Horse racing and betting have been working hand in hand for decades now. The two rely heavily on each other and as a result, they have been made to work with each other when it comes to the financial side of things.
There are plenty of people who aren’t aware how the process works and, in 2017, this was actually changed to signify changes in how betting practices work and the sums of money that are now involved. As a result, it said that the horse racing industry will benefit massively from the changes, more of which we talk about later in the article.
How Does the Levy Work & How Long Has It Been Running?
The levy came into action in 1961, the same year that high street bookmaking was allowed in the UK. As part of the legalisation of high street betting, it was decided that a percentage of the returns taken from horse racing bets from the bookmakers were put back into the sport.
The fear of moving outside of the racetrack to bet was that fewer people would attend race tracks as they were able to bet outside, which was often more convenient for most. This fear was confirmed and attendances at racecourses throughout the UK did decline. As a result, trackside bookmakers made less money, but also the money generated from ticket sales were down as well, meaning less money in the sport.
This is the prime reason for the levy, and it was agreed that to cover some of the downturn that the sport would see, the bookmakers would have to pay a percentage back into the sport. It was a fairly low percentage to start with, but it kept money coming into horse racing and, as high street betting continued to increase, the money proved to be a lifeline for the sport.
What Is the Current Law Surrounding the Levy?
The most recent change for how the process worked came about in 2017. In fact, the change was the first alteration to the tile since it was initiated in 1961.
The rules were changed so that bookmakers needed to pay 10% of any returns that they made directly from horse racing bets of sums over £500,000. So, if a bookmaker made £1 million from horse racing over a 12-month period (runs 1st April to 31st March), then they would have to pay in £100,000 to the levy to cover the deal that is in place. Please note, these aren’t overall returns, just returns from horse racing bets.
How Much Money Does the Levy Make Overall?
In 2018, it was reported that the levy was to be paid a record sum of £95 million for the year 2017-18. This was the first payment that was made under the new rules and a welcomed boost to an industry that has been struggling somewhat in recent years.
The money then gets reinvested in the sports. This might include things like the upkeep of stables, homes for retired racehorses, prizemoney, improvement in facilities, the ability of offer grants where needed and training of young jockeys, trainers and owners. Some have described it as a much-needed influx of money to keep things ticking over, whereas others say that it’s still not enough.
But the money that they make each year will depend on how well the bookmakers have done. The more money the bookies make, the more money that they levy gets. A conflict of interest? Maybe. However, many see it as a positive mover still.
Depends on the Bookmakers’ Net Win
The problems arise with the uncertainty on how much they will receive. We stated that in 2017-2018 the money was around £96 million, but the BBC reported that for the period following in 2018-19 that this money would actually be down a massive £17 million compared to the previous year.
The reasons is that the bookmakers have made less money. One of the key areas is the limitations that have been inserted on FOBT (fixed Odds Betting Terminals). These are basically like casino game machines that are in every betting shop. The max amount you can bet has been lowered from £100 a spin to just £2 a spin, meaning that the money they make has been drastically reduced. We’ve written a lengthy article on this already, so go check it out if you want to know more about FOBTs.
Aside from that, whilst the betting industry is usually pretty consistent and has been growing sharply since the introduction of online and mobile gambling, there is no way to know exactly how much money is going to be made one year from the next.
This drop is going to be massive for the horse racing industry and a spokesperson for the RCA (Racecourse Association), said that they were “shocked to see such a big difference”. Given that a lot of the money they make is invested in prizemoney, it means that they are likely going to have to address either the amount of payout that they make or the number of races that are run.
Who Gets the Best Deal?
It may be easy to sit back and say that the horse racing industry via the levy are getting a great deal here. They let the bookmakers do all the hard work and then take 10%. The reality is very different though. You see, they both need each other to progress. Horse racing is going to be one of, if not the biggest earner for any bookmaker, especially in the UK. If the racing industry started to slow down or the quality dropped, then the bookmaker has fewer races to promote and therefore makes less money.
If you think that £96 million was just 10% in 2017-18, then this means that the horse racing industry is worth almost £1 billion for these bookmakers. This will have an effect on other sports as well, as most people will bet on multiple sports which sees future investment.
In reality, it’s very much in the bookmaker’s best interest to keep the horse racing industry as thriving as they can. The stronger it is, the more money they make in the long term. Yes, the increase up to 10% will hit some bookies harder than others, but in reality, they will all be pleased with a more sustainable future for the sport moving forward.