“Icebergs Ahoy!”, but are the Officers on the Bridge of the Titanic Looking Through the Wrong End of the Telescope? More Views on the Ownership Strategy.

Just back from a super, relaxing holiday in the relatively isolated north-west of Tenerife. If you like golf, do go and stay at the Hacienda del Conde and play golf at the Seve Ballesteros course at Buenavista. While there, I read a bit about the island and I certainly wasn’t aware that Horatio Nelson didn’t just lose a sea battle off Santa Cruz, but it is also where he lost his arm. Apparently it was a battle he should never have lost – it was all down to complacency, not marshalling his resources properly, incomplete information and the wrong analysis of the situation. A bit like British racing, as you’ll see in this blog.

I kept my eye on a number of racing topics (I know, I should get out on the golf course more), and once again the strategic snail of the ownership strategy caught my attention, largely through an article in the Racing Post written by Jonathan Harding. For over a year I’ve been frustrated about the lack of clarity and progress on this strategy even though, apparently, the budget for it is now £1.66m, with the Levy Board alone contributing £790,000. The only way to gauge whether we’re getting value for money from this substantial investment will be the outputs from the study, and its impact on the attraction of new owners into the sport while retaining current ones. A coherent strategic plan still hasn’t been issued, and it does look as though the ROA is just tinkering around with the Titanic’s deckchairs. Where is the over-arching strategic vision? What are the major strategic priorities being addressed? What are the strategic goals and specific objectives that can be measured over a 1 / 3 / 5 / 10-year time horizon? What are the detailed and targeted initiatives to be deployed, and what are the resource implications for the industry? None of these questions have been properly addressed. Apparently there will be a communication exercise in the autumn and nothing would give me greater pleasure than putting ticks in all the boxes, and seeing the Titanic steer away from the icebergs unscathed.

Most worryingly, the Racing Post article stated that the strategy is all about “evolution not revolution”. The ROA has prioritised retaining owners over actively recruiting them, and that sort of one-eyed strategy appears to be gross neglect. Also, they have chosen to treat prize-money as a separate issue, and again that is flabbergasting. Just keep moving those deckchairs around …..

It’s not as though the icebergs aren’t big, prominent, ugly and frightening:

• Sole owners are in significant decline, down from around 7,000 to 5,000 in the last ten years.
• There are now more owners aged over 80 than under 40.
• The returns to owners are dreadful, with 73% of those owners receiving less than £2,500 per year, due to both the quantum of prize-money and its allocation. It is far too concentrated at the top tier of the sport, which benefits hugely anyway from ongoing stud value.
• The betting industry is hurting. For example, William Hill’s profits are down 33% with 700 betting shops likely to close by the end of the year.
• Racecourses are increasingly forecasting “significant risk of falling income” and almost inevitably reduced prize-money as a result. Newbury, which already has woeful prize-money for the quality of its racing, issued a note to that effect.
• While Logician put in a superb performance in the St Leger (for a £700,000 pot, the second-most valuable British Classic after the Derby), throughout the festival there were many under-subscribed races, which wasn’t surprising in view of the poor prize-money. Day 1 had a meagre £149k and the last two races on Leger day were 0-110 handicaps with prize-money between £12,450 and £15,562, whereas similar races at the York Ebor festival were worth £70k. Owners and trainers are voting with their feet / hooves. Those two races at Doncaster had three and two runners respectively.

And yet the ownership strategy isn’t examining initiatives to bring new owners into the game, nor to boost the prize-money to sustain it. This beggars belief.

Meanwhile, of course, it is very different elsewhere in the world. The new Saudi Cup, to be staged on 29th February 2020 at the King Abdulaziz Racetrack in Riyadh will be the richest ever race, at US$20m. Even the undercard has US$7m of prize-money. The Times has a view that we are now going to see a “high-rollers’ triple crown”, with trainers targeting this race along with the Pegasus in the US, worth £7.4m, and the Dubai World Cup at £9.9m.

Oh, to be a high-roller operating at the platinum end of racing, whether globally or in the UK. For them, life is rich and rosy, and indeed the ROA’s magazine, Thoroughbred Owner & Breeder, reinforces that view with all the top trainers, horses breeders and owners being feted and now has pages of over-priced “fashion” drivel as well. It would be a nice magazine to read in the lounges of the Titanic, maybe alongside a copy of the ROA’s ownership strategy, when it finally makes its appearance.

Icebergs ahoy! Do we have any lifeboats?

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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.

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.