Heavy going: how horseracing is coping in testing conditions

When 14/1-shot First Flow, piloted by David Bass, pulled clear after the final fence to upset the odds and land Ascot’s two-mile Clarence House Chase in January, it was trainer Kim Bailey’s first Grade 1 winner for more than a quarter of a century. However, the occasion was a rather muted affair at the Berkshire track for the veteran trainer and his team as the horse, owned by nonagenarian Tony Solomons, was escorted to the winners’ enclosure.

As had been the case for pretty much eight months since racing resumed on 1 June after a 76-day shutdown and the loss of nearly 300 fixtures due to coronavirus, racegoers were absent. And, as Bailey rued the following morning on Racing TV, there was no potential chance to acquire new owners in the bar afterwards in this word-of-mouth business. “Missing that opportunity is the biggest downside,” he conceded.

It’s a situation being repeated up and down the country at Britain’s 59 racecourses as meetings – weather permitting – continue to be staged behind closed doors with Covid-19 restrictions and social distancing protocols in place. Such is the impact of racecourses being devoid of spectators, tracks lost more than £250m in 2020. Indeed, racegoers typically account for almost half of turnover, says the Racecourse Association, while media rights, which provide a quarter of tracks’ income, have taken a hit from the closure of betting shops (each outlet pays around £30,000 per annum to show live sport).

Prize money for Britain’s second most-attended sport has also suffered. For instance, the prize fund for the most prestigious flat race, the Investec Derby, plunged to under £500,000 in 2020 from £1.6m the year before. “Racing has been acutely impacted,” says Charlie Liverton, chief executive of the Racehorse Owners Association. “Without spectators on courses and the impact on media rights income, there is less prize money for participants – be that owners, trainers or jockeys.”

The Horseracing Betting Levy Board, which helps fund racing and prize money through statutory bookmaker payments amounting to 10% of their gross profits from bets on racing, has also felt the squeeze, as its chief executive, Alan Delmonte, explains: “If we go back to March, the loss of what was about two-and-a-half months of racing was obviously very significant – you’d be talking in the region of between £15m and £20m of income that we’d ordinarily expect in that period that didn’t materialise.”

At the same time, the Levy Board was still incurring costs of around £2m a month due to financial commitments, such as contributing to costs incurred by racecourses relating to regulation and integrity. “And we’ve put more into prize money than normal, but it hasn’t made up for the loss. There has been pain felt across the sport,” Delmonte comments.

The situation meant the Levy Board had to dip into reserves. Around 10 years ago, its reserves were roughly £60m, but this amount sank to under £20m by 2017. That was when the levy was extended to capture racing bets placed with offshore operators, with the immediate result being an additional £45m in statutory payments when before it received around £15m per annum in voluntary payments from certain overseas online firms.

It meant yearly income leapt from £50m to £95m, while reserves had swelled to about £50m before coronavirus struck. Going forward, the aim for the Levy Board, which contributes an average of £5m of the £13m of racing prize money per month (average prize money per race in 2020 was almost £12,000), is to have cash in the bank of between “a minimum of 24 [million] up to something in the mid-thirties,” Delmonte reveals. “This Covid experience has reflected that it’s not a bad thing to have a bigger cushion.”

With 7,000-odd betting shops shuttered due to the latest lockdown and racecourses off limits to the public, Delmonte says there has been a further shift to online and that overall betting on racing has been “approximately at normal levels”. This trend would seem to be supported by William Woodhams, chief executive of exclusive web and telephone bookmaker Fitzdares based in London’s Notting Hill. “It’s been phenomenal from day one of June – UK horseracing has caught the imagination of punters,” he says. “It’s absolute bullshit that serious punters would bet on kabaddi and ping-pong…UK racing has a hard core of very knowledgeable people and they’ve loved it.”

There have been growing calls, though, for the levy to switch from gross profits to a turnover-based model, which even at 1% of turnover is likely to outstrip the £97m yielded for the year ending 2019-20. You could argue betting turnover has been growing above inflation for the past two decades, while revenue hasn’t, so a turnover levy would provide racing with a more sustainable income stream rather than a declining one in real terms.

As well as not profiting from the best horses losing, as is the case now, a turnover system could also go some way to discouraging operators from using racing to dish out generous offers to acquire users with the aim of cross-selling them into other products. Regulus Partners’ Paul Leyland says: “There is a fear that racing is sometimes used as a ‘loss leader’ to acquire customers which can be monetised on other forms of gambling such as football or slots. A turnover tax hedges against this, though it can be gamed in other ways.”

