Yes, It’s Resolutions Season Again for British Racing – Time for the Sport to Kick On

I know it’s a bit hackneyed but it always seems appropriate to reflect on the past year and focus on New Year’s resolutions. Mine are easy: weight down, alcohol down, exercise up. Job done then (same every year).

On the horse front, I already know that 2017 is going to see Owners for Owners involved with more horses either in training or in the pipeline than we’ve ever had, at 23. We’ve come a tremendous way in less than five years and it just shows the latent demand that exists for owners to come into the sport or increase their involvement if the whole experience is made easy and enjoyable. I’m not blowing our trumpet here, because that’s what the vast majority of our owners tell us. Indeed the other day I worked out that if you add up all the horses that our owners and friends are now associated with, it is well over 100, whereas it was fewer than 10 in 2012. Just shows what can be done.

So what is the collective view of Owners for Owners on ten resolutions for British racing? The top three are critical and the other seven are enablers.

1. Transform the governance of integrity. A huge issue, but from Mahmood al-Zarooni in April 2013 to the resolution of the Jim Best scandal in December 2016, British racing has seriously damaged its credibility and reputation. This isn’t the blog to dig into the detail of the problem, but we’re pointing the finger at the three Cs: complacency, cronyism and corruption. The whole of the supply chain of racing, from breeding to training and ownership to sales, needs to come under the searchlight with substantial tightening of governance and far greater transparency and scrutiny. Our real fear is that the first C on that list – complacency – will inhibit the significant changes now required.
2. Secure far more funds for racing. Hopefully in April the new post-Levy arrangements will come into force with full Government support, and that should be a huge step forward. But it remains to be seen whether the hostilities with major bookmakers can be properly overcome and equally whether racecourses will share far more of their income with owners and the sport. Our view is that at least £50m of additional funding needs to be captured and reinvested. Maybe more.
3. More owners and a much better experience. Without more owners coming in to the game, increasing their involvement and being retained by the sport, then racing’s economics are fundamentally impaired. There are two dynamics that we’ll be examining in more detail in 2017 blogs: firstly whether there is a fundamental decline taking place at the grass roots ownership level, and secondly whether foal over-production is a real issue or not. If there were more owners buying more young horses, there wouldn’t be a problem. Indeed globally it looks as though stallions, mares and foals have declined by up to 50% since 2007. The real market dynamic looks to be lack of demand rather than over-supply.
4. Bridge the gap between the top echelons and the grass roots. A resounding view of all our owners is that money needs to flow into the grass roots of racing rather than continually pump-priming the top end of the sport. The day I win the Derby or the Cheltenham Gold Cup, I really don’t believe prize-money will be bothering me. On the other hand, running in £5,000 total prize-money novice hurdles at so-called good tracks is insulting. Racecourses are taking the proverbial in some of this.
5. Active promotion of co-ownership in all its forms. 50% or more of all owners start off in some form of partnership or syndicate. The sport needs to make it even easier to come into the game through this route. As always, simplify the administration, actively promote and market syndicates and reinforce best practice and good standards through proper guidelines and codes of practice.
6. Boost business skills of trainers. We believe that trainers are the number one “gatekeepers” of the sport. The initial owner contact with an enthusiastic and skilled trainer who combines being a horseman with being a businessman has the greatest impact on ownership. Alas the vast majority of trainers are borderline insolvent and sadly lacking in the necessary marketing, communication, promotion and finance skills. In conventional business there would be a huge emphasis on coaching and professional development. It is a sign of the problem that even raising this would probably lead to resistance from most trainers.
7. Smarten up racecourses. With a few very obvious exceptions, many racecourses are just tatty from an owner experience standpoint. Signage is poor, car parks muddy, owner and trainer rooms scruffy and so on. Each racecourse should appoint a non-executive director to scrutinise the whole of their owner experience, and in particular, look at it from the perspective that the average age of owners is almost 60.
8. Build more partnerships. Racing, trainers and syndicates try to do far too much on their own. There is immense goodwill for the sport, which is barely tapped into. There are a huge number of natural alliances between racing, other sports, the hospitality industry, retailers etc. I am going to do some work in this area in 2017 for one of our trainers, and have been itching to do so for quite a time.
9. Teach the authorities the basics of change management. There have been two pathetic failures of “process change” in 2016, with Weatherbys Bank and the RCA / ROA pass card. This is self-inflicted damage. We have even heard of owners saying that rather than face any more hassle they will quit the sport, which is completely unacceptable. Before launching any more systems, will the authorities please properly test them, with user groups of owners. Non-owning, technology-savvy youngsters designing change for low-tech 60-something owners is a recipe for disaster.
10. A better year for Owners for Owners horses. While we have had some terrific times, on and off the track, this year will always be remembered for the sad demise of The Fugitive at the beginning of the year and Lord Ben Stack at the end of it. Huge sadness, which is taking some time to get over. May all our horses win in 2017, but more importantly, still be with us at the end of the year.

