08 Jan 2002 Pre-2014 Releases

Mr Chairman, President, my Lords, Ladies and Gentlemen. W?_x0019_ve come a long way these past four years. It was in this very week in 1998 that the British Racing industry set out on the path towards a new financial structure where it could control its own destiny and shape its own future.

The launch of the Financial Plan for British Racing was a watershed. It marked the first time that we clearly identified the cause of our industry’s financial difficulties and the steps needed to solve those problems.

The main cause stood out like a sore thumb: while other countries were getting between 5%-15% of betting turnover back into the sport, we were getting a paltry 1.2%. Look no further for why owners lose 80% of their money; why the training profession barely breaks even; why most breeders do it for love rather than money; why racecourses get a return on the value of their assets of less than 1.5%; and why many stable lads earn less than an unskilled agricultural worker.

For British Racing carries the stamp of many traditional British businesses – a great product but not enough money to invest in the business, not enough income to hire the right people; not enough revenue to market the product. And so, a business living on its history and tradition, relying on a long-established brand name while being overtaken by its younger, better-financed competitors who copy the product as best they can but improve the financial structure by changing the model.

The Financial Plan laid out the steps that were needed to restructure our industry. It called for the abolition of the levy, and its replacement with a purely commercial relationship between racing and betting. It called for the transfer of the Tote to racing. It called for a more equitable distribution of money between Government, bookmakers, punters and racing. And it called for racecourses to be allowed to develop their betting and gaming facilities on non-racedays.

All four goals required the help and support of Government and all four, in principle, have been achieved. It speaks volumes for the clarity and strength of our arguments but the Government also deserves our eternal gratitude for its grasp of the issues and its willingness to provide us with the environment for change.

Since 3 March 2000, when the decision to abolish the Levy and transfer the Tote to a Racing Trust were announced, the ball has been very much in our court. So far we have responded to the challenge, albeit with the anticipated hiccups that come with radical change. We have identified a clear commercial mechanism of pictures and data, which has received Government endorsement as the way forward; we have finalised the Go Racing deal; and, most importantly, we have agreed the Future Funding Plan as the way to bring our industry together with a clear agreement on the licensing of our rights and the division of our income. June 21st 2001 was indeed an historic day which I personally shall never forget. It is hard to admit that winning the Gold Cup in the afternoon with Royal Rebel was actually eclipsed by the satisfaction of concluding both the Go Racing Contract and the Future Funding Plan later that night, but it’s true. The Go Racing contract was the most complex, difficult and demanding negotiation I have ever been involved with, but it was the unique achievement of crafting an agreement between the many sectors of our industry, the Future Funding Plan, that gave me the greatest pleasure of all that day.

Since that date, the atmosphere within racing has changed out of all recognition. I believe that we are finally and truly one industry and I do not think you will ever again see the sort of infighting that had hindered our progress since time immemorial.

Outsiders of course think the racing industry is currently going through its most divisive era of all but only because outsiders make the grave mistake of believing that the betting industry is part of the racing industry.

It is no more part of our industry than it is part of the Premier League. It is a distributor of our product, sadly still our only retail distributor, but with the development of new media such as the internet and interactivity, a distributor finally getting some competition.

The betting industry has one objective – to increase the profit it makes from its customers. The definition of profit is the “excess of revenues over outlays and expenses”. In other words, maximise your income and minimise your costs”. Picture and data charges, and also the Levy, are costs to be minimised by the betting industry which means that the goals of racing and betting could not be further apart. Let no-one in Racing forget that fact.

The past twenty months have seen the betting industry in its true colours. First, it refused to make a single proposal as to how the levy should be replaced with a commercial mechanism. Then, it complained that BHB’s proposals were flawed despite the fact that BHB’s proposed commercial mechanism was the continuation of simulcasting to betting shops, a system that has been operated and effectively controlled by William Hill and Ladbrokes through SIS since the introduction of live pictures in 1987. But we proposed one major change. We proposed that we cut out the middleman, SIS, which had been making £30 million profit a year on turnover of £60 million, and sell our rights direct to bookmakers.

No wonder Hills and Ladbrokes didn’t like it. They own nearly half of SIS. For forty years, through the Levy and SIS, they and others have controlled our industry. Those days are now ended and we will decide the price of our product from 1st May 2002 when the RCA/SIS contract ends.

