How the Tote Can Solve All of Racing’s Financial Problems

When writing for the RFO and Sports Advisor in the past I took every opportunity to stress how important it was for the Tote to reduce the percentages that it took from the Pools. I also had a letter published in the Racing Post on 4^th July 2007 on the subject.

The debate in Parliament tomorrow 1^st March could prove crucial as to the course that the future Tote takes. Racing’s finances continue to suffer and a thriving Tote in the right hands could do so much to strengthen the Sport

Imagine that you are going to buy an item on the Internet, say a pen or a book. Identical product and delivery times etc. The three best quotes are £14, £6.50 and £5.

When you buy the £5 item you are also buying knowing that most of the money is going to Charity or a good cause.

It seems pretty logical that the latter would be the preferred choice.

The same scenario would be the case if you applied the same principles to betting on horses.

At the moment the Tote prices itself out of the betting market because it deducts too much from the Race Pools especially via the Internet. A couple of years ago the then Chairman of the Tote – Peter Jones likened the running of the Tote as to running a corner shop on Internet profit margins. My riposte at the time was why wasn’t the Tote running an Internet business on the Internet.

Racing could be completely self financing in my opinion if the Tote were to cut its deductions on the Internet side of its business to 5% from its win and place pools.

The bulk of betting on horseracing in the UK still takes place on the win and place singles market with each market on Betfair matching around £1million meaning that £500,000 is actually staked. That amount is supplemented by bets made in the betting shops, racecourses and the Tote itself. The deductions from SP bets is around 14%. Betfair overrounds are around 102% plus the deductions of say 4.5% average, making 6.5%. The Tote currently deducts 13.5 % from the win pools and 24% from the Place.

If the Tote were to deduct just 5% they would then undercut both the Bookmakers and Betfair. At the moment the Pools are painfully weak but they would soon increase and gather strength once punters realise where the value is. There would then be a snowball effect where the pools would continue to attract the bigger punters as they become large enough to accommodate bigger stakes. Imagine the Pools at Cheltenham where they could be the best option for punters. The pools could easily swell to over a £1million. Once recognised by punters as the preferred option this momentum would carry on for betting on the rest of racing.

I should add at this point that the 5% deduction would apply strictly to the Internet business. The racecourses and betting shops would have to carry a greater take out to cover higher overheads. Perhaps it would have stay at around 15% to break even. The Internet infrastructure is already in place and increased turnover would carry nothing in the way of additional and increased overheads.

The Internet Tote could handle multiple bets and any winnings in a yankee bet from the first winning selection would carry on into the next pool and so on. Pools would thus be strengthened again.

In fact once established, the Internet dividend or price could form the basis of a new Starting Price return. This could be used by Bookmakers when settling bets in the shops. The Tote could then charge the Betting Industry a fee if both parties are agreeable. The Tote could then develop a role as the layer of the last resort where if a punter could not get on anywhere else he could bet into the Tote pool. Bookmakers in turn could hedge into the pools in order to reduce any liabilities.

Betfair would still carry on and may lose some turnover to the Tote but would still offer a wider array of betting options and it is quite probable that the overall market for Horserace betting would increase as a whole. The main reason is that at 5% the deductions would compare favourably with betting on other sports such as football or golf. Racing could then recover some of the turnover lost in the last few years.

The shape of turnover would in turn have an effect on the nature of the racing programme. At the moment most of the racing in the UK takes place on handicaps. The off course bookies who provide the levy and offer racecourses fees to put them on, prefer handicaps as they offer bigger gross profit margins. Betting on Betfair suggests otherwise where condition races attract bigger turnover than handicaps.

Under a 5% regime cards would reflect the bigger turnover races. It is quite possible that claiming races get bigger turnover than handicaps. Racecards would then reflect the true betting market.

Security would improve. In Hong Kong security is much tighter because the bigger punters including Syndicates demand that racing is straight so they can have faith in the form. The same impetus would take place in the UK and as punters have more faith then turnover would grow again.

If Tote turnover were to approach £100k and £40k for the win and place pools per race then gross profits would be around £75Millions per annum. If that turnover were to double to £200k and £80k respectively then the £150Million gross profit would be enough to totally finance British Racing. It need not stop there. If overseas punters were to bet into the Pools then turnover could be garnered from all over the World. British Racing would be number one globally with consequent benefits for the rest of the Industry.

At the moment under the Gross Profits system the Racing Authorities have no incentive for punters to win. In fact owners get more if punters lose. This is a chronic, adversarial and contradictory way of running things. Under a new Tote regime Authorities would have an incentive to get punters to bet more and everyone would be working in the same direction.

So far the Tote has been hindered by a management that has had no incentive to develop the product. Under the current incumbent Trevor Beaumont all the indications are that he is acting in the interest of the Off Course Betting Industry. The bookies have always had considerable sway and there has been little doubt in my mind that the Government has deliberately kept the Tote quiet and ineffectual.

Now that the wraps are off things could undertake a significant shift.

If Betfred or Coral take control and introduce a 5% regime this could benefit punters but not necessarily the owners and racing in general. If the Ruben brothers get it I think this could be the end of racing as we know it and it could go into gradual and permanent decline. If Andy Stewart gets it then potentially this could be the best option as his City and Financial knowledge allied to his love of the game could mean a more positive direction can develop.

Hopefully tomorrow’s debate will take this idea on board.

