SOMETHING TO PONDER

Reading the irate posts regarding the HK meeting and betting odds reminds me of the perenially thorny issue of BETFAIR. ( I have been on a sabbatical from the aforementioned as I have no desire to be 'in hot water' with the Reserve Bank ).

I, and many others, buy and support racehorses. Usually at a loss despite all the spin you might read from industry insiders. This is largely because we 'like' the game but probably because we are delusional and hope/believe we will fluke a good horse one day.

In essence we provide 'the actors' whilst Phumelela/Gold Circle provide the infrastructure for the show. Nothing new in that until you look a bit closer.

Phumelela/Gold Circle then sell on the picture to other countries. Fine. I'm going to half believe that earnings from this exercise translate into increased stakes.

Part of this foreign income is derived from Betfair who PAY our racing organisations for the opportunity to take our racing. The selfsame organisations who are quick to sanctimoniously remind us that it is 'illegal' to trade on Betfair - effectively hiding behind legislation which they appear to have made no effort to have modified.

Given that they are being PAID by Betfair I find it a little difficult to stomach that they take pictures of my/our horses and 'export' them but will not make any effort ( in fact - they oppose it ) to ensure that I can use the facilities of the selfsame sponsoring organisation which offers a range of services - some of which are not available locally.

It might be an illuminating exercise to clarify to what extent they are authorised to trade off the back of our 'actors' INTERNATIONALLY without the permission from the owners of the property being exploited. I'm wondering if they are getting away with it only because they have never been challenged on it........It makes sense that there should be a totally different remuneration structure for a product being traded almost globally as opposed to just locally.

I , for one, do not recall signing any trade agreement with regard to the marketing of my horse's public performances. Perhaps it is just implied. Somehow I doubt it.

Can you imagine, fellow owners, a scenario where we had an RA or like body representing us where we merely withheld the horses from public performance pending a more equitable deal? Talk about taking our game back!

Nice post again Garrick. I still feel that Betfair should have a licence.
I have considered the pros and cons for years and there is a niche in the market for "all" parties. Interbet often beat Betfair at "the off". Betfair don't have double/trebles, we have the bookies for this. We have the tote for exotics.Betfair will contribute to added stakes/sponsorships.
You are correct that the "actors" are supplied by the owners and they deserve as many options as possible to punt their cash, without red tape and legal loopholes.

To play devil's advocate, because nobody from the establishment would ever take the time...

I would expect that the race operators would say that you (the owner) are paid an agreed (performance related) fee for appearances. How they generate the money to pay you is beyond your dictate. It is a take it or leave it offer they would say.

As in any negotiation, there is the option to withhold your end to force better remuneration, but given the competitive nature of the game there is always someone who will happily take whats on offer in your absence.

PS I have always thought that if our trainers (by 'our' i mean they represent the interests of their owners) that they should be a comparable force as the jockeys assoc. is, but it seems they can't leave the competition on the track.

as was commented on a recent thread, return to owners in SA is actually relatively high by international standards - way higher than in the UK, mostly due to the lower cost of keep rather than massive prizemoney of course

worth noting also that punter tax is collected by P/GC on your bets involving all racing, not just SA racing - so arguably racing in SA (or at least the racing companies in SA) is being subsidised in a way by UK, France, etc

P/GC makes money from non-SA racing:
a. from punter tax collected off SA punters betting locally at fixed odds, for eg on UK racing
b. from their share of the local commingled pools on non-SA racing eg. the french PMU

and from non-SA punters:
c. from their share of the commingled pools where the broadcasts of SA racing plus UK racing and others are sold as a package to (for example) the US, or Australia

whether the stakes agreement catches this revenue, and if so how much of it, is not something that i can answer, AB

i don't imagine a. or b. amount to very much (might be wrong), but c. is the cornerstone of P's growth strategy so it must be worth a bit.

...or is it? looking at P's website for the latest accounts for the year ended July 08:

1. stakes contribution
listed as an expense of R142.6m, and it drives off the previous year's tote take out. P earned R488.3m from local betting in 2007. if the stakes agreement requires P to pay 30% of take out, as i believe it does, then in 2008 local tote betting alone ought to have paid R146.5m to stakes. seeing the stakes pot actually got less than this, then it suggests that nothing from international is going in there.

there's no information on how much is received in local punter tax and where that goes

2. international betting
P generated R256.6m in turnover on international pools, but presumably due to revenue sharing arrangements it actually earned R13.4m in revenue from international betting - about 5% of the pools

under Other Operating Income, there is more international revenue coming in of R79.5m, which one must assume (if it is not betting) is mostly broadcasting fees charged to overseas totes and racetracks

3. joint venture with GC
one thing that one can only speculate about is the line for Share of Associated Company. i don't know whether this refers to tellytrack, or whether it is Phumelela Gold Enterprises. if it is tellytrack, i guess making R4m isn't a bad result, seeing it exists primarily to stimulate betting. if it is PGE, and assuming GC gets the other half of the profit, then isn't there a question as to precisely what material benefit GC obtains from having P commercialise racing on the global stage? if it isn't PGE, then same question applies - what's in it for GC?

4. investment in local racing
on the other side of the ledger, of course, P spends R423.1m running its business locally. it's impossible to know how much of this is operating and marketing the tote vs the administrative cost of running racing, maintaining racetracks and training facilities, but it won't be a small amount.

a large chunk of the R132m in local Other Operating Income is probably sponsorship payments from BidVest, Steinhoff etc, but i am guessing here. sponsors money doesn't flow through to stakes but it does go a long way to keeping the grass growing and the rail painted

nobody else with a view, or are you all in litigation already?

what's P's shareholding in it - 40%? so it makes R10m at the bottom line. you're right, that is handy. the benefits of running a central book...

on a lightner note great to see Betfair advertised on almost every single camera angle in Perth for the SA v Aus cricket, got all the prime spots and the boundry rope. Shrewd marketing to Aus and SA viewers alike!