Racing United?

The latest gimmick to appear in the battle around the funding of racing is the launch of Racing United, basically a petition sponsored by the Britiah Horseracing Authority (BHA), Racecourse Association (RCA) and the Horseman’s Group .

In launching the campaign, Nick Coward, BHA Chief Executive states, “The launch of this public campaign is the latest step in pressing home Racing’s case, a comprehensive case that is built on rigorous analysis, and which we have been advocating on behalf of the sport. Our objective is to secure what is right for the future of the whole sport, and the campaign is intended to leave no-one in any doubt as to the strength of support for it across the whole of Racing and its followers.”

All good words but vacuous all the same as racing shows a complete lack of imagination in continuing to pursue an antiquated, out-dated funding model.

Turning to the Government to sort out racings finances is, effectively, a tacit admission by racings rulers they do not have the wherewithal to run the sport.

Multiple champion jockey AP McCoy has lent his support to the campaign but speaking on BBC Radio he also said he believes racing needs changes at the top of its management structure. A very true comment and surely a statement that should be heeded, coming from somebody with a high profile in the sport, yet not renown for making “political” comments.

Also what is a petition, from what is effectively a self-interested constituency, going to achieve? I am sure, if polled, most turkeys would vote for the abolition of Christmas

The first change at the top of racing should be the immediate removal of BHA Chairman Paul Roy.

He has already amply demonstrated that he considers his ego to be more important than the interests of racing, continually becoming involved in purile, schoolboy mud-slinging with leaders in the betting industry.

That may be a character flaw, which although a potential embarrassment to the sport, it not necessarily terminal in terms of his position as head of the BHA.

What does make his position as Chairman untenable is his hypocrisy and double standards.

Roy has turned criticising and knocking betting exchanges into something of a cottage industry, taking any opportunity possible to criticise their business model and the perceived effect they have had on racing.

Yet this is the same Paul Roy who jointly heads an investment company which attempted to buy £40m worth of Betfair shares when the company was launched. A company which when only able to purchase £5m worth of shares then proceeded to hoover up as many shares as possible when they hit the market.

Now I am not criticising the decision of his investment company wishing to invest in Betfair, it is a very sound commercial incestment.

Yet this shows poor judgement on Roy’s part.

Firstly how does he reconcile his scathing condemnation of betting exchanges with this company’s acquisition of Betfair shares?

Notwithstanding the above there is a more serious “conflict of interest”.

Being a major shareholder in Betfair, via his company, Roy has an obligation to ensure optimum shareholder return and value in his investment. Yet in his role as BHA chairman he is espousing changes which would harm investors in Betfair. Is that not a conflict of interest?

Want another demonstration of his double standards?

Clearly from his background in investment banking and his on-going involvement in investment companies he is, at the very least, a supporter of a free market. Yet in his role of BHA Chairman he is calling for Government involvement in securing the future funding of racing. Is this not another example of double standards and hypocrisy? I have little doubt he would be the first to complain if the Government began restricting how his investment companies could invest or fund.

Also his criticism of bookmakers moving offshore is also somewhat rich. As an investment banker he knows the duty of organisations to secure maximum return for investors. Is that not what bookmakers are doing by relocating offshore?

Those who know me will also be aware I am no fan of bookmakers, but I do believe in a free market and bookmakers cannot be blamed for securing the best returns for their investors either by offshoring or reducing expense, be it minimising levy payments or other means of cost savings.

I wonder how many members of the BHA or RCA boards employ accountants to optimise their income by making the most of tax advantages and loopholes in the system?

Is that any different to what the bookmaking fraternity are attempting?

Now I have never met Mr Roy so I have no personal axe to grind per-se. Those who know him say he is an honourable man and I am sure he is kind to his family, friends and pets.

However there is a clear conflict of interest between his role as BHA Chairman and his other business roles, as well as some of his public pronouncements bringing the sport into disrepute.

For the good of racing it is time for Paul Roy to go.

Finally on the subject of Racing United, it would be better for the sport if racing was properly united, into a single group with appropriate business acumen and the ability and desire to fundamentally change the structure and funding of the sport.

Yes bookmakers do need to contribute more to the sport, yes exchanges do need to contribute more to the sport.

However it will not be achieved by Government intervention. It will not be achieved by leaders on both sides engaging in public slanging matches, allowing their egos to interfere with commercial interests.

It will be achieved by effective negotiation and a rationalisation of the number of fixtures so the sport is run to fit the funding not by demanding funding to support a bloated fixture list.

