UK: PRINCES AND PUNTERS.

UK: PRINCES AND PUNTERS. - Who really wins and who are the losers when the horses flash past the post at Britain's 59 racecourses? Julian Wilson takes us trackside, introduces some of the heavy betters and unveils the financial realities of the nation's

by
Last Updated: 31 Aug 2010

Who really wins and who are the losers when the horses flash past the post at Britain's 59 racecourses? Julian Wilson takes us trackside, introduces some of the heavy betters and unveils the financial realities of the nation's sixth largest industry.

By JULIAN WILSON.

There may be no business venture more thrilling than the one that comes hammering round that turn at the top of the stretch, leaning in to the rail, its rivals fanning out across the track, and you hear, then feel, the pounding - first in the feet, then up to your heart - and you rise from your seat or on to your toes and join with thousands of others in a mounting roar of competition.

You're at the races. You are taking part in the sixth largest industry in Britain, generating almost £6 billion a year in betting alone, and you're one in a crowd made up of many walks of life, every social and economic class, in all manner of dress in every colour imaginable. And yet there are but two groups. There are winners and there are losers.

For the punters, winners and losers are defined in an instant at the finish. The carpet of losing tickets at the racecourse and in the nation's betting shops makes it clear how most of them fared.

The off-course bookmakers prosper. Ladbrokes, the brand leader, had record profits in 1998 of £172 million. William Hill, the other leading player, changed hands last February in a deal that was worth £825 million. Definite winners.

Among the losers, ironically, are the manufacturers of racing's central product, the racehorse. They incur losses that increase by the year. Owners, breeders and most trainers are on a downward financial spiral that claims spectacular victims every year.

Horseracing goes on show this month. Royal Ascot, a festival of top-class racing and social extravagance, is the traditional, overdressed shop window of the racing calendar. It is perceived as a barometer of racing's health and popular appeal.

In the years during which I presented Royal Ascot for BBC-TV, attendances at the meeting increased by almost 50%. On the face of it, racing is happy and healthy. During Ascot, colossal deals involving future stallions are brokered. There is opulent wealth, colourful racing and a feel-good factor that even the erratic weather cannot diminish. But during the same period, the third week in June, there are meetings at distinctly less glamorous sites such as Southwell and Wolverhampton, where the racing underclass competes in an attempt to keep their heads above water. While Ascot attracts 70,000 racegoers on Gold Cup day, Southwell will entertain a few hundred.

This is racing's reality as the millennium nears. Southwell has one fundamental purpose: to keep the cash registers ticking over in 7,500 betting shops, while the 'manufacturers' pay heavily to provide the cannon fodder. Now the Government wants to sell its Tote betting business to raise something in excess of £150 million. When betting shops were made legal in 1961, the Horserace Betting Levy Board was created to compensate the industry - the racecourses in particular - for the inevitable loss of patronage and betting turnover on the course. Until then, cash betting was illegal in England, other than at the races. Off-course bookmakers were obliged to pay a levy (extracted from punters) for the privilege of cornering over 90% of the betting market. For good measure, the Government threw in a betting tax, which was abolished on-course in 1987 but remains off-course. The off-course bookmakers charge punters up to 9% to compensate for their tax and levy payments. It is thus argued, with some justification, that punters are helping to finance racing, and therefore have certain rights of access to information and a guarantee of fair play. The industry has taken this on board and the punter is now better served than ever.

He is provided, 24 hours in advance, with the correct list of runners and riders, the draw and declarations of blinkers and tongue-straps in every race. Trainers and owners provide forthright comment about their horses in the press and on television, jockeys are interviewed and the quality of racing information has never been higher. None of this was available in the 1950s. There were no declarations until 45 minutes before the race; no starting stalls; and at some racecourses, no photo finish.

Jockeys and trainers were not permitted to discuss publicly the prospects of the horses they rode and trained. Indeed, it was forbidden for a TV interviewer, even in the 1980s, to invite such information.

Now everything is freely available to the punter. Nonetheless, he still loses, consistently.

So much for those whose living depends on 'the product'. What of those who finance and produce it - the owners? The owner has seen his position eroded. He no longer enjoys the exclusive privilege of 'stable secrets'.

His role is rarely acknowledged in the press or on television. Most importantly, his costs have escalated alarmingly, notably since the advent of Sunday racing. Owning racehorses at the highest level, long ago the province of the landed gentry, is once again the privilege of very rich men.

Of the top 20 'owners' (several of whom are companies) only Jeff Smith and Kirsten Rausing are 12-months-a-year residents of Britain and pay taxes here. Jeff Smith is chairman of a leading engineering group, while Kirsten Rausing's family own the Tetra-Pak drinks carton business, valued at several billion pounds.

