British Racing Industry Road Show: A Case of Onwards, Upwards and Occasionally Sideways.

My wife and I were invited to the road show at Cheltenham Racecourse at the beginning of March. It was exceptionally well organised and informative, and well hosted by Lydia Hislop. I don’t think I’ve ever seen quite so many of racing’s leaders at the same venue; I chatted to Steve Harman, Chairman of the BHA, and then listened to Nick Rust (CEO of the BHA), Richard Wayman (COO, BHA), Philip Freedman (Chairman, Horsemen’s Group), Stephen Atkin (CEO, Racecourse Association), Rod Street (CEO, Great British Racing) as well as the leaders of the Professional Jockeys Association and Arena Racing Company. There was also a presentation dedicated to staffing, training and welfare issues with a panel led by the Human Resources Director of the BHA and well supported by other specialists in this field. Those who know me well will know that I was not sufficiently intimidated to refrain from asking questions, which I addressed to Messrs. Rust and Atkin.
Just to summarise the key targets that the tripartite group of the BHA, Horsemen’s Group and Racecourse Association signed up to in 2015, and which still guide the industry:

• 1,000 additional horses in training by 2020;
• Betting participation levels up 5% by 2018;
• Racecourse attendances to reach 7 million by 2020;
• £120m of extra income for the sport per annum by 2018.

At the same time there was open acknowledgement of the challenges that face British Racing, particularly:

• Sole ownership in decline;
• Shortage of skilled stable staff;
• Statutory Levy forecast to drop under £50m in 2017;
• Need to develop a constructive partnership with the British betting sector;
• Low returns to horsemen at grassroots level.

Within the various presentations there was certainly plenty of encouraging news, with good progress including:

• £30-40m potential increase in revenue to be raised by the new Levy; ABP scheme expected to raise more than £10m in extra revenue in 2016/17; 2% growth in total betting activity since 2014; ITV channel.
• £8m prize-money paid to the industry via Plus 10 bonus scheme; ownership decline halted; 505 additional horses in training since 2014; 3% growth in number of syndicates and partnerships.
• In The Paddock web site launched to promote syndicates; 2.9% growth in racecourse attendance since 2014; 12% growth in prize-money to almost £138m since 2014; new approach to the Fixture List under way; 4.7% growth in races with 8+ runners since 2014; 5.4m social media followers.

Phew! Lots of statistics there. Lydia did a show of hands on “optimism” for the industry, and very encouragingly it was skewed positively. There are many initiatives under way or in the pipeline, and there was a definite feeling of momentum for the next couple of years – hence the “onwards and upwards”.

But that doesn’t mean that all will necessarily be plain sailing. The questions I raised were all to do with “Grassroots Racing”. Very encouragingly the leaders of our sport are planning to focus much more effort and money on to the base of the racing pyramid, as they need to, because the most startling figure I heard was that the average cost recovery for those at the bottom of the sport is now only 8p in the £. When you look closely at the various graphs, the horses in training figure over the last five years has barely increased (13,716 to 14,033 in five years) while ownership has actually declined, although apparently that trend has now been halted (8,215 to 7,946 registered owners in five years).

I genuinely believe that this grassroots racing focus is both long overdue and absolutely essential to the long-term sustainability of the sport. If the grassroots owner retires or leaves the sport, the economics and competitiveness crumble. When you look at a race meeting such as the Cheltenham Festival on this week, all looks exciting with prodigious prize-money everywhere, but that is most definitely not how it seems on “normal” racedays. In fact I prefaced my question to Messrs. Rust and Atkin with a statement: “With Owners for Owners involved in 23 horses, I am an archetypal grassroots owner, enjoying 8p in the £ cost recovery, the dubious pleasures of minimum value racing when the total prize-money is only £3,500, endless hassles on badges, over-crowded lounges and nowhere to sit …. and yet I still remain optimistic.” I am just hoping that we see significant improvement over the next few years to 2020 to justify that optimism.

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“Vindication for Syndication”. How Owners for Owners Took On the Syndicate Industry and Won.

All our owners know that one of the most important guiding principles behind Owners for Owners is the determination to ensure that everything to do with owning a horse is fully transparent to them. We are passionate believers that owners must be completely aware of all aspects to do with the cost, performance and potential of the horse, and fully involved in every key decision that affects the horse and the partnership. This is covered in detail in our Partnership Principles, which we make available for anyone in the racing world to download without cost from our web site here. And, of course, a copy is given to every owner who is involved with us. Interestingly over the last couple of years I have had requests from people in other syndicates to use it, and I always allow that, with no charge whatsoever for the intellectual property. I have also circulated it to a number of leaders in the ROA and BHA.

When I first became involved in owning horses, well over a decade ago, I knew nothing at all about owning racehorses and went into it with a dangerous combination of naivety and enthusiasm. This brought me into contact with quite a number of commercial syndicates and I signed up with them without really considering any of the issues that affect most partnerships and most racehorses. I was, you might well say, “a lamb to the slaughter”. Again like many owners, I have had a wide range of experiences since: some good, but unfortunately many bad. I listed a number of the unacceptable practices found in syndication in the 15th September 2015 blog entitled As We Enter “Syndicate Season”, How Many of Them are Ripping Off the Owner?