Two very quick observations regarding funding:-

Twilight fixtures serve no purpose, other than to feed funds into the bookmakers coffers, if the bookmaking industry want twilight fixtures they should fully fund them themselves.

Northern Racing offer appalling levels of prize money, yet their last annual accounts show a profit in excess of £3m pounds, likewise Arena Leisure show profits in excess of £4m. Why should they not be forced to provide more money to bring prize money to an acceptable level.

It would be very simple for the BHA to immediately impose a meaningful minimum prize money level.

So instead of silly, facile, false “Racing United” exercises why don’t those who are suppose to be running racing actually do their job properly.

If they cannot then move over for those who are capable of doing the job, although I am not holding my breath.

Government Stepping Back

Just in case you have been on another planet for the past week or so, the United Kingdom is in the midst of a massive spending review.

The people of this once great nation seemingly never learn from history. After all, every time there has been a Labour administration, the country has ended up in a financial mess or close to financial and economic ruin.

Although it has to be noted under the stewardship of Bliar (not a typo) and Brown, the level of fiscal incompetence and pecuniary sleight of hand has plumbed new depths.

If I applied such creative accounting to my company accounts I would soon feel the full force of the authorities, yet such creative accounting of the national accounts is seemingly allowed to pass with impunity.

Anyway, part of the review has been a look at Quango’s, an exercise which has seen many, although not as many as should have been, abolished.

Interestingly this particular exercise could have a significant impact on horse racing.

There are three Quango’s specifically related to horseracing and each has a differing fate.

There is the Horserace Totalisor Board which, as has already been announced, will be abolished and sold off.

There is the Horserace Betting Levy Appeal Tribunal, which will be retained in its entirety as it “performs a technical function which should remain independent of Government.”

Finally there is the Horserace Betting Levy Board, which like the Appeals Tribunal is being retained and for the same reason. However there is a rider which states, “modify functions to remove Secretary Of State’s role in determining Levy.”

That rider is interesting and, indeed, most welcome as the Government should have no role in deciding the funding of any sport.

When I first read the summary I assumed the Government was planning to step away completely and was delighted, however it seems my delight may have been somewhat premature.

Jeremy Hunt, the secretary of state for Culture, Olympics, Media and Sport, believes there is no longer any need for any political involvement.

In a statement the Department For Culture, Media and Sport said, "We plan to remove the role of the secretary of state from determining the Levy scheme to give the body greater independence and help further to reduce Government involvement in horseracing.

"What will we put in its place? That's yet to be decided.

"Ministers will discuss the options with the Levy Board and the Racing and Betting industries with a view to ensuring the funding for racing is fair and collected from as broad a base as possible.

"An announcement will be made on all this in due course."

The BHA have responded predictably.

Nic Coward, chief executive of the BHA, said: "Racing welcomes the announcement from Government that they are retaining the Levy and laying out plans to modernise it.

"In particular, we welcome that this is a first step by Government to a legal framework that will, in their words, 'ensure that funding for Racing from betting is fair and collected from as broad a base as possible'.

"The principle behind the Levy and the Levy Board - that of a fair transfer of funds from betting businesses to Racing - remains fundamental, and this Government announcement sweeps away any uncertainty about this for the future.”

Paul Roy, chairman of the BHA, stated, "(the) announcement is one part of what Racing has united to call for.

"It's a huge step, but it will only deliver a fair return for Racing in future years.

"Action is needed under the existing system to deliver a fair return in 2011. The matter should not need to land on the secretary of state's desk.

"But under the current process, the power and responsibility to come forward with realistic proposals is solely with the Bookmakers Committee.

"The proposal they are sticking to is a long way from one that could even be considered, and they have shown no sign of moving from it.

"On current forecasts, their proposal would mean a contribution of less than £50m to the Levy in 2011 down from over £100m just two years ago.

"They appear intent on exploiting loopholes for as long as they can, with catastrophic consequences for our sport and Racing people.

"Meanwhile, however, one major bookmaker is stating that exchanges are short-changing the Levy and Racing by tens of millions of pounds, and exchanges point back at big bookmakers joining others offshore and exploiting loopholes in the threshold system, estimated as hitting the Levy just as hard.

"They are both right. The Bookmakers Committee have to come forward with a proposal to deliver a return that is fair to Racing."

I hate to say it but Coward and, especially, Roy are beginning to sound like one trick ponies, spouting out the same tiresome rhetoric.

This is the same BHA management who had no Plan B when faced with a 2011 Levy return which was significantly lower than their, arguably, unrealistic expectations.

