Youbet.com Forms Strategic Relationship With Gemstar's TVG

Youbet.com announced that it has struck a strategic relationship with TVG, a division of Gemstar-TV Guide International. Youbet.com streams horse races and facilitates online wagering on horse races, and the agreement with TVG will allow Youbet.com to gain access to virtually all of the premier race tracks including certain tracks where TVG previously had exclusive rights, such as Churchhill Downs - the home of the Kentucky Derby. Youbet.com gains access to stream around 45 percent more horse racing content through the agreement.

TVG is the 24-hour interactive horse racing network available nationwide on select cable systems and the EchoStar's Dish Network satellite system.

Youbet.com Chairman and Chief Executive Officer Robert Fell, views the Track Content and Patent License Agreement with TVG as integral to gaining broad market penetration and growth. "Nearly one-half of today's pari-mutuel wagering dollars are directly connected to the TVG-affiliated racetracks that we can now add to our online network. That equates to substantial opportunity for Youbet.com," Fell explained.

TVG is also allowing Youbet.com, non-exclusive rights to utilize TVG's patented wagering technology for online and automated telephone applications. Gemstar-TV Guide is infamous for its aggressive lawsuits defending its patents.

Under the terms of the agreement, Youbet.com will pay to TVG fees based on the handle generated by Youbet.com from wagering activity. TVG will also have the option of buying up to 19.9 percent of Youbet.com's common stock at $0.001.

Youbet.com will likely issue an additional warrant to TVG to purchase up to 51 percent of the its common shares outstanding at $2.50 per share subject to approval by Youbet.com's stockholders. Both warrants will be exercisable during the first 36 months of the agreement.

Horseracing is the one form of wagering that is exempt from the federal wiring act that prohibits wagers from being conducted over phone lines. According to Ron Luniewski, COO of youbet.com, the 1976 Horse Racing Wire Act amended the federal law, and the language was changed about a year ago to specifically allow wagers to be conducted through electronic devices, such as the computer and set-top boxes.

Horseracing operates as a par-mutual wagering system, which means that everyone bets into one pool and the odds change. The 1976 Act allows money to cross state lines so that bets can be placed in Illinois for a race that is taking place in New York. State governments receive tax revenue from the transactions.