The funding crisis in horseracing

its a bent industry that leaches off other sports for funding and exposure.

Not sure why anyone under 40 would care if it went bust completely

The Horsemen's Group submission is a laugh in that it justifies a "reasonable" contribution as £130-150m from the levy, its case based on its "needs" and through international comparisons. It attacks exchanges for their role and views the world through the prism of "entitlements" which our culture has now become dominated by and the racing industry is no exception. It is amazing how even top consultants advice can be distorted through the prism of self-interest. There is not a single sentence which looks from the other end of the telescope.

http://www.britishhorseracing.com/resources/media/publications_and_reports/50th_Levy_Scheme_Submission.pdf

Good article from Greg Wood on the Guardian site. The BHA seemed to have achieved the incredible feat of even horseracing supporters believing them to be in the wrong over the levy and taking the side of the bookmakers.

http://www.guardian.co.uk/sport/blog/2010/jul/19/
levy-board-bookmakers-racing

I believe Victor Chandler's 8% figure, but it's not necessarily an indication of declining horse-racing turnover.

Twenty years ago, when he says the figure was 100%, Chandler was a rails bookmaker/punter whose off-course credit operation was a service for those clients he had cultivated on the racecourse itself.

Since then he has moved offshore, actively expanded into the Far Eastern football markets and benefited like all his competitors from an online casino.

It's entirely possible horse racing could now be 8% of his turnover, yet still provide more revenue than it did in 1990.

screaming

VC said ".. it is the only sport where revenues are in decline" so he is doing less now than before. If VC was typical - which he isn't with no LBO's - then horseracing could find itself in a Mexican standoff with bookmakers if the BHA pushes too hard. If BM's stopped taking bets on horseracing who would come off worst?

cakes/slices lol, its declining, the only question is rate

The fact the BM's are paying big money to 'racing' via media rights doesn't look good for the BHA.

Watching the ATR coverage of jump racing at Ballinrobe this evening where there are big fields and exciting (if somewhat scary) races, makes me wonder what's the difference between the funding of Irish Racing and UK Racing that makes Irish racing appear, at least to this uninformed viewer, so healthy?

Its a genuine question. I suppose if i wasn't so lazy i could rsrearch  the funding arrangements  of Irish racing for myself, but someone on here probably knows already.

The whole essence of the case presented by the Horsemens Group (racing) is that horseracing warrants a take from bookmakers as enshrined in law, that this "take" is expected to be "reasonable" i.e. to both sides, and given the increase in training costs, inflation and the cost of extra fixtures, that racing has an increased "need" for more money, and that bookmakers unfairly are continuing to deny racing a reasonable return. "Racing" believes that its product is still no. 1 and that because it can be the reason why punters are atrracted to shops in the first place, racing warrants a take not just on the racing returns but on the whole amount gambled through bookmakers. Not just in the UK but on overseas racing as well.Oh, and as for exchanges, well there are people conducting business on the exchange who are regular winners (as demonstrated by BF imposing the PC)so they should contribute to the levy. And as exchanges don't take the risk that BM's take their levy payment should be higher than 15%.

I rather like the idea that someone can take a look at someone else's profits and say they should pay more. BF is being hoisted by its own petard on this.

Racing has yet to regsister that betting on horses is on its way down, fast. Neither does it recognise that it is punters who end paying the levy through worse margins. And it can't see that exchanges peaked in the horserace betting market some time ago for all the reasons we know.

Who is my customer and what are his /her needs and wants, and how can I satisfy them ?

That is THE question. The first and most important question that any business must ask. Get the answer right, act on it, and you have a chance of succeeding.

Herein lies the problem for the horseracing industry.It doen't have a single answer.

Breeders regard owners and trainers as their customers, trainers regard owners as their customers,courses regard racegoers as their customers, bookmakers regard punters as their customers, newspapers regard readers as their customers and TV channels regard viewers as their customers.

There are some people who appear in every category whilst most if not all are in more than one category, but this is never recognised seemingly withing the industry.

