|
|
| |
What's New
|
Fixture Funding
|
Traditionally the Levy Board has funded fixtures via a levy
from on and off course bookmakers. The Government has sought
to replace the Levy Board with a commercial system of funding.
Originally the Levy Board was expected to cease operating in
October 2005, this has now been extended to 2006. The
commercial funding plan was for racing, via the BHB, to
increase the commercialisation of its provision of daily race
data to the bookmakers to replace the levy funds. Initial
estimates indicated that income from such charging would exceed
that from the levy system by around 25%. The apportioning of
Data Income was for top slicing and the balance hypothecated to
the racehorse owners as prize money (75%) and to racecourse
owners (25%) based on the level of betting turnover generated
by the racecourses. However, the ruling from the European Court
of Justice in November 2004 made it clear that William Hill
(bookmakers) had not infringed the BHB's database rights by
publishing data on runners and riders on its website. Thus,
the proposed new fee system is at risk and a committee has been
appointed to review the options for racing. The present consensus
within the sector is that a solution will be achieved that will
provide at least as much a contribution to racing as provided by the
present levy system. In the meantime, the Levy Board will continue in
its role to channel the bookmaker levy into horseracing for the
short-term. Our risk management team is available to work with
racecourses to manage the risk associated with revenue uncertainties.
|
Fixed Odds Betting Terminals
|
One pressure on the sector at present is the growing presence of FOBTs in betting shops. In
spite of an absolute growth in gambling revenue, horse racing's share of gambling revenue is
declining. We believe that there is unfilled growth potential in betting on horse racing, but any
chance of exploiting this potential is being eroded by FOBTs and numbers betting, in particular
virtual racing. Recent research, which was commissioned by the Association of British
Bookmakers, finds scant evidence that FOBTs are encouraging problem gambling in spite of
independent contemporary research that shows roulette type gaming causes addiction.
However, it is clear that FOBTs are a significant cash cow for the major bookmakers. The
betting shop landscape is undergoing change and traditional betting markets are being
radically altered. Racing Economics calls for independent research into the impact of FOBTs
on the betting shop gambling pound and on gamblers.
|
Less Than 8 Runners?
|
This is becoming an increasing issue within the sector. Firstly, the present round of BAGS
contract negotiations for betting shop pictures with racecourses who's contracts have or are
coming up for renewal includes clauses that significantly reduces the media revenue for races
that field less than eight runners. Secondly, less than 8 runners is less than punter friendly
for each-way betting. Racing Economics is available to review possible strategies to help
racecourses maintain and grow revenue.
|
Current & Ongoing Issues
|
Sleepers - Unclaimed Winnings
|
The up and coming privatisation of the Tote required an
update of its accounting practices. One result has been the
treatment of unpaid winnings (sleepers). Historically the Tote
included unpaid winnings in the annual summary after 6 years
had elapsed. In modernising the accounting practices this has
been reduced to one year. The shock to the sector is that for
2003-04, unpaid winnings contributed £3.6 million to the
Tote's bottom line. This figure has astonished many in and
outside the sector and has led to a call for sleepers to be
returned directly to the sector, instead of contributing to the
benefit of the bookmakers. Good causes have been mooted as the
best beneficiaries of any returns of sleepers. Estimates of the
annual size of sleepers range from the wild (£500 million per
annum) to the conservative (£10 million). The rhetoric in the
sector has provided some very good points of view, but none of
it has been backed up by independent research. The actual
amounts have not been researched, nor has the impact of leaving
sleepers with the bookmakers vis a vis alternative uses of this
revenue. Racing Economics believes that sleeper revenue requires
independent cost-benefit analysis that clearly demonstrates
where the revenue is best deployed.