It has been very interesting to experience the reaction of some of the bigger commercial syndicates to the stance I took. The syndicate industry had set up a group called the Racing Syndicates & Clubs Association (RSACA) and I was asked / summoned to go and see them two years ago because they had taken a strong dislike to statements made on our web site. In particular when we partner out a horse we emphasise our tremendous value for money and use phrases such as “buying into a horse with Owners for Owners reduces the cost per partner by around 50%, with huge savings merely by cutting out expensive racing managers with high administration costs, and not charging indefensible mark-ups on the initial purchase price of the horse”. You can imagine my surprise when I attended this meeting, to be told that I was “breaking the law” by making false statements. This was absolutely preposterous, and I spent a frustrating couple of hours detailing cost breakdowns for the Owners for Owners approach vs. a number of named, big syndicates. I even went to the trouble of writing up the analysis and entering into extensive correspondence with the RSACA. I failed to convince some of their leading players and wasn’t surprised when they blocked an application from OfO to join the group so that I could try to change the practices from within.

At about the same time I was invited to take part in the BHA’s Strategy for Growth pillar team on ownership. I wasn’t there to represent the syndicate industry, although again the RSACA didn’t see it that way. Throughout my work on the pillar team I argued strongly for partnerships, shared ownership and syndication to be given a much higher profile in the promotion of British racing, and helped put together the business case for an additional 1000 horses in training by 2020, many of which would be owned in these types of structures. I also felt that it would be difficult for the BHA and Great British Racing to promote syndication properly without the industry being covered more thoroughly by the rules of racing, with the promotion of best practice and greater transparency through a code of conduct and freely available templates and tools to support anyone setting up a partnership. I have carried on with that work over the last year, including taking part in an ROA-sponsored working group to create such documents.

When all this started, I definitely felt as though I was taking on the syndicate industry and experienced a number of personal attacks by those with vested interests in the status quo and a reluctance to adopt more modern syndicate practices designed properly to protect the syndicate member. So I was absolutely delighted to hear that a number of the old guard have moved on, and that the RSACA is now more aligned with the OfO approach. It is changing its name to the Racehorse Syndicates Association (RSA) and adopting a new constitution. There is a new, modern web site at www.racehorsesyndicates.org. Maybe this time round they will finally accept OfO as a member. While we definitely don’t see ourselves as running commercial syndicates (we help co-owners come together in partnerships), we would like to help shape the industry so that it encourages more participation in the magnificent sport of racehorse ownership.

All of this is definitely good news. Not everything in the syndicate industry is working well however, and I’m sure there will be clashes in the future. However I do feel that the stance I adopted has been vindicated. Furthermore Great British Racing is going to launch a promotion of shared ownership and syndication in the autumn, and I’m now far more confident than I was that new and established owners will get a much fairer deal, with closer involvement and hopefully more enjoyment. As a minimum they should be able to compare one syndicate against another in a transparent manner so that they can select a syndicate that is closely aligned with their needs. Here’s hoping that more owners come into racing this way and have a thoroughly enjoyable time.

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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.

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.

The Growth Strategy for British Racing, Part 1 of 3: “Proud History : Bright Future”

Last week I went along to the BHA presentation and discussion at Newbury Racecourse on the growth strategy for British racing. Nick Rust. CEO of the BHA, led the discussion, supported by Rod Street of Great British Racing. It was a lengthy morning in front of 150+ attendees, a number of whom it has to be said are fully paid-up members of the cynical brigade. Personally I think it is really important to give credit to the BHA for setting up these briefing sessions. The leaders of racing are extremely committed to getting everyone in the industry behind the growth strategy in a really collaborative and positive way. One of Nick’s key messages was that this must be a “self-help initiative”, since no-one is going to bail out British racing and we’re certainly heading into a difficult five years. It is the first time I have had contact with him, and you couldn’t help but be impressed by his open style.

Because of the importance of the growth strategy, I am going to cover it in some detail in this and the next two blogs. Part 1 looks at the overall context of the strategy (I didn’t detect anyone disagreeing with the BHA’s analysis); Part 2 summarises the proposed initiatives and road-map (based on the work of the pillar strategy teams launched by Steve Harman last year, which consulted with over 300 key stakeholders); and then Part 3 will be a critical appraisal of the overall approach, the areas which are relatively non-contentious, those which are much more likely to be challenged and also the areas I felt were seriously neglected.

Both presenters were determined to show that a lot of work has been under way, and that racing is a really important industry. 85,000 jobs are dependent on it; there is a £1.1bn core annual expenditure; on-shore and off-shore betting turnover is £10bn+; there were 1,429 fixtures in 2014, with 5.8m racegoers attending; prize-money was a record £130m, and we are the second-best attended sport after football. Great British Racing (admittedly with a paltry £1.2m budget per annum) has done a lot of work to raise the exposure of racing to the public; the British Champions series is a real success; 10-year sponsorship has been secured for the Derby; and an international network of ambassadors is encouraging inward investment. Not everyone at Newbury was comfortable with the “marketing jargon”, but a lot is clearly being achieved. Without any doubt the relationship with government is probably at an all-time high, as evidenced by the cross-party support for the “racing right” that was announced by the Chancellor in March. Having “one voice to government” really matters, and this is a notable success. Equally the work of the Horsemen’s Group / ROA in obtaining prize-money agreements with 56 courses has injected much-needed cash in a sustainable manner.

