The Row Over Horse Race Sponsorship and Why Bookmaker Behaviour Has to Change

Last Saturday was the 58th year of the oldest sponsorship in British racing in the Hennessy Gold Cup at Newbury. With the row that has now erupted over Authorised Betting Partner (ABP) status and the brinkmanship between some of the big bookmakers and British Racing, one wonders whether we will see such successful and rewarding partnerships again, or whether a permanent chasm has opened up between the parties. Encouragingly there appears to be very little sympathy for the bookmaker stance as they try to evade making a fair and sustainable contribution to the sport. Indeed, for the moment, racing and the betting public appear to be disgusted by their short-sighted and extremely selfish stance. Surely this must in turn cause substantial brand damage – not least at a time when the financial performance of some of the big bookmakers is lamentable and they are increasingly huddling together through mergers or, as some commentators have said, “propping each other up like down-and-out drunks”.

ABP status is one tool to encourage bookmakers to make a proper contribution to racing from their offshore betting turnover. The BHA estimates that our sport is losing £30m a year because of levy evasion. Some bookmakers such as Bet 365, 32 Red and Betfair are already making a voluntary contribution (and you could argue, putting themselves at a competitive disadvantage to those that are not), whereas others such as Betfred, Ladbrokes, Coral, William Hill, Skybet, 888 Sport and Paddy Power are making no or minor contributions. From 1st January 2016 bookmakers will not be able to sponsor races without being ABP accredited.

It only took a few weeks from the announcement of ABP for brinkmanship to break out, with die-hard bookies threatening to pull the plug on their sponsorship deals: Betfred with the Cheltenham Gold Cup and Haydock Sprint Cup; Ladbrokes with the World Hurdle; Coral with the all-weather championships; and William Hill with the Kempton winter festival including the King George VI. Paddy Power have indicated that it could well affect their Cheltenham sponsorship. Some have questioned the legality of ABP exclusion as a potential breach of competition law. Alas, all very predictable, as was Betfair stepping in to the sponsorship role for the Tingle Creek at Sandown as soon as 888 Sport dropped out. This row is certainly going to test the unity of the various parties.

Obviously the row is not without risk. Although the figures are a few years out of date, when Deloittes and the BHA produced their Economic Impact of British Racing in 2012, total sponsorship was £82.2m, with 7,326 races sponsored. Of this, bookmakers’ contribution was £31.8m, covering 3,018 races, or 41% of the races and 39% of the total sponsorship pot. Similarly from the BHA Fact Book 2011-12, the breakdown of prize-money in 2011 was Levy Board contribution 34%, racecourses 28%, sponsorship 20% and owners 16%. So if the bookies decide to go elsewhere with their sponsorship money and fund other sports, it will clearly damage the funding of racing and owner prize-money, at least in the short term.

Is this a risk worth taking? The over-arching principle now guiding British racing is that there must be a sustainable, commercial funding regime for the sport. Bookmaker contribution through the levy (or its replacement) is critical. As many levers of persuasion as possible need to be used to encourage, cajole or coerce bookies back to the negotiating table. The levy talks have broken down, so the ABP route is one lever that is definitely worth continuing with, particularly if the bookmakers receive a proper package of benefits as a result of signing up. Unfortunately at the moment hostility between the parties is blocking off a more collaborative search for the many mutual benefits that certainly exist. Without bookmaker behaviour changing, this could still have the makings of a zero sum game. It is vital that the debate shifts as quickly as possible on to innovation and growing a bigger betting pie while making racing even more attractive to the sports-going public. This can only happen through commercial collaboration.

One benefit that may come out of the row is a complete re-think of racing sponsorship. From the bookmakers’ side a lot of it looks extremely pedestrian and little more than a naming and badging exercise for races. From the racing side the product proposition is generally tedious from Sunday through to Friday, with insufficient thought and co-ordinated planning being given to framing fixtures and races that genuinely excite the consumer and, in turn, maximise betting revenue. Admittedly there are the high points of Cheltenham, Aintree, Epsom, Ascot and Goodwood but thousands of races are instantly forgettable as, indeed, are their sponsors.

And finally, a strong case can be made for looking way beyond traditional race sponsorship by bookies. Racing has become inertial, with chronic under-representation of leading British and global companies in our sport. From the 2012 data, food and drink companies only put in £6.5m of sponsorship, while the financial services sector was even less visible with £4.3m. A massive mind-set change is needed from sponsoring races to sponsoring events and experiences. Marketing gurus argue for “the integration of sponsorship platforms”, “co-creation of brands between companies and consumers” and “customers acting as ambassadors”. Watching Neanderthal bookies locking horns with Great British Racing in ultimately self-defeating rows over financial contribution, it is easy to despair. However it would be of real benefit to the industry if a search for new sponsorship in turn brought in a new generation of companies and dynamic leaders from other sectors with an enthusiasm to transform the whole way in which racing is presented to the broader betting and racegoing public.

In the meantime, I enjoyed raising a glass of fine brandy to the Hennessy winner.