|
The Dual Channel Challenge
|
Our research in 2003 clearly highlighted the then increasing likelihood of a picture rights
crunch and the need for the industry to prepare itself for a cash crisis at attheraces. It gave us
no pleasure to see the fallout that occurred in early 2004. However, in the new environment,
with attheraces capturing only a share of the market and the new racing channel, Racing UK,
taking the balance, it remains uncertain whether either or both channels will sustain their
current positions. In November 2004, Racing UK achieved its target subscription base of
20,000 some 12 months ahead of target. Racing Economics anticipated that this would be
attained with the assistance of a major organisation, seeking to benefit from UK Racing's
client base, financially supporting the subscription is some fashion. This has been, in part,
achieved by the assistance of Victor Chandler via a voucher system for clients of both VC and
Racing UK who place a minimum number of monthly bets with VCBet. Racing UK has
achieved the same audience reach as attheraces via, the Sky platform, TeleWest and ntl cable.
Present estimates indicate that this has helped average betting turnover on Racing UK
screened races come close to attheraces, although viewer numbers for attheraces remain
larger. We maintain that the size of the viewer base has significant implications for
sponsorship. Thus, if attheraces can maintain significantly higher average audiences by
remaining free to air, then sponsorship is more likely to be focused on races televised by this
channel (and terrestrial televised racing). The choice that was faced by the racecourses in
choosing the appropriate channel was very complicated and not helped by issues such as the
potential rebates to attheraces and some strong emotive historical baggage. Racing Economics
argues strongly that independent research is urgently required to assist the racecourses to
ensure that they maximise the benefits from their picture rights including gaining a
perspective on whether both or either channels are sustainable. We fear that there is a strong
likelihood of further problems in the future. Similarly, research is required for the sponsors.
|
Competition & the OFT
|
The BHB's response to the OFT Rule 14
Notice included the release of June 2004 Report 'The
Modernisation of British Racing'. The OFT provided a
subsequent issue of a commitments notice which allowed
for a brief period of consultation which closed at the end of
July. We followed closely the potential impact of the original
OFT's Rule 14 Notice and we are looking at the consequential
changes we expect will occur in British racing. Broadly, we
believe that the changes envisaged will have a disproportionate
impact on individual racecourses. The comfort of a parochial
organisation looking (to some extent) after the welfare of the
racecourses will no longer exist and to date we have seen no
robust independent forward looking analysis that would assist
the racecourses prepare for their futures. The impact of the
proposed changes in fixture allocation and negotiation will
have major implications for the sector, and in particular on
racecourses staging flat fixtures. Also, racecourses will have
greater freedom to choose the individual races staged per
fixture. Racecourses continue to face individual
threats and opportunities. These need to be
independently qualitatively and quantitatively assessed,
individually or holistically, to understand the impact of
increasing competition between the courses and the impact of
the changes in fixture allocation and negotiation. Increasing
competition will benefit the industry, however, we remain
concerned about the seeming complacency of some of the
racecourses about their future. Clearly, the strategies
followed by some racecourses could significantly disadvantage
others. Conversely, courses that may at present have a
dominant and/or premier position within the industry may
unexpectedly lose out to more aggressive and ambitious
competitors. Racing Economics has the appropriate degree of
expertise and experience to assist racecourses in their mid to
long term corporate strategic development, both internally and
in the external environment to provide forward planning that
optimises the opportunities from the competitive pressures.
|
Reserves
|
As part of our ongoing sector
research, we looked at the impact that reserves may have on
entries, declarations and competitiveness of races in late 2003
and early 2004 and concluded that an appropriate system
should be established. Subsequently, and independently, the BHB
introduced reserves in a select number of races. The new system
of reserves has undergone a number of iterations. As yet,
there appears to have been no independent research to ascertain
the optimal process and thus there are likely to be further
changes in the future.
|
The Impact of the Expanding Fixture List
on British Horseracing
|
In 2006 the fixture list is planned to
expand to 1,500 fixtures per annum. The expanding fixture
list will have substantial impact on the sector. The expansion
will allow greater competition and ensure that there are enough
fixtures for the racehorse population and will provide the
opportunity for racecourses to optimise their fixture
requirements. It will also boost the appeal of the product to
racegoers and punters, and maximise income via providing more
betting opportunities with more competitive options (if most
field sizes are capped to 14 runners as mooted by the BHB).
