Race to win the turf war

When Ladbrokes finally signed up to Turf TV last week, it marked the beginning of the end of a bitter battle between the horse-racing industry and bookmakers that has been raging for the past year. William Hill is sure to follow this week, and with only Betfred left to reach agreement with the new dedicated betting shop channel, it seems certain that the four biggest bookmaking chains will end their boycott of the service that went fully live on January 1.

The dispute began in 2006 when 31 racecourses – including Ascot, Cheltenham, Aintree, Epsom and Sandown – entered into an agreement with Alphameric, a company that supplies betting systems to all the major bookmakers. The joint venture developed Turf TV in an attempt to gain greater control over the racecourses’ picture rights.

Previously, all 59 of the UK’s racecourses sold their live racing pictures to betting offices via either the Bookmakers Afternoon Greyhound Service (BAGS) – which then sold them on to Satellite Information Systems (SIS) – or directly to SIS, which provided the pictures and data to the betting industry.

For the past 20 years, since SIS has been in operation, it has dominated racing broadcasting. The service is controlled by bookmakers, with Ladbrokes, William Hill and The Tote holding stakes of 23%, 19% and 6% respectively. Turf TV’s exclusive alliances with the racecourses gave it considerable leverage to challenge SIS’s monopoly, but the big four bookies claimed taking its pictures would put a huge strain on their costs and vehemently refused to sign up. Betfred founder Fred Done once said the company would join “over my dead body”.

Smaller operators, such as Paddy Power, decided to take the service early on and The Tote signed up in June last year, but Ladbrokes, William Hill, Coral and Betfred held firm until late December, when Coral broke ranks and signed with Turf TV. It proved to be the tipping point and Ladbrokes came to an agreement soon after at a rumoured cost of £50m.

Ladbrokes’ head of public relations Ciaran O’Brien says: “Given the prospect that at least one of our large competitors was going to offer the pictures, we didn’t feel we could leave our customers with blank screens for some races, so we were pretty much forced to sign up.”

Coral is believed to have negotiated a “sweetheart” deal with Turf TV, paying a rumoured £3,800 annually for each of its 1,500 shops – a huge discount on the rate-card cost of £6,500 and thought to be even less than the fees paid by some of the first bookmakers agreeing to take the service.

One industry observer claims Coral’s sudden volte face has resulted in it being seen as a “pariah” among bookmakers. Gala Coral chief executive Neil Goulden says that the decision was taken after various technical problems were solved. Coral is now able to manage and edit the pictures itself and an acceptable level of cost has been found. He adds that he did not think it was right to involve Coral’s customers in the dispute, leaving them with no pictures. But there is no doubt the move has infuriated the other major bookmakers and left them with little choice but to sign up themselves.

Goulden denies that the decision is linked, as some have claimed, to the troubles Gala Coral’s Gala Bingo division is facing, following the introduction of the smoking ban and new legislation decreasing the payouts on slot machines.
Goulden says he is still “fundamentally opposed” to Turf TV because the racecourses already receive a “massive subsidy” via the statutory levy paid by all bookmakers. At the moment, a levy of 10% of UK profits on horse racing betting is collected and provides racing’s key financial underpinning.

Gala Coral has also declared a strong interest in buying The Tote, if the state-owned betting operation is put up for sale on the open market, as expected, in the next few months. The addition of Tote’s 550 shops would allow Gala Coral to expand the most lucrative part of its business and take its total number of shops closer to the 2,400 of Ladbrokes, the biggest high street chain.

Global Betting and Gaming Consultants chairman Warwick Bartlett says that while some of the bigger operators will increase market share, the high cost of Turf TV, in addition to the other commercial costs for betting shops, will force some of the smaller, independent high street bookmakers out of business. “There will be less opportunity and less price competitiveness as far as the consumer is concerned,” he adds. “It’s a backward step.”

Bartlett says that the bookmakers will soon get over their irritation at Coral’s about-turn over Turf TV, as they are obliged to sit together in trade association discussions. The big four are now lobbying hard to have the statutory levy either abolished or reduced dramatically. Goulden says of the levy: “They [the racecourses] can’t have an increase to our subsidy to the industry and then screw us commercially.”

The Government has been keen to distance itself from the levy as it could amount to illegal state aid under EU law, but a review panel chaired by Lord Donoughue concluded in December last year that there was no commercial mechanism to replace it.

The bookmakers’ contention is that racing has now found an alternative mechanism in Turf TV and that the levy should be abolished. They also argue that the amount of any levy should be reduced to take into account their increased payments for TV rights. The matter has now been referred to Minister for Culture James Purnell, who must make a determination by April. It seems likely that the levy will continue for another year at least, while litigation between the warring parties continues.

Last year, William Hill, Ladbrokes, Gala Coral and Betfred, together with BAGS, launched proceedings in the High Court against Turf TV and its racecourse partners, claiming the courses infringed competition law by selling exclusive rights to Turf TV. A counter-claim was then launched by Turf TV, alleging that the bookmakers and BAGS had themselves infringed competition law by colluding against Turf TV.

Bartlett points out that, while the Turf TV battle between racing and the bookmakers may be almost over, it is far from the end of the war. Racing may break the bookmakers’ control of the sport with the establishment of Turf TV, but if the cost is the loss of the levy, victory will have come at a very high price indeed.