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Speaker 1: This is the Bloomberg Business of Sports podcast from Bloomberg Radio,

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Speaker 1: where we explore the big money issues in the world

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Speaker 1: of sports.

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Speaker 2: I'm Scarlet Foos and I'm Damian Sasaur.

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Speaker 1: The Kentucky Derby on the horizon.

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Speaker 2: I love that.

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Speaker 1: I'm just kind of chopping as I've been ready to

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Speaker 1: go somewhere. Not sure where though.

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Speaker 2: Well, Scarlett, last week's derby, I mean the handle for

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Speaker 2: the whole week rose to a record three hundred and

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Speaker 2: ninety two million dollars. And by the way, Churchill Downs

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Speaker 2: invested over ninety million to kind of improve the facilities

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Speaker 2: this year. Really cool stuff.

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Speaker 1: Yeah, luck seating in all of that.

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Speaker 2: Right.

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Speaker 1: So, joining us now is the CEO of the company,

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Speaker 1: Churchill Downs, Bill Carstanjan Bill. Great to speak with you.

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Speaker 3: Thanks, Scarlett, It's fantastic to be here with you.

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Speaker 1: So obviously we have you on talking to us because

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Speaker 1: you've found a little bit of time in your schedule

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Speaker 1: before the one hundred and forty ninth running of the

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Speaker 1: Kentucky Derby on May sixth. What is the state of

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Speaker 1: pa landing over at Churchill Downs right now?

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Speaker 3: Well, fortunately, things are going really really well. This is

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Speaker 3: the one hundred and forty ninth consecutive Kentucky Derby as well,

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Speaker 3: So we've had a lot of practice. So the team

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Speaker 3: is firing in all cylinders and it's a big production.

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Speaker 3: Our team at the track flexes up from about two

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Speaker 3: hundred and fifty people or so to about twelve thousand,

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Speaker 3: so it's quite a production. But fortunately we have some

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Speaker 3: great people that have done it many times before.

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Speaker 2: Well, I mean, Scarlett, Bill's being far too shy. I mean,

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Speaker 2: let's be clear. They invested ninety million to expand premium

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Speaker 2: seat capacity this year after they had a record year

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Speaker 2: in twenty twenty two, which fares are passed the twenty

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Speaker 2: nineteen pre pandemic levels. Let me ask you this Bill,

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Speaker 2: by the way, congratulations on a tremendous first quarter. I

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Speaker 2: mean record ebit across all three segments. And you know,

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Speaker 2: I believe you know, if I'm not mistaken, I know

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Speaker 2: the Arlington acquisition had an impact, but net income was

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Speaker 2: up almost fourfold, So I mean, amazing job there. What

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Speaker 2: on earth is a historical race, ma I mean, for

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Speaker 2: our audience, you have to explain what these hrms are

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Speaker 2: and how it's driving your company's performance.

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Speaker 3: Yes, happy to do that and thank you for those

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Speaker 3: kind words. We have a great team here and we've

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Speaker 3: been following our strategies across our three segments and it's

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Speaker 3: really been paying off. So historical racing machines really are

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Speaker 3: machines that approximate slot machines. Really, a slot machine is

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Speaker 3: a device with the screen and around the back is

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Speaker 3: a random number generator that's based on an algorithm. Historical

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Speaker 3: racing machines look very similar to slot machines, and the

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Speaker 3: random number generator around back is really based on previously

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Speaker 3: run horse races. So it really, it largely approximates a

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Speaker 3: typical slot machine experience, and its existence is really a

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Speaker 3: function of the fact that different states have different legal

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Speaker 3: rules around how gaming is conducted and how the machines

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Speaker 3: have to work, and what machines are okay and what

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Speaker 3: machines are not. And in some states the form of

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Speaker 3: gaming is that is permitted requires some connection to horse racing.

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Speaker 2: Garlic, you have to listen to this. I just got

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Speaker 2: to give you this HRM in Kentucky, Alan last year

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Speaker 2: the handle six point eight billion outs in Kentucky a loan,

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Speaker 2: I mean, and Wyoming where there's nobody, I mean, it

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Speaker 2: did a billion three I'm looking at these numbers and

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Speaker 2: I can't even believe it. And so what does it

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Speaker 2: take to install these in your in your casino properties bill? Like,

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Speaker 2: I mean, is it a big deal or is it

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Speaker 2: just basically turning you know, plugging it in, turning it

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Speaker 2: on and and you know they will come.

