The Tote – Will Racing Miss the Boat Again?

The ex-Chairs of the UK’s two largest racecourse groups, David Thorpe (ARC) (below left) and Simon Bazalgette (JCR) (below right) – now colleagues at international consulting firm GVS EQ – consider British Racing’s history with the UK Tote, and the possible future.

The UK Tote was created in 1928 by Winston Churchill, a member of the Jockey Club, as the first licensed form of off-course betting in the UK. It was created with a specific mission to support British horseracing, but, structured as a Quango (a quasi-autonomous non-governmental organisation), it has never been owned or run by the sport. Its mission was lost when it was sold to privately-owned UK fixed odds operator Betfred in 2011.

Every few years, going back to the early 1960s, Racing has had opportunities to bring the Tote closer to the Racing fold, but has always been thwarted. Another opportunity may arise in the next couple of years – will it be grasped?

In the early years of this century, agreement in principle was reached with the Government for ownership to be transferred to the sport, but this was successfully challenged by the bookmakers.

Racing’s ambitions for the Tote then became a casualty of the 2008 financial crisis. In a last minute ditch to show he could rescue the public finances, Gordon Brown announced ten possible privatisation opportunities, including the Tote. The Tote was by far the smallest of the ten, and the only one which was not actually owned by the Government. In 2011, the new Conservative government jumped on it to show their commitment to solve the same issue, nationalising the Tote (bringing it under Government ownership), and then sold in a competitive auction. Ironically, it was the only sale from the original list of 10.

A higher (but more complex) rival bid, led by ex-BHA Chair Sir Martin Broughton, which had the support and involvement of the sport’s stakeholders was ruled out because the Government needed to show a quick win for the public finances.

Betfred acquired the Tote because of its fixed odds business and its betting shop estate, which fitted well with Betfred’s existing operations. Pool betting, with a seven year exclusive licence, was only of secondary interest, but the Government would not agree to separate out the pools operation to benefit the sport.

Seven years later, in 2019, when the exclusive licence had expired, Betfred was open to selling the pool operations, even though the exclusive licence had expired.

The British racecourses created Britbet as a vehicle to acquire the Tote from Betfred. Britbet was willing to pay a significant proportion of Betfred’s original book value of the pool only (shown in the Betfred accounts at £30m at the start of the 7-year exclusivity period), but were outbid by the current owners, a financial syndicate which paid a multiple of times higher than that original pool book value.

The syndicate includes some leading racehorse owners and breeders, and the ROA with a small stake, but there is no formal representation for British horseracing within its governance structure, and like all private companies, its primary focus is to create returns for its investors.

However, Britbet retained the rights to on-course pool betting at its owner courses, and the Tote had to agree to a commercial agreement with the courses, via Britbet, in order to retain the benefit of the on-course liquidity. It was also vital to the Tote to have an agreement in place to retain legitimacy with international pool operators, who are typically owned by their domestic sport. This allows racing jurisdictions around the world to co-operate, developing new products such as the World Pool (led by the Hong Kong Jockey Club) whose international partners are the pool operators authorised by the Racing bodies in each country.

The Tote/Britbet deal has ensured that British racing receives good value for the rights to racecourse liquidity (around £50m over the 7 years of the deal) and protected a key element of the future international economics for racing.

In 2025, the current deal between the Britbet racecourses and the Tote comes up for renewal, and the racecourses are in a strong position to ensure that British racing continues to protect its pool betting interests, and perhaps even to strengthen its position.

At a time when British racing needs to do all it can to ensure it has sustainable financial future, the separation with the Tote remains a potential weak spot, but also an opportunity. At previous times where the opportunity has arisen, racing has been out-manoeuvred, by bookmakers in the early 00’s, by Betfred in 2011, and in 2019 by the current owners’ willingness to pay a significant premium for it.

Racing benefited significantly from taking greater control of its media rights in the late 2000s – even though there remain arguments between racecourses and horsemen as to how that benefit has been split. While the Tote doesn’t have the same potential prize, it is still significant, and a separate Tote is sub-optimal for Racing, with potential future risks.

For the 2025 renegotiation, the Tote may well try to reduce the amount it has to pay to the sport on the basis that it’s the only game in town. However, the racecourses are also able to play a strong hand, and it is in the sport’s best interests that they do so.

The Tote needs the racecourses on board because the Hong Kong Jockey Club, the prime mover behind the World Pool, needs to know that the British racecourses are part of the deal. Britbet keeps a competitive option open for racing to develop its own direct pool relationships, supported by the media groups (because pool betting needs pictures and data to deliver the most value).

One of the risks from the Racing side is that of fragmentation, either between racecourses and the members of the Thoroughbred Group, or between different racecourse groupings, where large racecourses can sometimes be bought off with short term gain (or threats) at the cost of the long term good of the sport. Ironically, the need for pool betting to be integrated with British Racing is one issue where ARC and the Jockey Club have been aligned in recent years. By working together, they also open up the potential of investing in enabling technology for the on-course and global commingling systems.

British Racing has had its greatest successes when it has been able to align its varied stakeholders behind the best interests of the sport, rather than those of individual vested interests. The upcoming discussions with the Tote will be the latest challenge to the sport to focus on the big picture, and not to be divided and ruled. It is also an opportunity for British Racing to maintain its position at the top table of world racing where it belongs.

David Thorpe – Associate, GVS EQ

Simon Bazalgette – Chair, GVS EQ

(A version of this article appeared in the Racing Post in 7^th May, 2024)