Unfortunately though, significant storm clouds are building on the horizon, and Nick Rust in particular made no attempt to conceal these. Horses in training, owners, betting and the traditional racecourse audience are all in decline. The return on ownership, which I have often emphasised in these blogs (and I put a question to Nick on that subject), is at a miserable 26p in the £, and is unlikely to move much. That poor return has disillusioned many owners. Not surprisingly there were 7% fewer horses in training over the last five years, and 15% fewer sole owners. Over the last ten years, there has been a persistent decline of £400m in the betting gross margin. Some racecourses are struggling with profitability, while virtually all trainers, breeders and jockeys outside the top tier are securing an inadequate return for their efforts. If that is not enough doom and gloom, the levy income may well drop to just £50m by 2017.

In effect, therefore, the growth strategy for British racing is a turnaround one. These trends must be reversed, with a clear requirement that the sport, through its own efforts and tapping new sources of funds, needs to generate at least an extra £100m over the next few years.

An explicit strategic framework was outlined, with four clear aims: improve the number attending racing and the quality of the experience; boost racehorse ownership; revitalise and innovate betting; improve media consumption of the sport in order to “make racing part of the nation’s fabric”. Based on the work in 2014, there are four growth pillars: customer growth; horse population, owning and breeding; racing and betting; ultra-high net worth individuals. In turn there are two foundation pillars: integrity and recognition; participant welfare and training. Finally there are five key enablers: government relations; the racing programme; racing’s future financial model; a community engagement strategy; and communications. The initiatives connected with these will be examined in Part 2 of this series on 1st June.

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.

Great British Racing ... but Compare Dismal Doncaster to Dynamic Dubai

I’ve been very interested in the way Racing for Change has morphed into Great British Racing. On balance I’m definitely in favour, and their web site, www.greatbritishracing.com, gives all the details of what they are trying to do, as the marketing and promotional arm of British horseracing. Encouragingly, they have been really specific about their role, which is to widen the sport’s fan base, help grow revenue streams and maintain British racing’s position internationally. They have a clear mission statement about broadening the appeal of British horseracing at every level and have mapped out seven clear aims and objectives. Not everyone will like the marketing-speak, but if they meet their goals it will be a job well done.

So in this blog I thought I’d have a look at two of the aims and objectives, in the context of the start of the Flat at Doncaster. Let’s evaluate it in terms of aim #4, “Improve the production and delivery of the raceday experience .... Give customers a reason to visit and return”; and aim #5, “Market the thrill of ownership .... Attract, reward and retain existing racehorse owners”.

I don’t think the racing authorities could have kicked off the Flat in such a dismal manner as Doncaster on Friday, 22nd March. A seven-race card with total win prize money of less than £50,000; one Class 2, one Class 3, three Class 4s and two Class 5s, one of which was a very modest race for amateur riders. All run on very testing conditions in front of a minute crowd, and absolutely no atmosphere whatsoever. No evidence here of “the thrill of ownership” or “a compelling story”, and no incentive to “widen racing’s exposure across all media platforms” as the Great British Racing web site describes it. A total damp squib, followed by fits and starts over the next few weeks. What an absolutely pathetic way to kick off the Flat, and as the marketers would say, “bookend the season”.

In comparison, what about Dubai’s World Cup Saturday? Total win prize money of a whisker under £10m, and with fabulous prize money all the way down to 6th place. Indeed the lowest place prize money in any race was £12,269, which is only £700 below the top win prize money of the Class 2 at Doncaster.

Now obviously there is no way at all that Doncaster on a wet Friday in March is going to compare with Meydan in all its pomp and glory. But surely the collective racing industry can do something to kick off our Flat season with a much greater sense of style and excitement. Some ideas:

•   Change the start date of the Flat. Put it back until after the Grand National. Build up a real
    sense of back-to-back weekends of fabulous racing.
•   Dramatically increase the prize money for the first day of the Flat, and have it on a 
    Saturday.
•   Aim for £1m of prize money, with money all the way down to 6th place.
•   Frame the races in a way that really incentivises trainers to get their horses to Doncaster 
    for this kick-off meeting.
•   Make sure that the meeting doesn’t clash with another “showcase” event.
•   Have a proper PR and social media campaign well ahead of the meeting, to build buzz 
    and excitement.
•   Actively involve top jockeys and key sporting personalities in the whole event.

One of the races I’d like to see in this card would be the start of a “Syndicate Series”, say with a value of £50,000, that is open only to horses in joint ownerships, partnerships and syndicates with at least four owners per horse. Run this series throughout the season (and have a similar one over jumps). Have prize money down to 6th. It would guarantee maximum fields and big crowds with all the co-owners and their friends.

This seems such a good idea I think I’ll even send it to Great British Racing.