The top six owners in 1998 were Godolphin, the private stable of Sheikh Mohammed; Sheikh Hamdan, his elder brother who is Dubai's minister of finance and industry; Prince Khalid Abdulla of Saudi Arabia; Sheikh Mohammed again, in this case those of his horses trained at public stables; Sheikh Maktoum, eldest of the four Maktoum brothers and ruler of Dubai; and Michael Tabor, a former UK bookmaker now residing in Monte Carlo. Collectively these six won over 20% of the prize money available in Britain in 1998.

More importantly, their bloodstock investment and contribution to race entries ensured the competitiveness of British racing and kept its financial structure intact - if fragile.

Were the Maktoums to carry out recent threats to withdraw their bloodstock from the UK, that structure would disintegrate and British racing would be obliged to rebuild from a pile of rubble. The investment in horseracing and breeding by the royal families of Dubai and Saudi Arabia over the past 20 years has been awesome. The Dubaians have bought the best yearlings in America, England, Ireland and France, and the best mares worldwide.

They have bought the best stud land in Newmarket, and in Ireland's County Kildare, and in the US state of Kentucky. They have also bought and rebuilt several famous stables, mainly in Newmarket.

Sheikh Mohammed has been the driving force, although Sheikh Hamdan was the first member of the family to make a major impact as an owner. Sheikh Mohammed's first big success was with a filly named Hatta, trained by John Dunlop, which won the Molecomb Stakes at Goodwood in 1977. Within 10 years he had about 400 horses in training worldwide and owned four stud farms and 150 bred-in-the-purple broodmares.

He also owned or had shares in 15 important stallions, including the Classics winners Dancing Brave, Reference Point and Shareef Dancer.

At that point his investment was well over £100 million. In recent years he has rewritten the formula. Craving firsthand experience and hands-on involvement, he has set up his own international private stable, Godolphin, which he controls and manages, and transfers after summers in Newmarket to Dubai in winter.

Godolphin has enjoyed spectacular success in England, Ireland, France, Dubai and Japan. Last season, with only 60 horses, the stable won over £2 million in stake money in Britain alone and for the second year in three - with a relatively small string - headed the list of winning owners.

Previously, Sheikh Mohammed had been the leading owner eight years out of nine, but with a string of more than 200 horses.

Sheikh Hamdan has headed the owners' list three times and was the first of the Maktoums to win the Derby - with Nashwan in 1989. He has maintained a string of about 250 horses in Britain for the past 15 years, with 100 more elsewhere in the world.

Many of his successes, including two Derby wins, have been with home-breds. He owns 200 mares in England and Ireland and has four leading stallions in Green Desert, Nashwan, Muhtarram and Unfuwain. Several of his horses now run under the Godolphin banner, but he has remained loyal to his established trainers.

Sheikh Maktoum's horses in England are trained by Sir Michael Stoute, Ed Dunlop, Barry Hills and Mark Johnston. He takes a more patrician view of his racing. His Gainsborough Stud, at Woolton Hill, Newbury, is excellently managed and Sheikh Mohammed has ensured that his eldest brother is deeply involved in the Godolphin project with its Dubaian national identity.

But affairs of state restrict his firsthand involvement.

The fourth Maktoum brother, Sheikh Ahmed, has enjoyed success, notably with Mtoto, the 1988 Horse of the Year, but his interests have always been focused more on association football than horseracing.

Prince Khalid Abdulla is a modest Saudi Arabian who avoids publicity.

His Juddmonte Stud has been a bloodstock showcase for 20 years. The prince has 175 horses in training in England and France, including 46 with Henry Cecil at Newmarket. He also has a successful stable in America. He has won the Derby twice, with Quest For Fame and Commander in Chief, and the Prix de l'Arc de Triomphe in successive years, with Rainbow Quest and his best-ever horse, Dancing Brave.

The prince has invested hundreds of millions in racing and breeding, but has recouped substantial sums through prize money and the sale and marketing of stallions. Commander in Chief and Dancing Brave both went for huge sums to Japanese interests.

In the early '90s, the prince had a period of disillusionment with British racing, cut back his investment and ended his substantial retaining agreement with jockey Pat Eddery. But his breeding policies and management have been so successful - notably with stallions like Zafonic and Rainbow Quest - that he continues to take a day-to-day interest in his thoroughbred activities.