The same management who blustered about having to impose, much needed, drastic cuts to the 2011 program, yet then rolled over and published a fixture list with a token reduction of the number of fixtures, spreading the decreasing prize money even thinner.

It is a subject I have approached before and have no desire to revisit in detail again here.

Regular readers will already know my views on the CV’s of the BHA board and their ability to effectively manage a multi-million pound business.

Their slavish adherence to a single funding method, namely the Levy, shows a clear lack of financial acumen, foresight and an inability to view the wider issues.

The Levy is anachronistic and I have yet to seen any argument, yet alone a compelling one, as to why the Levy should be the means of funding the sport.

Why should racing alone receive a Levy contribution from bookmakers?

I had to smile, in particular, at Roy’s comments about racing being united. Racing is not united and never will be unless it is radically restructured. There are far too many disparate, vested interests in the sport for it to be unified.

The BHA is a vast improvement on its various predecessors, however it is still closer to being the Old Boys Club that was the Jockey Club, than being the effective custodian of a multi-million pound business.

The BHA needs to pay particular attention to the final word in its title, it needs to assert its authority and unite the sport as a single, cohesive grouping.

There needs to ba a funding model that is realistic and appropriate in the 21st century and not reliance on an anachronistic, unworkable model.

The BHA needs senior management who are not narrow minded, confrontational and who are ego-free. Individuals who are able to climb out of the deep, narrow furrow they have ploughed for themselves.

Watching the public pronouncements, from both sides of the debate, surrounding funding of the sport is like watching two alpha-males arguing over who has the biggest (or should that be smallest) penis, the on-going public spats are unedifying, achieve nothing and indeed discredit racing and the betting industries.

Most importantly racing, like any other industry in this country, needs to rationalise, indeed rationalise severely, to fit the funding available.

Yes it will mean a massive cut in fixtures, yes it will mean job losses, yes it will mean a decrease in the horse population. It means racing having to face the realities of the real world, realities others have been having to face for some time now.

Racing needs to emerge from its insular world and come into the real world and certainly the Government should not be getting involved in the macho posturing surrounding funding of the sport.

I would much prefer Government time and effort being dealing with defence, the NHS and education rather than becoming involved in debates about the funding of what is, in reality, a minority sport.

Instead of bickering with the bookmakers, perhaps those mandated with running the sport should concentrate their efforts in ensuring the Tote comes fully under the control of racing, although looking at their current track record that may well be a recipe for disaster.

Perhaps the Hong Kong Jockey Club, who really do know how to manage a racing set up, should come in and take over UK Racing and the Tote - lock, stock and barrel.

What A Carry On

The “Carry On ……..” films are something of an acquired taste and were based on a standard formula where there wass incompetence, misunderstanding and innuendo.

The saga of the 2011 fixture list certainly fulfils the first two of the above criteria.

According to the latest pronouncement from the BHA it looks like being late September before the 2011 fixture list is published – which will not be good news for printers of racing diaries and calendars.

The delay in publishing the new fixture list, normally published in July, is the result in a catastrophic drop in the Levy.

By all accounts those in the industry were expecting a levy yield of £150m, whereas the actual yield will be around the £70m mark.

Talking to individuals closely involved in the negotiations, those in the BHA were so certain of there being a £150m yield they had no “plan B”. Indeed it was actually put to a senior director of the BHA that the yield was not going to be as expected and when asked what the alternative would be, the somewhat worrying response was along the lines “the Levy will yield £150m, we do not need a contingency plan.”

If this assertion is true, and I have no reason to doubt either the reliability or integrity of my source, then it does not auger well for the future of the sport when the “leaders” adopt such an arrogant stance.

The press release detailing the delay in announcing the fixture list had one very telling paragraph in particular.

“…………. meeting of the British Horseracing Authority Board and the subsequent meeting of the Levy Board, together with detailed dialogue with the Racecourse Association and Horsemen's Group.”

Therein lies the problem, there are too many diverse, vested and often contradictory interests involved in the running of the sport.

More fundamentally the Levy is an unfair and anachronistic means of funding the sport.

Why should horse racing alone benefit from a bookmakers levy?

Why shouldn’t soccer, rugby, tennis, golf benefit from a levy as well? Indeed should the BBC not get a Levy payment on the Strictly Come Dancing betting turnover?

When the Levy was introduced almost 50 years ago bookmakers bet almost exclusively on horse racing and the Levy model had some credence.

Now, however, the environment is completely different and horse racing is just one of many sports vying for the punters pound.

