Race Funding – How Can We Align?
The Racing Post ran an interesting article on funding the racing industries around the world in May of this year.
It’s a pretty lengthy analysis with a lot of stats and charts, and it doesn’t cover the United States (in depth) or South Africa either.
So how do we differ?
Neill de Bruyn writes in the Sporting Post Mailbag that some experience is required.
In terms of total earnings, Japan leads the way, followed by the United States, Australia and France.
In terms of average price per ride, the order is Hong Kong, Japan, France and Ireland.
Racing in Japan and Hong Kong is heavily regulated by government law. The Hong Kong Jockey Club (HKJC) and the Japan Racing Authority (JRA) control all income derived from racing – no land-based bookies as far as I can determine.
The HKJC pays 12% of turnover to the government and withholds 4.3% for running costs and cash prizes (remember they only hold 88 meetings per year). Also note that residents of Hong Kong can, by law, only bet on horse racing and football.
The Japan Racing Authority retains 25% of turnover, two-fifths of which goes to government and the rest to races, including cash prizes.
In France, the Pari Mutuel Urbaine (PMU) has a monopoly.
Of its total turnover, 75% is donated in the form of winning bets, 9% goes to the State, 8% is divided between France Galop and Le Trot, the two main shareholders, to cover endowments and costs of operation, and the rest goes to paying business partners.
The Australian model is presented as a brilliant model of how the industry can maximize profits. The prize money is mainly funded by the betting tax which varies from state to state.
There is a higher proportion of pool bets in Australia than fixed odds bets.
Personally, I attribute the success of Australian racing not to their racing style, but to the fact that over 80% of their adult population is gambling, the highest proportion in the world, according to Wikipedia.
How else to explain a population that is less than half that of South Africa, yet capable of supporting races on 360 tracks?
Note that not all of the above racing jurisdictions need to rely on sponsorships to complete the cash prizes.
The situation in the UK is dire, according to the Sporting Post article. Racing Association estimates put ownership spending at £ 621million in 2019, while cash prizes of just £ 161million were up for grabs.
Prices in Britain are funded by a levy – a 10% tax on bookmakers ‘profits plus a bag levy, which provided 35%, owners’ entrance fees account for 15%, while the The remaining 50% comes from distributions on racetracks. Spectators finance about half of the income of the racetracks.
Irish races receive funds from the Treasury. There is no formal and direct link between the betting tax and government funding, suggesting that the Treasury review and adjust its support to the industry if necessary.
To South Africa:
The tote operators are, as we know, the main contributors to the prize money. They retain a percentage of the gross turnover of the bin (probably around 25%). If the government tax is 6%, that leaves operators with 19% for cash prizes and operating expenses.
The provinces levy a 6% tax on all winning bets from bookmakers. 50% or 30% (not sure) of this levy is paid to tote operators via the gaming agencies.
What caused our cash prizes and jackpots to shrink?
Obviously, the depressed economy and covid-19 are major factors. Unlike races abroad, SA races were suspended for 2 months, forcing tote operators to seek outside financial support (MOD and Hollywoodbets).
In addition to this, the Québec Ombudsman, before the endemic, asked the province of Gauteng to withhold its contribution to the races in terms of the percentage of the bookmaker’s royalty owed to them, and this order still seems to be in effect.
Another income stream that contributed to the prize money could also be lost due to the demise of Phumulela: normally 80% of the stock dividends going to the Thoroughbred Horseracing Trust from its 26.7% stake in Phumulela, have been added to the pool. .
In addition, Gold Circle also suffered a revenue disruption due to its 39% stake in PGI, a joint venture with Phumelela. There is an ongoing dispute between Gold Circle and the company’s rescuer, I believe.
To complicate matters, Phumelela (4 Racing) was / is also responsible for the sponsorship or partial sponsorship of the prize money in the Eastern and Western Cape. According to an article in the Citizen (October 14, 2019), cash prizes in the Western Cape are (or were) governed by an agreement whereby total stakes are (or were) set at 26% of the mass of net stakes combined with Phumelela. Regions.
I’m not sure what arrangement is in place for the Eastern Cape Silver Prizes.
Finally, it should not be forgotten either that the tote operators fund the NHA to the tune of approximately R60 million per year.
So financing in South Africa is more complex than you might think.
Is any of the overseas funding models better than South Africa’s?
Yes of course, if an entity has full control of gaming revenue, that appears to be the case. However, that won’t happen here in South Africa, bookmakers have been part of the industry forever.
The Australian “model”? I cannot see the South African public equaling the Australian public for the excitement of the race!
Great Britain? No, UK prices have been falling since 2019 and calls for reform are being made (although Ireland is back to pre-Covid price levels with further increases planned this year).
An increase in the percentage withholding on the pools? No, we are in line with Japan and France.
Many advocate an increase in the tax on bookmakers. I don’t know if tote operators would think that an increase in the tax on bookmakers, say 10%, would have a significant impact on their income. Then they should apply pressure if they feel the playing field is not level.
Some of the major fixed betting operators are reinvesting significantly in terms of sponsorships and community projects, anyway.
So ride the wave and hope the economy picks up and unemployment is reduced. The SA betting environment cannot really be compared to those in first world countries – disposable income here is much lower due to high debt levels and the fact that many people may depend on one support. .