Two days after Churchill Downs, Inc. (CDI) announced its intent to acquire the intellectual property rights to the GI Preakness Stakes and the GII Black-Eyed Susan Stakes for $85 million, the firm's chief executive officer, Bill Carstanjen, said Thursday during a quarterly earnings conference call that the state of Maryland remains “in control” of the overall Thoroughbred racing product and its infrastructure, but that CDI's “real team of experts” is ready to assist if asked to help grow those assets.
Although Carstanjen detailed the annual fee structure for licensing the intellectual property rights for Maryland's two most prestigious days of racing to the state and expressed optimism that CDI's control over the second leg of the Triple Crown equates to “tremendous potential” for the gaming corporation, he wouldn't discuss whether his firm intends to try and enter either the casino or historical horse racing machine (HRM) gambling sectors in Maryland, like CDI has done in every other state where it is involved in Thoroughbred racing.
“There has been a movement, particularly among the off-track betting parlors, or OTBs in Maryland, to get HRMs,” Carstanjen said in response to a direct query from an investment banker (journalists are not permitted to ask questions during CDI's quarterly earnings calls). “I don't want to comment on that right now.”
Carstanjen continued: “You know, we're getting our sea legs in the state. We're talking to the government. We're talking to the executive branch. We are evaluating how we can be supportive and helpful to the state in achieving their goals of creating a world-class, best-in-class event that drives tourism and investment to the state [with] the Preakness.
“So we're focused on that right now and becoming a more integrated part of that state-driven team,” Carstanjen said. “And HRM is a component of the discussion in the state. But I won't comment on it for now, as I said, [until] we get our sea legs and become participants in all things racing in the state of Maryland.”
Pending an expected finalization of the deal in the near future, CDI will start reaping licensing fees from the two-day annual event in 2028. The rights to this year's Preakness are still controlled by 1/ST Maryland, LLC (an offshoot of The Stronach Group), which is in the process of exiting the racing industry in Maryland after a 15-year presence in the state.
The 2026 Preakness will be conducted on a limited-attendance (cap of 4,800) basis at Laurel Park May 16 while Pimlico Race Course is being rebuilt to become the new year-round home of Thoroughbred racing in Maryland (except for the Timonium Fair).
The state of Maryland is controlling and bankrolling the Pimlico rebuild. The non-profit Maryland Jockey Club (MJC) took over the day-to-day racing operations at Laurel and Pimlico in 2025, and it retains the on-track operational control and media rights for the Preakness.
The 2027 Preakness is scheduled to be run at the new Pimlico, even though the facility's construction won't be fully finished by that time.
Carstanjen described the annual return CDI will get on its Preakness rights investment:
“The fee structure in Maryland is a two-part structure. First, a base fee of $3 million that grows at 2.5% every year starting in 2028. It does not apply for the 2027 Preakness [because] we haven't closed on the purchase of the intellectual property yet.
“And then the second portion of the fee is 2% of handle for the Black-Eyed Susan day plus the Preakness day,” Carstanjen said.
“So you add those two amounts together and you get you get the total. Last year, the Preakness and Black-Eyed Susan days in combination did about $140 million of handle to give a rough perspective on where it is at this point,” Carstanjen said.
Carstanjen did not specify whether the 2.5% annual fee increase is based on compounded or simple calculations.
Based on simple 2.5% increases alone, CDI's licensing fee would go up $75,000 per year. That fee would escalate substantially over the years if a compounded formula is applied.
In terms of the handle, using Carstanjen's $140 million benchmark as a start point, the 2% cut payable to CDI comes out to $2.8 million annually.
So assuming a low-end estimation of combined fees and handle at roughly $6 million annually, CDI stands to earn back its $85 million investment in at least 14 years.
However, that's not factoring in the potential growth of the two-day event, and Carstanjen indicated CDI was bullish on that aspect of the deal.
“For us, it's entirely consistent with how we look at things like the Derby. In my opinion, the Derby is always what's most special and what's most unique about our company, and it's an asset that can't be duplicated. It's just a very special, unique piece of Americana,” Carstanjen said.
“And we think Pimlico and the Preakness have elements to that itself, and it's about developing those and encouraging those things to happen over time,” Carstanjen said.
“Some of those attributes come in connection with iconic assets–unique assets, special assets. They can have different attributes than everything else over the time,” Carstanjen said.
“We think the Preakness is one of those assets. We think it has tremendous potential and tremendous history,” Carstanjen said. “And as it unfolds, we certainly are available to the state and happy to work with the state to help them figure out how best to transition that property into something great, like it's been in the past.”
A different investment banker on the earnings call asked Carstanjen to explain the “explicit goal” for CDI's acquisition of the Preakness rights.
“Maryland is in control of the destiny of the Preakness. They have the land. They've authorized, legislatively, $400 million of bond proceeds to invest in the property,” Carstanjen said.
“There's another of $125 million of other government funds that are available to invest in Pimlico and Laurel Park, which is the training center that they just approved buying earlier this week. So they have a war chest of about $525 million or so of funds that have been allocated to invest in racing, and they're in control of that investment,” Carstanjen said.
“We, certainly, upon closure, will be the owners of the intellectual property, and have started already a very strong dialogue with the state on how we may be able to help them achieve those goals,' Carstanjen said.
“We have 300 people that work here in Louisville, at the track or in our corporate offices, supporting our racetrack, doing construction and design, ticketing, sponsorships, wagering. We have a real team of experts here that do this on an absolute world-class level, and certainly those resources and efforts are available to the state if they seek our help and would like our help in any way,” Carstanjen said.
“But those discussions are just beginning. And it's important to let those discussions play out at the state's timing and direction. I would say that we really love the market when we compare it to, say, our own market here in Louisville and in the Midwest,” Carstanjen said.
“We love that corridor, that 'D.C., Baltimore, up-through-Philadelphia' corridor. There are lots of great customers there. There are lots of great potential sponsors and business partners there. So we love that market. We think it's a one with a lot of opportunity, and we have a lot of ideas,” Carstanjen said.
“For us, it's a thrill to be a part of that. That's, in our view, an iconic asset. And having been in the game for a long time, I'm familiar with the history of the Preakness, and I know what it's been in the past and what it can be in the future,” Carstanjen said.
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