08 Jun 2006 Pre-2014 Releases

Four years ago when I arrived at the British Horseracing Board (BHB), I observed a team in almost total disarray! Results had been poor and the prospects of success were limited or non-existent. How things changed… but that is more than enough about the English Cricket team!

The purpose of today is to reflect the on past year in British Racing as well as looking back at my time at BHB and setting out some other issues ahead I believe the industry must tackle if it is to secure a healthy sustainable future.

The popularity of British Racing is unrivalled in modern times – however the challenges confronting British Racing remain significant.
The evolution from the Jockey Club initially to the British Horseracing Board culminating in the formation of the British Horseracing Authority is almost complete – and it needs to be if the challenges are to be confronted and conquered.

Today is not a reminiscence of what could have been or an opportunity to validate BHB’s strategic approach to racing achieving financial independence by ultimately realising its commercial aspirations – what it is about is identifying opportunities that racing must take if the prosperity we all desire is to be satisfied.

And later I intend to recognise and express my profound appreciation to those whose contribution, support, vigorous discussion and occasional rancour ensured my time as Chief Executive of British Racing was extremely enjoyable, albeit at times frustrating.

But first to a review of 2005 – 2005 will be remembered by BHB as one punctuated with legal challenges to its commercial policy as it adjusted to the repercussions of the European Court of Justice (ECJ) decision in November 2004. Once it was followed by the UK Court of Appeal in July 2005, it had the effect of invalidating the use of pre-race data by British Racing as a basis for funding the sport as a replacement for the statutory levy mechanism.

The illogicality of the ECJ decision will always rankle with me. However, racing must live with the consequences and the most significant was to re-establish a funding mechanism that provides a sustainable financial driver for the sport to continue its era of prosperity.

As the Chairman has said, the ECJ decision precipitated the formation of the Future Funding of Racing Review Group, chaired by Lord Donoughue. The result of its exhaustive analysis was that the only sure-fire basis for funding the sport in the future was reinstatement of a statutory levy system.

While I agree that at this point in time a levy represents the best option for British Racing, and I express my gratitude to the Minister for Sport, Richard Caborn, for his support, we are back at square one in terms of ensuring a contribution is made by overseas bookmakers. In particular Irish betting operators who have harvested great profits over many years with scant regard for remunerating the sport that has enabled them to build their businesses – for without British Racing their businesses would not have flourished.

I am bemused by those who argue that the ECJ was a great victory for William Hill. The beneficiaries are the international free-riders who have built businesses on the back of British Racing. There cannot be equity in the ECJ decision when those whose very livelihood is contingent upon the viability of the sport in this country pay nothing for the privilege of betting on it.

BHB sought to address this issue – those who deride BHB for attempting to redress this anomaly show themselves as anachronisms whose primary inspirations are survival and mediocrity.

It was Peter Savill who originally advanced a package of picture and intellectual property rights as the commercial solution to the funding dilemma – sectional interest prevailed in racing throwing away this golden opportunity. This combination of rights is the correct path racing must ultimately tread but only when it has secured the intellectual property right of pre-race data to complement the vision rights that are seemingly unchallenged in terms of being an asset of racing’s constituents.

British Racing’s revenue stream from overseas betting operators has now all but disappeared and, in the light of the ECJ verdict, BHB suffered a further setback in a legal dispute with attheraces which was heard in September 2005. Justice Etherton agreed that BHB still had a right to expect payment for the use of the database but then, in my view wrongly, said that this was no more than the cost of production plus a small percentage.

I put to you that this argument is utterly refuted by the simple point that, if price is restricted in such a way, there is absolutely no incentive for BHB to attract new customers, because growing the market does not lead to any increase in revenue and the only effect is to reduce the cost to each of those who receive a financial benefit from using the data. I believe that a judgement devoid of commercial reality should not be left unchallenged and the Board is similarly convinced.

Before the ECJ ruling, British Racing was on the precipice of revolutionising the long-term revenue stream for the sport and securing the future of the sport.

To those critics who continually whine about the costs incurred by BHB during the past five years I point out that we have generated £64 million through data licensing agreements. This was money from sources completely new to British Racing – genuine additional income to the sport. A proportion of this income, inevitably, had to fund the comprehensive and wide-ranging legal and professional work which had made that new income possible in the first place.

These costs, in addition to those incurred in BHB’s lengthy and vigorous defence of British Racing against the attacks of the Office of Fair Trading (OFT), amounted to £16 million over that five-year period.

I make no apology for them. After deducting bad debts of around £9 million, the bottom line is this: BHB’s commercial policy delivered a net benefit to the sport of approximately £38.6 million over five years. Without BHB this would have been virtually zero. In the final analysis, £38.6 million is a substantial number that ridicules those who attempt to denigrate BHB’s commercial strategy, irrespective of whether it proved to be sustainable.