The current battle, being fought tooth and nail by the bookmakers, is about who controls the price of British Racing. The Levy system allowed them to control us through the Bookmakers’ Committee. Now they want to control us through the Confederation of Bookmakers Association. “Come and negotiate with us. We’re reasonable people. We want to see you all right. Trust us” they say.

But what they’ve really been saying the past six months to themselves is “We must keep control of the price and, if we all say we won’t accept their 2%, they’ll lose their nerve, rush to the negotiating table and then we can tell them what we’re prepared to pay and how we’re prepared to pay it”. In other words, the bookmakers would still control the price – and there wouldn’t even be statutory backing to force us to pay it.

Are we going to blow the opportunity to change the financial health of British Racing for the third time, having already blown it in 1961 and 1987? Have we got the bottle to stand firm this time? I hope so. For we have a good case and a strong hand.

Let me explain first why we have such a good case to support our charging structure. First, international simulcasting rates are generally 3% of turnover, but they can go as high as 9% depending on the quality of the race. We have been looking to charge just 2% for the first two years, rising to 2 ½ % in 2004.

Second, the betting industry are being given a tax cut of around £250 million by Government with the introduction of GPT, which has reduced the effective rate of tax from 6.75% to around 2%. They have spent 35 years telling us that they could not afford to pay racing more because their tax burden was so onerous; now that tax burden has been reduced dramatically, and they still want to pay no more than a pittance.

Third, the rate of 2% leaves bookmakers’ profitability from British Racing between 10-20% higher. So where is the justification for the claim that they can’t afford it?

Finally, let’s look at the charges for British racing compared to the charges for other betting products. William Hill and Ladbrokes did not complain when SIS set the price at £4,500 for greyhounds, numbers and foreign horseracing – representing just 25% of bookmaker turnover.

But they all screamed the house down when we set the price to small bookmakers at £3,000 for 65% of their turnover. Don’t tell me their objections to our pricing structure are based on commercial grounds. They are based solely on trying to pay as little as possible and keep control of the price.

Now, let’s look at the strength of the hand we have to play in the coming poker game with the bookmakers. We expect a favourable levy settlement in a couple of weeks’ time from the Government, many millions better than ever before. That would be the first blow for the bookmakers.

Then, they will have to decide whether to sign a BHB Data Licence or not by 1st May because, if they don’t, they will be in breach of the current law of the land when they use BHB data. And we will not hesitate to take out injunctions to protect our assets.

They will also be faced with the fact that they will not be entitled to an offset of commercial charges against the Levy if they don’t have a Data Licence in place. In other words, they could finish up paying twice, to us and to the Levy.

Of course, they could tell their customers that they won’t take bets on British Racing but that wouldn’t do much for their customer relations.

These are all hard decisions that bookmakers, including the Tote, will need to make in the next few months. They had the chance to take advantage of our concessionary rates but many decided not to do so. Let them now decide whether they intend to operate without a BHB Licence and whether they are willing to pay twice for the product.

We have decided our rates and have no further decisions to make. We will continue to respond to enquiries from bookmakers; continue to offer licences for our picture and data on an open, non-discriminatory basis at the rates we have established; and continue to pursue all unauthorised use of our rights. That is the strategy I recommend between now and May.

I have little doubt that those who depend for their livelihood on racing support this position to the hilt. I have taken time to canvass many opinions and I have never known this industry so adamant that the betting industry must finally pay a proper price for the product.

But I must warn you. The betting industry has already targeted one or two people in authority whom they believe will come to their rescue and force us to negotiate with the Confederation of Bookmaker Associations. People who have, in subtle ways, already indicated that they are willing to wave the white flag as their knees turn to jelly at the very thought of standing firm.

I have a message for those few. Do not even think of subverting the democratic process as has happened in the past. Decisions on such important issues will not be made without the widest consultation of those who depend on British Racing for their livelihoods and those who have a substantial investment in our sport.

For those who still think that we should be sitting down and negotiating as one industry to the other with the CBA, I ask you to bear in mind the following points:

First, the CBA cannot bind anyone in the post-levy era, unlike the Bookmakers’ Committee under the Levy statute. So, why would we support the abolition of the Levy in order to replace it with the same negotiating structure, but without the statutory backing?

Second, I have no doubt that to negotiate with the CBA would be to give up our right to establish the price of our product and hand control of our industry straight back to the bookmakers.

And finally, bear in mind that the bookmakers are a group with only one common thread between large and small – to keep the price of British Racing to a minimum.

