Affordability checks are only part of the problem

For 40 years we were told that a tax exemption on stallion earnings was imperative for the success of the Irish horse racing and breeding industry. Since its withdrawal in 2008 there has been no noticeable difference to the sport.

For another 20 years we were told the industry couldn’t cope without Brian Kavanagh at the helm of Horse Racing Ireland. Since his departure in 2021 everything appears to be running as smoothly as before.

Now we are hearing that if affordability checks are not done away with in the UK the sport is doomed.

The latest figures show a 16% fall in online turnover on horse racing in just two years. When those figures are adjusted for inflation it is close to a 25% drop. Unsustainable if that downward trend is to continue.

The success of the sport is certainly far more dependent on the revenue generated by bookmakers now than at any stage in its history, but I’m not convinced that affordability checks are at the core of the problem.

To my mind the big corporate betting operators started to move their focus away from horse racing well before the affordability checks were introduced. They have been systematically reducing their horse racing enticements for quite some time as their bean counters realised that the sport is not nearly as lucrative as other forms of gambling to their bottom line.

The online inducements to open a new betting account have been trimmed right back from the heady days where you could deposit €10 to get €100 in free bets with no string attached. The best odds guarantee (BOG), which specifically applies to horse racing, was an industry standard five years ago, but now barely exists in its original form. Treble the odds one winner in a Lucky 15 is also gone. Even the early odds on horse racing are merely a shadow of their former self, with most operators betting to ridiculously high over rounds and refusing all but the smallest of wagers until the markets mature.

All the little things that drew the racing punters into the online space have disappeared as the operators shift their focus to Slots, Casino and their latest cash cow, Bet Builders.

You might have thought that allowing the bookmakers to determine their own SP on horse racing would have been enough to stop the rot, but that seems to have made little difference as the corporate operators were hellbent on weeding out winning accounts and reducing potential liabilities at every turn. They have actually used the affordability checks to their advantage in many instances by making it as difficult as possible for punters to withdraw funds.

There is little doubt that the sharp fall in online betting turnover is a major worry for horse racing, but it has deeper roots than simply the affordability checks which are getting all the headlines.

This drop in turnover has been as much about a correction in the market instigated by the bookmakers, as the affordability checks themselves. What is most interesting is the success the bookmakers have had in achieving this. While the online turnover on horse racing has dropped like a stone, the bookmakers’ profits from the sport actually rose last year.

Another element of the current debate about affordability checks is that they are driving betting underground to illegal bookmakers.

The word ‘illegal’ when associated with gambling conjures up images of Triads and Mafia, but in reality the vast majority of legitimate bookmakers first cut their teeth as so-called illegal bookies.

I’m old enough to remember when off-course tax in betting shops was a whopping 20%, half that rate on-course, but in reality very few punters paid it. There was a vibrant black market and even the legitimate bookmakers of the time, with pitches on the rails or chains of betting offices, had lists of private clients that got on tax free.

Of course those bookies were not afraid to take a bet and hold it, unlike their modern equivalent.

The sophisticated corporate bookies of today are more than capable of fighting their own corner with regard to illegal counterparts, but I suspect they are not too worried about a portion of the market moving underground. This is the very part of the market that they don’t want in the first place.

Many key aspects of the industry have become wholly reliant on gambling associated revenues and illegal betting threatens to jeopardise that. The racecourses (both here and in the UK) being the most obvious ones as they directly benefit from race sponsorship, advertising and Media Rights payments coming from legitimate bookmakers.

UK prize money is also directly funded by this betting activity, but it is not as big an issue in Ireland where some 60% of prize money comes directly from Government funding.

The other area of the sport that is completely dependent on bookmaker revenues is the racing media. Most of the large mainstream advertisers such as drinks companies, financial institutions, car manufacturers and telecoms tend to steer well clear of anything related to gambling, so the only way the racing media has been able to survive is by linking up with bookmakers.

The clamour for changes to the affordability checks may well force through some alterations to their implementation and the Gambling Commission in the UK is currently trialing a ‘frictionless’ model which would certainly be a positive step.

There may also be some green shoots appearing on the bookmaker side. Industry leader bet365 recently changed their welcome offer back to bet 10 get 50 which could suggest a shift in their strategy towards horse racing bettors once again.

I suppose the affordability checks debate is akin to the other doomsday scenarios the sport has faced, those with the most to lose are usually the ones you hear screaming the loudest.