That’s it for now. Hope the hangovers aren’t too bad, and have a great year. 

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 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.

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.

Owners - #1 Stakeholders, #1 Economic Contributors …. But Well Last in the Economics of the Sport

I love this time of the year. Two year olds are coming out on to the track and showing us what they can do for next year; all the NH owners’ days are under way with the dreams of future Cheltenham and Aintree glories well and truly alive; and the champions’ days in Ireland, at Ascot, Longchamps and the Breeder’s Cup are still ahead of us. Lots to look forward to, and it is magnificent being an owner. Alas, the moose on the table (as one of my clients always used to say) is the lamentable return to most owners for their investment. In the last blog I was thinking of calling this one “Milking the 8,215 cash cows (owners) dry”. However, I’ve decided to stay with the facts as summarised in the Deloittes study, Economic Impact of British Racing 2013. But here is the key paragraph in the report for us:

“Owners are the single biggest contributors to the funding of British racing, both through their purchase of horses from breeders (£189m being breeders’ expenditure and commission paid on horse purchases) and ongoing training and racing expenditure paid to trainers, jockeys and supporting industries (£369m). After receipts of prize money and sponsorship of £85m, owners are estimated to have made a net injection of over £470m in 2012 (compared to £465m in 2008).”

So let’s dig into these figures as well as others in the report and highlight the key statistics and implications (bearing in mind that the key figures relate to 2012).

• As owners, we’re putting the thick end of half a billion pounds a year into the sport. No-one else puts anywhere near that amount of money into the game. We are the #1 economic contributor, by a considerable margin. 
• Prize money over the past decade has remained within a relatively narrow band between £94m and £110m. In 2012, it was down at £78m (although encouragingly it is rising through 2013). For every £100 an owner spent on training and racing their horse, they recovered on average £21. 
• Cumulative inflation over the same decade has been 34%, so as an absolute minimum prize money should have gone up over that period by at least a third. 
• Average costs per day for each horse in training rose from £54 to £62 over the four-year period to 2012.
• Gross cost per run was £4,000 (reduced by 20% when prize money is taken into account). This is far more than virtually every other racing nation because of the low prize money in the UK. 
• The expanding fixture list (particularly with the dross of A/W racing) has resulted in average prize money per race declining by 14% since 2003 (but of course has led to a rise in betting turnover). 
• There were 24,000 horses in training during 2012. 17,500 appeared on the track. So over a quarter of all horses didn’t appear, and obviously made no contribution whatsoever for their owners. Of those that did appear, 6,500 won at least one race, so – big intake of breath – only a quarter of horses end up winning anything. 
• Between 2008 and 2012, there was an 11% fall in the number of horses in training, and a 14% fall in the number of owners. 
• 60% of all owners are involved in joint ownership in order to share the costs. 
• The final statistic (from the ROA) is that the upper end of the ownership scale has been the most resilient. Owners with three or more horses are down 7%, whereas those with an interest in only one horse are down 16%.

Phew! At this point it’s probably best either to lie down with a large block of ice on your head, or alternatively bang said head against a brick wall. These figures just do not make any sense whatsoever. Having said that, I have no intention of decreasing my involvement, despite the economic lunacy of being an owner.

Graham Lee came out with a very interesting comment about his switch from NH to the Flat: “The jumps is about fun, but the Flat is about business.” I was talking to one of our owners and he both agreed with the statement while also thinking that it was ludicrous. Owners are being exploited because there is a view that they will carry on supporting the industry regardless because of their love for the game.

Well, my challenge to everyone in racing is let’s start looking at the whole game as a business first, and dramatically improve the total economics of the sport. That means that as owners, if we are the #1 contributor, there must be a fundamental shift in the returns. We are the #1 stakeholder, and if the economics don’t change, the whole sport is on extremely rocky foundations.