On Tuesday 8 December Nick Rust, the BHA’s Chief Executive, delivered the following speech at the annual Gimcrack dinner at York Racecourse:
It is a great privilege to be addressing you this evening, at such an illustrious and historic gathering.
As you can imagine, as I sat down to put this speech together I quickly realised that there was nothing much to talk about, nothing much going on – such a dull sport, British Racing!! Of course, far from that, the challenge has been choosing what to leave out.
I would like to take the opportunity this evening to provide you with an update on the state of our nation, naturally cover our relationship with betting – a topic which I’m sure has never been covered at a Gimcrack speech until now! – and my own perspective on the form it should take and where I firmly believe we, British Racing, can get to in the coming years.
I would also like to provide some personal reflections on what has been a whirlwind first year as Chief Executive of the British Horseracing Authority. A year in which my passion for this sport has only grown.
So, as we come towards the end of 2015, albeit with some fantastic racing still ahead of us, we remain a sport of considerable contrasts.
We’re set for a modern-day attendance record of over 6.2m and I applaud the hard work, at all levels of the sport, that will have gone into making that happen. In Yorkshire – and as with Scottish Racing, what a continuing beacon and sign of what can be done collectively Go Racing in Yorkshire represents – the attendance numbers were similarly healthy with a record 107,000 attending the SkyBet Go Racing in Yorkshire Festival, and here at York the continued investment in fabulous facilities, and the stellar work of William and his talented team delivered crowds of 350,000, up 10% on the previous year and very close to their all-time record, work that saw them rightly scoop four awards at the recent prestigious RCA Showcase Awards.
So, healthy crowds, and we are also seeing the number of horses in training and number of owners in this sport showing some signs of growth after a number of years of decline, and there will be record prize money paid out in 2015.
So much of the job is done, right?
Well, I certainly wouldn’t dare be telling any small or medium-sized training operation that they’ve never had it so good, or that the font-line people across the sport have the sunlit uplands secured. My meetings with the majority of racecourses are not dominated by conundrums of what to do with profits they are awash with.
Many of the warning lights continue to flash
- returns back to our principal investors, the owners, are at just 26p in the pound – and that’s after the purchase price of the horse – and this compares poorly with the over 30 cents in the Euro in Ireland and over 50 cents in France
- horses in training remain significantly lower than five years ago
- the number of owners from the traditional heartland of the middle income tier is falling
- print media coverage of the sport has been in decline
- many of our trainers, jockeys and stable staff struggle to make ends meet
- other general consumer trends could work against the sport in the coming years if we aren’t careful
We must redouble our commitment to self-help, and growth in our key indicators. The regional
industry updates Rod Street and I delivered earlier this year were not the end of the journey, but a demonstration that the sport has come together to develop a strategy in a number of key areas, to create the conditions for long-term growth. The seeds of the strategy were sown right here in the 2013 Gimcrack speech by my Chairman, Steve Harman, and the sport is coming together to progress the initiatives.
We set three clear targets for our industry:
- increase the average number of horses in training by 1,000 by 2020
- grow racecourse attendances to 7m by 2020
- increase betting on British Racing by 5% by 2018
Now, I am not saying that our other work will be in vain if we don’t get our relationship with the betting industry right, but we are at a critical crossroads with the link to our single biggest customer group.
Our relationship with the betting industry should be built on one fundamental principle: that the sport generates a return from bets that are placed on the sport. What could be simpler? It’s a principle that is recognised all over the world, wherever Racing and Betting takes place. It’s a principle that Government recognises, and that underpins so much of what we do – the number of our fixtures and the scheduling of them, a seven-day per week product, our race programme, handicaps and handicapping, our Rule book, our regulation of the sport, our integrity provision and so much more.
Our interdependence should produce the scenario that what is good for one party is good for the other. Growth for one industry produces growth for the other. Reinvestment by Racing to increase further its appeal as a betting medium continues this virtuous circle. This is what we are working towards.
It used to happen through the Levy, despite the frustrations that both parties have had around the edges of the mechanism. One-year deals by statute are not particularly conducive to partnership building, but we found ways. We are however now in the perverse situation that 40% (and growing) of betting activity is now taking place remotely rather than in betting shops and the vast majority of it is not captured by the Levy because it is routed offshore.
Betting consumers’ embracing of technology should be among the biggest success stories for the sport over the last decade, but instead it is our Achilles heel. This is not a sport railing against a disruptive technology – no Luddites here – but rather one in need of urgent replacement of our existing funding mechanism.
We know what the solution looks like, and know it is achievable. A mutually beneficial relationship. Common interest. Long-term deals with incentives built in for both parties. All operators that are taking bets on British Racing making a contribution back to the sport, and if they are not making a contribution back, then they are not taking bets on the sport. The value of Racing as a betting product, and the value of punters that bet on British Racing, recognised. Compliance with EU law – France and Ireland have managed it – no VAT payments, and a specific solution for Racing, based on its very specific relationship with Betting.
The Horserace Betting Right delivers this, all major political parties are publicly committed to its introduction, and we urge bookmakers to come with us on its final design.
But before its introduction we have to believe in self-help, believe in our own value – not with arrogance, but with confidence – and reward those companies that wish to make a contribution from their remote operations. Companies like Betfair and bet365, at the cutting edge of a highly competitive market but still recognising that there is the right thing to do, and also the benefits that can now be derived from such a commitment. Companies like 32Red, who are the most prolific sponsor of races in Britain, with around 1,000 races a year. These are the first to make commitments, and we heartily welcome them.