The levy isn’t due to be reviewed again until 2024 and there seems little appetite at the Department for Digital, Culture, Media & Sport to bring the timetable forward to consider a turnover-based model or broadening the levy to cover bets placed in the UK on international racing.

Acting up

Perhaps the biggest issue facing racing and the levy is the possibility of the Gambling Commission introducing affordability checks on punters once losses reach a certain threshold. A £100 net loss per month has been mooted, after which you’d have to prove you can afford to exceed this amount with either payslips, a P60 or bank statements.

“If it was a blanket policy that would be the end of UK horseracing overnight,” Woodhams blasts. “And that’s not scaremongering, that’s just a fact.” A case could be made that providing evidence for affordability checks is a mild inconvenience. On the other hand, there is no guarantee this would be a quick and seamless process, and many people are not comfortable sharing personal financial information with a betting company. It’s deemed an invasion of privacy if Twitter polls are any indication.

Therefore, will people bet using accounts of family or friends to avoid it, or will they bet in the shops using cash? Or could more money head to the on-course layers? All are possible. The real concern is that many will refuse to hand over financial documents and pack in betting on racing altogether. Leyland thinks that if affordability tests are brought in at the low levels and in the stringent manner suggested it could be “catastrophic to a great many racing stakeholders”. Senior racing industry figures have put the financial blow to the sport from a £100 net loss threshold at £60m a year.

However, Martin Cruddace, boss of Arena Racing Company and its 16 tracks, said the hit could be more like £100m annually when he appeared on Sky Sports Racing recently. He also suggested up to 70% of horseracing bettors would refuse to show evidence they could afford to lose more than £100 a month.

Ben Keith, founder of on- and off-course bookmaker Star Sports, says the robust source-of-wealth checks his firm already undertakes on high-spending customers have come at a cost. “I’ve lost many punters because I’ve called them asking questions that have got nothing to do with me and that are an imposition that I shouldn’t be having to ask. And I’ve got the expense of having to call these people all day long.”

Many who enjoy a flutter on the gee-gees fear the sport is being lumped in with online casino gambling, which is a more potentially harmful segment of the industry, and that games of chance involve no skill. They accept the need to address problem gambling but urge the government to recognise the difference between poring over the form of a 20-runner handicap and passively playing an online slot set to auto-spin.

That’s not to say there aren’t those who back horses blindly. Colin Hord, chair of the Horseracing Bettors Forum (HBF), which represents the interests of those who bet on racing, says: “We want to make some sort of distinction between horse race betting, as well as sports, and casino and games of chance where there’s a house edge and some of these products are known to be quite addictive and suck you in, whereas horseracing is an event-based activity.”

In fact, Keith would happily sacrifice gaming altogether to be able to freely lay bets to any stakes on racing and other sports. “If they said to me tomorrow, ‘Turn the casino off and we’ll never come near you again’, I’d turn it off. I don’t even look at our casino.”

Critics argue the multi-nationals strayed too far from their raison d’être – bookmaking – and became over-reliant on around-the-clock gaming products with their guaranteed house edges to drive revenue and profits. Now the industry is under intense scrutiny. Some of that scrutiny, as part of the Gambling Act 2005 review, will target advertising, with it looking likely gambling logos will disappear from football shirts. The UK imposing similar draconian ad restrictions like that of Italy and Spain seems remote, but the degree to which marketing practices could be curtailed is guesswork.

Make an exception

Racing’s stakeholders would want their sport exempted from any marketing restrictions because of its intrinsic links to betting and because it funds racing. Any outright ban on TV betting ads would probably mean the demise of ITV Racing. The free-to-air programme won a BAFTA in 2017 for its coverage of the Grand National and since racing’s resumption last summer viewing figures have been impressive, surpassing a million on occasions. In fact, the rescheduled 2,000 Guineas attracted a peak audience of almost 1.5 million. That was double the peak viewership of the 2019 running. Yet ITV Racing, which broadcasts almost 100 days of racing a year, is sponsored by Paddy Power, recently replacing William Hill, and the mid-afternoon commercial breaks heavily feature bookmaker ads.

