Funding Crisis in Racing – Continued

I was reading this article in the Sunday Telegraph paper version and fortunately it is available online.

This year the government was forced to step in and resolve the Levy dispute between the bookmakers and racing (again). Not too unpredictably, they opted to leave the Levy charge at 10.75% on the bookmakers and stayed out of the sport’s politics about who should be paying how much.

What this does definitely mean for the Sport of Kings is dwindling income from the bookmaker chappies. The Levy is forecast to have almost halved between 2004/5 and 2017/18, so the sport is trying to survive on a shoestring budget despite putting up more fixtures. Everybody (I hope) recognises that offshoring of betting is hurting the revenues, but how do the authorities tackle that?

We all know that some of the major races of the season (under both codes) are sponsored by bookmakers. Naturally they are not doing this entirely out of benevolence and the BHA is of the view that they can find alternate corporate sponsors for many of the big events – and they may well be right about that – but they appear to be destined to cut off their nose to spite their face in hammering the bookmaker sponsorship generally.

As Fred Done of Betfred points out in this article, where are the big corporate sponsors going to come from for “Wincanton on a wet Tuesday afternoon in February”?

Given the amount of money that the sport appears to be generating in “media rights” that clearly is not feeding back to the game, is the “Authorised Betting Partners” (ABP) idea actually workable? Is the annual disagreement over who should pay what simply being reinvented under another name? Would any government want to step in and adjudicate between the parties if the rules have been rewritten?

 

At this time it is hard to make a case for bookmakers having to pay any form of levy to the sport of horseracing. I may be corrected as I have not done any research but if I am correct in thinking that bookmakers are entitled through their business to offer their services on anything they wish from Football, Horseracing, Politics and who will win I'm a celebrity, so what is their obligation to support any one of those sports or events over another? Why should horseracing not stand on it's own two feet as any other sport, if it can attract crowds and sponsorship and TV revenue like football it will be a roaring success, but if akin to crown green bowls it will be marginalised, but why does it deserve subsidisation in 2015?

Horse racing should be able to charge as football does for it's content, meaning if shops, Attheraces, Channel4 and racingUK wish to show coverage they need pay. If companies wish to sponsor racing in any guise this revenue is also a source of income, and of course if people wish to attend the live event this will provide also. But if horseracing receives a levy why should every other sport not do so?

Horseracing is too big, too many courses, too many horses and too many trainers. It has an artificial size in relation to it's popularity and needs re-sizing. If bookmakers value the all weather meeting with 50 spectators let them pay the course directly to put on the card and the courses will be able to compete by asking a price to do so, if they ask 50k they will for example be able to run 6 races at 4k each fir 24k if it costs 20k in costs then there is a profit of 6k plus minimal gate receipts and catering etc.

Economics is allowed to be circumvented in racing for some reason and I feel it will and must change.

 

And there you have it. People trying to secure their own future.

 

I was thinking the same Blue. In showjumping there is no financial crisis. Enormous prize money on offer at the big events, No betting involved. As you say, it stands on its own two feet. It would be in trouble with no sponsorship so it's down to the sport to market it in a way that attracts the sponsorship. I presume a similar argument applies to golf, tennis, formula 1 etc.

 

Exactly Ron - why should tennis or golf not receive a levy payment?

I think it is a system from a past time when bookmakers were beholden to racing for the lifeblood of their business but this really isn't the case any more and hasn't been for a while. Horse racing needs a stimulus to change and be in line with basic economics and I feel the restructuring or doing away with of the levy should provide this. I also feel it would sort out the prize money issue as well as there would be fewer horses running at fewer tracks for more money within genuinely interesting and competitive races.

I find it hard to even contemplate what happens to all these low grade horses bred for low level racing. Too much breeding, too much racing, not enough prize money because economics is not allowed to be brought to bear on the sport.

 

Same as in show jumping Blue. Show jumping exists from the grass roots (Pony Club) up to BSJ registered which ranges from age group of riders, age group of horses, classes based on amount of prize money won, major events that have to be qualified for, international competition etc etc. Riders and ponies/horses find their own level in which to compete. Shows are run on a profit making basis by the venue owners. The only exception I know of is the one, of which my wife is a Director, which is a NP organisation (ie all profits are fed back in to promote the development of Junior show jumping).

