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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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.

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The Tesco Approach: “Every Little Helps” – But will extending prize-money down to 6th increase frequency of running horses, and as a result, field sizes?

We received a letter recently from Ruth Quinn, Director of Racing at the BHA, informing Owners for Owners that as part of the agreement on the 53rd levy scheme, the four largest retail bookmakers (William Hill, Ladbrokes, Coral and Betfred) have made additional voluntary contributions of £4.5m on top of their statutory levy payments for 2014/15. As a result, a total of £5m (the extra £0.5m coming from the Levy Board) is being injected into extending prize-money from 1st December 2014.

Basically, in some Class 2 to Class 6 races, place-money will go down to either 6th or 8th, with payments of between £200 and £400 paid on top of existing prize-money. This will ensure, in eligible races, that every horse finishing down to 8th in a Class 2 or 6th in other classes down to Class 6 will receive at least £400 or £200 in prize-money respectively.

Why is this being done? Initially, I thought it was purely for the obvious reason of providing additional prize-money for owners, and particularly providing additional reward for placed horses. As readers of the blog will know, I’ve advocated for some time that there should be much greater focus on placed horses, both in terms of prize-money and the whole owner experience, with racecourses being encouraged to acknowledge the performance of these horses even though they haven’t won or even come in the first three or four.

My second initial reaction was that while really appreciating the additional money, it is still unlikely in many instances to cover the costs of sending a horse to the racecourse. In another blog I mentioned a horse I was involved in, who ran really well at Wincanton in a 17-runner handicap to finish 4th, but where the prize-money was still only £238.50. When you consider the NH jockey fee of £161, riders’ insurance £21, entry fee of say £50, transport of c. £300, lads’ expenses of £50, racing plates at £70 plus my own costs of driving to the course and back of £50, then the total is more like £700. While enjoying the day out at Wincanton (which is one of my favourite tracks), the returns are clearly out of kilter with the costs ….. even with an additional £300 if the race was eligible for the new extension in prize-money (which it wasn’t).

So I decided to contact Ruth Quinn to seek her views. Interestingly from her replies to me it is now clear that the main logic of the extension to prize-money is actually all about trying to impact owner behaviour so that horses are run more frequently. Increasing the number of runs per horse could help significantly improve the overall competitiveness of British racing, boost field sizes and betting turnover etc.

Paul Bittar, former CEO of the BHA, was a strong advocate of owners running horses more frequently. Personally I think this is a complete non-starter, as do our trainers. Surely we all run our horses as often as makes sense for the horse, taking into account their wellbeing, suitability of going, race targets etc. Would I really encourage my trainers to run a horse more frequently, purely because there is a possibility of picking up an extra £200-400 of place-money – and equally, would they advocate the same?

Notwithstanding the point raised above that even if I did run I’d be losing money, but the horse would be unable to run for at least another three weeks. Let’s say the horse ran well and came 4th in an eligible class 4, I’m still only going to win a maximum of about £600, but with the cost of those three weeks’ training fees and all the running costs coming to, say, £1,500, I end up in an even worse position being £900 out of pocket.

If anyone can see a flaw in my logic, do please let me know! If there isn’t such a flaw, then why on earth do the racing authorities believe that owner behaviour can be influenced by such paltry amounts of money?

I’m going to be very interested indeed to see how the scheme works, and whether it does have any behavioural impact. As you can see from this note, I remain deeply sceptical and, I have to say, rather perturbed that there appears to be such a huge gap in thinking and practicalities between trainers / owners and those who want (quite rightly) to improve the competitiveness of British racing. Surely this scheme can’t be part of the solution ….. even though I always welcome every little increase in prize-money.

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.