Then there is presenter Matt Chapman who loudly gives viewers a rundown of the odds before each race and explains that if you stick £2 on an 8/1-chance you could get back £16 plus your stake. This isn’t lost on some, including well-known professional gambler Neil Channing. He says: “I’m not saying there’s anything wrong with it – he’s obviously trying to encourage new people into the sport – but there’s got to be a point when people say, ‘Hang on a minute, he’s giving people a class on how to bet at three o’clock on a mainstream channel’. It’s a fundamental part of the sport but I could easily see regulation coming in and people saying, ‘That’s got to go’.”

Paddy Power has sponsored ITV Racing since the turn of the year

When it comes to betting advertising on ITV Racing specifically, Channing adds: “In a world with people getting irate about shirt sponsors, I’d be amazed if they didn’t move on to saying, ‘Do we have to have Paddy Power ramming betting down our throat at three o’clock in the afternoon on ITV’? “If that does go, it would be the end of racing on ITV and it’s hard to see how the sport would grow and develop as it’s rare for it to get presented to a mainstream audience. That should be a worry for the industry. They would argue the demographic of the people who watch racing is not a lot of under-18s…There are people at ITV who would say it’s better to show a [James] Bond film, but there’s huge money in the advertising. Lose the advertising and you lose the coverage.”

“It would be dangerous for anyone to be complacent in a febrile political environment; assumptions are being overturned every day” [/su_quote]n that scenario, BBC Sport could step up and cover the bigger events like the Cheltenham Festival, the Grand National meeting and Royal Ascot. This isn’t a given, though, and if it did happen it probably wouldn’t be the level of coverage screened by ITV Racing. Reduced interest would have a knock-on effect on the levy and media rights straightaway and make recruiting racegoers of the future harder, argues Leyland. He continues: “As things stand, a critical mass of people seem to get the importance of advertising to the sport, the sport’s immense value to the rural economy and they also understand that racing is very different to other sports in terms of what viewers are expecting to be exposed to – racing was largely designed for betting after all.

“However, it would be dangerous for anyone to be complacent in a febrile political environment; assumptions are being overturned every day.” One assumption is the government is acutely aware horseracing is worth around £4bn to the UK economy and that duty on forms of gambling is north of £3bn a year at a time when public borrowing has ballooned to record highs during the pandemic. Racing is also said to support more than 80,000 jobs, making it the largest sporting employer. Furthermore, the industry has allies in high places: Chancellor of the Exchequer Rishi Sunak is MP for Richmond in Yorkshire, which includes the racecourse and training centre of Middleham, while Health Secretary Matt Hancock is MP for Newmarket, flat racing’s headquarters.

Leyland says: “Racing has a really strong hand in terms of its economic contribution and the support it has in parliament, but it has its enemies too and is also exposed to ‘collateral damage’, like affordability, so it needs to play its hand well.” Playing its hand well includes not making the same mistakes the bookmakers did by burying their head in the sand over FOBTs and denying the machines caused increases in gambling-related harm. On the surface, at least, this Conservative government doesn’t appear to be categorically pro- or anti-gambling, although some backbench Tories think their party shouldn’t behave like a nanny state and interfere in how people choose to spend their money. “A lobbyist told me that bookies will be made to eat shit for what they have done but, ultimately, the government doesn’t want to bite the hand that feeds it,” says Woodhams of Fitzdares.

An ageing audience

To outsiders, racing and betting on racing can seem an esoteric and confusing pursuit. The terminology alone is baffling enough before you even delve into deciphering race cards and understanding handicap marks and different types of races. Key stakeholders have tried for years to broaden the sport’s appeal. But there is no silver bullet. While evening meetings in the summer can be thronged with spectators, a large majority are more interested in drinking, socialising and the obligatory musical entertainment afterwards rather than the equine action. There’s no getting away from the fact racing fans and racing punters are an ageing demographic and that football betting, as it has done for a decade or more, dominates the sports betting mix when it was once all about horses and dogs.

“Horseracing needs to really modernise how information is being provided,” says Hord from the HBF. “Here we are in 2021 and we’re still providing people with ones, twos, zeros, and Ps and Rs next to the horse’s name and expecting people to bet on it. There is so much more that could be done, even just the use of colour.” Hord says football bettors enjoy accessing data so more needs to be done in this area. Most of the leading bookmaker apps and sites do include Racing Post or Timeform write-ups, live streaming and a few serve up on-demand video of each horses’ previous outings. This combined with best odds guaranteed (BOG), extra places and concessions like faller insurance make for an attractive proposition on face value. Yet, is it enough to entice casual sports bettors?

