Racing’s new leaders will need to attack poisonous gaming betting

The low-key but potentially significant squabble between Flutter Entertainment – the parent company of gambling brands including Paddy Power, Sky Bet and Betfair – and Arena Racing Company (Arc), which operates 16 British tracks, flared up again last week, when Sky Bet and Paddy Power took “a commercial decision” not to offer its customers early prices for the meeting at Lingfield on Wednesday afternoon.

The two firms’ decision to effectively boycott the card until a few minutes before the off-time of each racing was something of a delayed-drop payoff to a guest column by Ian Brown, Flutter’s CEO UK and Ireland, in the previous day’s Racing Post.

Brown’s piece included several interesting lines, including a claim that Flutter “on its own contributed over £140m [to racing] in 2023, across the levy, sponsorship, marketing spend and media rights” and another that “what we pay [for online streaming rights] as just one bookmaker is often close to the total prize money on offer”. Since Flutter is just one of several big operators paying for streaming rights, Brown continued, this “makes us wonder where the rest of the money is going”.

And Brown, of course, is not the only one.

The precise percentage of turnover that Flutter has agreed to pay for streaming rights is a closely guarded commercial secret. However, it has become increasingly apparent over the last year or so that Martin Cruddace, Arc’s chief executive, secured a much bigger slice of turnover for his tracks in the latest contract negotiations than his counterparts at Racecourse Media Group, which is the other major player and represents major tracks under the Jockey Club Racecourses banner as well as leading independents like Goodwood and York.

Maximising his company’s revenue is, of course, what Cruddace is paid to do, and since Flutter was apparently content to sign on the dotted line, there is a fair argument that it is too late to be bleating about it now. The rest of us would struggle to renegotiate a mobile phone or cable TV contract in similar circumstances, and a multimillion-pound media rights contract is – you would have to hope or think – as robust as they get.

But Brown’s comments are a dog whistle to the Thoroughbred Group – representing owners, trainer, jockeys and stable staff – which suspects that Arc tracks are feasting on cake for breakfast, lunch and dinner while offering only crumbs to the performers who put on the show.

In an ideal world, the Throughbred Group and the tracks would be cooperating to ensure that the return to racing from betting is both maximised and sensibly distributed. Punters, after all, are the sport’s customers. The bookies keep a slice of their spend as a commission for sitting in the middle. Anything that adds to the current friction and suspicion between the racecourses and the participants is, at worst, a score draw for the gambling firms.

At the same time, though, the timing and nature of Flutter’s – probably doomed – attempt to renegotiate its media rights contract seems a little odd. It suggests that their executives may have dropped an expensive clanger in the negotiations with Arc and paid well over the odds, a possibility that the shareholders may want to ponder before they hand out the end-of-year bonuses.

But it makes at least some sense when seen in the context of potential future changes to the taxation of online gambling. It went largely unnoticed at the time – everyone was fixated instead on the possible implications of “affordability checks” for punters – but last November, the former chancellor, Jeremy Hunt, proposed a consultation on replacing the current three-tier structure for duty on betting and gaming with a one-size-fits-all flat rate for all forms of gambling.

The current rate of general betting duty on betting – on racing, sport and so on – is 15%. The rate on gaming profits – online slots and casino games with guaranteed margins and profits for the operators – is 21%. The difference reflects the fact that betting profits are less certain and harder-earned, and acts as an incentive for firms to make money from betting, and not simply use it as a loss-leader while pushing as many customers as possible towards the slots and the virtual roulette wheel.

A flat rate for both betting and gaming – possibly at or around the current 21% for gaming – has the potential to be a much more significant long-term calamity for the sport’s funding model than any number of affordability checks. It would further boost the attractiveness of gaming products for operators, and also give Flutter and the other big operators a reason to marginalise their racing offering and reduce their media rights payments.

It might end up being forgotten about following Labour’s thumping election victory, but if it is seen in the Treasury as a potential source of extra funds for other essential government spending, it is more likely than not to reappear at some stage. If it does, we can expect the Betting and Gaming Council, the industry’s main lobby group, is unlikely to offer much, if any, resistance, since the big gambling firms will always prioritise gaming revenues over betting.

There was much concern in racing last week that the publication of the first Gambling Survey for Great Britain by the Gambling Commission would prompt calls for tougher regulation and more stringent affordability checks on all punters. Which, to some extent, it did.

But the detail of the survey also shows beyond any doubt that gaming products, and online gaming products above all, are significantly more dangerous than betting and lotteries. For instance, the commission itself highlighted a finding that “those who had gambled on online slots were more than six times more likely than average to have a PGSCI score of 8 or more [indicating an experience of problem gambling]”.

That is not an argument for levelling up gambling duty. If anything, it suggests that the differential should be increased – bumping gaming up to 25% might be a good place to start. It is not, however, an argument that the BGC or the wider industry is likely to endorse this side of doomsday.

The British Horseracing Authority is currently trying to find both a new chair and a new chief executive. Someone who is willing to not simply stand up for both racing and betting, but also actively attack the poisonous advance of gaming, would be a very timely choice.