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The funding crisis in horseracing
The funding crisis in horseracing
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Sorry ! I dumped it in from Word, my spelling is terrable.
(thats why im an accountant)  |
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tuckyboy
I thank you for the compliment regarding the thread and I am pleased that so many of the contrubutors to it, such as yourself, are providing well-thought through insights. Responding to your points. First, the issue of integrity (or lack of!) within racing. This is something that depends on how individuals perceive it and how their behaviour is influenced as a result. The perception of skulduggery is clearly high judging by the number of people mentioning the issue, and certainly since the inception of exchanges, the number of bent races is thought to be higher. Whether this is as a result of more light being thrown on to it through the audit trails,or more bent races, I don't know. Like crime in general, the figures can be influenced by definitions and procedures for recording crime. The general perception that racing is bent has probably been with us since the sport was invented 250 years ago and all one can say is that the growth and popularity of the sport for the first 200 of those years was there for all to see. I well remember people saying that in the pre-stalls days the starter would apparently say "tryers to the front, non-triers to the rear." True or not, I don't know but the view was prevalent. Sir Gordon Richards was supposedly adept at getting a fast break. Was he "allowed" to do that by the other jocks? Anyway, all the reporting in recent years cannot be seen as a positive but in some perverse way others may see it differently. With the recent news re.cricket, and tennis, F1 and football all getting a bad press and against the background of MP's expenses fiddling, bankers bonuses and near-criminal use of borrowed funds, the Prince Andrew "sale" of his property to a dubious East European etc,etc, it might just be that its all part of a general fall in moral standards. I agree totally with your second point regarding the change in society. I think that the introduction of the lottery in 1994 changed the general public's opportunity for betting enormously. They could now win large amounts for very little without having to think too much about it.It certainly changed the business prospects of football pools. And for many years, betting on horses was the only other real opportunity that the small bettor had. The intoduction of fixed odds betting on a multitude of sports must have had a huge effect, one that was accelerated with the introduction of the exchanges. The intoduction of the FOBT's was another factor.Perhaps, most importantly, the sport itself lost its place in the public's eye. Other sports have grown tremendously in relative popularity and I don't see how this can be reversed. Rob Hughes, in his last Chairman's Report for the Levy Board, said that racing's share of betting had dropped from over 60% share of gambling to 25% in his time and there is no sign that this is continuing to go South. Your point about TV coverage is well made. The control of pictures should give the sport (or at least the courses) an important lever over the control of income from bookmakers (or should I say from punters VIA bookmakers). The loss of terrestrial coverage (BBC especially) is a huge loss not really compensated for by the development of Racing UK and ATR.Has Racing got the necessary gonads to use this lever? |
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Have a look at the following extract from a table taken from the HG submission to the Levy Board. It details the financial contribution to British racing between 2002 and 2008. Figs in £M.
2002 % 2008 % growth betting industry 120 (19) 160 (15) 40 Racing consumers 197 (31) 404 (39) 207 owners training costs-net 125 (20) 275 (26) 150 owners-breeding costs 191 (30) 207 (20) 16 Total 633 (100) 1046 (100) 413 The first and "most striking" comment made by HG is that the split of expenditure (shows) a very substantial increase in contribution to British Racing of owners." The rest of the submission goes on to justify why racing "needs2 and "deserves" a higher contribution. Now, I don't know if that observation is what first strikes you, but it was not mine. The return from betting "levy, pricures,sponsorship)should be designated "FROM CUSTOMERS VIA BOOKMAKERS" because ultimately thats where BM's money comes from. Out of money lost by punters. Add that together with "Racing consumers" (admissions, course expenditure) and you will see that consumers accounted for 50% of funds in 2002 to 54% in 2008, an increase of £247M. Owners share of funds dropped from 50% to 46%. The next thing to strike me is the huge rise in NET TRAINING COSTS which have risen by an average 14% p.a way in front of anything else. Now, these figures are NET so the actual costs of training should have prizemoney added back. This would change the figs to something like £165M in 2002 to £331M in 2008. So, trainng costs have more than DOUBLED in 6 years. If I was looking for a starting point to question the business model I would have to say that the rise in costs by over 100% is rather extravagent even allowing for the fact that numbers and meetings have increased. Is such a rise necessary to give us the quality racing which we want? No wonder the trainer want more prizemoney. A cut in the meeting numbers should be followed by a decrease in training costs. Quite a few trainers would have to go out of business, others might have to merge. Welcome to the world that the rest of us have to live in. |
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As a matter of interest
When (which year) did the "levy" start? How was horse racing funded before the levy? |
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Rigsby
The levy was introduced in 1961 so is in its 50th year. Before then, as far as I know, there was no special arrangement with bookmakers. Remember, off-course betting shops were only introduced legally around then and before off-course betting was illegal. |
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So how was racing funded before 1961 and why was that funding system changed?
