Racing’s Bleak Future

[dave jay]

I can’t see all of the papers continuing print all of the racecards every day .. this time next year there will be meetings gong on that the great unwashed are unaware of. Why would they use precious column inches on meetings that no-one has an interest in?

[Anonymous]

Galejade/AP

I have just read that Ladbrokes expect a gross profit of around 12.5% on horseracing bets.
Betfair’s, unless I’m missing something, would be less than 2.5%, which surely suggests that racing does far better from bets placed with a bookmaker?

[Seagull]

Maxilon
Charles Cyzer is 64 years old and as you say he does not need the money!
He and his brother Richard made a fortune from Christmas crackers and fireworks.
They own the Elite firework company.
His brother owns a top Mayfair art gallery.

As most know Charles and his wife have bred a lot of the horses he trains and 99.9% run in his wifes colours.

They have never had the need to get outside owners.

His son Harvey was training from Bury Road Newmarket but results were modest and that plan soon folded.

I have never been to his stables but they can be seen from the side of the Cowfold to Horsham road. There was never much in the way of gallops from what I could see more of plastic road cones marking out bends and distances in big grass fields.

Maybe Charles could follow his neighbour in his next line of business as he has become a very large Ostrich farm supplying meat from these birds around the world.

He has never been a trainer to follow for me as overall results have been rather modest but he does get winners at his local Lingfield AW track.

There are some mega rich trainers here in Sussex such as Lady Herries, Lawrence Wells and Charles Cyzer was up with them.

The one I felt sorry for who recently gave up training was Sarah Willaims as she was running a yard more or less single handed but she used to get some nice winners especially at Exeter.

[Galejade]

Reet Hard,

I believe that you are quite correct. The levy applies to gross profits not net profits the difference between the 2 being costs which cannot be "fairly" distributed to a single transaction ie betting office rents, rates, costs of television screens, licences fees etc etc. Since the margin on bookmakers is so much higher that on betfair( a standing feature of Betfairs adverts) their gross profits are much higher than Betfairs since they have far more overheads and costs to deduct before arriving at their net profits. Hence since racing gets 10% of gross profits it gets far more of the punters pound from bookmakers than it does from the exchanges – at least that is what I am led to believe although AP apparently thinks this interpretation is incorrect.

[apracing]

It’s the attempt to compare punters in a betting shop with punters on an exchange that baffles me.

You talk about the ‘punters pound’ as though that was some sort of measureable thing. Perhaps, but only perhaps, in a shop it is, but on an exchange it’s meaningless.

If I bet £1000 this morning on a horse offered at 3.0 and later on I lay £800 on the same horse at 2.8, how many ‘punter pounds’ does that represent and how many of them do you want for racing.

The ability to trade in and out on the same horse inflates the figures bet on a race way above the actual amount risked by the punters that have bet on the race.

Using the argument you appear to be applying to punters (though I confess I’m far from certain what it is you mean), would you also argue that customers of Tesco should pay more income tax than customers of your village shop, simpy because Tesco operates to a lower profit margin?

AP

[Galejade]

Glenn ,

Finally got there! -sorry

[Drone]

The purest and most transparent system from racings point of view for collecting there levy would be the reintroduction of a small betting "Tax" ie every punter pays tax on when he makes a bet or , as used to happen, has the option of paying tax on winnings

Being pedantic maybe but…

‘tax on’ bets were opting to pay 10% on stake only, with any winnings untaxed.

‘tax off’ bets were opting to pay no tax on stake which meant no tax paid if lose, but 10% on returns (stake+winnings) if win. Not tax on winnings alone.

They didn’t miss a trick

[Glenn]

AP,

Incidently turnover in betting shops is most confusing too. If I go in with a pound to lose but happen to bet a 10/1 winner and then start reinvesting it before eventually leaving the shop with nothing goodness knows what Turnover I could have created by my activity.

You’re slowly getting there. If a punter has, say, twenty pounds to lose, he will tend to lose it perhaps five or six times faster in the betting shops. On the exchanges he will turnover five or six times more before losing the twenty pounds.

The levy gets two pounds in both cases.

Do you seriously think people would turnover the same as they do on the exchanges if they were forced to bet on bookmaker terms?

[Maxilon 5]

Thanks for that earlier response, seagull.

Very informative and I’m sure he’ll be back at some point. As with all of us, it’s in his blood.

