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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Curmudgeons, Grotesques …. and the Economics of Racing

Well the middle of this month has been very enjoyable, particularly with a fantastic retirement bash at Windsor Racecourse on Monday. I’ve stepped down from the chairmanship role in my consultancy, Future Purchasing, and was delighted when colleagues organised a celebration (I think for my achievements, rather than pleasure that I was leaving!!) with much merriment, drinks and dinner in a large box in the Royal Grandstand. Even the speeches weren’t too boring. There were a couple of jokes about Champion spark-plugs and melons that certainly wouldn’t pass the spam filters. Even managed to back a few winners. Jack and I staggered off the course loaded down with presents so there was some tremendous generosity. We both resolved to retire every year from now on!

This sort of party definitely illustrates how racecourses can make money and provide lots of entertainment for non-racegoers. The vast majority of our guests had never stepped on to a racecourse before, and wanted to know whether our sport was always like this – fine food, decent wine, private bars, panoramic view of the racecourse and river, etc. It was hard not to smile wryly, thinking about what it will be like as we go through the winter enjoying the facilities at some of the minor jumps tracks, or even more wryly when considering the very dubious delights of the all-weather.

My last blog on owners being treated as “cash cows” triggered much discussion about the crazy economics of racing. Indeed, over a few pints of Donningtons down here in the Cotswolds the Curmudgeon and I developed a whole economic model around ROO (Return on Ownership). Those of you in the business world know that ROCE (Return on Capital Employed) is a very important financial metric, and we believe ROO is the same for racing. At the moment the ROO is about 20%, if you’re lucky. In other words, for every pound that an owner puts into racing, they get about 20p back. This puts us right at the bottom of the league table. In many countries, such as Dubai, Hong Kong, Japan and Australia, the return is massively better. The key question is what to do about it. Now that I’m officially retired and have a bit more time, I’m intending to try to get my mind around that, and also do some digging and delving into the facts and data of actual returns. I’d like to see the BHA and the ROA set a formal target of, say, 50% ROO to be achieved within five years.

When a friend of ours, Ruud van Ruitenbeek, and his wife Di were staying with us a week or two ago, we went to visit the historic church of St. Peter’s in Winchcombe, built in 1468. Right around the sides of the church are gruesome depictions of people, animals and mythical beasts. I’d always thought these were called gargoyles, but Ruud discovered that “gargoyle” comes from the French, gargouiller, which means “to gurgle”, and therefore refers to a water spout. Since the ones at Winchcombe don’t have any water coming out of their mouths, they are apparently called grotesques. The one that I have put into this blog definitely illustrates the likely reaction of anyone who tries to understand the crazy economics of our sport. It equally depicts my reaction to the disgraceful way in which bookmakers are milking our industry and failing to reinvest their profits so as to make an adequate contribution. This is another area that I intend to investigate. I’m going to start by seeking clarity on the BHA’s strategy – is the plan to keep on appeasing the bookies by allowing more and more low-grade racing, or will they be facilitating fundamental levy reform, and if so, how?

Off to Yorkshire now to see the horses at Karl and Elaine Burke’s. Bound to meet a few curmudgeons up at Middleham. I’ll keep you posted.

P.S. If you’d like to see any of Ruud’s photos, do have a look at his web site, www.ruudseye.com - they are excellent. You can even buy his book of photos online.