Churchill Downs Incorporated has made headlines by announcing its acquisition of the intellectual property rights to the Preakness Stakes from 1/ST Racing for a staggering $85 million. This unexpected move has sparked discussions about the future of the Preakness, the second leg of the Triple Crown, particularly in light of the ongoing redevelopment of the Pimlico Race Course in Baltimore.
In response to the announcement, the Maryland Jockey Club quickly issued a statement clarifying its role in organizing the Preakness, emphasizing that it retains control over media rights and licensing for the event.
The intellectual property acquired by Churchill Downs includes the name of the Preakness Stakes and the Black-Eyed Susan Stakes, which is a race for three-year-old fillies held the Friday before the Preakness.
Two years prior, the Maryland General Assembly approved a $400 million renovation plan for Pimlico, which led to a master agreement allowing the state to take over the Baltimore track from 1/ST. Starting next year, the Maryland Jockey Club will manage the revamped Pimlico and officially oversee the race, while the intellectual property rights remain with 1/ST, previously known as The Stronach Group.
During a recent earnings call, Churchill Downs CEO Bill Carstanjen shed light on the financial aspects of the deal. Once finalized, Churchill will receive an annual base fee of $3 million, along with 2% of the total handle from the two racing days. This base fee is set to increase by 2.5% each year. Last year, the combined handle for these two days exceeded $138.5 million. If the handle grows by 10% annually, Churchill could recoup its $85 million investment by 2036.
Carstanjen emphasized that the company is eager to collaborate with Maryland's racing stakeholders to enhance the Preakness experience. With a team of 300 professionals skilled in various fields, including design and marketing, Churchill is well-equipped to contribute to Pimlico's success. However, he acknowledged that the ultimate decisions lie with Maryland's state officials.
Since Carstanjen took over as CEO in August 2014, Churchill Downs has seen substantial growth through strategic acquisitions and significant investments in existing venues, including the flagship track in Louisville. In the first quarter of this year, the company reported record net revenues of $663 million, with net income of $83 million and an adjusted EBITDA of $257 million, a stark contrast to figures from a decade ago.
Churchill Downs is also expanding the Kentucky Derby into a week-long celebration, with events like the Kentucky Oaks attracting over 100,000 attendees. The track has introduced themed days to enhance the overall experience for fans.