The parent company of Sky Bet and Paddy Power has warned that racing needs to adopt major changes as it has become “unprofitable” for bookmakers, with audiences falling and the “underlying quality” of the sport declining.
In an article in the Racing Post, amid a media rights dispute with racecourse group Arena Racing Company (Arc), Ian Brown, managing director of Flutter Entertainment’s UK and Ireland division, also questioned prize money levels and asked where its payments to racecourses were going.
The comments come a week after Flutter’s latest attempt to pressure Arc into returning to the negotiating table over the media rights deal between the two sides. Last week, Paddy Power and Sky Bet failed to offer advance prices for a meeting at Arc-owned Chepstow, instead offering odds only in the minutes before each race starts.
The move followed a similar move earlier this month over a card at Chepstow’s neighbours Bath. On that occasion, both bookmakers were not supposed to offer prices for the game but ended up betting on the matches just before kick-off following legal intervention by Arc.
In his opinion piece, Brown said bookmakers and British racing had “serious common challenges”.
He added: “Our data shows how falling prize money leads to falling numbers of participants, which makes the product less attractive to customers. This in turn leads to falling betting revenue, and therefore falling revenue for sport. It’s a clear and worrying spiral.”
Bookmakers contribute £350m a year to funding British horse racing through broadcast rights, levy and sponsorship. However, Brown warned his company was paying more for a declining product and said the relationship between broadcast rights and prize money had become increasingly estranged.
He added: “Our data suggests that the added value that customers place on some events is much lower than what it costs us simply to broadcast those races. Indeed, what we pay as a bookmaker alone is often close to the full amount of the prices on offer.
“We estimate that overall streaming revenue is around three times the prize money for meetings like Bath and Chepstow – and that’s before taxes too – which makes us wonder where the rest of the money is going.
“But there is a bigger, more fundamental problem here. As Flutter, we simply cannot afford to continue investing in horse racing as an unprofitable product with declining audiences, where media costs are rising at a rapid pace and the underlying quality of the product is declining.”
Brown welcomed the sport’s willingness to try new things, saying Premier racing was a step up from other events, but called on racing to consider going “further and faster” with the initiative while exploring other options to innovate and experiment.
The media rights deal between Arc and Flutter Entertainment is understood to run until 2027. While the precise terms of the deals are private, Flutter has previously claimed that the total media rights payments from bookmakers to racecourses were more than twice the levy, which was £105m under the most recent scheme. Media rights deals typically involve an operator paying a percentage of betting turnover to racecourses for the right to broadcast live streams in betting shops and online.
Flutter has already taken further steps to mitigate rising media rights costs by removing the popular Best Odds Guaranteed offer for some meetings and also reducing sponsorship at Arc tracks, including ending its support for the Sky Bet Chase at Doncaster this year.
This year, the company moved its operational headquarters and principal stock exchange listing to New York as it shifts its focus to the United States and the country’s thriving regulated gaming sector. It will look to save money elsewhere so it can focus its resources on the U.S. market.
The row will also dampen British horse racing’s hopes of persuading bookmakers to resume negotiations over tax reform, which ended abruptly in May when the general election was called.
Flutter and Racecourse Media Group have provided financial backing for ITV’s new horse racing documentary series, Champions: Full Gallop. Speaking ahead of its premiere, Brown said: “This is a showcase of what can be achieved when the industry comes together to tackle challenges collaboratively.”
