The British Horseracing Board has announced cuts to its budget of £8.7m to counter a potential shortfall in database revenues.
The BHB was hit hard earlier this year when the European Court of Justice unexpectedly ruled that bookmaker William Hill did not infringe the board’s database rights when it published racecard information on its website in 2001.
The verdict cast a large doubt on racing’s future, as the BHB had planned to replace the levy with data licensing to media outlets and bookmakers. Some Irish bookmakers are already withholding payment in the wake of the ruling, although “a significant amount of money is flowing in under the contract,” according to BHB spokesman Alan Delmonte.
While the BHB remains confident that it will ultimately be able to assert its database rights, the Board decided to reduce costs as a precautionary measure.
“The more we look at it, the more we see that a reconfiguration of our database processes to fit the ECJ criteria on database rights is straightforward. However, we recognise that the time needed to reach that position could be lengthy, as it could lead to a re-running of the whole legal process. We have therefore taken prudent, early action in order to ensure that the BHB remains in a position to fulfil its obligation as the governing body of British horseracing,” explains BHB Chairman Martin Broughton. “The expenditure reductions agreed yesterday were recommended by the Executive and unanimously supported by the Board, which took the view that these measures were right for the current time.”
The cuts range from incentive schemes to marketing and head office costs, and their impact will be wide-ranging, affecting owners, breeders, trainers and racegoers in several ways.
The largest saving — in the region of £3.2m — will come from suspending the Owners’ Premium Scheme from 1 January 2005. The scheme gave owners bonuses of between 25% and 50% of prize money if their horse was bred in Britain and it may prove a bitter blow for British breeders.
“The most obvious thing from an owner’s point of view is that, if you bought a horse with the expectation that — if that horse should win — you’d get 25% more money, and you find after the purchase that this is no longer the case, you may justifiably feel a bit duped,” says Michael Harris, Chief Executive of the Racehorse Owners Association. “There will definitely be some discontent [among owners] but it will be a question of degrees. If it had been running for many more years, than there would be a lot more discontent.”
However, Harris points out that “the whole point of premiums was to provide a boost to British breeding and that will now be put on hold, which is very, very sad”.
This view resonates with the Thoroughbred Breeders’ Association. “Owners’ premiums were very popular and very successful. Next year they were going to be paid to three-year-olds too and they were a boost for the British [breeding] industry,” says Gavin Pritchard Gordon, executive Director at TBA. “Having said that, we have to support the BHB and everyone has to take a knock. It is very unfortunate [that the scheme will be suspended] but we all understand that the BHB have got to find £10m of funding to be slashed and everybody has to take it. We very much hope [the premiums] can be reinstated. We’ve just got to keep our fingers crossed that the judging goes the right way at the Court of Appeal.” The BHB is adamant that the scheme has been suspended rather than terminated and Broughton hopes to bring it back in 2006.
The fixtures Development Fund, which offered prize money funding to courses that ran specific types of races, will also be put on hold, saving another £1.9m throughout next year. This could have a huge effect on the diversity of the sport because it could mean that supported races, such as novice chases, maiden hurdles or classified stakes, come to an end.
BHB Chief Executive Greg Nichols encouraged racecourses to continue staging these races “in the best interest of the sport as a whole.” Although he shares “Greg Nichols’ sentiment,” Stephen Atkins, Chief Executive of the Racecourse Association (RCA), says that the courses need some help from the BHB to keep these fixtures alive.
“[Racecourses] would like to run these races. The problem is funding. The only way to do it is to have marginal cuts in minimum [prize money] values. Without that, there is a real chance that races will be cut, although racecourses would not want to — but we operate in a challenging financial environment and racecourses are unlikely to maintain a balanced programme without help.”
The RCA have put a proposal to the BHB to salvage a variety of races. “It’s in the BHB power to make it happen, but to do so, they need to reduce minimum values — 10% would probably be enough,” says Atkins. “The real problem is the long lead time [it takes] to set the race programmes. Programmes are set now for the second half of next year so we’d need help quickly – and they are aware of that. It’s over to you Greg.”
But the BHB “will not rush into making any decision,” according to Delmonte. “Certainly, we recognise that we will need to look at all aspects of how racing is organised in the light if the ECJ ruling. We are certainly committed to being flexible, but we will not take any immediate decision.”
The BHB itself will face a degree of internal restructuring, as a number of head office appointments will be frozen, although no redundancies are planned at the moment. Other savings to the tune of £1.75m will come from the marketing budget, which has been halved in 2005. As a result, the Summer Triple Crown series will no longer run next year, although the Flat and Jump Awards and the Order of Merit will continue.
The BHB will also discuss with the Equine Fertility Unit and the Equine Genetics Research LTD the extent of its contribution —which was originally forecast at £600,000 in 2005. “The discussion is to ascertain whether to reduce or suspend this contribution,” explains Delmonte. “The Board has provisionally taken out the £600,000 from the budget but we want to discuss with [the units] what effect it would have [on their work] if the contribution were zero.”
In a bid to further compress costs, the BHB asked the Levy Board to fund the £2m cost of the Regional Racing programme next year, which the BHB has borne in 2004. It is unclear whether the regional fixtures will be scrapped if the Levy Board refuses to pick up their cost. “If the Levy Board do say no, we’ll have to deal with that. We have not made any particular provision for it yet,” says Delmonte. “However, there is a strong reason for the Levy Board to fund [the programme] because [the regional races] have brought more money through the Levy than they have cost.”
These cost cuts “take into account the most pessimistic scenario in which licensees simply refuse to pay money due under their licenses,” according to the BHB. “We want to be in a position where our infrastructure has not been unnecessarily impacted. While we have identified the further measures which would have to be taken if it transpired that the BHB could not establish a database right or its equivalent, we remain confident that these will remain as contingency plans only,” says Broughton.
However, if the Court of Appeal upholds the European Court of Justice’s verdict and rules against the BHB, the organisation could lose up to £14m in licensing revenues — which is about half of its total revenues — and may be forced to look at further cost reductions, which could potentially include some redundancies. “There would be further cuts if a certain set of circumstances happen, but we have not identified what [would be cut] yet” says Delmonte. “Like any organisation, when less money flows in than expected, it’s a question of looking at what cuts can be made. But until we get to that stage, the announcement we made [on Thursday] is sufficient to carry on running the company in the normal way.”
