Announcement by the Government on the Racing Right – Huge Milestone for British Racing

By the time this blog is posted, I’ll be down at Cheltenham Racecourse with friends and owners cheering on the start of National Hunt’s Olympics. For the occasional visitor to Prestbury Park, everything looks rosy in the racing village – huge crowds, fabulous facilities, majestic horses, big prize-money and enormous betting turnover, with this festival alone generating over £350m. What could possibly be wrong in British racing?

Unfortunately over the last couple of years it has become increasingly apparent that the levy system set up in 1961 is no longer fit for purpose, particularly with the migration of betting operators offshore, and with the accelerating use of remote channels the levy has halved. Without legislative change, racing faced a funding crisis, which is why the “Authorised Betting Partner” arrangement was put forward to secure voluntary payments from bookmakers of 7-8% on their online profits, in exchange for access to racing sponsorship, shaping of the fixture list and preferential media rights for certain services.

In my last blog I mentioned that I had been to the BHA’s forum at Newbury on 1st March, and that I had intended to summarise that today. However only two days later, on 3rd March, the Culture Secretary John Whittingdale announced to Parliament that new funding arrangements would be created to stop this levy leakage and that all bets placed on British racing by any British-based customer, whether in a retail betting shop or remotely, would come into the scope of proposed legislative changes to be fast-tracked through the House of Commons so that hopefully a new system will be in place by April 2017. The full endorsement by the Government of the so-called Racing Right is probably the most important proposal for British racing in 50 years, and is a tremendous enabler of the BHA’s Strategy for Growth developed by Steve Harman, Chairman of the BHA and Nick Rust, the Chief Executive, together with the active support of all the major stakeholders in British racing.

Racing’s leaders are to be thoroughly commended for this development, and it is most encouraging that the relationship with government is so strong and that the tripartite structure of the BHA, the Racecourse Association and the Horsemen’s Group has provided real clarity and cohesion throughout a turbulent time with a number of the traditional bookmakers such as Betfred, Ladbrokes, Coral and William Hill. Indeed I think this is the first Cheltenham Festival since the early 1980s where the Gold Cup is not being sponsored by a bookmaker (on Friday it will be Timico), and Ladbrokes are no longer associated with the World Hurdle (which goes to Ryanair). Indeed it is pretty symptomatic of the behaviour of some of these “traditional” (I’m actually tempted to use a much more pejorative description) operators that their reaction remains negative. As an indicator of that, Ladbrokes have had a right old strop and are refusing to open their betting offices at Cheltenham.

I’ll do a more detailed summary of the Newbury forum in the next blog. You may remember from previous communications from me that the BHA’s strategy is all about creating the right conditions for growth for the industry and particularly: seeking £120m of extra income for the sport by 2020; 1,000 additional horses in training by 2020; betting participation up by 5% by 2018; and racecourse attendance up to 7m by 2020. Clearly there are many interdependent factors in play to achieve these goals, but without any doubt at all, replacing the levy with a new funding platform backed by legislation is probably the single most important lever for growth. Without that, there would be a foreboding sense of racing being well and truly in decline, purely as a result of woefully insufficient income to fund the growth of the whole sport. Putting that in context, and quoting from the Newbury presentation, we’re currently 38th in the global league table of owner prize-money, and if we are ever to escape that lamentable position it is absolutely vital that there is a much greater and sustainable revenue pipeline.

Since I started doing this blog four years ago, it is the first time that I have felt that racing has finally turned a corner and that the sport is genuinely beginning to arrest the decline that could easily have become terminal. Hats off to everyone involved in this extremely significant and encouraging step forward. Doubtless there will be lots of detail to sort out, but the government’s backing for the racing right is of huge importance.

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Going Beyond the Scoop 6 – Why there should be more innovation in betting, ideally with a racing-owned betting operator

I think most of us who like a bet were delighted when the Scoop 6 was finally won, and the great eight carried off their £1.3m each – partly because it was costing a fortune every week to take part, in a vain attempt to win it, and partly because the races being selected were becoming increasingly impossible to assess. Indeed, you felt that Betfred were going out of their way to make it difficult. This was also not helped by some of the races being absent from terrestrial TV. A cynic would also argue that the cut to Betfred from organising the Scoop 6 had become a nice little earner …… or even a nice large earner?

Peter Jones, when he was boss of the Tote, invented the bet over a decade ago, and when it began it always included the best races of the day. That is definitely not the case any more, and it is debatable whether this is now a horse-racing bet or just a lottery bet. However it was designed to produce a big pool with a huge pay-out, and they certainly achieved that in May. The Scoop 6 has been a great success, and notwithstanding the reservations above, it is undoubtedly a good example of betting innovation. But do you think bookmakers generally are innovative, or that their business models and offerings are somewhat tired and old-fashioned?

Personally, I feel that the whole sector could do with a radical shake-up – both the bookmakers and the regulators in the Gambling Commission. I’ve discussed this with a number of our keen gambling owners, and one in particular has argued that their mission, “To ensure gambling is conducted fairly and openly”, is no longer being achieved. The largest gamblers now find that they can only bet if they lose; they are closed down if they win; and at best their bets are arbitrarily reduced or refused at the bookmaker’s discretion. And the sector lacks the necessary competition and creative leadership to drive positive changes.

So if you look at it from an owner perspective – as the largest stakeholder in racing, with an annual contribution between £0.5 and £0.75 billion on keep, training fees and bloodstock – would the sport gain if racing had its own betting operator? Many felt that was the case last time round, with the Tote privatisation, and an attempt was made (albeit late in the day) to try and put together a consortium of high net worth owners to take it over. When that failed, a massive opportunity was lost. In a couple of years’ time Betfred’s pool betting licence expires, and hopefully second time around the racing industry rises more forcefully to the challenge and takes on the traditional bookmakers with a completely different commercial model and purpose: “To become the most innovative betting operator in global racing: run by racing, for racing, with a highly compelling and innovative range of racing-specific bets that appeal to all gamblers both in the UK and worldwide”.

I know that Rachael Hood, the President of the ROA and wife of John Gosden, is already raising this issue and Owners for Owners are very much in support of it. Setting up a fixed-odds bookmaker that deals only with racing and which embraces the most modern technological and social media platforms could underpin the whole of racing’s finances and surely is worth examining closely from the standpoint of both the business case and the enablers to achieve it. To be successful, planning has to start soon.

In the meantime, the sport would probably gain from a forensic review of the practices surrounding how the Tote is currently being run. There is a fair bit of disquiet about manipulation of the pools and the take-out rates compared to the initial operating contract. The feeling is that it is just being run as a cash cow which, as ever, is hardly a stimulus to innovation.

This of course is not to say that there are no other major innovations possible. If the racing industry had a significant commercial profile in gambling, it could open up all sorts of collaborative ventures with both UK racecourses (such as leveraging independent racecourse betting, as at Chester) and also many different third parties in other territories around the world. Indeed, there may well be high net worth individuals, particularly in Asia, who could be very attracted by both the commercial opportunity and its centrality to great British racing – which by a considerable margin has the highest integrity in the world. Leaders, please step forward.

I am always interested to hear your views so please do leave a comment. If you can't see the comment box at the bottom of this post then navigate to the post using the right hand navigation or click here > and scroll to the bottom of the page. Look forward to hearing your views. Thanks very much for sharing them.