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All bets are off | Horse racing’s fight to reinvigorate its betting markets

Previously the unchallenged force in global gambling, horse racing has come under pressure recently as punters move to in-play betting on other sports. Ryan Herman looks at how the sport is fighting back in the UK, US and France.

Betting is the financial lifeblood of horse racing.  However, a pattern has emerged over the past decade across a number of countries where racing has been a major sport.

According to David Henwood of H2 Gambling Capital, a leading independent analyst of the global gambling industry, an increase in betting options, along with the ways in which people can bet, has had a profound effect on racing’s dominance.

Henwood tells SportBusiness International: “Over the last few years, it is fair to say the global gambling industry has seen a paradigm shift characterised by land-based to interactive betting; from racing (horses and dogs) to sports, predominantly football; from PC and desktop use to mobile; and from pre-match wagering to in-play.

“As more and more live sport is on TV or streamed via digital platforms, it is not surprising the gambling industry has responded…and quickly. Sports betting has become the fastest-growing market segment within all gambling worldwide, and now dominates with 48 per cent of the total interactive market.

“For the time being, horse racing still accounts for the majority of all global betting at 54 per cent of turnover, although the combined gross win [the money left over after the winnings have been paid out] of other sports, especially football, is expected to surpass horse racing as soon as next year or early 2018.”

According to Henwood, the sector has benefited greatly due to the development of interactive market channels.

“Now more than a third of sports betting activity is via mobile and is set to surpass 50 per cent in the coming years,” he adds. “In-play is growing at 19 per cent of all betting and could reach 50 per cent by the end of the decade, excluding horse racing.

“It is now considered the essential component for interactive business growth.”

To put it another way, as Alex Waldrop, chief executive of the National Thoroughbred Racing Association (NTRA) in North America, says: “We’re no longer the only game in town.”

Take Italy, for example. This is a country that has given us one of the world’s most famous jockeys in Frankie Dettori and produced two of the best horses of the 20th century in Nearco and Ribot.

Horse racing used to be the only sport in Italy that you could legally bet on. Then, in 2000, the government legalised gambling on other sports. That was always likely to hurt racing, but the take-out – the money the sport takes from the overall pool of bets – from a bet on a horse race ranges from 20 to 30 per cent. By comparison, the take-out on a football bet can be as little as five per cent.

The reason horse racing in Italy takes a bigger cut is because that money is used to fund the sport and includes operational costs on race days through to prize money, whereas football is not directly funded by gambling.

Even so, racing’s administrators in Italy have been accused of acting like a modern-day Emperor Nero while Rome burns.

Yet despite the nation’s economic problems, other forms of gambling are thriving. Henwood says: “Italy is the third largest regulated commercial sports betting market in Europe [behind the UK and Germany] and by far the leading virtual sports market globally, accounting for 23 per cent of all Italian sports betting activity.”

In other words, more people are betting on computer-generated sports than real-life racing.

Paradigm shift

However, some racing authorities are responding to this paradigm shift.

In the UK, betting turnover on horse racing dropped from £12.1bn (€14.1bn/$15.7bn) in 2009 to about £10bn in 2015.

During that time football has become the number one sport for online betting. A driving force behind this shift has been the rise of in-play betting. Whereas a horse race is over within a minute or two, a football match offers you 90 minutes to consider an array of different markets including next goalscorer and correct scores.

In November 2014 the British Horseracing Authority appointed Nick Rust as its chief executive. Rust had previously held senior positions at two of Britain’s leading bookmakers, Coral and Ladbrokes.

In 2015 the BHA unveiled a wide-ranging report titled ‘Strategy for Growth’. One of its KPIs is a five-per-cent increase in betting participation by 2018.

To achieve this, Rust has put a series of measures in place, including the introduction of Authorised Betting Partners (ABPs).

In the UK, betting turnover on horse racing dropped from £12.1bn in 2009 to about £10bn in 2015

Firms that signed up to become ABPs make a financial contribution to the sport and, in return, are allowed to sponsor major races and receive marketing support. This also earns them a greater say in transforming the betting model of the business.

The biggest betting firms almost immediately withdrew from existing sponsorship deals, but the British market is so competitive that Rust was still able to attract 11 online firms, including big hitters like Sky Bet, Bet365 and BetVictor.

The ABPs have been working alongside Rust to generate more revenue in ‘remote betting’.

Rust tells SportBusiness International: “The early indicators give us good cause for optimism. Realising this target is about engaging with our ABPs – who are delivering the sport a fair and sustainable return – to ensure our product reflects the changing dynamics of the betting market. An example of this is in the 2017 fixture list where we have programmed more evening meetings to drive remote betting activity.”

The number of evening fixtures will increase by 71 and there will be evening meetings every Saturday. Ironically, this has upset the very people Rust used to work for, as evening meetings generate less money in high street shops.

Rust adds: “This is also about listening to the customers themselves and that is why I am delighted that the Horseracing Bettors Forum has been established to give our consumers a voice in key matters influencing betting participation on the sport.”

