BHB AND OFT REACH AGREEMENT ON HOW RACING SHOULD BE MODERNISED

10 Jun 2004 Pre-2014 Releases

British Racing’s commitment to modernisation has taken another major step forward with the announcement by the BHB today that it will be implementing a wide-ranging series of changes to the financial, administrative and governance structure of racing outlined in a 42 page document entitled “The Modernisation of British Racing”.

These changes will have a dramatic effect on British Racing. It is anticipated that in 2006 data income will grow from £110 million a year to a projected £140 million; that prize money will grow from £94 million a year to a projected £125 million; and that annual racecourse attendance will grow from 6 million to a projected 7 million. Punters, spectators, racecourses, owners, trainers, breeders, jockeys, stable staff and bookmakers will all be better off as a result of the modernisation of the sport.

The BHB has undertaken to provide commitments to the Office of Fair Trading (OFT) that reflect these changes and the OFT has indicated that it proposes to accept these commitments, subject to a short period of consultation, and close its investigation without the BHB or the Jockey Club having been found to have breached competition law.

The Modernisation of British Racing represents the latest chapter in the process of modernising the sport that began in the early 1990s and has, since 1998, accelerated following the introduction of the Financial Plan for British Racing, the Future Funding Plan, the Racing Review and now The Modernisation of British Racing.

It is anticipated that the proposals contained in The Modernisation of British Racing will be implemented by 1st January 2006.

The Report recommends seven key changes to the structure of the sport:

(i) the separation of the governance and commercial functions of the British Horseracing Board (BHB);
(ii) the restructuring of the BHB Board;
(iii) changes to the management of racing’s commercial interests;
(iv) changes to the method of allocation and distribution of data income;
(v) the establishment of a prize money agreement between racecourses and the recipients of prize money (owners, trainers, jockeys and stable staff);
(vi) the introduction of greater competition between racecourses for fixtures;
(vii) the modernisation of the Orders & Rules of Racing.

BHB Chairman Peter Savill, who led the development of The Modernisation of British Racing, said today:

“This agreement with the OFT is a victory for common sense. We have preserved a structured fixture list under the BHB’s supervision; we have ensured the future of Jump Racing by persuading the OFT that it should be treated largely as a different sport; we have maintained the right to sell our data centrally; and we have preserved the crucial sporting rules which enable us to govern the sport and establish a sporting structure that supports the integrity of the sport and the development of the breed.

“At the same time we are happy to split the BHB’s commercial and governance functions, to introduce more competition between racecourses for fixtures, and to enable racecourses and the rest of the industry to be involved in the central selling, collection and distribution of data income.

“Everyone connected with the sport will be better off as a result of the modernisation of British Racing.”

Notes

1. Following the joint notification of the Governance Agreements of British Racing by BHB and the Jockey Club in June 2000, the OFT in its Rule 14 Notice of 8th April 2003 provisionally concluded that some of the arrangements relating to British Racing constituted an infringement of Chapter I of the Competition Act 1998. BHB, in its representations and in other submissions and in its evidence, has denied, and continues to deny, that there was or is any such infringement.

2. The Executive Summary from The Modernisation of British Racing document is attached. The full document is available at:

http://www.britishhorseracing.com/inside_horseracing/about/reports.asp

EXECUTIVE SUMMARY

1. The ‘Modernisation of British Racing’ is the latest chapter in the process of modernising the sport of racing that began in the early 1990s and has, since 1998, accelerated following the introduction of the Financial Plan for British Racing, the Future Funding Plan, the Racing Review and now The Modernisation of British Racing.

2. The report proposes seven key changes to the financial, administrative and governance structure of the sport:

(i) the separation of the governance and commercial functions of the British Horseracing Board (BHB);
(ii) the restructuring of the BHB Board;
(iii) the central selling of data by a commercial company (BHE) rather than by BHB;
(iv) changes to the method of allocation and distribution of data income;
(v) the establishment of a prize money agreement between racecourses and the recipients of prize money (owners, trainers, jockeys and stable staff);
(vi) the introduction of greater competition between racecourses for fixtures;
(vii) the modernisation of the Orders & Rules of Racing.

3. The BHB will retain its governance functions, relinquish its commercial functions and take over the appropriate functions of the Levy Board when it is abolished in 2006. The Jockey Club’s BHB directors have recommended to the Jockey Club that discussions should take place in 2008 between the Jockey Club and the BHB about merging governance and regulation.

4. The BHB Board will be restructured to reduce shareholder members (ICHL, Jockey Club, RCA and ROA) from nine voting seats to four (one each), and to add the NTF, an additional independent and an additional Executive in order to create a more independent, less sectional Board.

