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BRITISH RACING TO ESTABLISH AUTHORISED BETTING PARTNERS

Oct 20 2015

• British Racing will introduce Authorised Betting Partners from 1 January 2016
• Betting operators will be rewarded for having a mutually beneficial funding relationship with British Racing
• British Racing is taking action to stop Levy haemorrhage
• ARC and Jockey Club Racecourses have independently decided that no new commercial deals will be entered into with non-Levy paying betting operators

Today British Racing is setting out to establish a new and more viable relationship with betting operators in a move which addresses the need to create a sustainable method of transferring funds and value between the racing and betting industries.

British Racing’s leaders, through the Members’ Committee which is the focal point of the forthcoming tripartite agreement between the sport’s governing body the British Horseracing Authority (“BHA”), the Racecourse Association (“RCA”) and the Horsemen’s Group, supports the initiation of a policy that will reward betting operators who pay an agreed contribution to the Horserace Betting Levy (“the Levy”) for their digital businesses or who have a commercial funding deal in place which sees them pay an agreed equivalent sum to British Racing.

Currently, British Racing is losing out on an estimated sum of at least £30 million a year in Levy or equivalent payments. Over the last decade the Levy will have dropped from over £105 million in 2004-05 to a forecasted £53 million by 2017-18 if no action is taken, despite the sport remaining a highly desirable and seven-days-a-week betting product. This is because the majority of betting operators generating profits from taking bets on British Racing do not pay Levy on their digital businesses, which are based offshore and thus not covered by the Levy legislation. The Levy will continue to haemorrhage unless urgent measures are put in place.

The British Government recognises the importance of the British Racing industry, which directly employs over 17,000 people, and supports over 85,000 throughout the country, many in rural areas where it is a vital source of employment. The industry generates over £3.4 billion annually for the British economy, and is the second highest spectator sport in the country. It has committed to introducing legislation in the current Parliament to support the industry and close the loophole in the current Levy legislation through the introduction of a Horserace Betting Right, which is restricted to betting on racing, preserves the VAT advantages to Racing and to betting operators, and which can be delivered within EU rules on state aid.

However, given that the legislation may take several years to implement, given the current haemorrhaging of Levy, key stakeholders in British Racing are establishing a new arrangement for betting operators who pay the Levy, or an agreed contribution, on their digital businesses to acknowledge and reward their partnership approach.

Betting operators who have a fair and mutually sustainable funding relationship with the sport will receive the official designation, ‘Authorised Betting Partner’, and will be able to fully utilise British Racing to promote and grow their own businesses. A full package of benefits setting out how Authorised Betting Partners will be able to utilise their relationship with British Racing is now being finalised in consultation with betting operators.

While these discussions are underway, Arena Racing Company (“ARC”) and Jockey Club Racecourses, the two largest racecourse groups in Great Britain with half of the racecourses in the country and operating nearly 60% of the racing fixtures, have chosen to independently support the process. Neither racecourse group will enter into any new commercial arrangements, including race sponsorship, with betting operators who currently neither pay an agreed contribution in respect of their digital businesses, nor have a commercial deal in place to pay the equivalent sum.

The current standstill period will be in place until 31 December 2015 by which time discussions with betting operators to agree the most suitable package of benefits that Authorised Betting Partners will benefit from should be concluded. All existing deals will be honoured but not renewed. Any new commercial deals with betting operators will contain a break clause to be triggered should they cease to be an Authorised Betting Partner at any point during the duration of a deal.

Currently 32Red, bet365 and Betfair are deemed Authorised Betting Partners given they pay the Levy voluntarily on their digital businesses, or in the case of Betfair have a commercial funding deal in place which sees them pay an equivalent sum. The four leading high street operators Betfred, Coral, Ladbrokes and William Hill have made an additional voluntary contribution of £4.5 million over the last year. Future commitments that meet the required criteria will result in these major betting firms becoming Authorised Betting Partners.