Michael Tabor in some ways is the 'new kid on the block', although he has been involved in the betting side of racing for some 30 years. He owes much of his substantial investment to his association with John Magnier and the Coolmore Stud in Ireland. Tabor owns several horses in partnership with John and Sue Magnier, and was part-owner with Sue in last year's 2000 Guineas winner, King of Kings.

Tabor sold his successful Arthur Prince chain of betting shops to the Coral group for £27 million. In recent years, he has speculated successfully in the currency markets and today has a multimillion pound involvement in racing and breeding in England, Ireland, France and America - where he won the Kentucky Derby with Thunder Gulch.

Like JP McManus, his counterpart in Ireland, Tabor is a bookmaker turned punter and one of the few remaining racing figures capable of staking a six-figure wager on a single horse on the racecourse - and finding the necessary financial accommodation from a handful of bookmakers.

Over the years, other substantial owners have come and gone, blazing a spectacular passage through racing and burning out. More often than not, gambling was their downfall. In the 1860s, the 4th Marquess of Hastings, a profligate playboy who was elected to the Jockey Club at the age of 21, had won and lost a fortune before his 26th birthday. Having eloped with the beautiful Lady Florence Paget on the eve of her marriage to Henry Chaplin, Hastings then bet against Chaplin's colt, Hermit, in the 1867 Derby. Hermit won, and Hastings lost over £120,000 on the race - the equivalent of several million today. Hastings was ruined and was dead within a year.

His epitaph read: 'Hermit's Derby broke my heart - but I didn't show it, did I?'

More recently, Essex-born Terry Ramsden, who had made a £150 million fortune in Japanese warrants in the 1980s, decided to take the racing world by storm. In 1983 he paid a colossal six-figure sum for the two-year-old filly Katies, who proceeded to justify his outlay by winning the 1984 Irish 1000 Guineas, and the Coronation Stakes at Royal Ascot.

Ramsden stood triumphant in the unsaddling enclosure, grey topper aloft, with his long black hair tumbling over his stiff collar. 'My name is Terry Ramsden. I'm a stockbroker from Enfield. I've got long hair and I like a bet,' was how he introduced himself to the racing world.

Within three years he had over 50 horses with six trainers (including Jenny Pitman) and his gambling was legendary. He would bet up to £1 million on a race. He bought the house and stables near Newmarket now owned by jockey Frankie Dettori, and his helicopter was a familiar sight at the premier race meetings. Ramsden's business trading took place during the hours of dark. He was losing millions to bookmakers, but it was the collapse of the Japanese market that brought about his downfall. He borrowed from investors in a desperate bid to cover £147 million worth of losses sustained during a 41-day period, but the carpet was pulled from beneath his feet.

He was made bankrupt, lost everything, and fled to America where he was arrested in 1991. Extradited to England, he was sentenced to 21 months in prison for fraud.

An owner with a more business-like approach to the sport has been the multi-millionaire industrialist Lord Weinstock. He came into the sport in the late 1950s in partnership with his father-in-law, Sir Michael Sobell.

Their first horse, London Cry, bought for them by Sir Gordon Richards for 3,500 guineas, won six races in 1958, including the Cambridgeshire under 9st. 5lb. It was an amazing start.

The two men bought the Ballymacoll Stud in Co. Meath, Ireland, from the late Miss Dorothy Paget, and on Richards' retirement bought the West Ilsley Stables in Berkshire where Major Dick Hern became their trainer. In 1976 Weinstock caused considerable ripples by sacking the popular jockey Joe Mercer and appointing the younger Willie Carson. West Ilsley was later sold to the Queen but Ballymacoll remained the cornerstone of Weinstock's success. Almost all of his horses are bred at Ballymacoll, including the 1979 Derby winner Troy, who was retired to stud with a valuation of £7.2 million.

Weinstock was well served by the conscientious and skilful Hern, but the stable was ravaged by a persistent virus for years and the Weinstock horses underperformed. Latterly, Weinstock's senior trainer has been Sir Michael Stoute and the partnership has flourished. Stoute trained Pilsudski to win the Breeders Cup Turf, the Eclipse Stakes, the Irish Champion Stakes, the Champion Stakes and the Japan Cup. He was sold to Japanese interests as a stallion for a sum rumoured to be £7 million.

In recent years, Lord Weinstock has accomplished the remarkable achievement of racing at a profit - although he claims his racing and breeding interests have cost him £1.5 million a year over several years.

One owner-breeder who has made consistent profit is Gerald Leigh, a property millionaire who owns Eydon Hall Farm in Northamptonshire. 'In fact, it's the most successful thing that I've ever been involved in,' he says.

