Come back Chris, all is forgiven

I got a text earlier this evening from an old mate who wanted to know why I wasn't at the Betview Annual Awards at the Hilton Park Lane. Not long after, he texted me again to ask me my tip for the Online Company of the Year.

The short-list, it transpired, was Betfair, William Hill, and Ladbrokes.

I texted him back pretty quickly: I said I thought it would be William Hill.

Well, I wasn't going to say Betfair - it would have been too predictable an answer, coming from me, it was unlikely we'd be a realistic option (and as I gather we were trading at 1000 on the night and were booed when the short-list was read out, I suspect that view was shared by many there).

Of the other two, it seemed a no-brainer: Hills have done a lot online in the last year, while Ladbrokes are considered to have done so little in comparison that they recently fired their CEO, Chris Bell, and - passing over their MD of e-Gaming, John O'Reilly, for the top job, and appointing Richard Glynn who was welcomed by the City on the basis that he has 'online expertise'.

Ladbrokes won.

I wonder what Chris, John, the Ladbrokes Board, and the City make of that?

The wonderful thing about Digger

I was amused to read in Owen Gibson's Digger column in the Guardian this morning that what I have previously written about sports levies has 'got some sports governing bodies in a twist'.

I am guessing that by 'some sports governing bodies', Owen actually means Tim Payton, who is now at the ECB but who used to work as a lobbyist, and worked with us on behalf of the sports as we tried to secure agreement between us. I would think that the NGBs themselves have better things to do than care what my view of the world might be.

Whoever it means, though, the implication is that I've told porkies. 'Both things cannot be true' apparently - the both things being my version that 'we wouldn't put money into a trust [for sport] only to have a sports levy imposed at the behest of NGBs a short time afterwards', and, separately, the existence of a 'draft contract' which shows 'a clause that says that any payment will simply go towards any requirement for a statutory levy if one is introduced'. In fact, both things can be true, and it isn't difficult to explain how.

The 'draft contract' in question was a voluntary agreement which had been worked on for two years, by which Betfair was going to pay 3% (if I remember rightly; I think the figure started at 2.5% and went up, but it may have been the other way around) of the revenues gained on a particular sport to the sport in question.

It wasn't our preferred route, because, as I have mentioned before (in a piece in the Guardian, in fact!) we think it is wrong to be prescriptive about where the money is made, on the grounds that once you start to be so, you have to be properly so. You can't say "it's football's money" when actually you mean, "it's Manchester United's".

But it was as good as we could manage at the time, in the absence of a better idea.

So, yes, we had a draft agreement (although I would hesitate to call it a contract: the whole point was that it was a voluntary deal). And yes, we had agreed the level of contributions.

But the draft agreement in question was not the first draft agreement: it had, after all, taken two years to get to this point - an astonishingly long time when you consider that we were offering to give money on a voluntary basis. And the reason why it as taking so long was the sports' insistence that the deal needed to be linked to integrity (although, again, I would hazard a guess that 'the sports' here actually again means Tim's insistence: I don't believe that the sports had much involvement other than saying to Tim, "we believe your pitch that you can get us money; please go out there and do it," which is fair enough).

The result of the insistence, whoever's it was, was that the first draft of the agreement that reached my desk actually started with the words, "Because we accept that we cause an integrity problem for the sports, we (Betfair) have agreed to pay 3% of sporting revenues to the sports in question," the implication being that it was a direct payment to clear up our own mess.

It may not surprise you to know I wouldn't be keen on an agreement like that. Apart from the fact that I don't believe it, the fact is that if we'd signed it, it would have achieved exactly the opposite of what it was intended to do. Every monopoly in Europe would have stood up and said, "they even accept themselves that they cause an issue with sports' integrity: our argument for maintaining monopoly systems of betting in Europe is absolutely justified."

In contrast, a major driver for us signing the deal was that we wanted to knock down the other argument against us in Europe: that we couldn't work with sport. So, adding an integrity element to a voluntary agreement would have meant that we signed something that did exactly the opposite of what was intended.

For what felt a long time, Tim argued this point: he wanted to link it to integrity, for reasons which I never understood explicitly. My guess would be that he felt that it gave him a greater chance of using the fledgling agreement with Betfair as an argument for getting government to require something similar of everyone else in the industry, but that is, as I say, just a guess. It makes sense, though: he'd been given a job, and it would not have been easy to get a government to broaden out a voluntary gentlemen's agreement to a company's competitors; but it would have been reasonably simple to do it if it was based on an acknowledgement by the first signatory that there was a solid reason for the deal which could be tied to everyone else as well.

Again, though, the conjecture is probably not important. Eventually, Tim relented, and came back with a draft agreement which was, as we had intended originally, just short and to the point: "we want to give you money. This is how much. And by the way, if it becomes compulsory to make a payment, then this payment will fall away." This is the draft 'contract' which is referred to in Digger.

However, the same week that this agreement was finalised, I had a call from Richard Caborn asking me if I would go and have lunch with him and Chris Bell of Ladbrokes which I wrote about back in January. It was at that lunch that Chris Bell mooted the 'better idea' we had been looking for: not a draft agreement on the lines of what we had (where Betfair was out on a limb), but a Grass Roots Trust (GRT) for sport, funded by as many within the industry was we could get on board (and starting with Ladbrokes and Betfair together). I much preferred this idea (not least because it would result in a bigger fund of money), and I called Tim accordingly. I said that we thought we would get the GRT done, and I didn't want to sign our draft agreement if we were going to do so.