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At Last, One Voice for British Racing – and a Lot of It Focused on Bookmakers and Betting

Racing politics around the 55th Levy Scheme can be difficult for most of us to comprehend, but there have been a number of very significant and really positive developments recently reflecting months of hard work, particularly from CEO Nick Rust and Chairman Steve Harman of the British Horseracing Authority (BHA) in conjunction with the Racecourse Association (RA) and Horsemen’s Group (HG).

While we don’t yet have an enforceable horserace betting right, we do have a new tripartite governance structure underpinned by a signed Members’ Agreement; a Members’ Committee representing the BHA, RA and HG, meeting quarterly; and an Executive Committee dealing with the implementation of strategy, meeting monthly. Credit where credit is due: this is potentially a milestone moment that will dramatically improve and strengthen decision-making and introduce a far more coherent and unified approach, with British racing able to speak with one voice and hopefully rise above the infighting of the past. Obviously there will be some big challenges to address, not least over the race programme and fixtures. Indeed Nick Rust has insisted that the agreement will only be in place initially for 18 months, and the next step forward will be dependent on a Memorandum of Understanding on the reshaping of fixtures – which, of course, goes right to the heart of the economic model of racecourses.

It sounds complex stuff, but it is all part of a genuinely strategic approach to the strengthening and growth of British Racing. Nick Rust has made a couple of TV appearances recently in which he emphasised the need to achieve three easily understandable goals: increase the number of racegoers, increase the volume of betting, increase the number of horses in training. Central to all of that is clearly the need for investment and funding across the sport, which is why bringing the bookmakers to the strategic party in the right way is so critically important.

Alas, while the developments mentioned above are a very big step forward, the breakdown on 31st October in the negotiations over the Levy for 2016/17 was definitely a big step back – at least in the short term. Basically about 40% of all bets by UK customers on British racing are not contributing anything at all to the sport or its workforce. Normally on a £10 bet, about 15p makes its way into racing. At the moment there is zero contribution to the levy from the digital, offshore businesses, and that is an estimated £30m currently being lost. The effect of the haemorrhaging of levy in this way is likely to reduce the levy yield from around £100m to £50m or lower by 2017, which is clearly going to have a hugely significant impact on racing, not least on prize-money for owners, which as we know is already at the bottom of the returns on ownership in any of the racing territories worldwide.

With the negotiations having broken down, the matter has had to be referred to the Government in the form of John Whittingdale, the Minister at the Department for Culture, Media & Sport, for determination. This is the last thing British racing wanted, since it shouldn’t be the Government’s job to sort out our problems. Having said that, there is apparently a lot of support for racing and, indeed, the Chancellor, in this year’s Budget, pledged that the Government will support a new Horserace Betting Right to replace the outdated levy mechanism.

The 55-year-old levy scheme is clearly nowhere near fit for purpose. Some would even argue that it rarely has been, since it started. The way that it was set up and operated has enabled bookies to under-pay for decades. Increasingly they have put out a smokescreen that the racing betting product is far less important than it used to be, but Nick Rust, as an ex-Ladbrokes man, is now poacher turned gamekeeper and knows the inherent nonsense of that statement. Racing is the only sport that provides a 7-day, worldwide betting product. It is inherently profitable but has the powerful advantage of bringing in punters to bet on other offerings. It is that leveraging of revenue which is at the heart of potentially huge growth for bookmakers if they could move away from denial and squabbling over the levy to a far more strategic debate about how to stimulate innovation in gambling and harness the enormous global market into and through the best racing in the world.

However, the bookies must make an appropriate contribution to British racing. One lever therefore is ongoing persuasion and negotiation, but the other is to be more coercive. So another significant development over the last month shows the huge benefit of having a Tripartite Agreement. British Racing – BHA, RA, HG – has introduced a new designation of “Authorised Betting Partner” (ABP) for bookmakers who “have a fair and mutually sustainable funding relationship with the sport”. This comes in on 1st January, and there are three firms already with that status: 32 Red, bet 365 and Betfair, because they are paying voluntarily on their digital businesses or, like Betfair, have a commercial deal in place. That is not the case with the likes of Betfred, Coral, Ladbrokes or William Hill. Although there was a voluntary agreement several years ago under which bookmakers committed to £18m of such contributions, only £4.5m has so far found its way into racing. All of this demonstrates that racing cannot rely on voluntary payments, and it must be underpinned by legally binding funding requirements – hence the need for an enforceable Horserace Betting Right. In future, if a bookmaker is not an ABP, because they are not paying levy or an agreed equivalent on their digital business, they will be banned from taking out new sponsorship deals on most races and festivals. Encouragingly both Jockey Club Racecourses and Arena Racing Company, who operate half the UK racecourses and 60% of the fixtures, have already stated that they will not enter into new commercial agreements with bookies that are not ABPs.

While the structural side of all of this is clearly complex, the basic goals, levers and requirements are straightforward. As this blog was written mid-way through the Paddy Power meeting at Cheltenham, it is to be hoped that the bookmakers change their behaviour, finally get behind racing’s strategy for growth and accept the need for a proper, sustainable contribution. At the moment, taking Paddy Power as an example, their initial reaction has been to question the legality of the ABP sponsorship model. Who knows, maybe it won’t be that long before Cheltenham is looking for a new sponsor.

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