5. Ownership and control of BHB Enterprises, BHB’s commercial arm, will be transferred from the BHB to the industry and renamed British Horseracing Enterprises (BHE).

6. BHE will enter a 10-year licence agreement with BHB to commercialise the content of the BHB database and will license its use, ensure compliance, collection and audit of all use made and pay out all income according to an agreed formula.

7. All data income for Racecourse Fixtures (see point 14 of this Summary) will be distributed under an agreed formula whereby the apportioned costs of governance, regulation and commercial activity are top-sliced from gross data income, an Incentive Fund is set up to encourage racecourses to contribute their own money into the prize fund, with the balance hypothecated and distributed to racecourses in proportion to the amount of betting turnover generated by each fixture.

8. In return for the distribution of hypothecated income to racecourses for Racecourse Fixtures, racecourses will contribute 75% of all data income received from Racecourse Fixtures to prize money up to a threshold of £80m at which point racecourses shall be obligated to contribute 50% of all data income received from Racecourse Fixtures to prize money.

9. All data income for BHB Fixtures (see points 15 and 16 of this Summary) will be distributed in full to those courses operating BHB Fixtures, after top-slicing the apportioned costs of regulation, governance and commercial, in accordance with the amount of betting turnover generated by each fixture.

10. Fixture Incentives, Abandonment Payments, Divided Race Fund and Basic Daily Rates will all be withdrawn upon the abolition of the Levy Board, to be replaced by an all-encompassing data payment to each course.

11. With the expansion of the Fixture List and the better utilisation of the horse population through a reduction in maximum field sizes and other measures, it is projected that data income will increase from £110 million in 2003 to £140 million in 2006 and prize money is projected to increase from £94 million in 2003 to around £125 million in 2006.

12. The BHB will expand the Fixture List in 2006 to approximately 1500 fixtures after introducing narrow-band handicaps, initially for Flat racing only, and after limiting field sizes, other than in special cases and at certain times of the year, to fourteen runners.

13. The BHB will set up two separate Fixture Matrices – one for Jumping and one for the Flat – and will establish an appropriate number of Flat and Jump fixtures on a week-by-week basis throughout the year, based on the needs of the horse population.

The BHB believes that Flat and Jump Racing have different consumers and in general should be treated as separate branches of racing. The Flat Matrix will include Regional Racing and All-Weather Racing. Turf and All-Weather racecourses will compete against each other within the Flat Matrix. Other than in a very few instances, Flat and Jumping courses will not compete against each other in the fixture allocation process.

14. All fixtures will be divided into ‘Racecourse Fixtures’ (1203) and ‘BHB Fixtures’ (297). Racecourse Fixtures will comprise all 2004 fixtures except Regional Racing Fixtures and BHB leasehold fixtures which were granted on an agreed leasehold basis. Racecourse Fixtures will effectively be Class A fixtures.

15. BHB Fixtures will comprise the rest of the fixture list, over half of which fixtures will be created for the 2006 Fixture List for the first time, and will effectively be Class B fixtures. The large majority of BHB Fixtures will be Flat fixtures.

16. Racecourses will bid for BHB Fixtures competitively against each other for a 3-year lease with the course willing to bid the most prize money contribution winning the bid.

17. New racecourses will be defined as those courses that have never operated any fixtures. They will receive preferential treatment in the acquisition of up to 16 BHB Fixtures since they will only be able to acquire Racecourse Fixtures over a period of time.

18. A racecourse will, in future, be able to more easily improve its fixture list by:
• moving 10% of its Racecourse Fixtures every three years to other Racecourse Fixture slots;
• moving a percentage of its BHB National Fixtures every three years into Racecourse Fixtures;
• bidding for BHB Fixtures;
• swapping, trading or purchasing fixtures.

19. The new fixture allocation process ends ‘In Perpetuity Protection’ of a fixture and replaces it with ‘Three Year Tenure’.

20. The BHB will establish a Development Fund which will be used by the Racing Department to incentivise racecourses, primarily to put on races which are necessary for the development of young racehorses and the breed.

21. Certain Orders of Racing will be dispensed with including the 50 mile rule, minimum entry fees, restrictions on the number of handicaps, sellers and claimers that a racecourse can programme and restrictions on valuable races clashing with Pattern, Listed or other valuable races.

22. Minimum values will be replaced by meritocracy bands. In future, the BHB shall set the sum of the lower levels of meritocracy bands in totality at no greater than the total amount of money that must be contributed to prize money, thereby leaving racecourses free to decide how much they wish to contribute to prize money from their own funds.

23. Field sizes and the number of races that a racecourse can run shall be restricted so that the BHB can ensure that a Fixture List of around 1500 fixtures can be programmed.