I am quite struck by the level of interest in the in-coming Chairman of the Football Association. The first three pages of the Daily Telegraph‘s sport section are devoted to him and what his plans should be for the future of the sport; and the same topic, incredibly in my view, was the subject of this morning’s Five Live phone-in. I know footie is die-in-the-ditch sort of stuff, but even so.
The next leadership of British horseracing is unlikely to gain such prime media positioning, of course, which in itself tells you part of the story about the scale of the job that is there to be faced. While the challenges before racing greatly exercise the minds of a few, the rest of the country sees them as a little local difficulty in a far away land of which they know pretty much nothing. Part of the problem is that Racing continues to see itself as terribly important; while (whatever huge vote AP McCoy got on Sunday – and good luck to him for it) the public, and therefore the bookmakers who make money off what the public finds of interest , increasingly don’t.
This changing world provided for much of the content of William Haggas’s Gimcrack speech last week, even if all the headlines were, inevitably, made by his comment that racing had been ‘raped’ by the bookmakers for fifty years. Whatever the interest grabbed by one emotive word, though, I thought some other things he said were much more pertinent.
Not to write out vast sections of the speech, the lines that jumped out at me were, first, this one:
“Betfair’s two founders, Andrew Black and Ed Wray are racing people but now their company has been floated, there is no guarantee that the new Board will want to be helping Racing in any way, shape or form.”
And then these:
“It is quite possible that, in a few years time, betting shops will not exist in their current form as there is a likelihood of being able to watch a race anywhere in the country or probably the world on your mobile telephone and be able to have a bet on it at the same time. 2012 brings in digital television for the whole country which changes the landscape and will open up further opportunity for technology to bring everything to our fingertips. It is a frightening thought but an exciting one at the same time.“
The first of those comments is one that I have been making to Racing for the last number of years, urging them to take the hand that has been extended by Betfair over its first decade and recognising it as one of friendship rather than seeing it as a clenched fist. I have repeatedly tried to get them to see that when we started Betfair, we did so predominantly as a group of racing people; but that, today, those in key positions have less reason to feel warm and fuzzy about the sport – still less to take the time to understand the quirks of its politics.
I used to try to illustrate the point by letting them know, if they were not aware, that the Chief Executive was American (as indeed is the CTO); the chief commercial man, while English, has his sights set internationally; and the chap in charge of operations is German. As such, within the Executive, they had natural allies in the shape of the finance director Stephen Morana, Legal Director Martin Cruddace, and me. It was always a source of vague amusement to me that I should be seen by many in racing to be a thorn in the sport’s side, when in fact Betfair would wheel me out to talk to them largely because no-one else had any interest in banging their head against that particular wall.
I’m now history; and Andrew has since then stepped down from the Board. So, aside from Edward Wray who continues to be chairman, only Stephen and Martin remain as people you would describe as ‘friends of racing’ – very much, therefore, a minority. Given that they remain an influential one, there may still be a small window: while the ‘friends of racing’ within the company have diminished over recent years (while Racing has tilted at windmills), the horse might not (quite yet) have bolted. How nice it would be nice to see the in-coming Chief Executive of the BHA do what he can to salvage the position he has been left, before they go as well. My hope is that someone of Haggas’s reputation pointing this out may help some others see sense, and that 2011 finally brings an end to the absurd histrionics between Racing and Betfair which have characterised the relationship for so long.
A vain hope, you may say. And if you consider a conversation that springs to my mind as a result of Haggas’s second comment, relating to the changing world of technology, you may find support for your argument.
It took place last month, at the Peter O’Sullevan Charitable lunch, when I interrupted the ROA’s Paul Dixon in conversation with a former director of the BHA. They were talking about the sale of the Tote, and the ins and outs of what they said are not really relevant, except inasmuch as we moved on to discuss how betting might be conducted on racecourses in the future.
It was a topic that had been the subject of many conversations I had had with people around racecourses in Britain as, during the first half of this year, I pursued what I had dubbed my ‘Racing 2020 project’ – so called because it asked the two questions, “how do you see racing in a decade from now?” and, “what is your vision for the future of the sport?” (Can you see what I did there? I should clearly have been a headline writer for the Sun.)
