Betfair have agreed a landmark commercial agreement that will be worth at least £40 million to the sport of racing.
The exchange have signed a five-year deal with British Racing, comprised of the British Horseracing Authority (BHA), the Racecourse Association and the Horsemen's Group.
Over the period, Betfair has agreed to pay British Racing 10.75% of all revenues on the sport from its UK customers. The agreement also contains substantial guaranteed minimum payments reflecting both parties' confidence in the strength and growth potential of British Racing.
British Racing has made commitments linked with these minimum payments that ensure a minimum number of fixtures per year. Betfair's betting data will be used to help construct a fixture list that will optimise British Racing's attractiveness as a betting product for punters, the racing industry and betting operators. The agreement therefore aligns Betfair's interests with those of British Racing in seeking to increase revenues derived from a thriving horseracing industry.
The five-year agreement will replace Betfair's current annual voluntary Horserace Betting Levy payments, with the agreement taking effect from the 51st Levy Scheme covering 2012-13.
Betfair has already made upfront Levy payments of £6.5 million for 2012-13 which will be offset against payments due under the new commercial agreement.
The agreement is the first of what could become standard practice for both industries.
The Department for Culture, Media and Sport (DCMS) has indicated that it intends to consult in 2012 on proposals to reform or replace the Levy, which could include options to require all betting operators licensed in Great Britain that take bets from British customers to enter into their own commercial deals with British Racing.
Paul Bittar, Chief Executive of the British Horseracing Authority, who in conjunction with Simon Bazalgette, Group Chief Executive of The Jockey Club (the largest commercial group in British Racing) led Racing's negotiations, said: "We are delighted that we have been able to reach an agreement with Betfair, one which represents a landmark for both the racing and betting industries. It brings many benefits, including substantial and increased guaranteed funding as well as importantly providing certainty for the sport in relation to Betfair's contribution. We hope that similar arrangements with other betting operators will follow.
"This agreement has required a high degree of co-operation both within Racing, with all the major organisations closely involved in negotiations, and of course with Betfair, who have shown great commitment in their intent to be a constructive commercial partner with our sport. In particular, I would like to recognise the BHA Chairman and the Board for their vision and unwavering commitment in pursuing improved and more stable financial outcomes for the sport, as without it the deal would not have been possible.
"We firmly believe both in the value of British Racing as a product and the need to work closely with the betting industry for our mutual benefit. Government has committed to bringing forward proposals to address the long-standing and damaging flaws in our current funding mechanism. We continue to engage fully in this process, but in parallel British Racing also seeks long-term commercial deals such as this to assist in the transition to a wholly commercial future."
The announcement was also welcomed by the Racecourse Association (RCA), whose chief executive Stephen Atkin said: "The RCA board has worked hard, building on existing strong commercial relationships between our members and Betfair, and with our colleagues at BHA and the HG to reach a landmark deal with Betfair.
"Building on this deal, we are fully committed to working with other betting operators, both in the UK and offshore, to reach similar arrangements.
"In addition to the clear financial benefits for horseracing generally it also important that the deal is complementary to our work with the Department of Culture, Media and Sport and the betting industry to establish, through appropriate legislation, a sustainable and enforceable long-term mechanism to fund our wonderful sport, covering all betting operators.
"The future welfare of horseracing, and all the investors and participants in the sport, is closely linked to a strong partnership between British Racing and the betting industry to further expand interest amongst punters, alongside other key customer groups."