14 Jun 2001 Pre-2014 Releases

In this very room twelve months ago, I outlined a vision for our industry which I was convinced would ensure a healthy financial future for British Racing.

It was a simple vision: an industry in control of its own destiny, pooling its rights across all platforms and all jurisdictions, working side-by-side with a united strategy, an industry agreed on how it should divide its income.

It was a vision which Government supported both by its comments following last year’s AGM and by incorporating much of BHB’s Future Funding Plan into the Home Office Consultation Paper.

It was a vision supported by the owners, trainers, breeders and stable lads, indeed by every member of the Industry Committee. It was a vision supported by the Jockey Club.

Today the vision, if not in tatters, is certainly blurred. We are now left to pick up the pieces and build a revised structure from the poor cards we have been dealt rather than having a new pack of cards and dealing them ourselves.

As you will have read in the papers this morning, the Go Racing deal is on the rocks. Whether it is actually dead in the water or marooned is up to Go Racing.

We have advised them of our data licensing policy and they have rejected it. They want a ten year licence for media rights; BHB is only willing to grant five.

They want a licence for future technologies and platforms despite attributing no value to those rights and putting no projections in their Business Plan; BHB’s policy does not allow for use of its data in this way.

They want BHB to limit its price for data now to 1.5%; yet BHB has made it clear that it cannot establish a price until shortly before the Go Racing contract deadline of 30th June 2001, as I will explain later.

The standard terms under which BHB is willing to provide its data to Go Racing are clear and fair. The offer to Go Racing remains open, but the ball is firmly in their court.

During the past few months, you may have noticed that I have not expressed a view on the Go Racing contract, preferring to try to get it into a shape that I felt the Board could support. Those attempts appear to have failed and I would therefore like to outline my views in as fair a way as possible.

On the plus side, the Go Racing deal had good partners in Sky and Channel 4, guaranteed up front payments plus revenue shares, and a laudable desire to develop pari-mutuel betting as a meaningful alternative to fixed odds.

But there is no doubt that the downside was far greater.

There was no terrestrial coverage commitment from Channel 4. They refused to give it. Yet “guaranteed coverage” was supposedly the reason for the RCA recommending Go Racing over Carlton to its members in the first place.

The division of income was grossly unfair. The Go Racing partners were going to take over 70% of the money and give Racing less than 30% – a worse deal even than SIS.

The bundling of almost all rights into one deal for exclusive use for ten years was just as bad, for it would have prevented Racing from maintaining a competitive market for its product. I can perhaps make this point best by quoting from the Deutsche Bank statement on the Arena prospectus. It said “After years of successful operation, it will be difficult from a practical perspective to simply remove the Go Racing consortium in favour of another. In many ways we see this akin to the SIS contract with the racing industry for the provision of pictures to betting shops”.

An even worse aspect of the deal was that the commercial replacement of the levy had already been damaged by the Go Racing deal, possibly to the tune of £250 million, because it cut right across Racing’s strategy of selling pictures and data direct across all platforms and all jurisdictions.

I do not even think that the RCA selected the right partner in the first place. Not only were they offered more money by Carlton but they turned down a global interactive company who were prepared to pay 7% of turnover to racing rather than the 3% from Go Racing and were prepared to pay 4% of turnover on non-British racing where Go Racing were prepared to pay zero.

But it is the process by which this deal was developed that rankles. Those who had been granted the power by the racecourses to decide the actual way forward refused to include BHB in any discussions on media rights, yet they included BHB’s rights in their negotiations, despite being told that they were not authorised to do so; they never asked BHB what it wanted for its rights but told bidders that they weren’t worth more than 5% of the bid; they said they didn‘t believe in developing a strategy and were adamant they had to finalise the Go Racing deal before the Levy Replacement and the Future Funding Plan.

They thought Go Racing had nothing to do with Levy Replacement, ignoring the fact that the Go Racing deal was largely a betting rights deal rather than a media rights deal.

And when they recommended to the racecourses to sign the Go Racing deal they did so knowing that they had not analysed the Go Racing Business Plan, that the agreement transferred the cost of Go Racing’s £62 million irrecoverable VAT to Racing and that it would be impossible to collect a commercial replacement for the levy on any of the Go Racing turnover because they had handed over pictures and data – the very rights on which levy replacement were based – to Go Racing. Regardless of whether the Go Racing deal was a good one or a bad one, the process by which the decisions have been made has been amateurish.

Is this what those who have invested billions in providing the raw material, without which racing could not exist, expect of its leaders? Is this what those whose livelihoods depend on racing deserve? Of course not.

Do those investors and contributors have a right to participate in the development of the right vision for racing? Of course they do.

The development of plans that impact the future financial structure of the industry must involve all those who invest in and contribute to British Racing. It is not acceptable for one sector of the industry to take the view that it owns the rights and to hell with everyone else. For there are no rights in this industry which have a penny’s value without the contribution of the whole of the industry to the creation of their value.

But enough of the past and recriminations. We need to move on.

We have a choice within the industry. We can continue to point fingers, refuse to collaborate and become more sectional and increasingly insular. In short, we can take the view that racecourses and the rest of the industry are different species and we should go off and negotiate our rights entirely separately.

Or we can learn our lesson, shake hands and resolve to work together with a clean sheet of paper†_x0013_ and get it right this time.

How should we go about this? Well, first we need to finalise an agreement within the industry along the lines of the Future Funding Plan which covers the structure and division of income. We are almost there now.