 

The reason we have so much racing though is for the bookies. So why shouldn't they help pay for it.

 

The big question is, who really holds the whip hand here? Do bookies actually need racing, or does racing need the bookies? Despite avoiding the 10.75% tax on their overseas based internet concerns, both Ladbrokes and William Hill have seen a big hit in profits of late. Ladbrokes announced a drop in before tax earnings of 57%, William hill announced a drop of 39% which didn't help their share price one bit. Those two companies along with other avoiders Betfred and Coral made voluntary payments of 4.5 million between, which according to the BHA, leaves the industry about 30 million worse off. From what I've been reading, bookies don't want to pay more because after costs are factored in, they say that all they are looking at is about a 2% profit. A lot of the thousand or so "indies" are said to operation at a loss on the racing part of their business.

When the media costs and levy payments are added to the total, estimated 9 million pound sponsorship packages the betting houses are supplying, it's easy to see why the bookies are up in arms. And when racing comes out and says that unless the sponsorship comes from an Authorised Betting Partner, (someone who pays the full levy) it want's nothing to do with that company, it runs the risk of cutting off it's nose to spite it face. If bookies stood on their digs, and refused to pay the levy at all, if they all turned their back on the sport, racing would probably be dead within months. I would suspect that the media rights and incoming funding from the levy are about the only thing keeping most of the 59 tracks from going to the wall.

I don't know why the tote didn't work, but if it had taken hold, as it has done in some other countries, racing in the UK might not be in the parlous state it finds itself in now.

 

I simply don't understand that one. From where I stand, sponsorship should be gratefully received from any reputable source. Any off shore profits should be taxed according to the source of the investment. How the tax is determined and used is up to the Government. If they wish to fund sport from Betting Tax then maybe bookmakers should be made to produce separate accounts for each sport and any handouts to the sports distributed pro rata.

I've always maintained that view Cyc. I don't know who manages the finances of horse racing. But ideally there would be a British Horse Racing Association (BHRA) that would manage and control every single aspect of horse racing (ie registration and membership fees for horses, jockeys and trainers, race venues and fixtures, prize money etc etc. They would operate a "PMU" type betting operation with all profits fed back into racing. Bookmakers would be left with all other types of betting. I would allow "PMU" type outlets in all hotels supermarkets (anywhere there were relaxing areas for people to relax with a beer/tea/wine /food etc). In other words open up betting opportunities for people who would not frequent a betting shop and/or do not want to open a betting account in order to bet on line. I think I would also have a Betting Exchange (owned by the BHRA) with all profits being fed back into the sport. There you go - problem solved. It needs a great big brush to sweep out the old and bring in the new.

 

We don't need 59 tracks in my view I would imagine 25 could share out a fixture list and prove profitable. Racing needs shrinking to match it's actual profile rather than a artificially inflated one. It would be harsh and for two years there would be difficulties but afterwards the sport that emerged would be streamlined and able to stand on it's feet.

 

When off course betting was first legalised back in 1960, bookmakers only bet on horseracing and greyhound racing, as those were the only sports that were associated with gambling. Before that, racecourses made money by charging bookmakers to stand their pitches trackside; they still do charge bookmakers for this privilege but it is no longer a monopoly. Off course betting has also resulted in a general decline in racecourse attendance – remember those old pictures of Epsom on Derby Day with six figure crowds on the Downs?

The Levy was introduced to ensure that some of the money generated from gambling was returned to the sport. The theory was that this would be agreed to by both sides and for most of the last fifty five years agreement has been reached; however, nowadays bookmakers bet on many other sports, notably football for which the bookmakers have to pay the FA an annual fee for use of the copyrighted fixture list.

Many of us have been saying this for years. The problem is that nobody wants to countenance the loss of jobs and livelihoods that would result from downsizing, even if much of that employment comes with subsistence salaries.