Leigh has 20 horses in training (17 of them fillies) and has 19 mares on his stud farm. His breeding successes included Barathea, a champion miler and successful sire, and Korveya, a 16-year-old mare he sold last year for $7 million.

It was the influence of John Magnier, Vincent O'Brien, his future father-in-law, and Robert Sangster, the Vernons pools heir, that transformed what was traditionally a sport into a multimillion pound business in 1974.

Racing and breeding were entering a boom period in the early 1970s. David Robinson, the Radio Rentals millionaire, had already established a private stable in Newmarket on a business basis, colour-coding his horses by ability as reds, greens, and blues. The yearling sales were becoming competitive at top level. The leading agents, representing rich owners, were bidding fiercely.

It was against this background that Sangster and Magnier had a vision of creating a syndicate that could outbid, or buy in, its competitors.

Tim Rogers, owner of the Airlie Stud in Co. Dublin, was invited to take part, but had his own arrangements. So it was that Sangster and John Magnier visited Ballydoyle Stables for a meeting with the legendary O'Brien.

The project was as follows: they would form a syndicate; Vincent would select and buy the most attractive yearlings, with strong pedigrees, at the Keeneland Sales in Kentucky, and train them to win Classics. If they bought six or seven, and just one became a Classic winner, or better still a champion, they would have a stallion worth millions. A handful of other wealthy racing enthusiasts, notably Irish-American Jack Mulcahy and the Californians Bob Fluor and Danny Schwartz, were invited to join.

The team went to Keeneland in July 1975 and did their shopping. They brought home a package of horses that included The Minstrel, Artaius and Be My Guest. Six months later, Alleged joined the group, bought by Billy McDonald at a two-year-old-in-training sale in California.

The success of the project, thanks to Vincent's remarkable judgment, was stunning. The Minstrel won the Derby, the Irish Derby and the King George VI & Queen Elizabeth Stakes. Artaius won the Eclipse and the Sussex Stakes. Be My Guest won four races, including the Waterford Crystal Mile.

Alleged won the Prix de l'Arc de Triomphe two years running. The group had 'made' four stallions with a value of over $30 million. Suddenly the racehorse was a commodity. The valuation of a horse as a potential stallion had become vastly more significant than prize money. Racing and stud farming had become a fashionable investment sector.

For eight years, Sangster and the Coolmore connection (Vincent had bought the Tipperary stud from Wing-Commander Tim Vigors in the mid-70s) carried all before them. Sangster was champion owner five times in those eight years up to 1984.

The 'commodity' was booming, now that the Maktoums had come into the market. The bidding between Coolmore and the Maktoums at Keeneland became legendary, culminating in the battle for a colt called Snaafi Dancer who made $10.2 million - and turned out to be useless.

The inevitable crash came in 1985-86. The Sangster empire has never entirely recovered, while the spending power of the Maktoums enabled them to dominate the sport. A meeting was arranged in the desert to create an accommodation between the Maktoums and Coolmore, but it failed to materialise - although regular trading does take place between the two groups.

The Irish explored methods of damage control and Coolmore hit upon a plan for maximisation of income from stallions. Disregarding the traditional limit of 50 mares for a stallion, Coolmore started to cover 100 mares with popular stallions - and shuttle the stallions to Australia for a further full season of covering in the Southern Hemisphere's season.

But while the leading Irish breeders - several interrelated - salvaged the ruins of the European yearling market, the small breeders found it harder and harder to market their wares. High stallion nominations and rising costs made it difficult, if not impossible, to run a commercial stud at a profit. Only the top stallion owners continue to thrive.

In Britain, the number of commercial stallions owned, other than by the Middle East owner-breeders, can be counted on the fingers of one hand.

The inherent sadness behind the splendour and glamour of the Royal Ascot meeting is that none of the potential stallions on show is within the price range of British owners - and notably the English National Stud.

It will be, inevitably, a week of triumph for the Maktoums. After 20 years of involvement in British racing, their assets continue to be worth a small fortune.

Their investment, however, is no small fortune. It adds up to a substantial fortune - more than a billion pounds.

