I'm far from American - but their often used phrase 'get real' could easily apply to Racing.
I've read a host of well intentioned - but frankly misguided letters and columns about the shocking state of racing's finances. Constant attacks on the three major Bookmakers, Betfair, and even unfair criticism of the current leadership of the BHA are common place. Calls for a tote monopoly, vague ideas why majors should pay more, or an exchange driven utopia as possible solutions .
Is it unfashionable to tell things as they really are? Is the truth simply unpalatable? The arrival of the elephant at the heart of British Racing, in the shape of the all-powerful and 'benevolent' Betfair and its subordinate Betdaq is the heart of the issue.
Of course, I hear you say, that's obvious! We know exchanges equal nil profit. So why the complaints as to how much Hills or Ladbrokes pay to bet on British Racing? Is anyone really surprised at their cynical exodus to the rock? Trying to get such firms to pay more for Racing's product. Especially given the increase in costs from such as Gambling Commission fees, or picture rights costs, both absent just a few years back. Expert lawyers representing such concerns will only point out that betting on Racing simply doesn't yield the required margins any more, and it’s a hard argument to defeat. They combat low margin products simply by diversifying into the world of spinning fruits. Racing might lure the punters in but it's the flashing lights that turn the money over. As for exchanges, how they managed to persuade governments that individuals busy laying horses to the tune of millions every month aren't 'in business' can only be explained by the ubiquitous too difficult tray. How foolish the British Government must feel now they’ve legalised laying for fun – only to see the tax opportunities head to Gibraltar?
What's the real root of the problem? Well, a long time ago in a galaxy far far away (well, at least a different planet!) the then chairman of the Levy Board, Rob Hughes, sat down with six of his merry men to discuss the on course market. Specifically whether to permit this body to hedge with exchanges. In those heady days, Bookies would price up a race 15 minutes before the off, to a decent margin and no one complained. Substantial wagers were common place and uniformity of place terms were a given. It was the world of the Stephen Little, John Banks, and Leslie Steele. Giants who worked with a fair margin, and noone complained. Money span around the ring, and if the magic sign played, the prices naturally shrank. The ring was strong. And the margins of a strong ring were reflected off track. Let's not forget Bookmakers used to shoulder turnover based tax - so it must have been good. Imagine that chestnut today! Then a few ring Bookmakers discovered the arbing system. 'Money without work' as Martyn Verral would say. As the margins were still good, and money was still hefty in the ring - they found profit in hedging with exchanges using telephones rather than laptops because in those days to display exchange odds on track was outlawed. They argued for change. I remember their calls, nothing in life is that simple, I told them it would sour. Indeed it has - big time!
So, in a now infamous decision, no longer discussed at polite parties, Hughes decided in a split vote, to say 'yes' to exchanges on course. Let's remember they were in their infancy, and we were the only country to embrace their model. How France must have scoffed at our foolishness, sitting on their 700 million spending cash a year! Perhaps Hughes fancied making his mark on Racing. Well indeed he did leave an indelible print. Now the rings are decimated. The home of Arber’s. Bookmakers have forgotten the holy grail. Odds.
So what replaced Bookmakers on course? RDT. A creation of Betdaq. Their specialist software designed with the sole purpose of conveyancing money to the exchanges easy peasy lemon squeezy. It takes but a second to transmit a bet to Betdaq from the ring. Few hedge with other ring Bookmakers. And as the recession sat on our fair land, the same Arber’s have become more and more desperate to grapple every penny available, betting to infinitely small margins. Standard each way terms? In the bin! We don't have customers, they are the new fodder. Replaced by outstanding services such as an eighth the odds, and a fifth the odds in our Grand National. Lovely biscuits. Terribly simple if you're an on course layer, albeit not very profitable.
For the off course firm, betting to standard place terms? A disaster. At York's Ebor meet recently, I watched the betting on the Nunthorpe. Tiny liquidity on Betdaq mirrored precisely by layers on course. Every top win price on Betdaq available on the course network at precisely the same odds. Bookmakers betting to pennies, and where there's pennies, there's manipulation. Even one 154.0 chance on the exchange offered at 150 in the ring. In simple terms they were betting over broke. And goodoh, those same odds being transmitted for the merry men off track to work with! Thanks. Unlike the ring traders though betting shops don't have the luxury of a fifth the odds on the Ebor. Commonplace on course.
SP? Ah, a different story! By then most have pulled down their odds, fearing a late enquiry they couldn't move. And weighted towards the larger layers. It looks better than it really is. Especially when you consider 60% of the business is at show odds. The damage has been done.
The future? Reduced fixtures and Levy, shop closures, as more explore Malta and the like and ultimately industry SP's. Exchanges have their place, an armchair product, and that's where it should stay. I don't welcome Betdaq’ s on course involvement, it's destructive to the industry I love. The cartel of Betdaq – RDT – On Course Bookmaker has to be severed completely. The levy board experiment with permitting Course Bookmakers to hedge into exchanges has totally failed.
The ring is incredibly weak and this is reflected industry wide. Keep Nellie at the end of a mouse. Harrods don't over concern themselves over E Bay prices for the same products, and nor should we. Reverse the decision. And for those of you out there thinking this is surely too simplistic, that's precisely what it is.