Minus Pool.com

You can love or hate their fast food, but if you can say one thing about Yum brands, it’s that they know how to use public events, in order to raise buzz for their products. Sure Yum brands paid a lot more then $1 million to get a commercial on during the Super Bowl this year, but that money went into the pockets of ABC Disney shareholders instead of towards the people who brought us the game to begin with.

This year though, Yum brands is going to reward the athletes themselves and have agreed to a bizzare sponsorship of the Kentucky Derby, through a partnership with Churchill Downs. (CHDN) Financial details of the arrangement were not disclosed, but if any horse is able to beat Barbaro’s record of 6 and 1/2 lengths, then Yum brands has agreed to give a million dollars to the winner. Compared to what Churchill Downs will be taking in during the race, the $1 million is really just chump change, but it’d be a nice bonus, for an owner, on top of the winnings from the race.

At the very least, this partnership will help to raise awareness for the sport of kings. Barbaro’s fantastic run brought a lot of attention to the sport and it’s nice to see corporate sponsors lining up to help carry on the tradition. As more and and more sponsors start launching their marketing campaigns for the Kentucky Derby, it will be interesting to see if it lifts the Minus Index from the extra attention. I could see the publicity from the event bringing in new investors, but you’d also think that the smart money would have identified this sort of trend already (if it even exists).

Update - It looks like it only took about 3 hours for Yum brand’s prize offer to hit the mainstream press. The AP has a write up on the prize and mentions that this could become an ongoing event if no one wins. I bet that if you wanted to wager on anyone breaking Barbaro’s record, you could get 50 - 1 odds. If this is the case, then between the AP article, plus the blogger buzz, plus whatever coverage shows up on the social network sites, Yum just got a ton of press coverage for something that probably only would cost them $20,000 to hedge.

YouBet (UBET) investors gave up $9 million (7.5%) in market cap today, after the company started a game of chicken with TrackNet Media and was forced to back down. The action started last night, when YouBet issued a press release warning that they could lose access to the Kentucky Derby, over vendor hardball. TrackNet Media responded with their own press release accusing YouBet of trying to force them to negotiate when they hadn’t worked out other contracts.

Out of the gates, the stock traded down, but once the analysts got involved, it was a shark feeding frenzy! Ryan L. Worst with Brean Murray, Carret & Co told investors that “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.” Todd Eilers with Roth Capital also downgraded the stock and warned of soft profits. To make matters even worse, AllofHorseRacing.com jumped all over the PR blunder, in order to promote their own support for the Kentucky Derby.

After seeing the market’s response, YouBet issued a rushed press release announcing that they had extended their agreement with Churchill Downs (CHDN) to 2010. This is important because CHDN represents half of the TrackNet equation, but it did little to soothe investor’s nerves (although the stock did recover a bit over the remainder of the day.) They company also denied that the issue would impact their earnings because it would be offset by savings in marketing costs.

Whether or not it will impact earnings remains to be seen, but the public outburst does tell us something about YouBet’s negotiating position right now and things do smell a little desperate. I’m still familiarizing with the history of each stock in the Minus index, but luckily for me, there are others, who know more about this. Marshall Graham at Equinometrics offer an excellent hypothesis on what really might be going on.

“For the past few years America TAB and Youbet have operated offering both TVG and MEC tracks. Why the sudden change? My guess is that TrackNet intends to squeeze all ADWs out. If Empire Racing (which includes Magna and Churchill Downs) get the New York tracks, it is all over for Youbet.”

All in all, it was an ugly day that really didn’t need to happen. YouBet could have continued their negotiations with TrackNet privately instead of airing the dirty laundry. As a result, investors have lost some measure of confidence and they’ve damaged a key relationship with the blunder.

YouBet’s (UBET) stock is down 8% in the after market, after the company warned that they may not be able to allow it’s customers to wager on the Kentucky derby, after a vendor dispute. The Kentucky derby is a pretty big event for the horse racing industry. Every year, it draws out bettors who normally wouldn’t wager on the sport. YouBet is completely willing to pay for access to the event, but TrackNet Media, which is owned by Churchill Downs (CHDN) and Magna Entertainment (MECA) won’t allow them to accept wagers on the event, unless they refuse to do business with other racing providers.

To TrackNet’s credit, they responded to this public airing of their dirty laundry by saying that they don’t want to lock YouBet out, as much as they want to make a content agreement with Television Games Network first. TGN has had a history of insisting on these exclusivity agreements and apparently TrackNet is doing their best to open up the industry.

On one level, I can understand TrackNet Media’s desire to protect their races from being dilluted by other competitors and to negotiate their own concerns before addressing their partner, but on another level, this seems like a very low handed tactic to use, in order to apply pressure to a competitor. Somehow YouBet got caught up in all of this drama and regardless of TrackNet’s motivation, their business could be impacted. I’ll leave my readers to decide whether it’s a shrewd move on TrackNet’s part or a dangerous precident to set. If exclusivity does survive, then it will be a blow to consumers, but once again the odds will be stacked in the favor of the house.