Love them or hate them and I have to confess I am no fan of bookmakers, they are canny operators. Most have moved offshore to maximise returns and decrease their Levy liabilities and who can blame them for that. Most are shareholder owned businesses and they have a legal obligation to ensure maximum returns for investors.

To “protect” the Levy they made voluntary payments from the offshore betting and, culpably, racings leaders rolled over without a fight.

If offshoring was not enough to fatally damage the Levy then the introduction of the betting exchanges really threw everything into disarray.

Bookmakers complained because, overnight, their monopoly on laying had disappeared. No longer did they have exclusive access to and were able to utilise insider knowledge to make a killing.

Of course the bookmakers cried foul, saying individuals can benefit from inside knowledge, not known to the public at large.

That complaint is, of course, somewhat disingenuous as bookmakers have for years made use of information not generally available to the general public. Whether the information comes from schmoozing connections or, more sinisterly, overlooking defaulted accounts in return for information.

But of course the real objection the bookmakers have to the exchanges is it has hit their bottom line and profit.

For all their faults bookmakers are run by accountants who know exactly what they are doing.

Unfortunately the same cannot be said of the BHA.

It only needs a quick read through the CV’s of the BHA board of Directors to realise how weak it is and what little grasp of running a multi-million pound business there is.

Far too many of the Executive are racing insiders with no experience of running a major business. With all due respect to the individuals concerned how can a former trainer, formster and TV pundit, Clerk Of the Course and Cop as well as other lifelong racing insiders effectively control a multi-million pound enterprise?

Even those bought in from outside the industry do little to inspire confidence with only Paul Roy boasting any credible experience and that is only in merchant banking.

Even the Finance Director’s only previous experience was effectively as a departmental head of finance within the BBC – not the perfect financial model for horseracing.

With such a weak management structure it is little wonder the wiz kids n the bookmaking fraternity are able to run rings around the BHA.

Of course the lack of significant “real world” business expertise amongst the BHA executive is only part of their problem.

More significant are the other vested interests pulling in different directions. From the Racecourse Association (RCA) representing the racecourses, through to the Horseman’s Group representing trainers and the Racehorse Owners Association (ROA) representing owners. All of whom have differing and often contradictory agendas.

With such a fragmented industry, full of self interested bodies, it is actually a wonder racing has actually survived as long as it has.

Now it is approaching decision time.

The focus on next years fixture list centres around the 250 BHA funded meetings, of which 150 are in doubt.

The 16 fixtures allocated to Ffos Las, as a new course are safe, which is a relief as without them the course would not have been sustainable and it may well have followed that great white elephant Great Leighs although, unlike Great Leighs, Ffos Las is a course which deserves to succeed.

The main reduction will be at weekends with funding for four Saturday and two Sunday meetings each weekend. I agree with the four meetings on a Saturday but would prefer to see three meetings on a Sunday at the cost of having a blank midweek day, say having Mondays (apart from Bank Holidays) as blank days.

Of the surviving BHA funded meetings even some of these are in doubt as most of the meetings are the all-weather twilight meetings and these will only be allowed if the courses can guarantee an average prize fund of £3,000 a race, a sum significantly more than is on offer now. Better still, bearing in mind these meetings are run for the benefit of the bookmakers, perhaps the bookmakers should fully fund them.

In my view a reduction of 150 meetings in 2011is nowhere near enough. This equates to an approximate 10% reduction in fixtures against a drop in predicted revenue of around 50% ….. even a a grasp of basic schoolboy mathematics (or as I believe it is called now – numeracy) will tell you the figures will not add up.

There needs to be a greater drop in the number of fixtures and if that means racecourses having to close or the number of horses in training and the number of trainers operating being reduced then so be it.

Sure there will be posturing saying the industry could not survive such cuts, that is a parochial view. Is it not better to have a smaller more efficient industry than no industry at all, which is what will happen if drastic action is not taken.

In all other industries and walks of life drastic cuts are having to be made, racing should not be an exception. Yet one is left with the strong impression racings rulers think the problems can be addressed with the application of a sticking plaster rather than drastic surgery.

Perhaps it would be a good thing if racing as we currently know it failed. It would be painful but it would also give the opportunity for a new, leaner, better managed sport to emerge.

Personally I would like to see the sport run on the Hong Kong model, where all aspects of the sport are run and controlled centrally. There would be a Tote monopoly with all profits being returned to the sport. Broadcast rights would be managed more efficiently and professionally.

It is absolutely absurd and a damning inditement on the ability of the sports management that the sport actually ends up paying a broadcaster to cover the sport.

In the short term the 2011 fixture list should be cut to a maximum of 1,000 fixtures.