Youbet.com, Gemstar-TV Guide Forge
Deal for Horse-Racing Content, Betting
By JOHN LIPPMAN
Staff Reporter of THE WALL STREET JOURNAL
WOODLAND HILLS, Calif. -- Youbet.com Inc., which provides online wagering for horse racing, formed a partnership with Gemstar-TV Guide International Inc. that could eventually lead to Gemstar acquiring a majority stake in Youbet.com.
Youbet.com (youbet.com) allows customers to place bets online for horse tracks in 39 states. Gemstar-TV Guide, Pasadena, Calif., through its TVG Network unit, operates a cable-TV channel dedicated to horse racing and also offers in-home wagering services. The deal between the two companies provides TVG with access to Youbet.com's technology and a share in Youbet.com's revenue from wagering activities. At the same time, Youbet.com will gain content from major horse tracks under exclusive contract to TVG for which Youbet.com didn't previously have access.
Youbet.com to Reduce Its Work Force by 29% (Nov. 28, 2000)
Playing the Ponies in Your Underwear (May 1, 2000)
Youbet.com Agrees to Pay $1.3 Million to Settle Probe (Jan. 14, 2000)
"We did this deal primarily because content is king, but what we did not have is half the racetrack activity because [TVG] was locked into those markets," says Robert Fell, chief executive of Youbet.com. TVG has exclusive contracts with 20 major horse-racing tracks, including Churchill Downs in Louisville, Ky., and Hollywood Park in Los Angeles, that account for about 45% of all wagering activity, said Mr. Fell. "The biggest reason subscribers canceled with us or did not sign up is that we have not had the major track content," he added. Youbet.com has about 15,000 subscribers who pay a monthly fee of about $6 for basic access to track information and activity in 39 states that permit online-wagering activity.
Under terms of the deal, Youbet.com will pay TVG fees based on a percentage of online wagers. Youbet.com has issued to TVG warrants to purchase as much as 19.9% of Youbet.com's 19.4 million shares outstanding. The warrants are exercisable anytime within the next 36 months for a penny a share, or for a total of about $4,000. In addition, Youbet.com will issue, subject to shareholder approval, a second warrant to TVG to acquire an additional 30% of Youbet.com's common shares for $41 million in cash, also exercisable within the next 36 months.
Mark Wilson, chief executive of TVG, said the deal "provides recognition of our intellectual-property position" and would allow both companies to "leverage our combined strengths."
The two companies have agreed to cross-license patented intellectual property and to mutually promote each other's brands. TVG's parent, Gemstar-TV Guide, has been aggressive in acquiring patents relating to interactive TV and Internet technology and suing companies it believes infringe on its intellectual property, so the deal also could alleviate fears of any potential patent dispute down the road. Gemstar-TV Guide is 38.5% owned by Rupert Murdoch's News Corp.
Youbet.com had revenue of $7 million for the year ended Dec. 31, 2000, and a net loss of $1.7 million, or nine cents a share. Mr. Fell said the company has raised $80 million in debt and equity financing since 1998, which it has used to develop and deploy technology that allows customers to receive streaming video of horse racing and place bets online.
Write to John Lippman at john.lippman@wsj.com |
