Horseracing split again

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

In our January update we reported on the establishment of a joint venture between Racing UK and Alphameric which is aiming to provide televised coverage of racing to betting shops ("licensed betting offices" or "LBOs") in competition with SIS. Since then, each side has been preparing for the battle which finally commenced on Friday 20 April with the Newbury meeting that day.

In the preliminary skirmishes, the new joint venture (now called Turf TV) achieved a victory in persuading Ascot to sign up to its camp, even though Ascot is aligned to Attheraces (rather than Racing UK) for consumer television rights. That means there are now 6 courses (the others being Bangor, Chester, Goodwood, Newbury and York) whose races will not be televised in betting shops contracted to SIS from now onwards and a further 25 courses whose rights will fall into Turf TV early next year. However, having the rights to distribute coverage of their races to betting shops is of no value unless the LBOs actually sign up with Turf TV. To date, some of the Irish chains have signed up, along with several of the smaller "independent" British bookmakers. By contrast, SIS have secured long term supply contracts with all of the major chains and Fred Done has confirmed his chain's commitment by buying 7.5% of SIS at a cost of £8.625m. SIS has also lined up alternative racing to show in its customers' betting shops in place of the Turf TV fixtures which it will have no rights to display. Moreover, some of the bookmakers, who are big sponsors of racing – have indicated that they will review their sponsorship of races at those courses who have signed to Turf TV. This has reportedly prompted a complaint by Turf TV to the Office of Fair Trading and, indeed, we indicated in our previous update on this issue that competition law may well play a role in this dispute.

This is a high stakes game and neither side has shown any indication of folding. For the Turf TV courses it is about "controlling their own destiny" and increasing their income from LBO rights. However, if they do not succeed they could score a significant financial own goal. Apart from their loss of investment in Turf TV, there will be less exposure for their races in betting shops which will have a knock-on effect on the amount of levy generated by betting on those races. Moreover, the bookmakers will be forced to substitute other betting products (which may not include British racing) so that British racing's steadily declining share of the punter's betting pound will continue to fall. Even if Turf TV were to succeed in extracting increased income from bookmakers in return for the LBO rights, the bookmakers have made it clear that they would seek to recover this in their annual Levy negotiations.

From the bookmakers' perspective, this will probably only start to have real bite when all 31 courses' rights fall into Turf TV next year. Given that the biggest betting races are all on terrestrial TV (and can therefore be shown freely by all bookmakers in their betting shops), it is likely to come down to the so-called "shoulder" races at those meetings – for example, the 5th and 6th races at the 4 day Cheltenham Festival meeting which are the ones not broadcast on terrestrial TV. The bookmakers will need to calculate how many of their betting shop punters will go to another betting shop which has signed up to Turf TV in order to watch and bet on those shoulder races and how much turnover they are likely to lose as a result – particularly bearing in mind that an increasing proportion of their betting revenues come from telephone and internet punters who are likely to be able to view those races on their TVs or PCs.

There are no signs of this battle being resolved quickly and we expect to return to it in future updates.