The sport of kings is facing uncommonly hard times and is having to dig deep, writes BARRY O'HALLORAN

IRISH PUNTERS will head to Cheltenham with high hopes in just over two weeks, but the industry behind the sport they follow seems to have less ground for optimism at the moment. Cutbacks, industrial unrest and uncertainty over future funding have dominated the racing industry at various points over the last few months.

The recession means fewer horses are being sold, so fewer are in training, and there is less work for trainers, jockeys and stable staff, who account for the bulk of the 5,500 people working directly in the sport.

At one stage, racing and breeding accounted for 16,000 workers. Denis Brosnan, chairman of Horse Racing Ireland (HRI), the State agency that administers the sport, says that a survey it carried out recently indicates that both have lost 3,000 jobs since 2008.

Brosnan says stud farms, breeding operations and training yards have been letting staff go as business has tightened. “There’s never likely to be a fuss when it happens, because it tends to be twos and threes everywhere, but we’re looking at between 20 per cent and 25 per cent overall,” the former Kerry Group chief executive says.

Curragh-based John Oxx, who trained world champion, Sea the Stars, last year, says the number of horses in training is down in virtually every yard. “Almost everybody has been affected, and particularly people in national hunt,” he says.

Racing was never going to be immune from recession. However, its funding structure complicates the picture. Up to last year it relied on the Government channelling money collected from a levy on betting turnover through to the Horse and Greyhound Fund, which was used to pay prize money and to support long-term development.

Legislation created this structure in 2002, when the levy was 2 per cent. Brian Cowen subsequently cut this to 1 per cent, but in 2008, the legislation allowed for the link between the two to be broken.

HRI and the industry generally expected it to be renewed. It wasn’t. Instead the Government began cutting what it contributed to racing – hardly surprising given the state of the exchequer’s finances.

This year, funding was cut by 13 per cent to €59.2 million. HRI reduced prize money to €48 million, back to 2002 levels, although the fund is still better than what’s available in Britain. The axe also extended to pay, and to the funding of the Turf Club, which regulates Irish racing, and whose staff are now threatening to strike.

Racing and breeding accept that nobody should get a free ride. However, they argue that they are not getting a fair share of the betting cake – the sport’s traditional source of funding.

HRI has been lobbying the Government both to increase the levy to 2 per cent, and more importantly, to tax online and telephone bets, which are not subject to the tax.

The move to capture online betting has become a flashpoint between the sport’s administrators and the bookmakers. HRI estimates that between €1.4 billion and €1.5 billion is bet online in the Republic every year, with another €3.1 billion bet on the high street, Brosnan says. However, a PricewaterhouseCoopers study commissioned recently by the bookmaking industry says that the internet and phones account for just short of €800 million, or 22 per cent of the overall market.

Irrespective of the amounts involved, there is the question of capturing and taxing it. One suggested solution is to license and tax all online operators, irrespective of whether or not they have a presence here, and ban those who do not have a permit from advertising here.

Patrick Kennedy, chief executive of Ireland’s biggest bookmaker, Paddy Power, argues that this will not work. He says online operators do most of their marketing and customer acquisition online. He believes the evidence thus far means attempts to enforce this are doomed to fail.

Kennedy points out that Australia, where Paddy Power’s subsidiary is the biggest online sports betting operator, has banned internet poker and casino games. “Australians now spend more per head on poker than in the UK, where it is legal,” he says, adding that the country is now looking at repealing its laws.

Similarly, while the US government has spent over one million man hours attempting to enforce its restrictive online gaming laws, the New York Times estimates that the US illegal internet sports betting market is worth $200 billion.

Kennedy points out that internet operations run by the biggest Irish players, Power and Boylesports, employ 900 people, most of them graduates. He stresses that the Irish industry is not against paying tax on online betting, but only if the regime does not put it at a disadvantage to competitors who are based offshore.

His solution is a licensing system that is based on realistic expectations of the revenue that can be generated on the one hand, and on the other, designed to encourage businesses to base operations in the Republic.

HRI’s aim is to ensure long-term funding for the sport, which it says will allow it to plan for the medium- and long-term developments. But its immediate concern is to support prize money, which it says plays an important part in encouraging investment in the sport.

Not everybody accepts that maintaining prize money should be a priority. However, Oxx, who trains mainly for overseas owners, says it is key to attracting these clients. Even though most owners accept that good horses are a rarity, when they do get one, they like to see a return in the form of prize money, he says.

Oxx also argues that it has helped to underpin the quality of racing here and make it more competitive than competing European jurisdictions. “If your horse wins in Ireland, people know that it’s a good horse,” he says.

The Department of Justice is due to bring forward proposals to reform gambling laws. But even at this stage, neither side in the debate is prepared to bet that they will include anything resembling a resolution.

Brand of success: business in the saddle

SPONSORS ARE a key part of racing’s funding mix, but the recession means that it’s a buyer’s market, with potential backers looking for hard evidence of value before committing money.

Liam Holton, director of marketing at Punchestown, which stages Ireland’s premier national hunt festival in April, says sponsors want to see data indicating the kind of return they can get before taking the plunge.

Punchestown uses information compiled by market research group, TNS, that tracks overall brand exposure through various media and channels. Against the benchmark of conventional advertising, racing sponsors get 8-12 per cent return. Brands displayed give exposure on television.

Holton points out that a sponsor’s name is automatically attached to the race every time it is mentioned; for example, the Punchestown Gold Cup is called the “Guinness Punchestown Gold Cup”.

Twenty-five backers are lined up for this year’s festival and Punchestown has kept its three headline sponsors: Guinness, Ladbrokes and Rabobank.

Ryanair, the festival’s “official airline”, has increased its association with Punchestown. Gigginstown House, owned by its chief executive Michael O’Leary, is sponsoring a €90,000 race to carry the airline’s brand.

The airline has also increased its backing of the Cheltenham festival, where it has sponsored a race universally known as the “Ryanair” since 2006.

Peter McNeile, Cheltenham’s director of racing, says Ryanair took advantage of a tough market to strengthen its position.

Despite that market, McNeile says events such as Cheltenham and Punchestown will continue to attract business.

Mark Noonan, director of marketing at Boylesports, says market conditions mean there is good value for racing sponsors. “It’s still very much part of our strategic marketing mix,” he says, “and there is genuine value out there now.”

BARRY O’HALLORAN