BRITISH HORSERACING AUTHORITY: Any international racing jurisdiction considering permitting Betfair to operate in their territory has to give very careful consideration to the impact on their sport, and learn from the British experience

by | 11.17.2010 | 12:48am


Following today's announcement from Betfair that it intends to list on the London Stock Exchange, Paul Roy, Chairman of the British Horseracing Authority, said:

“Today's announcement is no real surprise to the markets.  What will be of great interest is that it comes a day after the close of a major consultation process by the Horserace Betting Levy Board, that strikes at the heart of Betfair's model, at a time when the figure of an underpayment to Racing of £30m has been stated by a leading betting industry figure, and during which the future relationship between exchange betting and Racing is under close scrutiny by the relevant authorities.

“The markets will understand that we are in the midst of a new process which will decide the basis on which all parts of the betting industry, including Betfair, will contribute to the Levy.  It is clear the contribution is going to have to be on a significantly different basis to what has gone before.  We are ready for serious dialogue with the betting industry, which includes exchanges, through the Levy Board.  We await the betting industry's position. A failure to resolve issues by agreement will see it referred to Government and the Secretary of State for Culture, Media and Sport at the end of October.

“British Racing is the sport upon which Betfair was founded, and from which it continues to generate a substantial proportion of its business. There are many in British Racing who for a great many reasons would not have allowed exchange betting, had it been our choice as opposed to the Government's.  The history of the last few years has proved those sceptics to have been right.  This was compounded significantly by the failure of a system based on database rights which was intended to replace the Levy. Under that system, Betfair would have had to enter into commercial arrangements with Racing, as well as any betting operators wanting to offer bets on the sport.
require_once(ABSPATH. ‘/wp-content/blogad.php'); ?>

“There remain a number of fundamental questions around the business of exchange betting. We are confident that these will be resolved as part of the wider issue of the relationship between racing and betting.  The new Government has signalled its policy commitment to ensuring a value transfer form betting to Racing as it sets policy to catch up with changes in technology and the way people bet.

“We would entirely agree that Betfair has been “disruptive” and “fundamentally changed the sports betting market”. Whether intended or not, it has certainly disrupted British Racing's finances, and has created severe consequences. It has indeed, for its customers, “eliminated the need for a traditional bookmaker”, and markets itself as “cutting out the middle man”. At the same time Betfair has argued it should be treated as a traditional bookmaker for the purposes of its contribution to our sport. Betfair cannot have it both ways.

“Our response to the Levy Board consultation states that it seems certain that some customers of Betfair and other exchanges that carry on the business of receiving or negotiating bets, and that should therefore be paying Levy. This is entirely consistent with Betfair processing more transactions per day last year than all European stock exchanges combined, with some of their clients making many thousands of transactions and data requests on a daily basis.

“Any international racing jurisdiction considering permitting Betfair to operate in their territory has to give very careful consideration to the impact on their sport, and learn from the British experience. In fact, we understand that they are offering far better terms to other Racing authorities, and we call on Betfair to now engage with us constructively and end the uncertainty.”

  • Paging Mr. Burn……

    Paging Mr. Burn……..Mr. Burn please report to the Paulick Report. Please give us another one of your long-winded posts about how Betfair is good and good for California racing. Maybe you might actually want to use some facts such as what your American pricing model might be since the tracks or owners can’t live off the 0.5% you are proposing.

    Paging Mr. Burn………has anyone seen Mr. Burn!!! maybe he is at TVG getting those on-air loudmouths to blow their checks on bets………

  • Duped

    Boy, these guys really try to dupe the industry.

    The British Horse racing board wants to tax a new form of betting like an old form of betting and shove new players into a high takeout system. It is the way horse racing boards operate because they have no clue what makes bettors tick.

    The same thing happened here when the industry was behind shutting down offshore books, and said “when we shut them down, people will flock back to racing” After it passed congress, with the racing exemption, to no bettors surprise, handle just kept tanking, while racing execs wondered “what happened”.

    Maybe the British horse racing authority will ask people what has happened in Australia when new forms of betting were allowed. There (in 2009 when handle was off here by 10% because of the “economy”, fixed odds betting in the tote and at betfair increased 36%, and purses grew by 8%.

    Then again – no they won’t, because they can not convince you of their case if they use that data.

    New forms of betting are the future for any game. The only thing stopping them are horse racing authorities who would not recognize a bettor if he looked at him and bit him in the nose.