Nick Rust, Chief Executive of the British Horseracing Authority, said:

“British Racing offers world-class sport, gives enjoyment to millions of people a year, employs over 85,000 people and contributes £3.4 billion a year to the economy. But we are underfunded and loopholes in the Horserace Betting Levy system, allowing the majority of betting operators to make no contribution from profits made on British Racing through their digital businesses, continue to play a large part in that.

“We welcome the leading stance being taken by ARC and Jockey Club Racecourses. The concept of British Racing working in a sustainable manner with betting operators is an important one. Every stakeholder in the sport must understand and take on their responsibly for the creation of the right structure to support the funding of our sport.

“This platform should help the Government to complete its commitments to British Racing to resolve the problems of the outdated Levy legislation with the introduction of a Racing Right to ensure a fair and equitable funding mechanism between the racing and betting industries.”

Maggie Carver, Chairman of the Racecourse Association, said:

“The RCA is working with our colleagues across racing and betting towards the introduction of a Racing Right. Despite the Government’s welcome commitment to this policy it will take some time and the development of this new relationship with betting operators is an important step in the right direction.

“The RCA and its members value all aspects of our commercial interaction with betting operators which brings benefits for all parties. However, it is right that the relationship is based on a fair contribution being made by all betting operators, wherever they are based, towards the existing Levy or any future funding model. The initiative being shown by ARC and Jockey Club Racecourses is entirely consistent with these principles and has our support.”

Philip Freedman, Chairman of the Horsemen’s Group, said:

“The Horsemen’s Group fully supports the stance being taken by ARC and Jockey Club Racecourses, and welcomes the lead they have taken on this issue. Indeed, we see it as essential as we await the forthcoming Horserace Betting Right. While horsemen are free to compete in races of their choosing, we will ensure they are aware of sponsorship of races by non-Levy paying betting operators in order that they can factor this into their decision-making. The Horsemen’s Group remains committed to working with the BHA and all stakeholders to ensure British Racing has a fair and equitable funding mechanism in place in the years ahead.”

Martin Cruddace, Chief Executive of Arena Racing Company, said:

“It is simply not an option to allow the status quo to continue. We understand that our own long term growth and success can only be guaranteed if the whole of British Racing grows and succeeds. This is a substantial undertaking involving significant short term consequences but it is a necessary one if we are to ensure the sport has a sound basis on which to move forward in the years ahead. We are pleased to be able to work alongside the BHA, Jockey Club Racecourses and the Horsemen’s Group in progressing the plans. Today’s announcement will protect and improve the industry which will benefit all stakeholders, including betting operators whose businesses require British Racing to grow and succeed in the future.”

Simon Bazalgette, Group Chief Executive of The Jockey Club and Chairman of Jockey Club Racecourses, said:

“This is an important moment for British Racing and in the creation of a level-playing field for betting operators who take bets on our sport and are some of our most important partners. Between now and the end of this year we will be working with betting firms to agree both the criteria and benefits for becoming Authorised Betting Partners. The time has come to make our symbiotic relationship a sustainable one too for the long-term.”

Notes to Editors:

For more information contact:

Will Lambe
Director of Corporate Affairs, British Horseracing Authority
wlambe@britishhorseracing.com 07816 914 409

Susannah Gill
Director of External Affairs, Arena Racing Company
sgill@arenaracingcompany.co.uk 07751 870 929

Scott Bowers
Group Director of Communications, The Jockey Club
scott.bowers@thejockeyclub.co.uk 07809 665 840

Background Q&A

Who is currently an Authorised Betting Partner of British Racing?
At the moment 32Red, bet365 and Betfair are Authorised Betting Partners as they all pay the Levy, or the equivalent sum through a commercial deal, on their digital businesses.

How can a betting operator become an Authorised Betting Partner?
A betting operator can become an Authorised Betting Partner if they pay an agreed contribution to the Levy on their digital businesses, or who have a commercial deal in place which sees them pay an equivalent sum, as agreed appropriate by the BHA, ARC and The Jockey Club.


Does this announcement cover affiliate websites?
Yes this announcement includes affiliate websites who will be deemed non-Authorised Betting Partners if they direct customers to operators who do not pay Levy on their digital businesses.