The result is that intelligent people who say belong to the Horsemans Group see no further than the people who pay their bills. They have no regard for the people at the end of the line, the punters and enthusiasts, who not only provide most of the funding either directly or indirectly but who also make the atmosphere, create the interest and help to keep the media involved. You will find hardly any mention of let alone understanding of this fact within the submission the THG submitted.

Instead, they see life as an adversorial match with bookmakers from whom they need to wrench as much money as possible using the law as their most potent weapon but also using the most flimsy justifications.

Until such time that the industry can see itself through the telescope from the ultimate customers point of view it will never be able to solve its problems.

Horse Racing and Greyhound Racing used to be just about the only thing that people could bet on legally and because of that both attracted huge crowds.  If Joe Public fancied having a bet, it would probably be on a horse he had little or no knowledge about.  Now if Joe Public fancies a bet, he can bet on what colour dress the queen will be wearing at Ascot.  In fact now he is likely to have a bet on stuff that interests him and he has some knowledge of.  He might not know how good Richard Hannon's latest 2 year old is, but he thinks he has a fair idea about who is going to be relegated from the Premier League this season.

Horse Racing is going to go the way of Greyhound Racing, and who watches that now?

There are a couple of interesting claims made by THG. One is that exchanges (BF) don't contribute enough to racing. The other is that because racing is an "anchor" product to LBO,s, the levy should be related to the total sports take and racing should have a share of the additional take from other sports.

Using a back of an envelope, the anti-exchange stance doesn't hold up. The BF 2009 Review said they had a gross take (commission) of £300m, 49% of which was earned overseas which leaves c.£150m from the UK. The total gross take in the UK market is £3000m so BF have 5% of the total. Assuming that proportion holds for horseracing then BF's take on UK horseracing is 5% of £1000m = £50m. A 15% levy amounts to £7.5m. They paid £7m last year. Where's the problem? Why can't the flaw in racing's argument be seen? Of course, there is also the issue of BF players conducting a business and therefore should contribute to the levy. BF have opened the door on this through the PC so we shall see what we shall see.

As to the argument that racing is an "anchor" product and gets punters through LBO doors, so if used as a loss leader racing would be getting less than its fair share, I would say that this is a very mute point. It could just as easily be turned on its head these days with the argument that its the machines which get the punters through the doors, not racing.

There is no doubt that racing has got its tail between its teeth and it is giving itslef a good old chase.

It seems to have said to itself that becaue a big chunk of racing's income comes through the levy on bookmakers, then horseracing is in the business of providing a product to bookmakers. From that "insight" came the view that increasing the number of meetings was a "good thing" because it would increase the gross take and therefore increase the income that racing receives.

In fact,as it is now finding out, it does not follow that people will bet more because there are more meetings (especially lower grade meetings - remember banded racing?).

Racing now appears to be obsessed by the finances of gambling and bookmaking so much does it now see itself as a by-product of the gambling industry - a feed product on which bookmaking depends. This relationship has determined the strategy that racing has adopted and it overwhelms its thinking.

If racing were to concentrate instead on what the public thinks and wants it might find that the position might be reversed and it would be bookmaking adopting its strategies to fit in with the demand created by the horseracing business. A perhaps subtle distinction but one with huge ramifications for the future of racing in this country.

Also the tax change led to FOBTs being feasible. 6% turnover tax on 2.7% turnover profit roulette would have not worked. So racing had a short term boost that is being eroded as these games and other low margin products take hold.

frog2

Valid point. The GPT demonstrated its superiority in revenue raising terms over a direct tax on stakes/profit. The s/t boost has diminished for sure.

rem

Phil Bull was forever pointing out that what makes horserace betting so different was its blend of skill and chance. Reduce the game to races every 5 mins and it becomes nothing other than a spin of the roultette wheel. By giving bookmakers what they wanted racing has killed the skill element for many people. If an increasing number of punters want that, then so be it, racing doesn't have to follow suit especially as it can nver beat the machines on the issue of volume. Quality in racing terms and in betting terms should be the route. It may lead to a reduction in numbers employed, bred,meetings but it would be a better product to promote and for people to enjoy. Smaller is better. Less is more.

hammer the felons, get it as straight as possible

Agreed Aussie.