In January 2007 BHA will assume the role of governing authority for British Racing; I encourage its Directors to deliver leadership based on principles of impartiality, accountability and importantly a genuine affection for racing, taking into account racing’s most significant attributes, prestige and history, along with a dose of commercial reality.

They must restore the pre-eminence of what is best for British Racing in their adjudication and resist capitulation against outside forces which peddle a policy line inconsistent with what is best for the overall good of racing. If this means challenging competition authorities, parties driven by a sectional agenda or, for that matter, anyone that seeks to unravel our great sport for no intrinsic gain to racing, then I implore them to do so.

Racing must continue to redefine itself, concentrating on expanding a revenue basis of its own rather than relying upon the heavy dependency of the profit margins of the British betting industry.

The Modernisation of British Racing (MBR) provides a template for BHA and its constituents to strive towards securing new revenue streams that generate greater revenue from a broader range of sources. I urge people to look behind the recommendations and understand the principles of maximising the horse population, utilising the resources of racecourses, capitalising on the burgeoning growth of horses in training and the pronounced public interest by the consumer.

A prominent feature of MBR was instilling greater competition within the allocation of fixtures. The objective was to invigorate a process that ascribed permanency to many fixtures which fail to generate significant funds for the sport whether in levy generation, attracting on course attendance, sponsorship or corporate hospitality or for that matter on any other basis.

The more commercially focused and cash generative racecourses must be given an opportunity to expand and improve their fixture list. Depriving them from doing so is depriving the sport of much needed revenue.

Ascot, for example, has invested £200 million in its future and to confine its fixture list to its current limitations makes it impossible for them to achieve their commercial ambitions, ultimately impacting on the promotion and economic viability of British Racing and in time the possible unravelling of the solidarity, competitive balance and inter-dependence referred to previously.

This is not a clarion call to promote the interests of big racecourses to the detriment of the small, but to liberate the commercially-focused racecourses that successfully and astutely plan and invest in their business, regardless of their size.
In addition, the distribution of levy funds must undergo a transformation as it provides little incentive for the more commercially astute racecourses to expand their horizons.

It is a mechanism that ensures that the ownership of a fixture is an impregnable fortress. Furthermore, I have always advocated that the distribution of levy should be proportionate to the level of betting turnover each racecourse generates.

There are those who suggest it should be proportionate to the betting margin for each racecourse. However this is incompatible with the principles of promoting excellence and encouraging meritocracy. If gross profit was the only motivation there would be utter devastation of the race programme with racecourses rushing to put on handicaps for moderate horses.

There may be an opportunity for a new hypothecation based on turnover to contain an element of gross margin, but I would argue that it must be a relatively small percentage.

Turning to the positives of 2005, Racecourse attendances had exceeded the six million barrier in 2003 and 2004 but dipped to 5.9 million in 2005, although I am confident that this was all attributable to Ascot’s closure. We can be pleased with the retention of our audience and I look forward to attendances elevating beyond the 6.5 million barrier, just as we increased them from less than 5 million in the early years of the decade.

The expansion of horses in training continued with a 3.4% increase, exceeding 14,000 horses for the first time in living memory. This statistic is accompanied by an increase of 1.5% in the total number of owners with in training at 2005 levels reaching 9,400.

I am pleased that the strenuous efforts and compelling arguments put forward by the VAT Registration Working Group capably led by Jeff Ennis MP succeeded in our representations to Government for the extension of the VAT Scheme. The benefit of the Scheme exceeds £20 million per annum, in addition to enabling £11 million in sponsorship income for owners.

British Racing is indebted to Jeff and his fellow group members in achieving an outcome that will enhance the viability of racehorse ownership in this country and underpin thousands of jobs.
The sport remains committed to the implementation of a variety of recommendations formed by Lord Donoughue in his Stable and Stud Staff Commission.

BHB formed a steering group during 2004, chaired by Baroness Mallalieu, with responsibility to oversee the adoption of many of the recommendations. There is much more work to be done and any delay in implementation is not through a lack of diligence by Baroness Mallalieu’s group.

However I am afraid that the delay is more attributable to the sort of foot-dragging that is symptomatic of a sport that at times is in self-denial about the fact that it needs to radically change its ways, particularly in relation to the unsung heroes of the sport, the stable staff.
The impetus for change should be considered an imperative as without change we will not be able to realise our objective of expanding the fixture list.

The most critical issue that warrants our urgent attention is solving the pension dilemma. It is patently not right that in the 21st Century stable staff is shackled with a pension scheme that invests the grand sum of £400 per annum – this equates to an increase in the State pension for a lifetime employee of an additional £11 per week. Insulting and derisory are words that spring to mind. This is an area in which I hope that BHB and BHA will tackle with gusto.

