attheraces and the Future of British Racing

13 February 2004

The termination of attheraces' broadcast agreement with the Racecourse Associations has raised concerns over the possible effect on future revenues for British tracks.

Officials on both sides are confident that a resolution can be reached and that broadcasting will continue, but many doubt that revenues will remain on pace.

In June 2001, the newly formed attheraces consortium, a conglomerate owned by Arena Leisure, Channel 4 and BSkyB, inked a deal with the RCA, which represents 49 of Britian's racecourses.

The original deal was worth £307 million to the tracks, but included a performance-related out clause for attheraces; it could be reworked if the overall gross profit margin recorded by the Tote (the sole source for attheraces profits), dropped below 20 percent for more than 90 consecutive days.

According to attheraces, after The Tote slashed margins on its interactive bets by 47 percent last year. Margins fell below 20 percent in late October, and the 90-day period expired Jan. 22. The contract called for another 30-day period for the two sides to renegotiate a new agreement, but both sides have agreed to part ways.

attheraces informed its customers and partners that it would stop broadcasting will end March 29.

So now, only two-and-a-half years after the signing of a deal billed as a saving grace for British racing, some in the industry feel racing is back where it was in the mid '90s.

Not so fast, says attheraces.

The group can now negotiate with individual tracks and has stated publicly that it is still committed to its business plan.

"Hopeful that a new deal can be reached which ensures the continued presence of horseracing on the attheraces channel," the company said in a statement.

The broadcasting conglomerate, which also operates a companion Web site, might be in better shape to negotiate deals now than it was in 2001.

The Racing Channel, attheraces' biggest competitor in 2001, went out of business last year, and no other competitors have emerged because attheraces held the rights for nearly all of the country's tracks.

Rivaling broadcasters have a window of opportunity to work out deals with individual tracks, but most media insiders say attheraces is the only network with scheduling that would allow it to carry extensive racing. The creation of a new channel or competing conglomerate is also unlikely.

The Jockey Association was one of the many groups praising the attheraces agreement when it was signed. John Blake, the association's chief executive, thinks deals with individual racecourses can be struck. Blake said there is little evidence to suggest that the move could lead smaller course to close, as some have speculated.

"The hope would be that any renegotiated attheraces deal doesn't undermine their budgets so much that they would be forced to close," he said. "In terms of our profession, we of course support all the courses. The smaller ones are extremely important both for bringing horses through, and providing vital opportunities for the 450 or so professional jockeys and many amateurs too."

Ian Hogg, managing director of attheraces, said the consortium has paid more than £95 million in rights payments in addition to making significant contributions to the industry through the attheraces TV channel and by promoting British racing overseas.

"We regret that we have been forced to give notice to terminate but remain committed to negotiating a new rights deal and firmly believe that securing the long-term viability of attheraces will also benefit the racing industry as a whole," Hogg said.

Arena Leisure released a statement to the London Stock Exchange, informing the investment community that if deals with individual tracks can't be reached by the end of March, then some of the money already paid to the RCA could be returned.

"In the event that new deals cannot be agreed prior to this date (March 29), the attheraces contract will terminate and the rebate provisions detailed in the media rights agreement will apply," the statement read. "These provisions provide for recovery by attheraces of a significant proportion of the monies advanced to the racecourses since the commencement of the contract in 2001."

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