The Authorised Betting Partner (or ABP) model is neither a declaration of war nor an appeal for betting operators to take some kind of moral position, but rather a commercial approach being taken by the sport, based on a confidence about the reality of what a clear association with British Racing means to leading betting brands, and also how consumers will choose to spend their money based on that exposure, and their growing understanding of whether their bet will contribute to British Racing or not.
For too long, British Racing has had a paradoxical view of its relationship with Betting. One moment it is symbiotic, next the betting operators can’t do without us and at other times, my goodness, we can’t do without betting operators.
The truth is that there continues to be a strong interdependence between British and Irish-facing betting operators, and British Racing. You will hear talk of how little profit is generated directly, and the key word is directly, from betting on British Racing. The fact is that it is still about 18% of all betting shop total gross win (and more than 40% of turnover on over-the-counter business only). And it’s about 30%+ of remote betting activity. Significant in its own right, but people who bet on British Racing are more likely than most to bet on multiple betting and gaming activities, and this is what makes them so valuable to betting operators. This is why you see such major offers to entice customers around our major festivals. The betting operators know that the value from these customers goes well beyond Gross Win on British Racing.
But be in no doubt, without the ABP initiative we are staring into the abyss of further drastic cuts to central expenditure, and this sport looking very different indeed.
Without the ABP arrangements we announced last Thursday, we would be looking at Levy income of around £50m in 2017 compared to nearly £100m eight years ago. The decline is NOT because of some major fall in betting activity, but rather because consumers have switched and remote operators are escaping the Levy from their offshore bases.
So I say to commercial parties in Racing, especially the racecourses, please do consider the ABP initiative commercially. See what it means to you – for the majority of commercial parties in racing, the Levy cliff we are facing dwarfs any gains or savings from new or renewed sponsorships from non-contributing betting operators.
And if you’re worrying about existing betting operators who have not yet signed up to ABP status, you should be encouraged by the number of so-called smaller operators who have approached the BHA over the last two weeks asking how they can become an ABP and start sponsorships. They see the opportunity.
And by coming together, I believe that racecourses will also be able to work on new, broader arrangements with major partners, breaking traditional boundaries and the traditional sponsorship mould in this sport. Yes, innovation can come from individual decision-makers, but aggregation is the successful trend across all other sports, and we should take the opportunity for brands and service providers to associate themselves with British Racing as a whole. In the meantime, should anyone have doubted that British Racing can attract commercial sponsors from outside of betting, the announcement today of Timico as long term new sponsor of the Cheltenham Gold Cup should go some way to allaying your fears.
I believe that our approach on ABPs is already being rewarded, and to reiterate, there was complete unity from Racing’s representatives in the negotiations around the Levy – the BHA, racecourses and horsemen – that the offer that did come through from a small group of offshore operators fell far short of a reasonable contribution, and sadly could not be relied upon. It is too little appreciated that the previous four-year deal with the major retail bookmakers with remote operations saw just one year’s agreed £4.5m contribution take place, and this autumn’s offer had similar strings attached. Racing was not willing to be bitten twice and knew that major remote operators were willing to offer a more sensible rate, as we have seen in the ABP commitments announced last week.
Racing’s unified approach has been greatly assisted by the new Members’ Agreement – the BHA, racecourses and horsemen – which cements a togetherness and sense of purpose at the heart of the sport. Acting in factions and self-interest will not allow British Racing to flourish and grow, and we owe it to all those working in the sport, and to our successors, including attendees of Gimcrack dinners in future decades to work for the common good.
The BHA will play its full part, in what has to be a concerted and team effort. I’m aware that the sport looks to us for leadership, often in areas outside our perceived core responsibilities or where a vacuum would otherwise exist, and a great strength of the Members Agreement is that we have clarified our ways of working, consulting where required and forging consensus on matters of strategic importance. There is no land-grab, and what we do, we do in the interests of the sport as a whole.
Just as there are brilliant people throughout racing, there are great people within the BHA, and a workforce committed to achieving the best for this sport. A priority of mine has been that we are – and are seen to be – more in-tune with our participants, and I wish to see this continue throughout 2016 and beyond.
We’ll continue to regulate without fear or favour – those bound by the Rules should be among the chief beneficiaries of a thorough rewrite of the Rule book next year – and demonstrate equine welfare leadership. A comprehensive integrity review should ensure that we have the trust of our stakeholders and the confidence of our consumers. We were heartened by the degree of engagement with our recent consultation on holistic race planning, and this can start bearing fruit.
There has been a step change in the training and welfare provision in the sport, and much-needed and increased focus on recruitment and retention of core staff, but there is always more to do.
So, it has been some year off the track, and events on it never fail to remind us why we are here, and what’s at stake. Faugheen, Dodging Bullets, Coneygree, Many Clouds, Gleneagles, Legatissimo, Golden Horn, Solow, Muhaarar, Trip To Paris, Jack Hobbs, Litigant, Ajaya (obviously!), Arabian Queen, Shalaa, Mecca’s Angel, Air Force Blue, Vautour, Cue Card Smad Place, Sire De Grugy. It has been some journey for me already, and I hope that we will all continue to work together with the same commitment and energy seen in 2015.
It therefore gives me great pleasure to reply on behalf of British Racing and in so doing, I would like you to raise your glasses to the future success and prosperity of British Racing.