What about those betting operators who have a land based business that pays the Levy and a digital business that does not?
Any betting operator that has a digital business that does not make the required continuation to the Levy will not be considered an Authorised Betting Partner.

Does British Racing expect other betting operators to become Authorised Betting Partners?
British Racing requires a sustainable long term relationship with betting operators which means seeing the latter become Authorised Betting Partners. We believe betting operators will see the advantage in having full access to British Racing to grow their business and so will wish to become Authorised Betting Partners.

What happens if no betting operators choose to become Authorised Betting Partners after this announcement?
We believe other betting operators will become Authorised Betting Partners but if none choose to do so British Racing will continue to work with the Government on the implementation of a Racing Right in order to ensure a fair and equitable funding model for the sport.

How will customers know if a betting operator is an Authorised Betting Partner?
In due course British Racing plans to have a logo, or ‘kitemark’, which will establish a betting operator as an Authorised Betting Partner. A betting operator will be able to carry this logo on their website and use it in their promotional activities. In addition there will be a significant planned media campaign to highlight the roll Authorised Betting Partners play in supporting British Racing.

What are the key advantages for a betting operator in being, or becoming an Authorised Betting Partner of British Racing?
As the initiative develops British Racing will ensure that Authorised Betting Partners are able to utilise the sport to grow their own businesses in ways non-Authorised Betting Partners cannot. This may include, but not be limited to, race sponsorship, access to ticket concessions for their customers, wifi access on racecourses, access to racecourse’s customer data and more advantageous streaming costs.

Will non-Authorised Betting Partners still be able to advertise with Channel Four, At The Races and Racing UK?
Yes, as it currently stands although this is an area that will be examined in due course.

Given betting operators spend millions in sponsorship and media rights each year why should they also have to pay the Levy?
The Levy is designed to transfer funds from the business of betting on races back to racing in a broad sense. Sponsorship and media rights are separate payments for identifiable and distinct commercial products, with the benefit accruing to each betting operator individually. Betting operators of all sizes gain from their relationship with British Racing, based on their ability to take bets on the sport. It is not fair or equitable that they can use British Racing to grow their profits without making a contribution to the sport from their digital businesses. An estimated 35% of the market, including two of the most successful digital businesses (bet365 and Betfair), is able to pay the Levy, enter into commercial relationships and still succeed.

Will this effect Licensed Betting Offices’ (“LBO”) Media Rights?
No. It is in the interests of British Racing and betting to have a full service of racing in the betting shops and for LBOs to flourish.

Do other racecourses, such as Ascot, Goodwood and York, support this initiative? If so why have they not joined Arena Racing Company and Jockey Club Racecourses in signing up to only doing business with Authorised Betting Partners?
ARC and Jockey Club Racecourses have taken the lead but it is a matter for other racecourses as to whether they follow.

Will this activity push betting operators away from British Racing so they focus sponsorship and marketing on other sports?
Despite the popularity of other sports British Racing remains a very important betting product for the majority of betting operators, both in acquiring new customers and encouraging customer spend. This announcement does not change this. Of course it is likely that new opportunities will be found, but that is a risk that has to be taken.

How will horsemen support this initiative?
This announcement has the support of the Horsemen’s Group. While owners and trainers are free to run their horses in races of their choosing we will be aiming to inform and educate about any new sponsorship of races by non-Levy paying betting operators and hope horsemen will factor this into their decision making. This will allow horsemen to make an informed choice about which races to enter their horses in full knowledge of the impact their decision has for the long term health of British Racing.

What sum constitutes an ‘agreed contribution’ to the Levy?
Currently 10.75% of Gross Profits from UK customers betting on UK races but British Racing is open to discussing a graduating rate from betting operator over a number of years.

How does British Racing reach the estimated £30 million figure for the current shortfall in Levy payments?
It is an estimate of the market size based upon numerous publically available resources, and third-party analysis.

Where do things stand with introduction of the Horserace Betting Right?
The Government remains committed to a Racing Right and discussions are ongoing between the BHA and the Department for Culture Media and Sport. We are hopeful of continued progress in this policy area.