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It wasn't. The levy was introduced to protect the horseracing industry because it was deemed important to the economy.
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sandown
in the racing consumers figure 2008 - would that include the highly lucrative picture rights? Also, if you estimate the 2010 betting industry figure it will show a decline of approx £90m on 2008 - so whatever these stats are suppose to be showing, the current dilemma cannot be argued from 2002-2008 data |
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Did you say "£1046 million " ?
Thats actually quite a lot! The Premier League is the most lucrative football league in the world. With total club revenues rising 26 per cent to £1.93 billion as of 2007–08. If these and those figures are true than horse raceing just needs to reduce the total number of races down to under 800 races in a season In total. Then just double the total contribution paid. At that point raceing will be on par with the prem league per race/game on average. A cut in the meeting numbers should be followed by a decrease in training costs. -exactly my point. But a word of warning.. Eleven of the twenty Premier League teams made an operating profit in that year ! |
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birch2
The picture rights are included in the betting industry source.My first post outlined the projection for 10/11 which at that time was a drop in the levy of £45M to £70M vs 07/08 although I believe that this figure is optimistic now . (Where does your £90M fig come from?).I haven't seen a figure yet for the TV rights.Any drop in prize money means that owners costs will rise to cover it less their cutbacks, of course. |
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The racing consumers income goes through the courses who we are told don't make much of a a profit out of it. (The increase comes from increased admission charges and increased attendances from more meetings but costs have gone up considerably, too.)Apparently they are out of pocket on the increased meetings.
About 50% of the levy goes on prize money which is what the HG are chiefly concerned with. |
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The industry is facing a classic double whammy. Income is falling fast and costs are rising fast.
The courses are increasing revenue but costs are going up in line and there's not much money in it (in total- but what about Cheltenham, Ascot i ask?) The Levy Board income is dropping and they have overheads and other expenditure areas beside prize money to cover. So, prize money has to drop which means that owners net costs will be higher as a result - and there training bills are increasing at the rate of 14% p.a. I suppose more accurately we should call this the OWNERS FUNDING CRISIS. But, i believe that in the course of this thread we have shown that it the crisis is not just about falling prize money levels. There is a structural problem with costs running away against a background of declining punter interest in horseracing. The levy board is not in itself the problem, as it looks reasonably cost-effective (about 3-4% of income in overheads)but the fact that racing has no control over the betting product, does not see the interface with the punter/racegoer as important as the "players" side, and has done nothing to prevent the decline in punter interest in the sport, is where the problem lies. If it got to grips with this, the prize money issue would become of secondary importance and could be dealt with. |
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Racing in general has no celebrities that the general populace aspire to be. Jockeys are generally not "cool"( a few excetions every now and then).
The stars are the horses really and when a superstar horse comes along the general interset factor does in fact go up. However,the sport is perceived as crooked, old fashioned and difficult to understand ( eg the weights, the handicapping etc etc). There are too many races involving horses, not running to win but running to get ready for the next race etc etc. Too many trainers conning owners. The subtleties and complexities of the sport are mind boggling really. Far above the head of the average punter. People punted on it in the past simply because that was all there was to punt on effectively. The betting markets have expanded exponentially and I'm afraid that horse racing probably has no real future in the modern scenario. Sorry horse race lovers, but them's the realities. |
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Frog Hair, you have hit a very salient point there. The horses are the stars, and do bring people into the game. Look at the hero status that Red Rum, Dessie etc had.
