Youbet falls on potentially lost license

The Woodland Hills, California.-based web site said because of an impasse in negotiations the partnership that sells content for the Kentucky Derby - TrackNet Media Group LLC - may not grant Youbet a license to accept bets on races at the group’s tracks.

Brean Murray, Carret & Co. analyst Ryan L. Worst wrote in a research report losing TrackNet’s content would shave a penny or two from Youbet’s second-quarter profit. That represents 20 percent to 40 percent of the profit analysts polled by Thomson Financial forecast for the quarter.

Roth Capital Partners analyst Todd Eilers downgraded Youbet to "Hold" from "Buy," cutting his price target to us$ 3.50 from us$ 3.75. He predicts "some negative impact" to profit.

Youbet’s stock sank 28 cents, or 9.2 percent, to us$ 2.76 in afternoon trading on the Nasdaq Stock Market.

More than 40 percent of the wagers Youbet accepts are placed on races at tracks whose content is controlled by a network called TVG. About a quarter of Youbet’s wagers - or us$ 117 million a year -- are placed at tracks whose content is controlled by TrackNet Media.

TrackNet Media told Youbet it had to choose. Unless Youbet stopped accepting wagers for TVG-controlled races, TrackNet Media would not grant a license for its own races, including the Kentucky Derby.

Youbet said unless TrackNet Media drops this demand, the site will stick with TVG. "We won’t risk key business relationships with tracks, horsemen and customers, or shareholder value, for a deal that strips us of this popular and productive content just to carry one race," said Youbet’s chief executive, Chuck Champion, in a conference call Monday.

Champion said Youbet’s outlook for profit in 2007 is unchanged. The wagers the company loses from TrackNet will be regained by picking up lost customers from other sites that capitulate to TrackNet’s ultimatum, he said.

TrackNet, which is a partnership between Churchill Downs Inc. and Magna Entertainment Corp., said in a statement if it does not revoke the license Youbet would be the only site that offers wagering for every race in the US