The augmentation of the British Pattern in recent years has been a positive step, yet there are signs that there may be an overcorrection in that we have too many Pattern races which could lead to depletion in the international recognition of British Racing.

There is no doubt in my mind that a comprehensive evaluation of the International Pattern would lead to major change and a reduction in the number of Group and Graded races – British racing and breeding would not be immune from an analytical review but ultimately it would be significantly benefited as the many other countries would suffer a severe reduction in the number of Pattern races they conduct.

A solution that I passionately advocate is the formation of a new category of events, designating them as Super Group 1s to distinguish those events truly deserving of recognition as pre-eminent events on the international calendar.

Make no mistake British Racing is the loser if there is a continuation of the unabated expansion of the Pattern on the international front. We should take the lead and drive a programme of reform before the prestige of our top events is tarnished by association with countries who patently do not belong in Part One of the International Cataloguing Standards.
The sale of the Tote has been a preoccupation of Racing for some six years. At the inauguration of the sale process British Racing formed the Shadow Racing Trust which we had hoped would ultimately assume ownership of the Tote once it passed into Racing’s hands. Again European authorities have intervened and we have been compelled to look at alternative ownership models to achieve the aim of securing the Tote in Racing’s interests.

The acquisition of the pari-mutuel monopoly (and its property portfolio) is a gilt-edged opportunity for racing to invest in a revenue stream that unquestionably has failed to deliver the right result for racing throughout its 78 year history. I would disregard the threats of those with a vested interest in preventing the sale of the Tote to racing interests and who cite vertical integration as grounds for not doing so. British Racing is the most liberalised, competitive and diverse racing jurisdiction in the world – allowing scare-mongering to succeed is not a prospect racing should countenance.

The only threat to racing in not assuming “ownership” of the Tote is the onset of discord within racing – I implore those with the financial capacity to complete the task of bringing the Tote under the direction of racing to forget individual interests and forge a partnership that provides racing with a betting medium that has the capability to significantly increase an ailing revenue stream.

Finally the Thank Yous – we have yet again enjoyed the support of the All Party Racing Group (APRG), jointly chaired by MPs Jeff Ennis and John Greenway. The APRG has been an integral ally throughout many battles that British Racing has endured. My sincere thanks also to Richard Caborn and his team at the Department of Culture, Media and Sport for their dedication to racing’s interests over recent years.

On a personal front I extend my sincere gratitude to the expert and committed team that comprise the staff of BHB. They are incomparable in terms of their loyalty and output, their spirits are unflagging, their minds as sharp as ever and they have contributed greatly to the success of British Racing during difficult and uncertain times. The current Executive team is an invaluable asset to racing, they hold my deepest respect and I hope you cherish the “asset” as much as I do.

I am extremely privileged to have had the opportunity to work under the guidance of Peter Savill and Martin Broughton. Peter was an inspiration, at times difficult to work with but always willing to listen to a differing view. However his boundless energy combined with unstinting loyalty and acute and decisive intellect are characteristics that best represent Peter in my eyes. Thank you for the opportunity but more importantly thank you for being a great friend.

Martin has a distinctive style, no less effective but certainly less demonstrative. I have appreciated his unflinching support, generous counsel and razor sharp mind and like his predecessor I regard him as a friend.

To the many Directors who have served BHB with commitment and drive thank you for the vigorous although often protracted debates, your contribution is often under-appreciated but certainly not by me. To the many organizations that represent the various and numerous interests in racing thank you for the generous support and the camaraderie that exists amongst those entrusted with the responsibility to make our sport an even greater spectacle for people of all backgrounds to enjoy.

Finally and most importantly to my wife, Victoria and sons, Tim and Lachie, thank you for the sacrifices you have made in allowing a selfish indulgent individual to live his dream by taking the helm of British Racing. Anything that I achieved in the role was only possible through your unflinching support. I am forever appreciative.

In closing I would like to add that those who have worked and associated with me during the last four years know that from day one I have passionately maintained that British Racing is the best in the world, notwithstanding its chronic under-funding and the occasional internecine conflict. Whilst British Racing’s pre-eminence is unchallenged, despite best endeavours, the most fundamental problem confronting the sport, securing appropriate funding, remains unresolved.

In closing I extend my best wishes to those who participate in British Racing and convey my thanks to you all for your assistance. I wish everyone involved within this great institution the very best in achieving their aspirations for the sport and deriving as much pleasure as I have enjoyed as Chief Executive of BHB.
For those wondering why I have chosen 30 June to leave the BHB’s employ – I regard it as a tactical retreat in the unlikely event that England wins the World Cup!