Last year we had a true star on our hands, and what do the owners do, straight to stud as a 3yo, it's not as if they are short of cash either. When you have that kind of short-sighted attitude from the big owners, then what chance does racing really have? |
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It says a great deal about the state of the game at present that Sea The Stars barely impinged on public consciousness despite winning six consecutive Group Ones.
I wonder how many years' Stud fees the owner would have had to forego before anyone apart from Racing heads were even aware of his existence? Again, the shortsightedness of the game's governors bears the major part of the responsibility. If he had won the Derby on an otherwise sportingly barren Wednesday afternoon, would he have remained a virtual nonentity as he subsequently cut a swathe across the racecourses of Europe? Personally I don't blame the owners in any way for packing him off to a life of priapic bliss, but they might have found it more difficult had his profile been as high as it could have been. |
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The game is run so badly in the UK it is untrue.
Walk around the streets of Melbourne and I can guarantee that 99% of people you asked would know who Makybe Diva is, and the races she won. Ask the same question on the streets of the UK about STS and you would be lucky to get 20% of people knowing. I get a feeling the only way to save the game in the UK is to go the Aussie route and go for an off course tote monopoly. The bookies have far too much of a vested interest, and along with an impotent and incompetent governing body are destroying racing. |
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Of course aussi, that would be the ideal scenario for the future funding of the game, but it would require certain prerequisites to be in place before it could even get off the ground as an idea, let alone a reality.
Firstly, it would require a revamped Tote - at the moment the Tote is so moribund an institution that it enjoys zero trust and respect among the betting public. It would also require the BHA to get off its mollycoddled backside and put forward credible plans to firstly take over the Tote, and then to make its products accessible to the public in places in which it is not currently. Finally, and perhaps the biggest hurdle, it would require someone in Government prepared to ignore the blandishments of the bookmakers - when you consider how these vested interests have inveigled both Government and the BHA into doing their bidding in the last twenty years, this last hurdle seems insurmountable. Personally, I think the betting public would buy into the idea provided the Tote takeout issues could be resolved, and I also feel one could safely ignore the inevitable protests from some of the louder voices on here about their inalienable right to beat the market at early prices, given that if they had any real success in this regard they are soon denied the opportunity to take advantage of early prices to any worthwhile level. |
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Agreed Tuckyboy.
It's going to take some very difficult and extreme changes to sort this mess out. A properly run and regulated tote is the obvious way forward. Following Australia's path is probably the way forward. Once that is established, allow betting in pubs and clubs. The UK gambling laws are exceptionally archaic in that respect. You can throw money in a fixed odds fruit machine in a pub, where you cannot win in the long term, but cannot bet on a horse race. Insane. Take racing and gambling out to the public, get rid of the sweaty gambling shop, crooked race persona it has at the moment, and make it "user friendly". I enjoyed nothing more than heading down to my local pub TAB in Melbourne and having a bet, on a TAB terminal, whilst watching the racing with friends over a pint. It does however need sorting, and fast. The current measures are merely a sticking plaster over a huge gaping wound. |
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The effect of rising costs for the marginally economic smaller owner and trainer is to increase corruption or at least unpredictable results at the lower end of the game.
If these people cannot turn a profit through their usual activities, they will turn to gambling at least to claw back some of their losses. To drive up its popularity and protect its revenues, racing needs control of betting and further needs to offer the best prices. The advent of betfair has made it much harder for racing to do this through a fixed odds operator or better-run tote. This isn't so much as the volumes bet (rather than traded) on exchanges, which are still surely smaller than bf wd surely like, as because liabilities management has been enormously simplified for the offcourse books by 1) being able to dump winners onto bf; 2) being able exceptionally to hedge onto bf; and 3) having a bf tissue constantly available. It is highly unlikely that bm s wd be able to offer customers they are happy to have BOG if it weren't for the existence of the exchanges. Bf is about to float, w/ some big owners not necessarily happy to be sitting on losses. Its founder owners have made substantial fortunes and are no longer in place as managers. If anyone in racing had any sense, they wd crash this flotation; they wd get the major owner-breeders together to offer a higher-than-current market valuation and leverage their position w/ rights-owners and broadcasters into a better position in the betting market than wd be possible for other potential owners. And the first step of an industry-owned exchange wd be to prohibit bookmakers from hedging on the site. |
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The ATR interview with Mark Johnston showed once again the head-in-the-sand attitude of the "horsemen" who see the issue mainly in terms of increasing prize-money so that owners can get a better return than the 24% recovery from prizemoney which they currently receive - and which may drop even further in the next year.