At the same time the two rights owners – BHB and racecourses – must sit down together with advisors to develop a strategy for the exploitation of our rights.

The strategy should identify the value of our rights and their correct packaging. We should then put together a tender document for each package detailing the length, terms and conditions of the contract. Just like the Premier League.

It is probable that we should be dividing our rights into four or five packages and awarding the rights to different bidders rather than bundling them into one package.

Will other companies be interested? Of course they will. I’ve already had three phone calls since late yesterday wanting to discuss the opportunities. We have an enormously appealing product and I am confident that we will generate more income than we would have under the Go Racing deal which was on the table. And I’m confident that we can do it with the whole industry behind it.

It is now time to pull this industry together as quickly as possible to ensure that it unites rather than fragments.

To this end, I shall be inviting the following groups to put forward a representative to sit on a Strategy Group that is truly representative of the whole industry:

 From the racecourses – one representative from each of the four main groupings – the Terrestrial Rights Group, Arena, Northern and the independents.
 From the owners – one representative from the ROA and one representative from the major owners.
 From the industry – one representative from the Industry Committee and one from the TBA.
 From the betting industry – one representative from the Tote

These nine people will be joined by myself, Chris Reynolds, an appointee from each of the Jockey Club and RCA and appropriate advisors.

The purpose of this group will be to reach a consensus on the strategy for the industry. It will then be up to the representatives to keep their constituents informed and to get them to agree proposals.

I am hopeful that the industry will support this move to bring us all back together so we can start to make decisions that are developed and supported by each and every one of us.

I would like to move on now to talk about the other issues that confront us.

On the issue of establishing a price for the commercial replacement of the levy, we have commissioned the Henley Centre, the respected research organisation, to carry out a detailed analysis of the projected profitability of the betting industry after the abolition of General Betting Duty. We have also asked them to calculate the impact of different percentage payments to Racing on that profitability. There is no doubt that the betting industry will be substantially better off when gross profits tax replaces GBD and we believe that it is right that the benefit is shared with the racing industry which provides 70% of its turnover.

What we are particularly mindful of though is the impact of our pricing policy on small independent bookmakers who, although paying very little levy, bear the brunt of the charges by SIS for delivering the pictures to the betting shops. We want them to flourish under GPT as well as the big multiples.

We are determined to make sure that the commercial replacement for the levy falls upon the betting industry in a fair way and will therefore only establish a pricing policy when we have the benefit of the research we have commissioned and have had a further meeting with the Confederation of Bookmakers towards the end of June.

We have so far had two useful meetings with the betting industry, who accept that in a commercial environment, Racing is entitled to establish the pricing of its product, just as Racing accepts the right of any bookmaker to either reject the price or to challenge it.

The betting industry has made it clear that it would prefer to keep the levy if possible. This is not an option as far as Racing is concerned, nor does it appear to be Government’s intention.

The betting industry has also challenged Racing’s right to charge for its data by appealing the judgement BHB won in March in the High Court against William Hill for using BHB’s data without a licence. Furthermore, it has complained to the OFT about the 1% licence fee.

Clearly BHB is being challenged to defend its rights in court. Therefore, BHB believes that the sooner the issues are considered and resolved by the competition authorities the better for all concerned.

We remain confident that we will prevail and are encouraged that Jens Gaster, the lawyer who drafted the EU directive on Database Rights, has published his view that the decision given in the BHB/William Hill case is (and I quote) “a very fine review of many if not all basic elements of database rights under the Directive”.

I have throughout the last year kept the Government fully informed of all developments and, as recently as yesterday, advised them that I see no reason why they should not proceed with their plans for the abolition of the levy.

It is important to remember that our strategy for Racing is not dependent on the timing of the abolition of the levy. We are looking to charge the betting industry for our picture and data rights on a fair commercial basis from no later than May 2002. It is highly probable, with the appropriate safeguards, that we will allow payments made to Racing to be offset against the levy so that eventually the levy income will be zero and Racing will receive all its income direct.

This will allow a seamless transition from levy to commercial replacement and enable Government to keep its watchful eye on the process as it develops.

I am confident that Racing can stand on its own two feet, that it will generate not less than the income projected in the Future Funding Plan and that a commercial mechanism to replace the levy will be in place when the current SIS contract ends on 30 April 2002.

There is no doubt that we are making inexorable progress towards our goal of a healthy financial structure for British Racing based on commercial principles where we control our own destiny.

In the past 18 months, in addition to establishing the right to charge for our data, we have achieved our goals of persuading Government that the Levy should be abolished, that the Tote should be transferred to the ownership of Racing and that General Betting Duty should be replaced by a less onerous Gross Profits Tax. The much under-rated Financial Plan, which was the first to propose the introduction of Gross Profits Tax in 1998, has been vindicated in so many ways that even its initial critics must now acknowledge its validity.

There is still an enormous amount of work to be done. The timetable tightens daily and we need to accelerate at a time when the pedal is already flat to the boards.

Last year I offered a plan for unity, based on the pooling of rights. So far it has been rejected. Today I offer another plan for unity, this time based on the pooling of minds. If this plan is also rejected, there can indeed be no hope for this industry.

Maybe the machinations of the Go Racing contract will be a wake-up call that we must work together if we are to achieve these goals. If so, then the experiences of the past twelve months have not been wasted.

It would be good to think that we could not only control our own destiny but control our desire to press the self-destruct button every time we have an opportunity to restructure our financial future.