Of the many ideas being mooted, one that I suggested racing might work on – perhaps even with a technology-driven betting organisation, if anyone can think of one – was the development of wifi clouds above racecourses which automatically logged people using PDAs into the course’s own portal, which then provided a means of betting. With the explosion in iPhone and Blackberry ownership in the last two years, and with the demographic of race-goers almost certainly having a significantly higher level of such ownership than the general public, it seems foolish to me for racing not to be developing solutions for this now, rather than turning to address it in a few years’ time, when someone else has beaten them to the punch (whereupon everyone can start whinging about the fact that they don’t own the product).
The answer I got was, “Not everyone owns an iPhone.”
I remember how Betfair was dismissed in similar terms between 2000 and 2002 – not quite with the words ‘not everyone uses the internet’, but frankly not far off. Looking back, it is hard to argue with the view that had Racing seen where Betfair was going when we were looking for investment, then not only would there be no funding issue, but a great deal of time and energy (not to say money spent on legal fees) would have been saved and used more effectively for other things.
To be fair, it was never a slam-dunk; and Racing at the time had plenty on its mind. But missing an opportunity is one thing; compounding that error by forever harking back to it is quite another. Nic Coward’s first task when he took the job should have been to get out of all the arguments that had bogged racing down for years, but unfortunately (for everyone) almost the first thing he said was about the need to get more money out of Betfair. As a result, racing has wasted four more years than it needed to.
His successor will, perhaps, have better luck with timing, in that the Levy Board consultation will just have been completed by the time that he (or she) arrives. If racing loses the ‘exchanges must pay more on the grounds that its customers look like bookmakers’ debate again, as I think it will, let’s hope the new CEO grabs the excuse finally to lay the argument to rest. That way, racing can get on with attempting to shape its future, instead of trying in vain to correct the mistakes of its past.
Another enjoyable and thought-provoking blog.
Do you think there will definitely be another CEO in the short term for The BHA?
They seem rather top heavy (and middle heavy, and bottom heavy, to tell the truth) for an organisation with limited scope beyond the regulatory.
Would you be prepared to give your view on some of the names already suggested (including yours!) to fill the role?
KUTGW
Simon
The tracks are making a fortune out of in running players… little chance of them supplying everyone else with free wifi! There used to be free wifi in the bar at Folkestone but it appears to have gone so as not to upset those paying 20k a year for boxes.
Totally agree with everything else you’ve written. The chance of the BHA taking any notice seems remote unfortunately. I mean, I see some of the stuff Paul Struthers has written on twitter and he seems to have genuine antagonism for Betfair. Quite incredible from someone in his position (if it’s all tongue in cheek then he’s still being naive writing it in my opinion).
Trigger Happy – yes, I take your point; but bear in mind that come 2020, everyone will be 3G connected (5G?) and it’s not a question of providing free wifi so much as ensuring that the way that people connect at that point (indeed, in the years before that) involves going through a portal which allows them to bet, which is owned by the course. There’s so much talk about how so many Tote outlets are not profitable, and how they would make more money turning them into points at which beer is sold… So, let some of them sell beer, but make sure you still provide a means for people to bet as is currently the case. Mine may not be the solution, I grant you that; but my main point in suggesting it is that better minds than mine who work for tech-focused companies could provide them, if the people running racing talked to them about the future rather than the past.
SImon – I suspect that there will be, although that is not necessarily the same thing as thinking there ought to be. I think that most of the functions performed by the BHA should be performed by other bodies which already exist, and that the role of the BHA (and the FA, in fact) should be mainly ambassadorial for the sport, as well as being the guardian of the rules. As to the mooted candidates, I haven’t heard many to be honest, but I think it would be a serious mistake to take someone who is already in the racing hierarchy, for the reasons I suggest in the post. And me? If anyone is offering odds on that, I’d lay it in size… I can’t think of anyone off the top of my head who racing are less likely to approach!
Mark, you keep on skirting around the levy question for me (that is, in the posts I’ve read). What is the alternative to Betfair paying more? There is a funding gap that needs to be filled. How would you fill it?
I used to work for a fixed odds bookmaker which de-prioritised racing (it only contributed ~15% of turnover and even less of margin) because its strength lay with other sports (particularly in:play)…so I take the point entirely. I’m just genuinely intrigued about how you would fill the funding gap…
When I observed – on my first visit to Peterborough Road – that ‘not everyone uses the internet’, I never in my wildest dreams imagined that 10 years on you would employ as many as you do to take instructions over the phone.