MJ, who must be the most out-spoken of all trainers,and is an intelligent man, admits that he doesn't know anything about betting, doesn't want to know, and wants the racing industry to concentrate on its "knitting". Gambling and racing are two separate industries and racing shouldn't get involved, he says. He sees the HG as being the future and knows that unless the situation improves, British racing will lose out in the competive arena with other countries who receive much more from gambling. Looking at the gross take from betting on British racing (figures from the HG submission), its clear that around £1.0 billion goes into the coffers of the bookmaking industry each year. The take reached a peak in 07/08 at £1.23 billion but on present forecasts this might have dropped to as low as £0.8 or £0.7 billion (I haven't seen any estimates of the total and am going only only BM's reports). That's still a lot of money that punters are losing and I guess that it must be galling for owners to look at wht gambling takes out compared with what they put in. They put in half a billion and gambling makes a billion. Racing must see that they are being played for a fool by BM's who have vast resources and manpower, and live in a dog-eat-gog world. They know how to handle themselves. They have the sophistication of large public companies and consultants etc behind them. L/T they can do w/o racingeven though it is still the largest product. The decline in gross take from racing is occuring becasue BM's want racing income to be canibalised as BM's encourage punters to switch to other products. But, its also down to punters losing interest in racing. The HG doesn't really appreciate that this is happening. It looks only at the LBO stats and doesn't really have a grip on the internet growth. Neither does it understand the exchange model and still sees BF and others as under-paying. Not surprising if even someone like MJ doen't really have a clue. Askari1, I like your BF idea - out of the box - but let's remember that after 10 years BF still only has c.7% of the racing market. Its peaked. It wouldn't cover what racing needs.The same goes for the Tote. But with a radical revamp, i still think that is where the future lies although racing may have to play hardball and forego any deal with the BM,s. It could then justify keeping the pictures for Tote and to TV subscribers. Risky strategy perhaps, but how else can things change? Govt's view is going to be critical to racing's future funding. If the levy deal can't be agreed by Oct 30 it has to go to the Miister to arbitrate. That looks the most likely outcome although it has to be said that we have yet to hear BM's formal response to the HG submission. |
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I still think you guys are missing the basic point, because you are too close to the matter at heart.
You obviously love the sport, and good on you for that, but the general populace couldn't care less about it. The first and major step in remedying the decline should surely be to address this basic issue. Why is the public not interested ? Is it too boring ? Probably not really, though the majority of races are seemingly nothing events. Is it too complex ? Most certainly. Is it corrupt ? Probably not quite as much as generally perceived. I believe therefore that the primary issue is a marketing one, that is marketing the essence of what horse racing can offer to the public in terms of real entertainment. If the public is not being entertained, it won't come in numbers. The glory days of racing were when horses were essentially a large part of everybody's daily life. That's gone forever. Whether horse racing can mutate into something appealing to the modern man is a matter for serious conjecture. |
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To be honest FAFH, it is part of the aforementioned issue. If Racing were to discover a broadcasting partner whose interest were in increasing rather than eroding public awareness and appreciation of the sport, then that would at least go some way to addressing the point you raise.
None of us is naive enough to think that the electronic age can be rolled back so that the working man will again spend his entire stash of fun money on round-robins, but we do have a consensus amongst us that the efforts to at least partially restore the sport to its former prominence are at best useless and ill-advised. I have been racing with innumerable first-timers, and the overriding impression is that it is a breathtaking spectacle and that punting is fun. Unfortunately the Victorian strictures that still bedevil the experience - dress codes, high admission prices, segregated viewing areas etc, discourage them from returning. Change has to come, there is no doubt about that. We can not just give up, we have to discover new ways of attracting and retaining the public, but we are all agreed, I think, that the token efforts being made at present are only delaying the demise of our sport. |
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It isn't necessary to appeal to everyone and very few products manage that. Most markets are segmented including sports. What does matter is that when you do manage to attract newbies to try your product, you don't put them off, as tuckyboy describes.And what you must not do is to drive away your existing loyal customer base as an unintended consequence of pursuing some other group or action.
