Over the past few weeks, the sport of kings has descended into farce as Go Racing struggled to secure its &£387m ten-year deal for horseracing media rights.
Last week, the Go Racing consortium – comprising BSkyB, Arena Leisure and Channel 4 – finally reached agreement with the British Horseracing Board (BHB) and the Racecourse Association (RCA), over the supply of pre-race data.
The sticking point arose over the handling of the deal. RCA owns the media rights to the racecourses while BHB owns the information on runners and riders. Initially, RCA negotiated with Go Racing for a financial package on behalf of BHB. But BHB chairman Peter Savill was unhappy with the process and told RCA it was not allowed to negotiate without BHB’s input.
Last Friday, Go Racing agreed to change the terms of the deal, giving BHB 50 per cent of the profits made from the sale of its data for use on mobile phones. Under the original terms of the deal the organisation would have received 25 per cent.
BHB will review the media rights to its data after five years and the rights to its new technology data after two years.
Go Racing is undeterred by the changes, with chief executive Chris Stoddart arguing that “new value will be generated for all parties in racing”.
The company has trumpeted the deal as a “real opportunity for the media rights to British horseracing to be exploited” with &£80m of the &£400m due to be pumped into marketing. It will now start looking for a marketing director.
The deal will see the consortium set up an interactive television channel next spring and a website, which will allow punters to watch races and place bets at the same time. Go Racing has also entered into sub licences with the BBC, Channel 4 and BSkyB for terrestrial and satellite broadcasting of racing. NTL has an option to buy ten per cent of Go Racing’s share capital, allowing it to put the interactive channel on its platform. Other digital providers, including Telewest and ONdigital, will also have the opportunity to pay to broadcast the channel on their platforms.
Go Racing will make its money from a tote betting system with an estimated profit margin of 25 per cent. A tote pools betting money, with winnings based on the amount of money put in the pool.
BSkyB already knows the potential of interactive betting. In the nine months to March 31 2001, it achieved revenues of about &£36.6m through online and interactive betting via its subsidiary Surrey Sports.
Brewin Dolphin leisure analyst David Pope says the company will have to achieve a 20 per cent share of the horserace betting market from year six onwards to make the deal work. He also maintains that the revised deal puts the racing associations in a stronger bargaining position.
“The deal is viable but is a slave to the uptake of new technology,” he says. “It will broaden the market and appeal to people who feel uncomfortable walking into a betting shop. But the marketing behind the deal will also raise the profile of horse racing and help bookmakers, at least in the short term.”
Traditional bookmakers will be invited to tender for a presence on the Go Racing website and channel. They will have to pay fixed fees and a percentage of their revenue. Although details will be announced closer to the tendering process, bookmakers William Hill chief executive David Harding believes the revenue percentage to be taken by Go Racing will be “substantial”.
But, Harding, a vocal critic of the deal, believes the shorter review periods mean the overall cost of the deal to Go Racing over ten years is unclear.
He also claims punters won’t be interested in tote betting and is concerned that Go Racing will put off traditional bookmakers, including William Hill, from having a presence on the site because it will charge too much.
“With pool betting you don’t have the buzz of pitting your wits against the bookmakers,” he says.
Harding says there are fundamental reasons why Go Racing will struggle against high street bookmakers. “You don’t get the camaraderie if you bet at home. And many people like to bet with cash. I also don’t think a lot of punters want to bet in front of their family,” he says.
Oliver & Ohlbaum Associates advises media companies on sports rights and managing director Mark Oliver agrees that some punters like to go to the betting shop to get out of the house. But he believes bookmakers are talking down Go Racing’s plans to secure a more competitive rate to be on the platform.
He envisions Go Racing doing “barter” deals with TV companies across time zones, allowing the company to televise racing almost 24 hours a day. And he believes the new media aspect of the deal, which means punters can bet and access data through their mobile phones, could be crucial as the technology develops.
“I think you’ll get bigger spending punters who will stop using the [land line] telephone to place bets and will go interactive on the mobile. They may go to the bookmakers socially but they may not bet in there.”
Now the rights’ deal has been agreed, albeit painfully, Go Racing will have to get down to the nitty gritty of getting bookmakers and customers to use its much-lauded betting platforms. With the high street bookmaker deeply embedded in betting culture, they may have their work cut out.