I recently caught up with some old bookmaking chums and with hindsight I wish I had not because their story about current trading was quite depressing. 

They complained of pointless over regulation that was more geared toward political correctness than being effective and a Gambling Commission that was more intent on finding facts that fit its story rather than listening to what the industry is telling it. Add to this the burden of taxation and you can see why many bookmakers no longer have the enthusiasm they once did have for the industry.

The number of betting shops owned by independent bookmakers has declined 24% to 1,225 in a four year period. Some estimate that the actual number of bookmakers could be as low as 600.

There was one salient point that came across in my chats – less interest in horseracing from punters in betting shops. Quite a surprising comment when racecourse attendances over the last five years have broadly been the same at around five million.

According to the Gambling Commission in 2008/9 turnover on horseracing was £5,743m but by 2013/14 it had fallen 17% to £4,729m. The gross gaming yield (GGY) over the same period had fallen by 23%. That is the important figure because it is on the gross win that the horse race betting levy is paid.

It now costs an independent bookmaker £30,000 to take Turf TV and SIS. I was told that had inflation been applied to these charges since inception the fee would be closer to £15,000. Such is the exploitation of media rights. All logic tells me this is not sustainable. At some point supply must meet demand and demand is declining. The bookmakers I talked to were seriously questioning whether racing media rights were sustainable in the future; they doubted the value or need for the product.

“Surely you could not contemplate having no horse racing in a betting shop?” I asked. 

“Let’s take Royal Ascot as an example. It was really great racing this year but it was just like an ordinary week so far as revenue was concerned”, was the reply. 

As one bookie said, “Go into a betting shop and count the customers at the counter. You will be lucky to see four on most days.”
Turnover on football from 2008/9 to 2013/14 is up 40% and the gross gaming yield from FOBTs is up 24%. Why? The horse racing product is complex, people have to invest time and thought before placing a bet. They choose not to. 

But the FOBTs have now been hit with an increase in machines games duty to 25% and the customers who wish to stake £50 to £100 have to register and open an account at the shop counter. Apparently the customers do not like this and few have registered. I hear that large staking bets in this category have dropped 85%, but revenue has fallen only 7%. Customers are just staking less (i.e. below the threshold for registering), playing longer but spending more or less the same. 

Another futile exercise dreamt up by those that like to tell people how to behave because they know best!
The betting shop faces competition from the internet, where value and choice abound. Nineteen percent of all gambling according to the Gambling Commission is conducted over the internet. It will be much higher when we have the full twelve month returns after the imposition of Point of Consumption Tax with offshore bookmakers now being licensed in the UK.

Then we have social responsibility. Good customers who have had the same betting patterns for many years are being pestered by the hapless cashiers to see if they need help or guidance. I would like to publish the response from the customers but I had better not. The cashier ends up in tears and so it goes on.
In our newsletter we have said on numerous occasions that the increase in the number of betting shops was just that a blip. The number will fall. You just have to wait for declining revenue to meet higher expenses. There is no need for further action on the part of Government. 

Future of SIS and Turf TV 

Both Turf TV and SIS’s days look numbered. Arena Racing Company (ARC) and Racecourse Media Group intend to create a single production centre to provide pictures and data. ARC controls 15 racecourses and RMG 34. This would leave only 11 racecourses for SIS to talk to. SIS’s current contractual arrangements end in 2017 with the old Northern Racing which is now under ARC control.

With the racecourses now taking more control of the product and in particular the data the fear is that fixed-odds betting maybe abandoned in favour of a Tote monopoly. This in my view is unlikely for a number of reasons. 

1. Punters would not bet at Tote odds causing racing’s revenue to decline further 
2. The market is not formed on the racecourse. Early prices with Internet bookmakers very often commence trading the day before. The market is established long before racecourse bookmakers arrive at the course. 

It was a huge mistake on the part of the Levy Board and racecourse bookmakers not to fully support the retention of Rule 4.2 which prevented money leaving the racecourse to the off course exchanges. Rule 4.2 ensured the importance of the racecourse in forming the market. With Rule 4.2’s abolition the market is now formed over the internet. The effect has been to lower margins to the benefit of the punter but an overall loss to the horse racing industry. As I mentioned before the GGY for horse racing has fallen 23% causing a similar fall in levy yield.

By Warwick Bartlett