Take the price of admission to courses. It's clear from the HG's submission that courses have pushed prices up over the past decade in an attempt to cover their costs. At the top of any complaints list, high entrance costs usually comes first followed by poor catering and the high cost of food and drink on-course. Not only do newbies not return but the regulars also go far less frequently than they did - they can't afford to especially when the costs of transport are taken into account. Take a family and multiply the cost by four and you soon realise that taking the family becomes a once a year visit at most.It's just not affordable.Add in the premium charged when the band nights are put on, and you come to believe that racing doen't actually want your custom. Change the culture to one where you can drink where you like and as much as you like and there's another reason for not going as frequently. The move to expand the meetings led to the the drop in fans being interested because there was too much racing and too much poor racing at that, to make following racing worthwhile. An unintended consequence of the introduction of betting exchanges is that for a lot of puinters they became aware of how difficult it has become to actually win playing the horses. For any actual fan of racing it must be a real turn-off to read about all the traders, who admit to knowing sweet FA about the sport, make tens of thousands of pounds with their robots. If you can't win even when you study form, why bother? There must be a huge amount of disenchantment and I would suggest that the first user group to tackle are the lapsed loyal customers (racegoers and punters) - get them back. The Racing For Change outfit are laughable. I would appoint a first-rate ad agency to tackle the problem. That was my business 20 years ago and this kind of problem is meat and drink to solve given some first-rate minds and a decent budget. |
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Does horse racing even need a live audience to be successful.?
I'm sure the horses couldn't care less. Just stage races for TV and betting. Don't bother with attracting on course spectators or punters ? |
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Would football be the same without the crowd?
Would you follow football if you have never been to a match? Would the theatre be the same without the audiance? If you go racing and enjoy the experience you are more likely to become an enthusiast. Obvious, really. |
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In your examples you are using situations where humans are watching humans.
Watching their faces in the cinema/theatre? Watching a goal being scored? Is watching a horse run the same type of thing ? For the afficianados of horses and horse breeding, yes of course, but for the rest of us ? |
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Hummm
I agree with many comments here... ^^^^^ With both the problems of getting the sport profitable, getting people to attend races, and the betting/raceing balance problem. I did go to a british small horse race a few years back. Over hedges. I spend the day wandering arround in my wellies  (a bit like going to Reading festival). Cheep as chips n fun.In comparison, I went to Hongkong night race, with a 20,000 capacity night. Totally different, it was much more set up for the Yuppies. Think of Wembely Stadium. Hongkong race track is on the Main tube network, with a train every 2 minuits. As for the propblem of getting more money out of Gamblers to help the sport, would a better idea not be to slim the sport right down ?? Regarding the oncourse costs. Imadgen takeing a family to Ascot  .What the sports needs is grass roots. A few family friendly days out mabe. Dont forget family days out compete in summer with theme parks, football, shopping ect.. Would I pay £50 a ticket to go to Ascot. Forget it! xxxxxxxxxxxxxxxxxxxxxx A bit of subject, But???? Could a course not do a split day to get some extra people in? eg, 10am -12 raceing. 12 - 1pm Lunch, 1 - 3 Formula One on a huge screen, then mabe 4 till 6 raceing. Making it a proper sports day out. |
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MIB34
I sort of like a lot of your posts. But geez, as someone else mentioned, they're very hard to read format wise. Can't you do something about your presentation, just to make it easier for us to take in your comments. |
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MIB is going to be on my committee for the restoration of Horse-racing.
Someone else will be taking the minutes [;)] |
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Sorry.. My pc is in the process of downloading a new copy of word. Hopefully it will be sorted.
Thanks tuckyboy. Dont panic, I shall do the accounts ;) |
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Your ideas are good mate, and your heart is clearly in the right place.