Additionally, owners could benefit from a greater opportunity
to win prize money via an increased pool of prize money and
much of the new structure based on meritocracy (dependent on
the outcome of fixture funding). However, the
benefits to the punter and bookmakers (and other stakeholders
who may benefit such as racecourses and owners) need to be put
in context to the dis-benefits/costs that will be experienced
by the supply-side of the sector. In particular, the jockeys,
trainers and stable staff will be drastically affected by the
change in the structure of the fixture list. The key
issue is whether the supply-side has the resources to meet the
increased demand. For instance, are there
enough jockeys to meet the increased and more dispersed
demand?, similarly for stable staff. When labour
supply cannot meet demand, the key economic short-term
adjustment is upward pressure on wages;
is the sector prepared for this possible outcome? Racing
Economics expects a short-term supply side constraint with
concomitant impact on wages and thus costs in the sector.
The extent of this constraint requires detailed research to
measure its impact on the sector.
|
48 Hour Declarations
|
| Racing Economics' research has
clearly demonstrated that 48 hour declarations may not benefit
all the stakeholders in the sector. The impact of this
development on key stakeholders (i.e. trainers, jockeys,
logistics, media, owners etc.) needs to be framed in the
context of the other stakeholders who clearly benefit
financially from the change, such as the bookmakers, televised
racing channels, etc. Thus it is critical to understand how,
with a redistribution, a balance can be achieved between those
who patently dis-benefit from 48 hour declarations and those
who obviously benefit - with a view to establishing an
equitable balance. Development initiatives need to be
relevant, credible and consistent if they are to produce
positive change and benefit all stakeholders. Racing
Economics continues to believe that further independent
research is required to fully understand the dynamics and
levers required to establish 48 hour declarations equitable to
all stakeholders.
|
|
Stable & Stud Staff
|
The resulting excellent Report from the BHB appointed 'Independent Commission into the
Recruitment, Training, Employment and Development of Stable and Stud Staff' of 2004
identifies and addresses a very wide range of employment issues in the sector. The Report
addressed nearly all the concerns raised by Racing Economics previously. In particular,
looking at where and what are the problems and providing recommended solutions in a
well-balanced structure that benefits all of racing. The Commission has studied the reasons
for the issues, and provided recommendations for change in an industry-wide framework.
The recommendations put equitable onus on the key sector stakeholders and urges
modernisation of the Stable Lads' Association. The Commission emphasises that the industry
needs to retain and attract staff in the face of competition from other sectors. However, our
remaining concern is that the intensifying need for staff due to the expanding fixture list and
number of individual races will not be adequately addressed by the recommendations, despite
an increasing influx of foreign employees. The impact will be increased pressure on productivity
and wage rates to ameliorate the cost to the yards and ultimately the owners. The effect of
this predicament may be to limit the effectiveness of some of the Report's recommendations.
However, without further research, it is difficult to quantify the effect of these developments
and thus provide substantive process to address. Racing Economics has expertise in labour
economics issues and will monitor developments.
|
Racecourse Development
|
We have detailed experience of the
interface between the developer, local economy and the planning
authorities. Thus, we are uniquely placed to undertake
economic impact studies and/or appraisals of proposed racecourse
developments. We have recently completed a detailed Independant
Appraisal of the proposed Ffos Las equine centre for the Welsh
public sector. Our rigorous quantitative and qualitative
economic analysis provides the basis that would support or
decry the benefits of the developments, particularly for the interface
between the racecourses and their local economies.
|
|
Racing Economics, PO Box 25,
West Molesey KT8 2WW, United Kingdom
Tel: +44 (0) 20 8873 0513 <>
Mobile: +44 (0) 7952 562 646
email: info@racingeconomics.com
|
|
|
|
|
