Report highlights mutual interest of racing and betting
Report highlights mutual interest of racing and betting
The report that formed the basis of the evidence for the economic case for the UK’s new levy agreement for horseracing highlighted the uncertainties surrounding the future of horserace betting even as it put the case for the mutual interest between the two industries.
The report from Frontier Economics into the funding of horseracing was released for public consumption last week. The paper and its conclusion were cited by the government when it announced the details of a new long-term funding regime in mid-January which will see all betting operators paying 10 percent of their gross gaming yield (GGY) from horserace betting to help fund the sport.
On current levels of betting turnover, this equates to around £90m a year compared to the £54.5m figure raised by the old levy in 2015-16.
The report delves into the “complex flow of funding into and around British racing” and makes it clear there are clear differences between the “common interest costs” model that was used by the French authorities to determine the funding level for horseracing in that country and the UK example.
Still, in making their estimates the Frontier team say that understanding the alignments between what makes a good racing product and what makes a good betting product forms the basis of its calculations.
A key factor for both is competitive races which the report points out means sufficiently large field sizes. “A strong positive correlation has been found between the number of runners in a race and the betting turnover generated,” the report points out.
Betting turnover drops significantly for races where there are fewer than six horses. Similarly, the report continues, races without clear favourites (and particularly odds-on shots) tend to generate substantially more betting turnover and GGY because they are inherently more attractive betting mediums.
Yet field sizes remain an issue in UK horseracing with the average number of runners in UK horseraces falling from 11 in 2005 to nine in 2013. Worse, the average number is still falling. According to the most recent statistics from the British Horseracing Authority (BHA), the average number of runners fell to 8.8 in 2015.
The decline is directly linked to the increase in the number of races run per year which have risen from under 8,000 in 2002 to 10,040 in 2015. To answer the issue, the report talks about the measures introduced by the BHA to ensure competitiveness including ensuring horses of comparable ability compete against each other, the running of development races in the build-up to championship races and the use of the handicapping system.
The declining competitiveness of horseracing has been cited by some in the betting industry as a reason for a claimed decline in interest in betting on horseracing. The Frontier report confirms there has been decline in land-based betting but it adds that it is not clear what the overall trend is given the lack of data on the offshore remote industry. As the report states, the lack of data clarity “implies uncertainty over levy contributions in the future.”
The report relies upon the Gambling Commission data up until March 2015 which includes a mere five months of data from the new online Point of Consumption regime. It extrapolates from this to suggest that total betting turnover on horseracing was £9.3bn, consisting of £5.4bn in land-based betting and a further £3.9bn from remote. The report suggests GGY of £1.06bn.
The latest figures from the Commission for the year to March 2016 show off-course betting turnover on horseracing relatively stable at £4.77bn and with pool-betting turnover falling back slightly to £450.4m or a combined land-based figure of £5.22bn. However, land-based GGY fell back nearly 7 percent to £596.6m while pool-betting GGY on horses was also down nearly 5 percent to £102.3m.
The picture remains complicated in the remote sector. Though the Gambling Commission figures have a breakdown on turnover for the 12 months – a figure of £5.29bn which comfortably exceeds retail turnover – the GGY figure is obscured by what the Commission terms as unallocated revenue share. Hence, the GGY figure of £345.8m underestimates the actual number. Using a pro-rata calculation, we can estimate that racing GGY was worth another £143.8m, making a total figure of around £489.6m. The total for land-based and online GGY is the very close to the Frontier estimate for 2014/15 at £1.08bn
That the total figure is stable is at least a positive though given the growth being seen by the rest of the sports-betting market of 20 percent-plus, it shows horseracing is somewhat losing ground.
This is confirmed by some of the supplementary data collected as part of the report. A qualitative survey of 11 operators in both online and offline betting (and which equated to circa 75 percent of the total market for horserace betting) found that according to one operator, the volume of betting on horseracing was definitely falling; another one suggested that there was definitely migration between offline and online; and another operator suggested the volume was flat (which again given the rising market generally suggests a falling market share).
Totally Gaming says: There can be no doubt that it remains in the interests of both the betting and racing industries to come to an amicable agreement with regards to funding. As the Frontier report makes clear, there are indeed clear common interest costs that mean that a levy is justifiable. Now the two industries must work together to ensure the popularity of horseracing can not only be maintained but extended.