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Speaker 3: The hard part really is is getting the machine manufacturers

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Speaker 3: to to modify their production process to build these so

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Speaker 3: that they comply with the rules of each state around

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Speaker 3: historical racing machines. So once we do that, once we

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Speaker 3: can actually get the machines produced, then the process becomes

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Speaker 3: a lot more around the construction of a casino or

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Speaker 3: a casino floor, which we have some practice in. You know,

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Speaker 3: we we do have a great business going with historical

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Speaker 3: racing machines, but we also have plenty of traditional class

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Speaker 3: three they call it Class three slot machine casino operations

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Speaker 3: across the rest of the company. So we've we've got

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Speaker 3: gaming experience and virtually every segment of the US gaming market.

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Speaker 3: And once we get the machines produced for us, we

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Speaker 3: fall back into our processes and patterns that we use

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Speaker 3: when we when we build some of our other traditional casinos.

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Speaker 1: So can you explain how these hrms, these historical racing

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Speaker 1: machines are integrated or related or linked to the general

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Speaker 1: state and the general sport of horse racing. Is there

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Speaker 1: a synergy, there is our feed through.

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Speaker 3: Often they're required to be at the same place where

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Speaker 3: you have your horse track. That's not universally true, but

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Speaker 3: in general it's true. So sometimes there's a physical connection

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Speaker 3: to horse racing that they're located in the same spot,

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Speaker 3: but generally the customer bases are a little bit different.

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Speaker 3: The typical horse racing player person that bets on horse

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Speaker 3: racing can be male or female. Tends to be male,

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Speaker 3: tends to like the puzzle of it, more focused on,

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Speaker 3: more focused on it as a game, more interested in

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Speaker 3: things like sports betting or playing poker, whereas the HRM

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Speaker 3: machines really attracts male or female, but traditionally tends to

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Speaker 3: be more female, middle aged, and generally more interested in

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Speaker 3: just the experience of playing slot machines as opposed to

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Speaker 3: the experience of doing a puzzle or betting on sports wagering.

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Speaker 2: Bill, I could you know we consigure all day and

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Speaker 2: talk to you about the content journey for Catino operators,

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Speaker 2: but we don't have you for so long and we

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Speaker 2: got to talk Kentucky Derby. So what's going on? I mean,

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Speaker 2: what's the experience going to be like this year? How's

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Speaker 2: it going to be different from last year? What's your

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Speaker 2: audience expecting.

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Speaker 3: You hear the old adage don't build the church for

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Speaker 3: Easter Sunday, That's just not in the case with our

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Speaker 3: operation in Kentucky. The facility is really constructed to house,

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Speaker 3: you know, to entertain one hundred and fifty thousand people

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Speaker 3: on Kentucky Derby Day. So it's quite a production in

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Speaker 3: hospitality is and we've had great success constructing, replacing, and

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Speaker 3: building lots of new hospitality to house all kinds of

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Speaker 3: different groups. The Derby itself is really a microcosm of

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Speaker 3: the country. You know, people started the infield and then

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Speaker 3: they work their way up to having actual bleacher seats,

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Speaker 3: and then stadium seats, and then a box with their friends,

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Speaker 3: and then indoor dining and then work there with turf club,

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Speaker 3: the mansion. There's so many different experiences and types of

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Speaker 3: hospitality there. It's really built to serve the needs of America.

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Speaker 3: So all different types of groups, all different types of

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Speaker 3: preferences for hospitality, and folks often over the years graduate

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Speaker 3: in their minds to different different levels of hospitality. So

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Speaker 3: it's it's it's a kaleidoscope, you know, it's a collage

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Speaker 3: of of all kinds of different people looking for all

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Speaker 3: kinds of different hospitality experiences, but sharing this common, this

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Speaker 3: common sort of holiday festival spirit that really infects the

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Speaker 3: whole town.

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Speaker 1: Absolutely. I mean it's something that everyone gets into. Can

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Speaker 1: you walk us through what the last week will look like?

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Speaker 1: When do the horses, the jockeys start arriving, When do

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Speaker 1: fans and participants start arriving, and how much I guess

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Speaker 1: I just want to get a sense ince Damie and

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Speaker 1: I unfortunately are not going to take there what we're

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Speaker 1: going to be missing out on.

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Speaker 3: Yeah, so the energy hits you, you know, the unique

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Speaker 3: energy of the Kentucky Derby hits you when you when

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Speaker 3: you arrive in the airport. It really is akin to

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Speaker 3: a holiday. So for example, on the Friday before the

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Speaker 3: Kentucky Derby, it's the day called the Oaks, It's where

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Speaker 3: it's the it's the race for the Phillies. So so

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Speaker 3: for the girls, the three year old race for the girls,

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Speaker 3: that's a day off from school. That's a holiday in

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Speaker 3: this region, so it gives you a sense of what

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Speaker 3: is it like here. Everything's building towards the derby. There

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Speaker 3: have been activities going on since about heavy activity since

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Speaker 3: about a week ago. Other people have Fourth of July

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Speaker 3: fireworks display. This town kicks off with thunder over Louisville,

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Speaker 3: which is really built around a giant fireworks to display.