“No one is interested in Frankel as much as they are in Ronaldo,” responds Bernard Marantelli, previously CEO and founder of pools betting company Colossus Bets. “Frankel runs for three years and Ronaldo plays for 15, so the affinity in a sports obsession lasts longer than the one in a racing obsession. I just don’t think there’s a resolution to getting the public interested in horseracing to anywhere near the level they are in sports.”

In addition, Marantelli insists racing simply doesn’t have the true worldwide appeal of sports like the NFL. “Even the Melbourne Cup or Hong Kong Cup are not really global. People really don’t want to bet on racing other than in their home jurisdiction. So, I think racing has a world of problems to remain relevant as a betting medium.” He adds: “Horseracing as a betting medium is in a terminal, irreversible decline – without serious innovation in betting.”

Furthermore, scandals from time to time reinforce the view among some casual observers that racing isn’t entirely straight. Just last month, an investigation found that a horse called Viking Hoard had been administered a massive dose of a sedative, acepromazine (ACP), before a handicap hurdle at Tramore in Ireland in October 2018, resulting in the horse being pulled up. Someone had laid Viking Hoard on Betfair for €34,899 to win €3,200. The Irish Horseracing Regulatory Board (IHRB) revealed two lay bets had also been placed on Viking Hoard in races at Sedgefield and Galway in 2018 to the tune of €30,279 and €55,000 respectively. Yet the person behind the bets wasn’t identified as the IHRB said they were “initially placed with a limited company, which placed them in turn with Betfair”.

Even though the story caused barely a ripple in the mainstream media, it highlighted the lengths some people will go to with scant regard for the horse or jockey’s safety for relatively modest returns. It’s also not a good look. “Talk to the average person in the street about horseracing, they’ll probably either use the words ‘cruel’ or ‘fixed’,” says Hord. Indeed, Channing says there continues to be a perception that the sport is a “little bit dodgy”, and he questions why more isn’t made of huge gambles that come off, or nearly come off, after, for example, previously running a horse over its unpreferred trip to conceal its true ability.

“Suddenly they punt it first time in a handicap and it shows its true form and wins easily. People tend to think that’s part of the buccaneering spirit, that’s the fun of the game and they got one over on the bookies.” A case in point was a gamble involving three outsiders in multiple bets on 7 February that could have cost the industry millions of pounds had the third not been beaten. Channing suggests betting coups and the Viking Hoard case “chips away at the sport” but he follows up by saying: “I think the sport is a lot cleaner than it used to be – by a long way.”

Summer nights

For racing fans, attention turns to March’s Cheltenham Festival, the highlight of the jumps season. Then it will be the Grand National a few weeks later. Ironically, last April’s Virtual Grand National was easily the most watched race of the year as 4.8 million viewers tuned in to watch and bet on (a maximum of £10 win or £10 each-way) a simulated version, such is the public’s affection for the famous steeplechase.

Racing, for now at least, seems set to continue behind closed doors. The hope, however, is that racegoers can make a welcome return in the summer, which is the most profitable part of the year, obviously subject to the vaccine rollout. In fact, Chester Racecourse has unveiled plans to administer rapid tests for up to 5,000 racegoers each day at its three-day May meeting if lockdown restrictions are eased by then. And come the autumn things should be clearer regarding the degree to which racing and the gambling industry will be impacted by the gambling act review.

Channing is on record as saying the review is “an existential threat to racing”. Strong words indeed. “I haven’t changed my mind on that,” he tells EGR Intel. “I actually think it is similar to Covid – it’s very serious for the industry and people are very slow to realise how serious.” Star Sports’ Keith also urges caution: “I don’t feel that negative and that horseracing is going to end but it might not be the horseracing that people love.”

Moreover, he worries about the determination of the “bookie-haters”, as he refers to them, to push for more regulation. “The baying crowd will never stop. When lots of silly rules come in, they will want more. They are costing many people their jobs. More and more regulations mean there will be less bookies and less choice, less BOG, less concessions and less competing on prices… Bookie-haters are costing the economy money.” For bookmakers and the so-called Sport of Kings, there are plenty of obstacles still ahead.