OUTLAY BY THE TOP WINNING OWNERS

MOHAMMED AL HIS GODOLPHIN HAMDAN AL

MAKTOUM STABLE MAKTOUM

Horses in training

in Great Britain 110 60 250

Costs p.a. £2.25m £1.2m £5m

Races won 1998 62 38 113

Winnings 1988 £855,877 £2,287,367 £1,520,232

MAKTOUM AL KHALID MICHAEL

MAKTOUM ABDULLA TABOR

Horses in training

in Great Britain 98 130 26

Costs p.a. £2m £2.5m £500,000

Races won 1998 50 64 11

Winnings 1988 £737,403 £1,016,063 £473,577

SERVICING THE PUNTERS SEEMS TO BE A BETTER BET THAN STAGING THE SHOW

BOOKMAKERS

Licensed Betting Offices, once described by bookmaker John Banks as 'a licence to print money', have diminished in number from 15,741 in 1966 to about 7,500 as slow offices closed and others were swallowed up or driven under by the Big Three of Ladbrokes, William Hill and Coral. Bookmakers say the offices are cost-intensive and yield minimal margins after tax and levies. The British Horseracing Board says racing, which gets £55 million a year through the Levy Board, needs £100 million to make prize money attractive - and it should come from betting. Bookmakers say they cannot afford to pay more, but the leading firms show good profits.

William Hill's estimated pre-tax profits for 1998 were £93.5 million - up by 22%.

RACECOURSES

Britain has 59 courses: 16 with flat racing, 24 National Hunt, and 19 dual-purpose. Their ownership is disparate. Some, such as Ascot and Goodwood, are privately owned. Others belong to corporations, shareholders or trusts.

Some return an excellent dividend to shareholders; others survive on Levy Board subsidies. Attendance at Ascot in 1996 was a daily average of 27,577; Southwell's was 975. Some courses, notably Chester, have enjoyed increased patronage since racing on Sunday - with betting - became legal in 1993.

The change benefited only the racecourses as owners have found costs substantially increased, while trainers and stable staff carry a heavy load, working up to 29 days in 31 and causing many to drift away from racing.

COST OF OWNERSHIP

Likely costs, on the basis of five races as a two-year-old.

Yearling purchase (25,000 guineas) £26,250

Agent's commission £1,312

Insurance £1,181

Registrations (colours, etc) £160

Training (12 months @ £32 per day) £11,680

Gallop fees £650

Farrier £550

Entries £750

Transport £1,500

Veterinary £800

Jockey fees £307

Total: £45,141

WHY THE BREEDING BUSINESS TROTTED OFF TO GREENER PASTURES

STUDS AND STALLIONS

Thoroughbred breeding is big business and Ireland is arguably the world's breeding capital. Irish breeders have two advantages over British counterparts - wonderful stud land and significant tax benefits. Charles Haughey as the minister of finance in 1969 exempted from tax the sale of stallion nominations. Investment in shares of Irish stallions became commercially attractive, not only to the Irish but also to UK breeders, some of whom set up stud farms in Ireland. The balance of power swung dramatically from England to Ireland. In 1970, only 37% of foals born in the two countries had been bred in Ireland. By 1998 it was 60% - a total of 7,718, compared with 2,382 in 1970.

Apart from stallions owned by the Maktoums in England, most of the important stallions now stand at Coolmore Stud in Tipperary or the Irish National Stud in Kildare. British breeders and the English National Stud are invariably outbid for prime potential stallions. Breeders' groups are campaigning to cut the number of years over which a stallion's value can be written off for tax purposes, but any such concession will be too little, too late.

ANCILLARY TRADES

There are some satellite businesses whose profits hinge on racing's financial health, notably farriers, veterinarians, horse transporters, saddlers and feed merchants. With over 12,000 racehorses in training, there is plenty of trade. A problem for many is getting their bills paid.

PAPER PROFITS ARE SLIM IN RACING BUT TELEPHONE TIPSTERS MAKE HAY

TRADE MEDIA

Following the demise of Sporting Life on 12 May 1998 after 139 years, there is one specialist horseracing paper, the Racing Post, published by Mirror Group. It sells up to 90,000 copies daily at £1 and is said to be trading profitably. There are various weekly and periodical publications, notably Raceform, the official form book.

Such is its importance it was once subsidised by the Jockey Club. Although Racing Post won the lengthy circulation battle with its senior competitor, its backer, Sheikh Mohammed al Maktoum, lost patience with its inability to move into profit and sold it to Mirror Group Newspapers for £1. About 80 journalists were made redundant. Profit margins are slim in racing publications.

Video production is an equally competitive market. Race videos have limited sales, while the market for stallion promotions has lost the vibrancy of the late 1980s.

PARASITES

The growth of telephone tipsters has been spectacular. Calls cost up to £1.50 per minute and various premium lines take well over £100,000 of racing 'spend' out of the market every week. Some tipping lines, while in flagrant contravention of Jockey Club rules, provide an excellent service with genuine inside information. Others are run by charlatans. The Jockey Club claims they are powerless to intervene. Meanwhile, the service operators - and British Telecom - are making colossal profits.

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Subscribe

Get your essential reading delivered. Subscribe to Management Today