At the time (it was October) I also told him that if we had not got the GRT done by Christmas, I would revert to the agreement we had drafted. I blatantly went back on that, such that, sadly, we ended up getting neither done. You could argue that in this, I was at fault. But the reason for my doing so was that I was subsequently led to believe that Tim was actively lobbying against the GRT. Indeed, I came out of a government meeting one day in which I had been told that Tim's opposition to the GRT on behalf of the sports was one of the sticking points to progressing it, only to pick up the phone to Tim asking me 'how you're going with your Grass Roots Trust idea'. Again, fair enough: the GRT wasn't what he'd been tasked with securing or had promised. I guess it isn't called politics for nothing.

If Gerry Sutcliffe has written to the sports expressing disappointment that his plan for a voluntary levy through Sport England "has not been taken up by the gambling industry", he should know that I share that disappointment; and although I haven't spoken to him about it, I suspect that so does Chris Bell.

But the only two differences between Gerry's plan and the GRT plan we presented was that ours laid out the two things which we believed would be needed to get the rest of the industry on board: that our mooted fund should not be run by Sport England, but through a separate Trust run at arm's length from the gambling industry, so that the money didn't get lost in a big hole and it could be made clear that the industry was supporting specific projects; and that it should be accompanied by a clear statement to NGBs that the threat of a statutory levy is removed - the condition that is questioned today by the sports bodies through the Digger column.

As it happened, neither condition was forthcoming. It seems to me that neither is onerous, and I would hope that if we actually got them both, the idea could be resurrected.

But in their absence, in the interim, a few industry players have got together and have struck a separate deal of our own with the Players' Federation instead.

Quote quiz

Given the comments made today at the BHA's AGM about the impact of betting exchanges on bookmakers' margins (a comment which makes no sense for a host of reasons), I thought it worth digging out a couple of past quotes.

For five points each, who said each, when, and in relation to what? Here's a hint: Betfair launched in June 2000. (Answers below)

1. "It [Falling margin] is a serious situation and is impacting heavily on profitability.The problem is that bookmakers are getting less margin out of the fancied horses. If a favourite should be 15-8, it is starting at 9-4. In the short term, punters are getting good value, but it is not sustainable and we will have to consider how to deal with the problem."

2. "If you take the view that it is all fine and dandy, it misses the point that 10 per cent of turnover, on-course, is affecting margins on the other 90 per cent, off-course. If it continues, shops will close and bookmakers' ability to pay the Levy will be affected. It cannot be ignored."

3. "Whether it is a case of a new type of bookmaker or too many bookmakers chasing too little money, it is difficult to see how they are making a profit and we are certainly suffering the consequences. [...] From the punters' point of view, it is wonderful news, but it impacts on the industry's profitability and on its ability to meet levy demands."

Answer? All are taken from an article in the Racing Post on 12th September 1999, before Betfair was even incorporated. They relate to the debate over pitch auctions, and in turn they come from:

1. Tom Kelly, at the time Secretary-general of BOLA.

2. Chris Bell, at the time Managing Director of Ladbrokes Racing

3. John Brown, at the time Chief Executive of William Hill.

Deloittes/Ladbrokes report

I'm afraid I haven't read all of the Deloitte report published today by Ladbrokes.

I was all set to: I think it is important to get the full picture, and I take my hat off to Ladbrokes for having commissioned it. I agree entirely with their Chief Executive, Chris Bell, when he says that, "This report comes at a crucial time for the industry and will help inform the Government and stakeholders about the important contribution the industry makes to employment and taxation in these difficult economic times. We hope it will contribute towards more informed policy making and help remove much of the uncertainty that has surrounded the taxation and regulation of our industry in recent years."

But having read seven lines of it, I don't know if it is worth me reading any further. They're the seven lines in a box entitled 'The tax differential', on page 38, and they read as follows:

"Acting on a British betting exchange, a layer can offer bets and profit without paying taxes or levies as a licensed betting operator does (10% of levy on profits on British racing, and 15% betting duty). Efficiency is gained here as instead of the layer paying tax and levy on their gross profits, the exchange pays tax and levy on its commission which is usually circa 3% on the layer's profits. therefore the levels of tax and levy are smaller compared to traditional bookmakers."

This is the same tired old argument which has been run by opponents of Betfair for ten years now. People tried to get MPs to believe it as the Gambling Bill (now Act) was debated, and got nowhere; and then they tried to get the Treasury to believe it, but the Treasury spent 18 months analysing the true picture and rejected it as a massive over-simplification. The Treasury accepted, after detailed and lengthy study both of customer behaviour and of mounds of empirical evidence, that in fact, Betfair's customers (backers or layers) are not bookmakers avoiding tax and levy at all. If you want the arguments why, you can find them here.

Personally, I think it's a shame that a statement that is so obviously political should appear in this report. Ladbrokes have a good factual story to tell: they are leaders in an important industry, the contribution of which needs to be recognised.

How that cause is helped by including within the report a bit of betting-industry political in-fighting with plenty of history, I don't understand. It makes it too easy to dismiss a report whose publication should be welcomed.