In fact this is where I would start as it should not cost as much as other changes probably would. It is horrifying to see how much of the Levy money is supposedly spent on this and yet no-one believes it is doing a damn bit of good.

Sandown was buzzing last night as it was one of those band events evenings with racing tacked on as an appetizer. I guess the crowd might have been 2 or 3 times the usual mid-week crowd for low grade racing.Cost more to get in, mind you. I can't blame the course for wanting to attract more people and in the s/t I hope it was profitable. It might help attract the younger crowd to racing (I guess it was 75% below 40 age group) and 50% below 30) but I wonder. To my eye, the pre-parade had about the same number as usual and the main paddock maybe more but not lots.

According to the Horsemen's Group report, racecourses have been having a poor time of it with profits dropping considerably. Take out the short-lived high from ATR contribution and the trend is down. The increase in meetings has cost money and these would run at a loss without the levy. So who wants them then? The prospect for courses is not good given the new age of austerity with demand expected to be down for attendances and non-racing events.

I know that everyone believes prices to be too high and food & drink over-charged but I wonder what the alternative is other than a much bigger subsidy from the levy, and that's not on with the levy due to fall. There is always the chance that low entrance fees might produce the crowds, and the Towcester model is worth trying elsewhere, but I can't help but feel that the problem is much more deep-seated than the price of entry.

The truth is that the public is losing interest in the sport both as an entertainment and as a gambling platform. There is a profound need to re-create interest amongst the public and it if this was a simple business/market issue I would say that it is in dire need of a highly creative advertising and marketing effort sustained over a long period. There is so much in racing's history, such a story to tell, such opportunities being missed. To position it as an alternative to the spin of a roulette wheel is ludicrous and self-defeating.

Racing is in a muddle. The control of the race program actually limits the number of meetings/types of race that courses can offer to the public, much to the annoyance (even detriment) of racecourses. Unrestricted scheduling by racecources would create a competition that would result in an explosion of meetings competing for money and against each other that could appear chaotic to the racing public and a nightmare for trainers and jockeys - probably resulting in a two tier system and many courses going to the wall.

If money is all racing desires then they must step into the market place - where a rude awakening awaits.

The most basic question that can be asked is: what is horse racing? Does anyone actually know the answer?

Just noticed that I used 15% instead of 10% for levy. Don't know why but it deosnt really change anything.

Point is that Racing says it needs up to £150m next year and bookmakers say £70m affordable. Big gap.

Other sports have gate receipts, TV rights, sponsorship from which they make money. Racing has in addition a levy on gambling profits. I can only assume that the Govt 50 years ago agreed to this after 250 years of Racing w/o any levy that Racing empoyewd too many people directly and indirectly to fail. Seems that the figures are areound 18,000 direct the rest indirect. It also pays tax etc. Still, the Govt has made an exception in the case of Racing and its a privilege rather than an entitlement.

Racing would be in the mire without it becasue its business model doen't wor. Costs are too high because its labour intensive and the costs of staging are high.

If horseracing was starting from scratch and presenting its business model to say Dragons Den, would it get support?

Owners want to run their horses and courses want to put on meetings because the public come to watch. Unfortunately, the economics don't work without sponsorship and without a contribution from gambling. Taking gate receipts and gambing payments (inc tv rights) together the public/bookmaking contibutes  54% of income whilst owners cover the rest.As this 54% in 2008 is up against 50% in 2002, its clear that the public/bookmaking is more than matching owners. So where is racing's beef?

To answer your question REM, I don't think that anyone now would put together a horseracing business without control over gambling income. But, at its basic, it's a visiual entertainment, an investment opportunity for speculation in bloodstock, and a gambling platform. And its not profitable. So Dragons Den would give it a miss I think.