other growth projects or return it to shareholders”.
The company will now focus on retail sportsbooks at its facilities around the country. It will also look to sell its market access to other operators.
“This isn’t the result we wanted when we started the business in late 2018 but it is the prudent next step forward for our company,” Carstanjen explained. “We remain absolutely committed and excited about TwinSpire’s online horseracing business.”
Rocky path for TwinSpires
The decision will not surprise industry observers. Churchill Downs had an uphill battle in online gambling since it launched the BetAmerica brand in late 2018.
The company relaunched under the TwinSpires banner last year in a bid to improve its fortunes. It also changed technology providers, but the hoped-for bump never materialized.
In Pennsylvania in January 2022, TwinSpires took around 0.6% of online sports betting handle.
What’s the damage for Churchill Downs?
CDI did not break out the online wagering results specifically. However it noted Q4 EBITDA from TwinSpires was down $13.9 million year-on-year to $11.7 million.
That was because of a $9.5 million increase in the loss from Sports and Casino due to increased marketing and promotional activities, the company said.
CDI stock dipped down around 3% Thursday to $208 before rebounding this afternoon to $214.
Stocks only go down?
The CDI withdrawal adds to an increasingly bearish narrative around US sports betting, as investors grow concerned with lack of profits.
Wynn said in November last year it was cutting marketing spend in a bid to stop losing money. Then a report in January said the company was trying to sell off its digital business altogether.
Likewise, Caesars said this week it was cutting external marketing in a bid to cap sports betting losses at $1 billion.
Meanwhile, stocks like DraftKings and have seen massive sell-offs as investors refuse to underwrite further losses.