Don't worry about the spelling and sh1t. It's only a forum. I only mentioned the three-foot gaps between the words in your posts in the first place because I had visions of you frantically pressing the space bar. You just crack on, however you like. I particularly like your last idea about a day devoted to sport, with a race meeting filling the gaps. I'm playing cricket Saturday, and I will miss the St Leger. We need visionaries like you imo. |
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Your idea would be great for Chester, we could have a few dog races as well.
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FATH, the growth area in horse racing areselling overpriced food and pop concert tickets to hen parties. The decline is in the share of the casual punter's pound the sport attracts and in bookmaker payments to its administration.
Fwiw, I feel that racing shd try to get a few well-placed opinion formers on its side--people like the general sports editors of newspaper and esp. news programmes. A few years ago the winner of the King George in midsummer led the sports news--now it's below who qualified where for a grand prix. Racing has the second biggest spectator audience in the country--ahead of rugby and cricket, but it is less publicised than both of those sports. It needs to do something to drill the names of its top five or six horses into the heads of the non-specialists. |
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*growth area is in selling
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@tuckyboyI went to a "Car show" a few years back. To be honist cars really arnt my thing (my best mate is mad about them). Anyway, at the show as far as I can remember there were as follows 400+ car Show n shine 100+ car Raceing on a 1/4 mile drag strip 200+ cars raceing on the race track On top of that there was Huge TV screens showing action football. There was an Xbox area, and a beach voly ball compatition. Oh and a Babe "talent show" page 3 style. For a car show I was impressed. Aditionally the events food was well priced. A good day out. Last year I went to Le'Man in France (24hour race). Even there they had stuff for young kids, and a huge Funfair for big kids. |
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A round of applause for The Tote, please. I have always derided this outfit, choosing not to bet with them because the pool system is inferior to fixed odds for anyone who tries to make his betting pay. I have just read their last published accounts and, you know, they really do a reasonable job for racing and I guess that they deserve more credit.
The Tote has as its objectives, the furtherance of horse racing in this country and given their competitive disadvantages versus the big BM's, they generate a disprortionate amount for racing, more than I realised. That is not to say that things couldn't be improved significantly. There is no doubt that the solution to racing's funding success lies with the Tote. If only they had developed the exchange concept! If they ran an exchange I for one would support it. i'd rather see profits go into racing than into shareholders pockets.Perhaps they should be the ones who buy BF! I'm sure that with govt backing they could raise the readies. How to make a success of the Tote? That is the question which the industry should be addressing. They have the racecourse prescence,100 LBO's, call centre established. Surely this is where the focus should be. |
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Sandown
You seem to be arguing against yourself to a certain extent. One minute you say that racing has to broaden its general appearance from being boringly televised, corrupt, expensive to visit courses etc etc. Then you say that the real solution is all about making the betting experience the best it can possibly be. What's it to be. Is racing about entertainment visual wise, with betting thrown in for a side interst factor ?. Or is it totally just about betting and breeding ? |
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FAFH
I'm not certain that I understand your post. I see no inconsistency with any any of my previous points.Racing has evolved over 250 years and is bound up like a siamese twin with gambling. You can enjoy a day at the races or watch it on TV without betting but 9 out of 10 people will find that having a bet is just about the most natural thing to do. No other sport is better desined to bet on whether you are a noviced or a professional. The thread topic is about the funding crisis. Somehow racing must bypass the BM's and get straight to the punter if it is ever to significantly increase its income through betting. The Tote is a channel that is already in place, set up to help horse racing, but punches below its weight. If the Govt. does decide to sell it off to racing interests then that could be the start of something very positive. |
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OK I see your point quite clearly now.
You do accept that the glory days of horse racing as the pre-eminent betting platform are over. But you are saying that they can and should be able to at least keep up with the other newer forms of sports betting. I agree with that. The old established bookies are a hindrance to this and should be sidelined as soon as possible. The tote is probably the answer. Exchanges are too sophisticated for the general populace. |
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Could they not put exchanges on site ??
It would just take a couple of lorries. (they could charge parking)., 300 or 400 terminals. A satilite broadband reciever.and an uplink dish. Me, Id go to a horse race if I could rent a desk, with 1g Broadband. And a place to attach my laptop.  or, Im sure with 3 or 4 fit girls, a live live feed on BF prices and a huge screen you could take on the bookies whilst onsite. Why wait for tote?? |