    These organizations need to get with the times, and every one of them should have gamblers advising them, not old time monopolists who cater to 1950 principles and trainers and owners with no clue about what makes a customer bet or pass his product.

  • Birdrail

    How do you propose to pay for the very expensive act of putting on the show of horse racing if not from levies from wagers? I’ve got news for you: 0.5% isn’t going to do it.

  • ace

    My feelings towards Betfair and their Trojan Horse TVG are well documented here.
    Having said that, I am at a loss as to how to stop them.
    My main interest now is how to invest in their IPO.

  • David

    With due respect to Mr. Burns, let’s not forget about Kinky. You know Kinky, he’s always right. Sophistication and capacity scream at an otherwise archaic pari-mutuel world that simply fail to get it. GNP would no doubt take a huge hit if not for Kinky’s personal handle and tax coffers enjoy periodic windfalls for respective fair shares of Kinky’s net win. No, the world truly needs more of Kinky. In fact though that’s kind of the problem. Obviously, Betfair is counting on there being plenty of Kinkys out there willing to play a disproportionate share of discretionary income versus lesser cyber jerks. We’ll see. No one said exchange betting wasn’t an attractive platform from the punter perspective; but as the British Horseracing Authority is suggesting, where is it written that the model will work for racing? The Kinkys of the world apparently want racing as a menu item but could care less how the industry is to adapt to a model used to paying virtually nothing for content; and, despite massive intellect, solutions offered by Kinky . . . oh, he doesn’t have any does he? What we do get is ramblings about how smart Kinky is and how “ignorant” everyone else must be, how racing’s very future is dependent upon acceptance of Belfair as lord and savior and, of course, treasured narrative on various blogs. Hey Kinky, try a race without blinkers once in a while.

  • Tinky

    Who, exactly, is “Kinky”?

  • Ziggy

    It is easy to make a profit if you steal audio equipment and sell from the back of your truck. Ray, don’t you think it is time you stepped up to the plate and exposed these charlatans? We know you have access to what’s been going on. Don’t you think illegal offshore gambling and tax fraud is something worth investigating?

  • An IPO in London means that Betfair must stay in the UK and not move to Malta. Unlike many bookmakers who have done that and don’t pay anything to the Levy.

    I think football (soccer) betting will eventually dwarf racing’s contribution once Betfair expands worldwide (they are also developing a financial betting platform). While Andrew Black has been instrumental in Betfair’s prominent support for racing, once Betfair goes public it may be easier for Betfair to forget a little about racing should they fail to come to an agreement with racing’s authority figures.

    Who knows what the condition of racing will be by then.

  • Picksburg Phil

    The US racing industry should be on their collective knees profusely thanking Betfair for trying to drag them kicking and screaming into the 21st century. A reasonable person would think that the racing industry would want to attract new customers to replace the ones they’ve chased away over the last 20 years. Exchanges vs. pari-mutuels is like the difference between Jessica Biel and Rosie O’Donnell. (hint: Rosie is pari-mutuel)

  • Horse Person

    At your peril USA.

  • Ziggy

    Thank God there is still a government in the world that has the public interest at heart.

  • Tinky

    Glad to see that a number of posters have taken time away from their Tea Party rallies to comment equally reflectively on this subject.

  • Tinky

    In the Telegraph (UK), a terse response from the Association of British Bookmakers (i.e. ALL bookmakers, not just Betfair):

    The warning came as the British Horseracing Authority launched its ‘Racing United campaign for a fair Levy’, which is backed by all the major stakeholders including jockeys, trainers, owners and racecourses, and calls on the government to close what it describes as loopholes in the current system. Levy funding has fallen from £115 million to £75 million in three years.
    The BHA wants British-licensed bookmakers operating offshore and some betting exchange users to be subject to the Levy, and the threshold under which small shops do not pay to be abolished.

    Bookmakers rejected the Racing United campaign, with the Association of British Bookmakers warning that income will fall even further next season as the gross win from racing is forecast to fall from £1 billion to circa £750 million.

    “The ‘Racing United’ campaign completely misses the point,” said ABB chief executive Patrick Nixon. “The levy is declining because horserace betting is less popular with punters, not because betting companies are moving offshore. Bookmakers are now putting more money into racing, not less, through media rights, sponsorship and levy.”