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Speaker 3: So as we get into this last week, all the

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Speaker 3: horses are here, the jockeys, many of them are here,

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Speaker 3: but many of the owners, the trainers of the horses,

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Speaker 3: and the horses themselves, they're all here. And what's happening

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Speaker 3: in this community is a series of events built around

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Speaker 3: everybody's own individual rhythms how they celebrate with their family.

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Speaker 3: But at the track, we kick off with opening night,

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Speaker 3: which is Saturday, and then we take Sunday and Monday

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Speaker 3: off from racing and then Tuesday, Wednesday, Thursday, Friday, culminating

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Speaker 3: with Saturday with the derby. Every one of those days

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Speaker 3: is a really big day. So for example, on the

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Speaker 3: the day before the derby, we'll have anywhere from one

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Speaker 3: hundred thousand to one hundred and twenty thousand people. Follow

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Speaker 3: it up the next day with the derby and one

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Speaker 3: hundred and fifty thousand the Thursday before all this. I

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Speaker 3: don't know what all crowd will be this year, but

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Speaker 3: it'll probably be forty to fifty thousand, and then you

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Speaker 3: back up earlier in the week. So every day has

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Speaker 3: a theme. Every day has a different set of traditions

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Speaker 3: and festivities around today. And people don't generally go to

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Speaker 3: every single day. Of course we do. I do. But

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Speaker 3: everybody has their days that they like to participate in

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Speaker 3: before we get to the big day, and they're racing.

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Speaker 3: We're racing courses each of those days.

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Speaker 2: Bill, I just have one more question for you. How

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Speaker 2: many times a day are you checking the weather? And

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Speaker 2: what's your favorite weather application? I use? I use the

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Speaker 2: Weather Channel. I'm just curious whether at the Dark Dark

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Speaker 2: Dark Sky, Yeah, bought up by Apple.

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Speaker 3: My favorite one is the one that gives us the

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Speaker 3: best news. So it's going to change every day and

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Speaker 3: during the day. But the thing about Kentucky is if

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Speaker 3: you come to Kentucky this time of year, it looks

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Speaker 3: really like Ireland. It's almost emerald green. It's rainy season.

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Speaker 3: So we get a fair amount of rain in Kentucky

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Speaker 3: during this time of year. And that's why everything's beautiful

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Speaker 3: and green, but it can rain on derby day. It

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Speaker 3: usually rains during the week, and so paying attention to

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Speaker 3: the weather is a real art, and it's one of

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Speaker 3: my least favorite parts of what we do because I

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Speaker 3: have absolutely nothing that I can do about it. I

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Speaker 3: have no control over what the weather's going to be,

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Speaker 3: and we're prepared and people come and they have a

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Speaker 3: great experience even if we do get poor weather. But

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Speaker 3: it's a lot more fun for us when the weather's perfect.

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Speaker 3: So every year I hope for perfect weather. Most years

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Speaker 3: it's it's good enough. It's rarely perfect, but most years

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Speaker 3: it's pretty good and it's a great event anyway. But

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Speaker 3: the weather is a it's a real subculture here is.

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Speaker 3: Everybody's giving lots of advice on what to expect, but

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Speaker 3: who the heck knows what you know? What I've learned

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Speaker 3: is weather in our twenty first century here, weather prediction

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Speaker 3: is not all that accurate, and maybe AI will help

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Speaker 3: us out make us more accurate.

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Speaker 1: But I like that let's put some good use, right, Yeah,

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Speaker 1: that would help us. I'd be all for that, Bill,

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Speaker 1: Thank you so much for your time. Bill cars Engine

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Speaker 1: is CEO of Churchill Downs.

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Speaker 3: Thank you, I appreciate it. Happy Derby everyone, Happy Derby.

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Speaker 2: Thanks, good look to you.

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Speaker 1: That was Bill Carstanjen. He is CEO of Churchill Downs,

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Speaker 1: which of course is hosting the Kentucky Derby, the one

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Speaker 1: hundred and forty ninth running of the Derby. This has

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Speaker 1: been the Bloomberg Business of Sports podcast. I'm Scarlett Foo

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Speaker 1: here with Damian Sasur. Starting next week, by the way,

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Speaker 1: we will be uploading our podcast shows exclusively on Fridays now,

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Speaker 1: and of course we will continue to dig into the

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Speaker 1: world of money and sports. You can find me on Twitter.

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Speaker 2: I'm at Scarlet Foo and I'm on Twitter at d

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Speaker 2: sas Hour.

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Speaker 1: You're listening to Bloomberg Business of Sports from Bloomberg Radio

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Speaker 1: around the world.