Apart from that common goal, they are about as disunited as British Racing was before we agreed the Future Funding Plan. The small bookmakers want their pictures charged on a percentage of turnover; the big ones want pictures divided equally between all bookmakers so that the burden falls mainly on the small bookie with the lowest turnover. The only way to reach agreement with a body comprising two opposing schools of thought is to give them a deal which satisfies both schools but doesn’t satisfy our own side.

There are two other issues about which I would like to talk briefly – the Tote, and the state of the British Breeding Industry.

My views on the Tote’s decision to boycott BHB’s concessionary rates have been well aired. They were only aired because the Tote Chairman, for reasons known only to himself, decided voluntarily to announce to the world that the Tote had rejected BHB’s rates. This was extremely damaging to racing’s cause and it must surely have been obvious that it would be. I have asked Peter Jones to come to the BHB Board tomorrow afternoon where he will be asked to explain both the decision and the announcement of that decision.

I apologise to those who may have hoped that I would speak primarily about the state of the British Breeding Industry but I took the view that the most important issue for the British Breeding Industry at present is the financial health of British Racing.

I am very confident that we will have considerably more money available in the next few years and the challenge will be to spend it wisely. An important clause in the Future Funding Plan states that 30% of BHB’s 20% share of incremental income will be spent on “purposes which directly benefit racehorse owners and/or breeders, whether through appearance money, prize money, owners’ premiums, or breeders’ prizes”.

There is no doubt that we must urgently address the unlevel breeding fields of both Ireland and France and I see it as a priority for the BHB to introduce a meaningful programme of owners and breeder?_x0019_ premiums for British-bred horses along the basic lines of the successful French and Australian schemes. I look forward to the TBA playing its part in the development of this scheme.

Much has been said about breeders’ prizes in the past two months. I will not fuel the debate other than to say that unless a scheme has a substantial fund attaching to it, it’s not worth arguing about one way or the other. The ultimate goal of British breeders must be to raise the demand for British bloodstock and the best way to do that is for us to incentivise people to breed British and to buy British in the sale ring.

As a small breeder myself, I have much sympathy with Tony Morris’s views on the over-use of stallions, despite the fact that he was the author of the immortal headline ”SAD, MAD, BAD” when Celtic Swing was rerouted from Epsom to Chantilly. The covering situation is getting so out of hand that the worry has moved from “Will there be a hundred other yearlings by Rampant at the October yearling sales?” to “Will this stallion have the time to cover my mare so that I can become the seller of one the hundred other yearlings by Rampant at the October yearling sales?”

Perhaps reality is just beginning to sink in. It is interesting that, although Spectrum finished top of the list of 2nd Season Stallions in Europe and sired a Classic winner in only his second crop, many people think that the jury is still out on whether he can be regarded as a successful sire. Covering 219 mares last year, a strike rate of winners to runners of just over 30% and only Golan of real note from 117 runners in Europe in 2001 can hardly inspire confidence that the near £4milllion spent by mare owners on him in 2001 was money well spent.

There is still much work to be done at BHB. We need to build a first-class executive team to drive the strategy for the industry; we need a more streamlined Board with more independents and less sectionalism; we need favourable rulings from the OFT and ECJ; we need courage and we need support.

When the new commercial structure is in place, we will need to look at the product we are offering and how we are marketing it; we need to expand Sunday racing further and we need to attract many more to work in the industry.

But in the short-term, we need to implement our commercial terms and policies despite the desperate attempts of the betting industry to thwart us by using every trick in the book.

It is perhaps a sign that we are winning when it seems the only tactic of the other side is to try to drive us into submission with litigation and poison pen letters to sectors of our own industry.

The next few months will not be easy for us but I am confident that we will win if everyone holds their nerve and stays firm of purpose and strong of will.

When we reflect at next year’s TBA Dinner, I suspect the battle about the price of the product will seem a distant issue, as the Go Racing contract does now.

Let no-one misconstrue my firmness for antagonism. I am fully committed to working with the betting industry and forging closer ties and friendships but it must be on our commercial terms. We will not be bludgeoned into submission by either financial muscle or legal maneouvering. Nor will we give up our right, in the commercial world, to establish the basis on which we license our rights to bookmakers or the price we charge for those rights.

When the betting industry finally appreciates that that is our creed and that it is sacrosanct, then we can start to look forward to the day that Warwick Bartlett or John Brown might experience the honour I have felt tonight to be your Guest of Honour.