.

[wit]

Galejade,

I’d ignore all the self-interested factional claims and counterclaims and just go to the last word in the respective audited accounts:

Betfair’s 2006 accounts:

Revenue 144.7m
Less
Cost of sales 35.9m

"Revenue represents the commission and fee income from the Group’s bookmaking activities and online gaming products…..The Group uses the term revenue rather than turnover to avoid confusion with the alternative definitions of turnover used within the bookmaking industry….

Cost of sales principally comprise Gross Profits Tax, UK Horseracing Levy and other data right charges."

From Ladbrokes 2006 accounts:

European Retail 771.5m
("all activities connected with shop estate in UK and Belgium…not phone or internet")
less
Gross Profits Tax, horse and dog levy 139.8m

So Betfair paid roughly 24.8 per cent of what it ended up keeping from punters over in GPT and levy, while Ladbrokes paid roughly 18.1 per cent of what it ended up keeping from punters over in GPT and levy.

(Ladbrokes moan about poor race results in October and November 2006 which would have depressed their GPT and levy figure – their equivalent figures for 2005 were 752.4 and 159.1 – so 21.1 per cent of what they ended up keeping from punters went in GPT and levy the previous year)

That Betfair percentage actually confirms my own experience : I find anything between 20 and 25 per cent of my gross win over a year being taken in commission. I’ve not sat down and worked out quite how it gets there from the much-touted 5 per cent figure, but I know that it does.

My conclusion (and I suspect also that of HMRC, which has looked a number of times now at the system in operation and is doing nothing to change it) is that the way things actually work punters contribute about the same in GPT and levy whether using the exchanges or the books – if anything, slightly more if they use the exchanges.

best regards

wit

[Seagull]

These are the figures generated by the levy in recent years.
They are from the BHRB site.

1997/1998 55.5 million
1998/1999 51.5 "
1999/2000 52.5 "
2000/2001 55.2 "
2001/2002 67.0 "
2002/2003 74.5 "
2003/2004 102.0 "
2004/2005 97.0 "
2005/2006 89.5 "
2006/2007 90.0 "

this year the estimate is £55 million and a forecast next year of £49.5
million.

From 1997 to 2007 thats £644.7 million.

£10 million was wasted on the Discover Racing scheme.
Remember those trailers they were towing around showing the joys of going racing but they were only ever seen on racecourses so it seemed a bit of a waste of money to me.

£172,000 was given to support rare breeds of horses and ponies.
This included £40,000 to The Shire Horse Society.
I dont know what this has to do with horse racing but I suppose it saved the likes of Whitbread and Fullers breweries helping out so much.

Of course the biggest problem was when they lost the data right court case to William Hills as this was meant to be worth a cool £600 million in just 5 years. The lawyers fees incurred by William Hills was £800,000 and I suspect its the best bill that Hills have ever settled.

Another lost cause was to attempt to get newspapers to pay for the right to publish racecards. Most editors just refused to publish some racecards so again more damage to horse racing. That plan was quickly dropped.

They attempted to raise on course bookmakers charges but all that transpired was on course bookmakers had a strike for a few days when they refused to mark up races. The off course firms were left to decide ‘industry prices’ I bet they loved that one!

I note the likes of Mick Channon and Gerard Butler have supported Charles Cyzers decison to quit due to poor prize money but there is no doubt that by next March they will both be seen with nice sun tans after returning from some exotic winter holiday.

It would be interesting to learn how much Mick Channon and Richard Hannon make per year on buying 2 yo horses and then selling them on.
I was told it is around £1 million per year.

For me the bottom line is not how much I turnover but that when I look at the card details on betfair the card withdrawn figures exceed the card deposit figures.
The easiest way is to achieve this is to ensure that I attempt to obtain the best value and to me overall it is on the exchanges.
I do not see why I should pay any extra charges in order to compensate for the mistakes made by those that have run racing so poorly.

PS I note that Charles Cyzer has a rare runner down in Devon on Sunday with Jamie Moore booked>

[Galejade]

Wit,

I apologise to everyone if the bookmakers have done a pretty good job in snowing me as it would appear according to the figures that you are quoting.

I am now totally confused because adding up the net cost of sales for Betfair and Ladbrokes alone in the numbers you are quoting we are already way above the Levy raised according to the levy Board and as quoted in Seagulls post and we have not as yet taken into acount William Hills, Corals, Victor Chandler and Uncle Tom Cobleigh and alls claimed contributions.

