Monday, 15 June 2015
The Growth Strategy for British Racing, Part 3 of 3: Many Positives, Credit where Credit’s Due, but also Some Major Areas Still to Focus On
On the eve of Royal Ascot, it’s easy for the outsider to look at our sport and believe everything is very rosy. Over the last few months we’ve had huge crowds at the Cheltenham Festival, Aintree, Newmarket, and Epsom on Derby day where they had over 120,000 attendees. Bloodstock prices at the sales are booming and sponsorship, particularly through Qipco, is injecting the highest level of investment that British racing has ever achieved. The quality and integrity of racing in Britain are by a considerable margin the best in the world, so there are many positives.
And yet as flagged up in the last two blogs, there are deep-seated problems in the sport, particularly around funding with a major dip forecast in a couple of years. When Steve Harman was appointed Chairman of the BHA, he was determined to develop a more strategic approach to racing and drive significant changes, initially around governance and leadership at the BHA. In effect the Board has now been transformed; there is a new CEO in place in Nick Rust; and relationships with Government have never been better, with a commitment to implementing the Horserace Betting Authorisation Right within this Parliament. British racing has never had a clear strategy, and credit should be given to Steve for driving through a process that encouraged all the main stakeholders to rally round, bury their differences and for the first time, “speak with one voice”. Full marks for that. The new Strategy for Growth is actively supported by Owners for Owners and we even made a contribution into one of the pillars, on ownership. Not surprisingly, therefore, we are very much in favour of the approach, although we are also prepared to argue that there are some additional areas to emphasise.
Key Targets for Growth in the Coming Years
BHA summary: increase the number of horses in training – 1,000 new horses by 2020; raise betting participation levels – up 5% by 2018; increase racecourse attendance levels – reaching 7 million by 2020; new income for the sport - £120m p.a. by 2018.
OfO appraisal: setting clear targets is a huge step forward for racing. However we would have liked to see at least two more: return on ownership at 23% (with owners losing on average 77p in the £) is abysmal compared to almost any other country in the world. The BHA should commit to improving that in a defined way between now and 2020. Also, the targets set are in effect focusing solely on increasing revenue, but like any other turnaround strategy racing should also set clear goals for cost down. Cost reduction is not mentioned at all in the Strategy for Growth. We believe that a cumulative target of £100m cost savings over five years could be achieved, with the savings reinvested into the sport. There is enormous scope for such savings in racing administration, contractual commitments between owners and trainers and standardisation of procurement.
Growth Pillar: Customer Growth
BHA summary: national survey of attitudes towards racing; consumer insight project with the involvement of all racecourses; improvement of sponsorship leverage.
OfO appraisal: it appears that racing from a spectator standpoint is going through a structural change. The average race-goer is now attracted to big events. Top race-days and those with themes such as Ladies’ Days are increasingly popular. At the same time the lower end of racing, and particularly the all-weather, has been abandoned. Terrestrial broadcasting is in decline. As an example, viewers for the Derby dropped from 4.1m in 2006 for the BBC to 1.47m on Channel 4 this year. There is a real need to improve the attractiveness and appeal of British racing. Two immediate areas require focus. The BHA needs to be given the authority to exercise centralised control over fixtures and the race programme. This will be an interesting test of the new tripartite governance structure between the BHA, the Horsemen’s Group and the racecourses. Secondly, and as a result of this, a much more holistic approach can then be adopted towards race planning, particularly based around much-needed data analysis of the preferred pattern of race-days and race types.
Growth Pillar: Horse Population, Ownership and Breeding
BHA summary: more efficient and cheaper ownership administration; easier access to syndicates to encourage new ownership; creation of wider options for colours to encourage associations with brands and clubs; improvement of the overall ownership experience.
OfO appraisal: having influenced the goal of 1,000+ additional horses in training by 2020, we are looking forward to a range of centrally-led initiatives aiming to achieve that. Similarly a dramatic simplification of ownership administration is a “quick win” – or at least it ought to be. We have a concern that because ownership administration and the cost associated with it is a revenue generator for Weatherbys and the BHA, it will suffer from a lack of urgency. While adding to the number of horses and, as a result, the number of owners is absolutely necessary, so there should be a similar focus on decreasing the churn rate and retaining owners. The Strategy for Growth doesn’t really address this issue. So for example while we can only applaud the investment at the top of the sport, there is a concern that the “ordinary owner” remains neglected, particularly in terms of prize-money. As an example, the minimum values prize-money at Class 2 level and below is far less than it was a decade ago, with place-money in particular at derisorily low levels. There is no point investing resources in bringing lots of new owners in, if racing can’t retain them.
Growth Pillar: Racing and Betting
BHA summary: “own Thursdays”; align GB and Ireland race timings and other race timing improvements; creation of a Racing & Betting Forum, key leaders from racing, betting and the media examining ways of improving participation in betting on British racing.
OfO appraisal: in many ways the ordinary punter has been a neglected stakeholder within British racing, and we applaud the commitment to engage the “voice of the gambling customer”. However from a betting innovation perspective we were very disappointed by the lack of transformational recommendations in the Strategy for Growth. Obviously the racing right, if secured, will be a huge step forward, but we felt that there should have been more insightful analysis of the opportunities presented by the decline of the on-course betting trade and the transformation of the off-course market, particularly through digital and online gaming. Furthermore, in only three years’ time the Betfred exclusive seven-year tote pool betting licence expires. There will be considerable benefits for the racing industry in acquiring that licence, and we hope that will come back on to the agenda. Finally, British racing remains undeveloped as a global betting opportunity and that needs examining in far more detail, together with the emergence of new betting platforms to capture it.
Growth Pillar: Ultra High Net Worth (UHNW)
BHA summary: create a short list of UHNW targets and identify potential assets for investment; integration of existing efforts and resources; develop a more formal relationship with UK Trade & Investment (UKTI).