Saturday Racing

Suits Me is the Bet To Win at Lingfield 4.20. Cnditions are now in his favour.

How I Started Pricewise

It seems that the Pricewise betting feature in the Racing Post has been around forever and is a recognised and integral part of the horserace betting landscape.

Whenever a big race is featured the markets are on standby for the announcement of the Pricewise selection. Then all hell breaks loose. Big arguments take place as to who got what bets, for how much and at what prices. It is debatable the extent to which bookies take bets before cutting the price and just what their liabilities are after accommodating punters in the shops to their chosen and restricted limits. Nevertheless the column commands huge attention.

You may wonder how Pricewise got started. While Mark Coton may have been the initial Pricewise contributor the concept was not his.

I started Pricewise and this is how it happened.

In around 1985 I joined the London Racing Club. Having recently moved to London with my job and with nobody at my workplace interested in racing I thought I would toodle along to The Glassblower pub just off Piccadilly Circus one evening where the meeting of the club was held on the second floor of the establishment.

The first time I attended was an awkward experience as I knew nobody there and arriving early merely made my unease all the more acute. The social experience of joining any club is never easy but it was not long before I got chatting to a couple of the regulars. I cant quite remember who the Guest speaker was on that first occasion but over the months that followed an assortment of racings luminaries turned up to represent the various factions of Racing’s rich tapestry. The Chairman of the club at the time was Roger Cook who along with his wife Sue ran a pretty efficient and amiable outfit.

One of the guests in those first few months was Graham Rock who had just been appointed Editor of the fledgling Racing Post. The Post had been kick started with the backing of Sheikh Mohammed and the Maktoum family of Dubai and was instituted as a competitor to the Sporting Life who had the market to themselves among the racing dailies.

Brough Scott was the editor in chief and was instrumental in the conception of the idea and securing the financial backing for the venture.

After the speech and question and answer session I later spoke directly to Graham that evening. Quite often when you speak to people selling their products or ideas you find them with a fixed agenda and inflexible to new attitudes. They often seem in a defensive and almost combatitive mode as if trying to defend their territory from an attack.

Graham was quite the opposite. I think he appreciated that the audience were a sophisticated and representative sample of racing enthusiasts and he was reactive to positive suggestions

.

At the time the Bookmakers had increasingly supported the idea of going up with their prices especially on a Saturday when the big handicaps offered big fields and even bigger ovverounds. In the seventies Bookmakers would offer prices on races they were sponsoring themselves and pretty much kept the market to themselves. With pickings so rich it was not long before all the books were offering prices on pretty much every race that they could.

What then tended to happen was that Bookmaker adverts appeared all over the Paper with dozens of races featured and prices on all of the horses contesting them. I found on a Saturday that it would take ages to collate the prices and found myself drawing up grids filling in the prices of the various firms seeing who was biggest and with what terms for places etc.

I had before that evening floated the idea in conversation with some members of the Racing Club that it might be good if the paper were to produce all the races and prices on one page so that punters could see at a glance the various odds on offer. They could also see what firms were best for multiples as some books would be bigger on some races but not on others. I found most of the members in agreement.

I put it to Graham and also suggested that Bookmakers might support the idea as punters would see straight away which firms were biggest and that would increase turnover for the firms. Likewise if a firm wanted to duck a horse the grid would similarly work in their favour. Graham agreed that it was a good idea and he would take it away and see if it had support.

I also suggested that one of his journalists could write a piece highlighting the best prices available and any value that ensued.

Anyway, it was not long before Graham put the proposal into practice and the Pricewise column was introduced. It was a great success.

The legend that is the Pricewise column today developed during the time that Melvyn Collier was in the seat. Not only was he tipping winners but some of his selections were spectacular to say the least. His success gathered momentum and seemed to peak to my eye at least, with the victory of Papillon in the Grand National which fired a huge nationwide plunge and ensured the column fame forever more.

At the time I was working for the Sports Advisor magazine under the editorship of Andrew Sim. Andrew had a long and distinguished record as an investigative journalist with The Sporting Life before the increased sales of the Racing Post put that esteemed paper out of business (no doubt due to the success of the Pricewise concept!). There have been very few investigative journalists in racing since the War and even fewer with tenacity and success of Andrew.

It did not take me long to realise that Ladbrokes were consistently shorter with their prices when Pricewise put up the same horse. Now I dare say that over the years bookmakers might have approached a successful journalist so as they could mark their card beforehand in order for their odds to be under the market. But it seemed to me in this case that it was the other way round and that Ladbrokes were marking Collier’s card especially as many trainers would have been putting their bets through them. Ladbrokes were forewarned on most of the big races as a consequence. At the time prices were being held and profits were proving to be enormous. If Ladbrokes were to duck the huge liabilities and their competitors were to cop all the winning bets it could lead to movements in share prices and the improved perception of Ladbrokes as a company in the eyes of the City.

I put it to Andrew that as editor of the magazine that it might be worth following up the theory but after talking with his bosses it seemed they were keen not to upset a potentially major advertiser. That was the end of that. In turn and no doubt fired by his success at the Post, Collier left the paper to set up as an independent tipster but singularly failed to match the success of his Pricewise tenure. That in itself proved the validity of my suspicions at the time.

Pricewise carries on today and has done much to add to the sales and profits of the Racing Post though I never managed to get a copyright fee or similar which would have been nice!