Vested interests

He says that historically a major problem for British racing has been too many different vested interests failing to work towards a common goal.

“I think the main achievement of the Strategy for Growth has been the entirety of the British racing industry coming together to define and attempt to achieve some ambitious goals for our sport,” Rust adds.

“There are a lot of reasons to be positive. The government has committed to replacing the Levy – which is failing to capture the majority of remote betting on our sport and putting unnecessary strain on our grassroots – by next April”.

The Levy was introduced in 1963 and is a tax paid by bookmakers on horse racing bets placed in the UK. Move on 53 years and most bookmakers are now based offshore and therefore don’t have to pay into the Levy. The BHA claims this tax loophole costs British racing about £25m per year.

“That will not only help relieve the funding pressures our sport has faced for years through outdated legislation, but also give us the chance to work with all betting operators on a level playing field to develop the sport for our mutual benefit,” Rust says.

“More broadly, we are the country’s secondhighest attended sport, our major festivals are growing as betting and sporting events, and we have an exciting opportunity with the new rights deal with domestic commercial broadcaster ITV from next year. If everyone comes together – including the betting industry – we can achieve an awful lot in the future.”

If getting the various bodies involved in British horse racing to speak with one voice has been a challenge, then it is virtually impossible in America.

Even though horse racing is still the only sport you can legally wager on in America, this has not stopped turnover dropping by a third over the past 13 years.

There are lots of reasons to be positive… We are the country’s second-highest attended sport

Henwood cites the rise of Daily Fantasy Sports as a factor behind the decline in horse wagering. It is easy to see why the chance of winning large cash sums on picking a fantasy NFL team has a greater appeal to a younger audience than finding the winner of a horse race.

He also says that online sports betting is the proverbial elephant in the room. It has been illegal since 2006, although you can bet on a horse race online.

According to the American Gaming Association, the amount wagered illegally on the 2015 NFL Super Bowl was $95bn, or 38 times greater than the amount taken by the legal sportsbooks of Nevada.

Upward trend

US racing finally received some good news recently when it was revealed that betting turnover increased by 1.8 per cent in 2015 and the upward trend has continued.

According to the NTRA’s Alex Waldrop, last year was only the second time wagering increased annually since 2006.

There is no question that American Pharoah’s Triple Crown success in 2015 captured the public’s imagination. However, how long US racing can bask in the glow of a horse that retired last November is a moot point. One problem for US racing is that it is so factionalised. There is no single governing body and the NTRA exists to promote racing across the nation, while betting regulations run along state lines.

This does mean some racetracks can experiment and effectively act as testing grounds for the rest of the country, but only as long as state laws will allow.

Monmouth Park in New Jersey recently became the first racetrack to allow Betfair’s exchange betting to operate on its premises. The only other state to approve exchange betting is California. As yet, nobody will grant Betfair a licence in the Golden State.

The sport wants to see what Betfair will put back into racing and assurances that being able to bet on a horse both to win and lose will not open the door to corruption. If Betfair can address those concerns, then the Breeders’ Cup at Santa Anita in November could host exchange betting.

Waldrop has also been lobbying the US government to change its rules on betting and tax. Essentially, if somebody wins more than $5,000 on a race, or 300 times the original stake, that money is withheld and only gets paid out after submitting a tax return.

Waldrop argues this is outdated. Betting is no longer just about picking one horse to win, but involves multiple permutations.

“If successful, it will result in millions of dollars in additional pari-mutuel handle [turnover] annually,” he says. “This will benefit not only horseplayers, track operators, owners and trainers, but also federal and state governments.”


The pari-mutuel system, where the bets go into a central pool, used to be the ‘only game in town’ in France. That all changed six years ago.

Henwood says: “Betting on French horse racing has been in significant decline due to rapid growth of sports/football, following the opening-up of commercial online sports betting market in 2010 to new dot.fr operators.”

Online sports betting overtook horse racing in 2015 and football makes up 58 per cent of the sports betting market.

Jean-Christophe Giletta is the deputy director general for France Galop, the country’s governing body for horse racing. He says that the sport stagnated and simply failed to attract new customers. “There are many things to improve and the first one is the product, our sport,” he tells SportBusiness International. “How we can make it easier to understand for the general public?”

The fixture list is also about to receive a shake-up. The nation’s premier racecourse at Longchamp, Paris, is currently undergoing a major redevelopment. When it re-opens in September 2017, ‘Nouveau Longchamp’ will have all-weather as well as turf racing.

Giletta reveals that subject to planning permission, “we will probably increase the number of meetings from 30 to 60 per year.”

Rumours of racing’s demise may have been exaggerated, but it must continue to adapt in what has become such a fiercely competitive marketplace.

“You can’t help but feel there is much more to come as the bookmakers increasingly drive consumer behaviour with more product innovations be they spreads, personalisation, fantasy, virtual and even esports,” Henwood concludes.

“Traditional horse racing has significant competition and we watch with interest.”

The battle, it seems, has only just begun.


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