Thursday, 1 August 2013

A One-Eyed View of Racing – Revenues Up and Costs Down

Throughout my consulting career I always made sure that clients worked hard to concentrate on both sides of the business equation – put in place the strategies and innovations to grow sustainable revenues while doing everything possible to reduce costs in a similarly sustainable manner. Incredibly, I often found many clients would only concentrate on one half of this equation, and I termed it the “one-eyed view of the world”.

I don’t know why, but I read two things recently about racing that made me twitchy and, if I’m honest about it, somewhat irritable. Racing quite rightly is determined to increase its slice of the sports and betting pie and grow overall revenue so that more money flows into the sport. For owners, the big worry is that not enough comes back to us through prize-money. And yet the sport doesn’t really seem to concentrate on the cost base. Indeed, from an owner’s perspective, I think we are often seen as a cash cow, there to be well and truly milked. So what irritated me?

I noticed that on 20th July Haydock Park was (in its own words) “turning itself into a House of Fun”, with a “fantastic summer’s night of action-packed racing and live music”. Well, the “action-packed racing” was an exceptionally dreary card with only 37 runners and most of the fields not big enough to allow each-way betting. Madness topped the bill. Maximum ticket prices were £60 and, amazingly, 19,000 people turned up, thereby generating revenues well north of £1m. Win prize-money on four of the races was less than £3,000. Doubtless everyone who paid a premium price loved the music, and it has put a lot of money into the racecourse’s coffers. But as owners, will we see any of it? Great that revenue was up, but the racing was awful. If Haydock Park is first and foremost a racecourse rather than a music venue, how do we gain anything from it? Don’t get me wrong – I’m very much in favour of using racing’s assets in a way that maximises revenue, but there must be a risk that the main experience and its raison d’être is diminished. If so, Madness.

Secondly, in the latest Owner & Breeder magazine, I read about Noel Chance retiring. Great trainer, two Gold Cup winners. Jamie Snowden is now in one of his former yards, Folly House. Noel said of being a trainer, “It’s a wonderful life. I never had a bob, but I didn’t eat in a bad restaurant or stay in a bad hotel. It’s a surreal existence training racehorses. You’re dealing in vast amounts of money belonging to other people, and you tend to lose touch with reality to a certain extent. You tend to lose the value of money, particularly when it is other people’s” (my emphasis). It is that line that irritated me.

In Owners for Owners, we’ve gone out of our way to find trainers that we admire, respect and trust. So the comments I am about to make do not apply to them. They wouldn’t be on our roster if they did.

But I do think that racing authorities, many trainers and agents most definitely do not think enough about the cost base and forget that they should be husbanding owners’ hard-earned cash and doing everything possible not to waste it. At the moment, the average return on owning is less than 20%, i.e. 20p in the pound, which is a fraction of what we find in many other countries. And yet racing only really concentrates on trying to take revenues up. Maybe it should also concentrate on bringing costs down. Lots of ways of doing that: simplify the administration; rationalise the charges; avoid wasteful multiple entries; share the transport (not charging 100% for each horse when there is more than one in a box); cap training fees (they can range anywhere from £30 to £70 per day, and yet staff costs are relatively constant); refuse to bid up sales prices to ridiculous levels (aided and abetted by the agents who love the buzz of buying the top lots); making sure there is no luck money or hidden kickbacks; and avoiding bottom-of-the-barrel syndicates that double or treble the value of horses they have bought cheaply and passed on to naïve and gullible owners.

A bit of a rant, that. I did say I was irritated. I think I should discuss all this with The Curmudgeon who has been in hiding recently. I’ll find out his views over a few pints of Donnington’s fine ales here in the Cotswolds.


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