OfO appraisal: one definition of a UHNW individual is that they don’t just own a company – they own a country. This area by its very nature is extremely sensitive and confidential and therefore it is not surprising that this section lacks specific detail of implementation. As has been seen, however, with the huge investment from the Middle East, securing a small number of extremely wealthy individuals can generate a massively positive impact in racing. Likely to be a prime focus for the Chairman of the BHA and we wish him well in pursuing it.
Foundation Pillar: Integrity and Regulation
BHA summary: enhanced equine anti-doping measures; rewrite the rules of racing.
OfO appraisal: obviously an essential foundation because without integrity there is no faith whatsoever in the quality of British racing. However we feel that it is time to put a number of other integrity issues properly on the table and would like to see a cross-racing investigation into the integrity of the bloodstock industry, sales houses, agents and syndicate racing managers. We all know of many rumours in this sector and there is definitely a need for greater openness, transparency and, as a minimum, “light touch” regulation through the framing of required minimum standards, codes of conduct and penalties for proven breach.
Foundation Pillar: Participant Welfare and Training
BHA summary: restructure of the sport’s welfare and training provision; integrated recruitment; injury rehabilitation; funding reform.
OfO appraisal: impossible to disagree with any aspect of this pillar. It says everything about racing that until the latest reorganisation of the BHA there was no-one at the centre in a human resources leadership role. Full marks for finally acknowledging the criticality of people, skills and capability in any change management programme.
It is clearly early days in the Strategy for Growth. We will certainly keep a close eye on developments and update our readers through this blog. Best of fortune to all those involved in implementation.
Monday, 1 June 2015
In the last blog I looked at the overall context of the growth strategy for British racing, as presented by Nick Rust and Rod Street in early May as part of their road show around the UK. While lots of initiatives were outlined, there was also some doom and gloom …. and indeed only a few days later Paul Lee, chairman of the Levy Board, duly announced a £4m reduction in expenditure in 2016 (which is bound to affect prize-money) and more substantial cuts threatened for 2017 – a timely reminder that all the various parties in racing really need to give total commitment to the growth strategy. So in this blog, here is an outline of the recommendations. Doubtless other ideas and activities will be developed as the strategy is implemented, so this is not necessarily a complete list, but the main themes and pillars are as described in the presentation.
1. Racing Structure & Governance
Like it or loathe it, racing does not operate through a conventional integrated structure with clear lines of authority. Consensus and collaboration rule the day, despite the considerable downside that this can lead to lengthy delays in decision-making and also allows stakeholders to exercise negative authority by blocking much-needed changes and reform. Nick Rust emphasised the need for racing to help itself and pursue “one journey: one voice”. Hear, hear! There is going to be a governance change with a tripartite arrangement between the BHA, the Horsemen’s Group and the Racecourse Association. There will be a members’ agreement, a members’ committee to steer strategy, and executive committee to make the key decisions. This is a challenging arrangement which will need “collaboration with teeth”.
2. Critical Success Factors: Transformation vs. Incrementalism
One way of evaluating any strategy is to look at the recommendations which are essentially incremental vs. those which are genuinely transformational. This is not in any way to knock incrementalism, but there is normally a need for significant innovation in a small number of key areas to drive successful change. We will return to that theme in the third blog, with a more critical appraisal.
Four clear, quantifiable targets / CSFs were highlighted: 1,000 new horses in training and racecourse attendances to be at 7 million by 2020 (vs. 5.8m today); betting revenues to rise by 5% and a minimum of £120m of extra income to flow into the sport by 2018.
3. Racing and Betting Pillar
Vital need to reverse negative trends. Incremental recommendations included: connecting better to betting consumers; setting up a Racing and Betting Forum; improving sectional timings; closer alignment in race timings and broadcasts between GB and Ireland; and introducing an “Own Thursday” day, where betting can take place free of many of the other sporting distractions. Transformational recommendations: there weren’t any.
4. Customer Growth Pillar
Incremental recommendations included: developing better customer insight; using customer data more effectively; setting up a national survey; better promotion through social and digital media; seeking more sponsorship. Transformational recommendations: there weren’t any, although the vision of 7m racegoers may well need some.
5. Horse Population, Ownership & Breeding Pillar
Incremental recommendations included: simplifying owner administrative processes to lower the cost and complexity; liberalisation of colours; framing minimum standards for trainers, racecourses and the administrative experience; launching a data project on owner experience and owner churn rates. Transformational recommendations: although there weren’t many specifics, there is a clear intention to put funds behind the goal of 1,000 additional horses in training by 2020. That will be a centrally-led drive.
6. Ultra-High Net Worth Pillar
No real detail here, other than saying there is a need to “integrate and optimise new and existing resources”.
7. Integrity & Regulation
Strong commitment to maintain the world leadership reputation of British racing, and for there to be “impactful, cost-effective targeting of risk areas”. Incremental recommendations such as a plan to simplify and make more transparent the rules of racing; continued targeting of corruption, but making sure that the authorities are aware of “the danger of sledgehammers to crack nuts”.
8. Welfare & Training
Not many specific recommendations, although there will clearly be greater emphasis on integrated recruitment and learning and development; injury rehabilitation and broader education on relevant subjects such as nutrition for jockeys.
Running right through the presentation and discussion were continued references to “Where is the cash going to come from?” Part of that is the “need for fair and sustainable funding between betting and racing on a reasonable basis”; part through the introduction of the Racing Right; and part through the need for racing to be far more open to ideas for investment from outside the sport. A lot of that will have to be transformational.
Doubtless you will have your own views about the coverage and relevance of all these various ideas and recommendations …. together with key elements that you may feel have been neglected. More about that in the next blog.