    A spokesman for Betfair said: “Betfair pays the full rate of Levy in exactly the same way as any other UK bookmaker. Previous Government reviews have concluded there is no case for treating exchanges or their customers any differently to any other bookmaker or their customers. Nothing has changed.”

  • stillriledup

    It doesnt matter if betfair is good for california racing, its good for the fans and customers. Betfair gives bettors more options, which is a good thing.

    Maybe the racing industry needs to lower the ‘commission’ that trainers and jockeys get and give more of that money to the horse owner. Trainers and jocks in California are toasting their wine business in their Manhattan beach condos while the owners and bettors continue to bleed.

    Jocks and trainers don’t lose money if the horses they ride or train perform poorly. They don’t make money, but they don’t LOSE money. Bettors and owners, on the other hand, actually LOSE money if their horse races poorly (the horse’s value goes down) and the bettor loses money if his horse runs poorly. If you are a bettor or owner, you HAVE to win to win. With owners and jocks, they get paid no matter what, especially trainers.

  • Ziggy

    France banned betting exchanges and they are the only successful racing jurisdiction in the world. The discussion is over. Racing has a lot to do but Betfair isn’t the answer and they have questionable ethics. Pitch pennies in the washroom if you want to go head to head and eliminate the middleman.

  • Duped

    How do you propose to pay for the very expensive act of putting on the show of horse racing if not from levies from wagers? I’ve got news for you: 0.5% isn’t going to do it.:

    The same way AUS has the last year in year two of betting exchanges and fixed odds wagering – by increasing handle.

    During our “bad economy” Aussie racing grew handles at 5.5% and that nasty betfair was a part of it.

    Fixed odds wagering was up 36% and increased purses by 8%.

    Purses went up 3.8% as well.

    It’s called “growth” – something we fail to understand over here in the US.

    Scare tactics are not a policy, they are for people who do not have a policy, or are too worried about their slice to change.

    Beware the fear mongers – they only use fear, they do not use facts.

  • … or via some other innovative revenue platform.

    The “business model” to support racing via intra-industry taxes and transfers is rapidly becoming obsolete as the result of innovations elsewhere – and nothing that can change that, ultimately. The “good old days” are not retrievable. Don’t waste resources (human, time, money) on protecting the old model – use them to find a new one.

  • ThomasMc

    Racing needs to grow their pools by concentrating on international wagering.A percentage must be removed to run the show but the bigger the pot the smaller the take has to be.Betfair should not pay less than anyone else.

  • Florida bred

    Protectionism does not work. Betfair has built a better mousetrap. The CA legislation says they have to have an agreement with the local tracks/horsemen. Get what you can or get nothing. You’re not going to continue to force people to bet into an outdated system. $15 billion in handle to $11 billion in handle on North American racing, 2004-2010 is all you need to know. That money is not coming back unless you offer people better ways to wager it.

  • ziggy

    Wednesday, 22 September 2010
    Andrew Black steps down from Betfair board
    On the day Betfair officially announced their intention to list on the London Stock Exchange, one of the two original founders of the firm, and the one responsible for the idea, Andrew Black, has resigned from the board of Betfair. He made it public on Facebook.

    This doesn’t come as a surprise at all, ‘Bert’ had admitted some time ago that he was advised to step away from Betfair totally, otherwise he’d forever be getting frustrated with its direction now that he was no longer involved in the firm on a day-to-day basis. Now he can just sit back and enjoy what it has done to his bank balance.

    Well done Bert.

    Take the money and run.

  • Betfair is what it is. You can’t reverse the technology, or eradicate the fact that it has a strong market. Who cares who resigns and doesn’t or who makes money? It’s a business and a successful one. Compete.

  • David

    An attractive, innovative wagering platform and an industry in need of sweeping reform . . . those are the facts. But, should convention give way to new wave at any cost? Even if it could, the racing industry cannot contract on a dime any more than exchange betting can drastically alter a model that has gotten them here. In order to explore future potential, content will cost more to certain platforms with racing risking short-term exposure by taking less pari-mutuel yield. Otherwise, you have a food fight with punters devoid of an attractive product and an industry in decline.

  • Persian Punch

    If you think you can fund the sport of racing on the quivalent of 0.3% of turnover being returned back to the sport, which is what the UK get from Betfair, you’re living in cloud cuckoo land.

Twitter Twitter
Paulick Report on Instagram