I am pleased for all shareholders that the board were open minded and reviewed their internet-only policy.
@Stu,
I can’t speak for Mark, but I’d ask what you mean by the phrase: “there is a funding gap that needs to be filled”. That phrase usually gets trotted out by Racing to demand more money from the Betting Industry, but part of the problem is the inability of the people who purportedly lead Racing to see the wood for the trees. It’s insane to look at that in isolation. Racing’s income comes from a whole variety of sources, including picture rights, admission to courses, sponsorship etc.
It’s total bollocks to suggest that you shouldn’t look at any other part of Racing’s finances when asking the question posed by the Levy legislation: “what are Racing’s reasonable needs?”. While I’m not suggesting that it’s any easier than getting millions more from the betting industry, it’s indisputable that any amount of “funding gap” could equally be bridged by increasing any of Racing’s income streams, or by becoming more efficient and reducing costs, as most industries have done post recession.
That’s not just my opinion by the way. The Government Appointed Members of the Levy Board commissioned Deloitte to tell them if Racing’s demands for £130m-£150m of Levy were reasonable or codswallop. In case you haven’t seen it, the answer was resoundingly “codswallop”. You can read a summary here of their view of Racing’s demands, points 1.17 to 1.37.
http://www.culture.gov.uk/images/publications/HBLB_Annex_C.pdf
Point 1.25 was the most damning in the original, and it’s been toned down for the summary, but it’s still scathing: as Deloitte point out, you can’t say anything meaningful about “Racing’s reasonable needs” if you don’t consider 90% of the sport’s income and 87% of its costs.
In any event, Racing’s whole approach is misguided (and potentially disastrous) regarding betting. The only thing you’ll hear its “leaders” say is that they want a “fair” return to the sport – which in English means they want to be paid more per pound bet. That would be fine if the amount of betting on horse racing never changed – it’s obvious then you’d want to maximise margin to maximise profit. Unfortunately the amount being bet by customers on Racing is in decline, and has been globally for decades. This is hardly surprising – betting on Racing peaked in popularity when there were no alternatives: no online poker, minimal betting on football, tennis or other sports, no online casinos and no FOBTs.
Racing’s problem is that people are spending less betting on its product. If sales of something are in decline then the very last thing you’d do is look to keep profits up in the short-term by increasing the cost of it, because pretty obviously that will hasten the rate at which volumes decline. That’s basically the lesson that no one in Racing globally seems to have much interest in learning. In the last decade Racing’s income from betting has decreased in the US, Hong Kong and Australia – only one of which has exchange betting, and then with a negligible share of the market. Yet in the UK, where people who haven’t given it much thought think Betfair is somehow to blame for a “funding crisis” the Levy is higher than it was 10 years ago.
Look at what they’ve done to address declining amounts being bet in the US tote pools: increase the takeout! It’s funny when you read comments about betting exchanges possibly being licensed in the US, and wondering how the US could possibly think that allowing a low-margin way of betting would be a good idea. It’s because they’ve tried shafting the customers with poorer and poorer value betting, and the customers have voted with their feet.
To be fair to Mark, he has actually suggested what Racing should be doing to improve its finances: find ways of making betting (with operators who pay Levy) more attractive to customers. Having excellent on-course WIFI that steers punters to a Racing-controlled betting portal would be an obvious one that Mark did suggest recently. Accepting sponsorship only from Levy-paying betting operators would be another trivial improvement if Racing really was United. After all, Racing looks pretty stupid moaning about offshore bookies not paying Levy, when it’s responsible for directing the betting public there in the first place.
Anyway, I don’t hold out much hope for the new CEO being any brighter than the bloke he’s replacing. I predict that one of the requirements for the job will be “must blindly blame Betfair for all Racing’s woes”. Firstly so that the new boy will fit in with the rest of the team, and secondly because it’s the perfect excuse for failure. If you run the sport into the ground by incorrectly assuming that Betfair is the problem, spend millions on a wild goose chase trying to get more money out of an organisation that only made £18m profit last year, and less than a third of that on Racing, then as long as you are unwavering in that message you can then blame Betfair, rather than your own stupidity when it all ends in tears.