Can you shine any light on this too? ie is the key word "principally" in the definiton of Cost of sales.? I cannot find any explanation on the Horse Race Levy Board’s website.

[wit]

Galejade

The directors’ report accompanying the Betfair accounts includes the statement:

"Betfair remains a relatively small player…its share of the UK horseracing market for example is still lower than 7 per cent (from around 5 per cent last year)."

If on that basis we take 40 per cent of the 35.9 million as being levy (since GPT is 15 per cent and levy is 10 per cent), that would imply 14 million is around 1/15th of total levy.

That would imply aggregate levy at 210 million, which is clearly beyond the Levy Board’s figure of 90 million.

I can’t explain that.

However, comparing the Betfair GPT/levy figure of 35.9 against the Ladbrokes GPT/levy figure of 139 would imply, if Betfair has 7 per cent, that Ladbrokes has around 28 per cent of the UK horseracing market – which does sound in line with what I’ve heard previously.

So it does seem to work on a percentage basis even though it doesn’t seem to match up for either of them in terms of absolute amounts received by the Levy Board – in a year with a declared bad October and November in terms of winning horses, Ladbrokes won’t have paid levy of 55 million just on its own (40 per cent of 139).

Ladbrokes’ accounts are at

http://investors.ladbrokesplc.com/reports

and its reported GPT and levy figures for 2006 and 2005 are in note 8 on page 71 of the accounts (page 73 of the pdf).

it seems in the case of both Betfair and Ladbrokes that we need to take nearer 40 per cent of 40 per cent of what they put in their respective accounts to make it square with the 90 million aggregate, so there may be some accounting factor going on that we’re missing.

Hills’ declare (page 56 of pdf) total GPT and levy for 2006 (including phone and internet) of 174.1 million, which x 0.4 x 0.4 would make them paying 27.8 million in levy – again sounds about right:

http://www.williamhillplc.co.uk/

then go Investors – Financial Information – Company Reports

so my final bottom-line view on approximate 2006 levy contributions from their respective accounts would be:

Betfair – 5.7 million
(ie 6.3 per cent of the 90 million levy from just under 7 per cent of the market share for UK racing)

Ladbrokes – 22.2 million (24.7 per cent of the 90m levy)

Hills – 27.8 million (30.9 per cent of the 90m levy)

best regards

wit

[Drone]

Most interesting Wit, thanks very much.

[apracing]

I think the annual figures quoted by Seagull are the amounts paid by the Levy Board towards prize money.

But the Levy also pays a daily rate to tracks to cover lots of other things involved in a day’s racing, like patrol cameras, stalls, security of stables etc etc, all under the general heading of ‘integrity costs’.

Add in the other things the Levy has to pay for and I suspect that explains the difference.

AP

[wit]

AP,

there’s clearly something going on in accounting terms that’s affecting in the same way the reported levy figures of both bookies and exchanges, and not making them coincide with HBLB receipt figures.

judging by the HBLB’s report downloadable here:

http://www.hblb.org.uk/document.php?id=56

the 90 million figure does seem to be yield rather than prize money distribution.

the HBLB report indicates that of the 90 million, roughly 60 million went on prize money, 20 million on integrity services, and 7 million on "other racecourse expenditure".

best regards

wit

[Pompete]

Wit…your figures are correct.

Betfair’s lastest Levy Payment was 6.1m. This sum is the amount equivalent to 10% of their Gross Profits, which is defined by the Levy Commission as: ‘The Gross Commission on Horseracing Betting Business deducted from the winnings paid out to Bettors and Bet-Takes’

Betfair’s contribution can be compared to William Hill’s Levy Payment, as an example, which for the same period was 26.7m. In both cases they paid GPT at 15%.

Pro rata, if Betfair’s claim to a 7% market share is correct this would place Hill’s with 30% of the same market, based on their contributions to the Levy. This 30% figure ‘seems’ right (I’m happy to be wrong) and suggests that Betfair’s contribution to the levy is proportionate.

As an aside, the current estimate for this year’s levy is 85.5m, down from 95m (2006/07) and in consequence the Prize Fund is planned to drop from the current 55m to 49.5m.

http://www.bookmakersreview.com
http://www.hemscott.com/companies/
Horseracing Bettng Levy Board

Pete

[Author]

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