 

No disrespect to Showjumping as a sport, Ron, but it is hardly the sport of the working man. Certainly the image that it has in Britain is of a sport for the well-heeled and wealthy country set as the ordinary man cannot really keep a couple of ponies in the garden shed for the kids to school over obstacles on the front lawn.

 

It's not cheap owning racehorse QM

 

Yes. Without the bookies, racing would dwindle to the state of racing in France, which, although very well funded by their PMU monopoly, is desperately poorly attended. They have nearly five times as many courses as Britain but most of the provincial courses would not be economically viable without the French dirigisme.

Bookmakers’ profits have been hit markedly in the last few years by too many punter friendly results in the big events (not just horseracing but other sports) plus the on-going competition for online and mobile customers that has seen many players offering increasingly unprofitable enticements to gain market share.

The bookmakers cannot refuse to pay the Levy. If no agreement is reached between the parties, as last year, then the matter is decided by a government minister. As racing still represents the majority of bookmakers’ business, it would be suicidal to both parties to end their symbiotic relationship. The parlous state of many of our smaller racecourses has seen a couple shut in the last few years and could well see others follow if they do not find other ways to generate revenue on the 300-plus days a year when they have no race fixtures.

We do have a Tote here, which used to be run by the government and all the profits went straight to racing. It never had a monopoly like the State-run PMU does in France because when organised horseracing first started, the owners of the horses wagered on the races and that was where bookmaking originated.

Once off course bookmaking was legalised, the chances of a gambling monopoly for the sport totally disappeared.

 

Let me help out with a bit of disambiguation here: the Horseracing Levy and Betting Tax are two separate entities.

Bookmakers only have to pay the Levy on profits they make from horserace wagering. Any profit they make on football, tennis or any other event generates no Levy funds. When the big bookmakers issue profit warnings or their accounts register falls in profits, this is bad news for racing as it means less Levy money.

Betting Tax is a tax levied by the government on bookmakers’ turnover on all betting activities. This was the original reason why so many bookmakers set up their online and mobile wagering operations offshore. As betting tax is charged on turnover, a bookmaker has to pay it irrespective of the profit/loss his business makes. Because this is a government tax (just like VAT or income tax), the money goes on public spending and nothing goes to the sources of the wagering.

 

Just displaying my ignorance (again) QM . Thanks for the clarification

 

Bookmakers have never had it so bad in my opinion which is why they increasingly rely on gaming machines and the like. The punter has more information, more resources such as replays, no betting tax and best odds guaranteed even though all bookies have to price up each race early morning to compete.

When I first came to the sport in 1987 you had a 10% tax on all bets or all winnings (your choice), the only comprehensive resource was this huge form book which hurt your arms just holding, there was no such things as a replay resource and you could take a price on about 3 races a day early morning as the rest opened first show about 20 minutes before the off. The only thing they have in their favour is the ability to monitor punters and close accounts more easily to try and control winning clients.

Lets have the bookies free to run their business and the racecourse run as businesses also and we will get a stronger industry.

Most courses to double as both flat and jumps where practical - 25 strong courses with a good book of fixtures attracting sponsorship from anyone who wishes to pay including bookmakers. Just as Sky pay to show football let racing sell it's rights to be shown on tv, shops and pubs etc. Let them use all the tools open to them to attract and build live attendance. Job done.

 

You and I started in betting shops at around the same time, in the era before pictures from every meeting. Back then it was just the normal TV racing (BBC and Channel 4) and ‘the blower’ commentaries on everything else until SIS was first introduced. Betting tax still exists but it is charged on bookmakers’ turnover instead of the punter deciding whether to pay it up front or from his winnings (if he had any). There was the Sporting Life in the 1980s if you had half the morning spare to wade through a broadsheet assessing the form; and the writing of the likes of Geoff Lester was always good quality.

Racing already does sell the TV rights to the likes of At The Races, Racing UK, SIS, and Channel 4, from which it does make quite a good revenue – in fact more money than it currently gets from the Levy. Obviously it would be fanciful to expect media rights to make the billions that football pulls in because most of our horseracing program does not have global appeal: they will pay to watch Man United v Liverpool in Singapore but not a wet Wednesday at Fakenham.