Flutter chief calls for major change and claims racing has become 'unprofitable' for bookmakers

The parent company of Sky Bet and Paddy Power has warned racing must embrace major change as it has become "unprofitable" for bookmakers, with a shrinking audience and the sport's "underlying quality" in decline.

Writing in the Racing Post amid a media rights row with racecourse group Arena Racing Company (Arc), Ian Brown, the chief executive of Flutter Entertainment's UK and Ireland division, also questioned prize-money levels and asked where its payments to racecourses were going.

• Here at Flutter we can't afford to keep investing in racing as an unprofitable product with a shrinking audience - change is needed  

The comments come the week after Flutter's latest attempt to put pressure on Arc to return to the negotiating table over the media rights contract between the two sides. Last week, Paddy Power and Sky Bet did not offer early prices for a meeting at the Arc-owned Chepstow, instead offering odds only in the minutes before each race was due off.

That followed similar action at the start of the month for a card at Chepstow's stablemate Bath. On that occasion the two bookmakers had not been due to offer any prices for the meeting but ultimately bet on the contests just before the off following a legal intervention by Arc.

In his opinion piece, Brown said that bookmakers and British racing had "some serious shared challenges".

Ian Brown: "It is a clear and concerning spiral"

He added: "Our data shows how declining prize-money leads to declining field sizes, making the product for customers less compelling. This, in turn leads to lower betting revenues, and so less revenue for the sport. It is a clear and concerning spiral."

Bookmakers contribute around £350 million to British racing's finances annually through media rights payments, the levy and sponsorship. However, Brown warned the sport his firm was paying more for a declining product and said the relationship between media rights payments and prize-money had become increasingly distant.

He added: "Our data suggests that the incremental value customers place on certain fixtures is much lower than what it costs us just to stream those races. Indeed, what we pay as just one bookmaker is often close to the total prize-money on offer.

"We estimate that overall streaming revenue is around three times the prize-money for meetings like Bath and Chepstow – and that's also before the levy contribution – which makes us wonder where the rest of the money is going.

"Yet there's a bigger, more fundamental issue here. We, as Flutter, simply cannot afford to keep investing in horseracing as an unprofitable product with a shrinking audience, where media costs are escalating at significant rates, and the underlying quality of the product is declining."

Brown praised the willingness of the sport to try new things, saying Premier racedays were outperforming other fixtures, but called on racing to consider going "further and faster" with that initiative while also exploring other options to innovate and experiment.

It is understood that the media rights contract between Arc and Flutter Entertainment is due to run until 2027. While the precise terms of these agreements are private, Flutter previously claimed total media rights payments from bookmakers to racecourses were more than twice the levy, which stood at £105 million in the most recent scheme. Media rights deals typically involve an operator paying a percentage of betting turnover to racecourses for the right to carry live streaming in betting shops and online.

Flutter has previously taken other steps to mitigate rising media rights costs by removing the popular Best Odds Guaranteed offer for some meetings and also cutting back sponsorship at Arc tracks, including ending its support for the Sky Bet Chase at Doncaster this year.

The company has this year moved both its operational headquarters and its primary stock market listing to New York as its main focus has moved to the United States and the burgeoning regulated gambling sector there. It will be looking to make savings elsewhere so it can concentrate resources on the American market.

The row will also dampen British racing's hopes that it can persuade bookmakers to return to levy reform talks which ended abruptly in May when the general election was called.

Flutter, along with Racecourse Media Group, has provided financial backing for the new ITV docuseries on horseracing, Champions: Full Gallop. Speaking before its premiere, Brown had said: "This is a showcase in what can be achieved when the industry unites to tackle challenges in a collaborative way."

The story in 60 seconds

What is Flutter Entertainment's issue with Arena Racing Company?

The gambling industry giant believes it is paying Arc too much for the right to bet on and stream races from the racecourse group's stable of tracks and is trying to get them to renegotiate their deal.

What has Flutter been doing to bring this about?

Flutter's biggest bookmaker brands Sky Bet and Paddy Power have not offered early prices on a meeting at Bath and one at Chepstow this month, choosing instead to only offer odds in the minutes leading up to the races involved.

What has Arc's reaction to this been?

When it appeared that Sky Bet and Paddy Power were not going to offer any betting on the Bath fixture, Arc quickly got the lawyers involved and forced Flutter to row back a little. Since then it has not engaged in the debate as it believes customers will simply switch to other bookmakers with which Arc also has media rights deals.

Read these next:

Here at Flutter we can't afford to keep investing in racing as an unprofitable product with a shrinking audience - change is needed   

Paddy Power and Sky Bet stick to their guns to offer only SP odds for Chepstow in media rights row with Arc 

Flutter dramatically backs down in media rights war and offers Bath betting after threat of legal action 

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