Bookies are right to close accounts
A recent report by the Horserace Bettors Forum (HBF), a relatively new body which the BHA helped put together, claims that up to 20,000 betting accounts have been closed by bookmakers in the past six months. That’s not to say 20,000 punters have been affected; many online punters have multiple accounts.
This is a bandwagon that never stalls. It is kept rolling on forums and social media by punters who range between disgruntled and apoplectic. The Guardian ran a piece yesterday and I see that a blog article by the informed and respected Kevin Blake is back doing the rounds on twitter. Kevin’s argument is long and lucid, and that length and lucidity seems to have taken in some judges who are normally more objective.
Kevin’s case is that by closing accounts, bookmakers will steadily drive away highly informed and dedicated racing folk from the sport, thus damaging racing.
Here is his case for the prosecution, along with my comments:
Where this stops being just a problem for a sector of the betting public and becomes a potentially major problem for the entire racing industry is here.
The group that bet restrictions and account closures affect the most may not be big in number in the overall context of the entire punter population, but they are one of the most important groups of all racing followers, passionate racing enthusiasts that have the made the long-term commitment to grow their knowledge to an extent that enables them to bet successfully on the sport.
Those customers are exceptionally difficult to attract from scratch and those that we already have should be cherished and looked after by the racing industry.
Why should they be ‘cherished and looked after’? Racing’s levy income is a percentage of the profits bookmakers make from bets on racing. Punters who ‘bet successfully on the sport’ reduce that income.
However, there is little doubt in my mind that bet restrictions are the single biggest source of frustration for this highly-valuable group of people and my fear is that if the situation doesn’t change, they will be frustrated into reducing their interest in betting on racing.
Again, ‘highly valuable’ to whom?
The dangers of this should be obvious, given that racing’s share of the overall betting pie has already been significantly reduced in the last 15 years due to the ever-growing popularity of sports betting and online casino-style games.
Racing’s share of the betting pie has indeed been reduced, and yes, much of that reduction is down to the actions of bookmakers in promoting other betting ‘opportunities’. The main reason bookmakers have done this is because racing has become a very expensive product for them, especially in betting shops.
The normal costs of business on the High Street are onerous for many retailers. Bookmakers have the added burden of media rights payments to racecourses (for live pictures and commentary), and the Levy payments. High Street bookies do well to make between 1% and 2% net profit from racing. Why wouldn’t they try to promote other products with a much higher margin?
Kevin acknowledges this:
An even bigger development in Great Britain has been the introduction of extremely lucrative fixed-odds betting terminals in 2001. Such low-risk high-turnover betting mediums are far more attractive betting products for bookmakers than horse racing. They are also much cheaper for bookmakers, as horse racing costs bookmakers many millions in media and data rights.
Indeed, a cynic might suggest that it would suit the interests of bookmakers just fine if punters continued to turn away from horse racing and towards other betting mediums, but horse racing cannot afford to lose such valuable customers.
I’m afraid customers are only valuable in the business sense if they contribute cash to the sport. Yes, let’s have more of them by making racing a much more attractive product for bookmakers to promote. Make a start by slashing media rights costs.
Given just how vital media/data rights and the funds generated by betting tax/levy are to the funding of horse racing at both sides of the Irish Sea, anyone with an interest in the future of horse racing needs to sit up and take notice of this issue, as the long-term consequences for what is going on should be clear to everyone.
If bookmakers continue to be allowed to conduct their businesses are they are, effectively making it very difficult for anyone with a clue a fair shake at making a profit by betting on horse racing, the future effects on betting turnover on horse racing could be very serious.
To use an old cliche, turnover is vanity, profit is sanity. There is no point increasing turnover by 500% if it cuts profits by 5%.
A further drop in betting turnover on horse racing will not only detrimentally effect betting tax/levy takes, but it will inevitably lead to a drop in value of media/data rights that play such a prominent role in racing’s finances. In that event, closures of racecourses and prize money reductions would be inevitable.
If a turnover drop affects media rights, that might actually be helpful for racing. Media rights payments do not go to ‘racing’ as some collective body, they go to racecourses (because the BHA foolishly surrendered commercial fixture rights to tracks). So those profiting from huge media rights income are the likes of Jockey Club Racecourses and Arena Racing Company who between them own 30 racecourses. Yes, they put some cash back in by way of prize money (especially JCR), but they are at liberty to use their income as they see fit – as, of course, are the remaining 29 racecourses.
Kevin Blake’s suggestion as a possible solution to account closures:
A very curious precedent has recently been set in Australia. Last year, officials in New South Wales introduced a minimum bet that bookmakers must accept, with bookmakers with turnover of more than AUS$5 million being obliged to lay a punter to lose AUS$2,000 at a city meeting and AUS$1,000 at country fixtures, while bookmakers with less than AUS$5 million turnover will have to lay their customers to lose AUS$1,000 on all thoroughbred meetings.
All of these conditions apply to bets placed online or on the phone from 9am on the day of an afternoon meeting and from 2pm in the case of an evening meeting. This ruling was greeted with great criticism from local bookmakers, but almost a year on from its introduction, the vibes from Down Under is that it is working well for both punters and bookmakers.
The key difficulty in the above system is that once your account has been closed, you cannot bet at any price. Even for those whose accounts are still open, the above is not a cure-all; here is an extract from the terms and conditions on the NSW policy (italics mine):
“All punters are entitled to the price publicly displayed in the wagering operator’s latest betting market on their website or betting board. The only time a changed price can be offered after a punter places a bet is if the official APN price had just changed or another bet has been layed at the original price and the wagering operator is adjusting the price, which will flow through to their website or betting board. Time log records can be checked to confirm this process.”
So, if 2/1 is on display for your selection, by the time you click ‘bet’, the price might have changed as the algorithms alter the price according to stakes arriving from punters elsewhere. This effectively renders the guarantee useless.
Perhaps the most practical point to make in the face of this rolling bandwagon is this: what would you do if you were running the business? No company bars people from whom it can make a profit. Yes, some ‘innocents’ will be caught in the crossfire of algorithms that are constantly being refined, but all in all, bookies must be happy that they have got them just about right.
Also, there is a legal aspect to this. Company directors are legally obliged to act in the best interests of their shareholders. If they are aware of a tool which can be used to help protect shareholder funds, they must use it, unless they can construct a convincing argument against doing so. I’ve yet to see anyone make such an argument, and lest you think I’m a bookmaker’s advocate, I too have been ‘restricted’ in my betting (though I have never had an account closed).
I’ve been in bookmaking and racing all my working life and the bookie side has been much maligned, wrongly so in my opinion. Bookmakers are, in the main honourable people running a very tough business. I’d be just as willing to criticise them when I think they are wrong (like the Grand National day nonsense of silly and greedy overrounds). But in this case, they are doing what any sensible business person would do. If critics would take the emotion and self-interest out of it, I believe they would concede this.