By Nicholas Cooper, ROA President
Thanks to the support of government and to the persistence of the BHA, the biggest change in the central funding of British racing in well over half a century will occur in April this year as the levy system will be replaced by an entirely new model.
Based on a rate of 10% on gross profits on horseracing bets, levy replacement will capture the all-important offshore business on British racing and produce an estimated annual income of £90 million, against the current £54.5m.
The collection and distribution of funds will be taken over by the Gambling Commission and a new Racing Authority respectively, but not until the beginning of 2018.
At this time, however, we remain uncertain as to whether racing’s old nemesis, European State Aid legislation, can still possibly frustrate the new legislation now being put into place.
It would be catastrophic for racing if anything were to trip up the levy replacement programme in the coming months. Even if the existing Levy Board were to act as a safety net, the board’s much-diminished funds would not allow it to sustain anything like its current contributions to prize-money.
So, as we pray for a smooth legislative passage towards the introduction of the new structure, we must still recognise that central funding will be dwarfed by media rights income flowing from bookmakers to racecourses for pictures in betting shops.
It is an unavoidable truth that every time a betting shop closes there is less money for racing. Equally unavoidable is the fact that FOBT machines have become fundamental to the profitability of betting shops. It is therefore argued that racing should give its full support to bookmakers in the face of probable legislation against FOBTs, but is it right that we should adopt such a position when the jury is still out on whether these machines are addictive?
Bookmakers also claim that racing is no longer a big money-maker for them but this is a bit rich when it is they themselves who often choose to keep their margins very tight on horseracing bets as a means of attracting more punters. Such a strategy might suit their marketing departments but it does nothing for racing’s income which continues to be linked to gross profits rather than turnover.
Nowhere is the inter-dependence of racing and betting more clearly defined than with the Arena Racing Company courses which provide most of the live racing action pictures in betting shops during these winter months. But due to the current stand-off in commercial negotiations between Ladbrokes/Corals/Betfred and Arena’s new media company, The Racing Partnership, the affected betting shops are now seeing their customer numbers diminish.
This dispute will surely soon be settled, though it is not entirely unhelpful to have further proof of how betting shops remain so dependent on the racing product, even if it is has been an expensive way to underline the point.
It is difficult to talk about the racing-betting relationship without mention of the BHA’s Authorised Betting Partner concept. This has bound participating bookmakers to an agreement to pay British racing voluntary contributions on their British horseracing business that fell outside the scope of the levy.
The ABP initiative has proved very worthwhile, capturing significant funds for racing that we would not otherwise have received. The ABP experience has also underlined the fact that some of the major bookmakers cannot ever see beyond their balance sheets and that the large independent racecourses would rather sit on the fence than to sign up to the terms of an agreement that is for racing’s greater good.
All this will, however, soon be behind us as we approach the brave new world of a funding model underpinned by new legislation. It will ensure our industry not only receives income commensurate with the true volume of betting on British racing but will also enable us to decide how it is spent.