"Betfair is determined to change the way we bet, the bookmaking industry is desperate to stop them. Who will win the battle of the bookies?"

This half hour edition of the Money Programme was entirely devoted to the battle between the betting exchanges and the traditional bookmaking industry. Screened on BBC2 at 7.30pm, this would have got a sizeable audience, including many who would have little or no prior knowledge of betting exchanges. This is the first programme to take a full balanced look at the whole of the industry, without just focussing on the integrity issue, and for those with anything other than a detailed knowledge of the industry, this would have served as a comprehensive and informative introduction to the subject.

Putting the punter in control

"We’ve put the punter back in control, we’ve offered him choice and value that he hasn’t had in 40 years from the traditional bookmaking industry and we’ve let him control his own destiny."

Mark Davies - Director of Communications, Betfair

Fears expressed prior to the programme by some that this would be a propaganda vehicle for the bookmakers were quickly dispelled when the programme opened with the above quote.

The message was clear, betting exchanges are new, exciting and innovative and they are good news for people who like to bet. A point that was reinforced by a contribution from a less partisan source, Keith Elliot of The Horse Race Betting Levy Board who said:

"The whole of gambling has really been revolutionised and to the benefit of the punter."

One of the benefits of this new type of betting is the ability to bet that a horse will lose, and the programme followed a pro Betfair layer, Raj Patel who explained the appeal of having every other horse in the field on your side. The other major benefit of course is the additional value available. Keith Elliot, summed this up when he said:

"The odds that a punter gets on the exchanges are going to be significantly better, nearly always, than they would be with a traditional bookmaker, because the traditional bookmaker has a wide range of costs, particularly overhead and fixed costs which do not apply to the ordinary betting exchange user."

The BBC didn’t take this suggestion at face value, they put it to the test. In their experiment they chose an afternoon race meeting at Goodwood and put £2 on every single runner at Betfair and a Big 3 bookmaker. At Betfair they placed the bet at available odds ten minutes before the off and at the bookies they took the SP. They then added up the proceeds of the winning bets at Betfair and at the bookies and the results were staggering. The winnings from the bookies amounted to £187 compared with £334 at Betfair. As the presenter pointed out "for price sensitive punters there is no comparison."

The integrity issue

"The last person to see a horse who has the ability to spike that horse could profit quite significantly from it losing."

David Harding - Chief Executive William Hills

We were given a potted history of the bookmaking industry and the golden age since the high street betting shops became legal. The Big three of Ladbrokes, Corals and William Hills were described as massively profitable businesses, that are now being threatened by the emergence of the betting exchanges. The CEOs from Ladbrokes and William Hills had two main arguments against the betting exchanges, firstly that they were responsible for the corruption of racing and secondly that they were responsible for an erosion of the SP margin which impacts on the profitability of bookmakers across the country. Both issues were looked at in detail.

David Harding of William Hills said that betting exchanges have, for the first time made it possible for a person to profit from a horse losing a race. Chris Bell of Ladbrokes went further and said that as a result of betting exchanges, at least one race a day is fixed, comments which caused a storm when they were made public in the days leading up to the screening of the programme. As an example the case of Miles Rogers was discussed. Rogers, the owner of Platinum Racing, was banned from racing for two years for laying his own horses to lose on betting exchanges. Paul Scotney, Head of Security at the Jockey Club told the programme that it would have been impossible to prove the case against Scotney, had it not been for the comprehensive audit trail provided by Betfair. Betfair were able to supply this information under the terms of the Memorandum of Understanding. Mark Davies explained that this is a voluntary agreement between Betfair and the Jockey Club, which enables Betfair to provide the Jockey Club with transaction details for customers that are suspected of cheating. Betfair also provide information to the Jockey Club in advance if they spot any suspicious activities before the race, as they did in the case of Kieren Fallon's mount.

I sympathise with the CEOs of the bookmakers. They have a responsibility to protect the interests of the business they represent which currently means doing all they can to impede or halt the progress of the betting exchanges. The two men interviewed did a pretty good job under the circumstances, but the bottom line is that there is only so much they can do, as the arguments at their disposal are weak and do not stand up to close scrutiny. In dismissing the Memorandum of Understanding Harding said that he "preferred prevention to cure." What does he mean by that? Surely he doesn’t think he can reverse the debate to a point where the very existence of betting exchanges is a point for negotiation? Of course not, the debate has moved well on from the point of discussing the exchanges' right to exist. This statement is a meaningless diversion which saved him from the uncomfortable job of having to explain why the bookmakers with their concern for the integrity of racing have resisted any such agreement themselves.

Chris Bell, also in discussing the MoU, compared betting exchanges reporting on corruption in racing to Columbian Drug Barons ringing up the Mayor of New York to tell him that he has a drug problem in his city, when in fact they are the cause of the drug problem. Not only is this analogy offensive, it is irrelevant in the current debate, and purely designed to deflect attention from the fact that betting exchanges are working with the racing authorities to combat corruption in a way that the bookmakers have resisted at all costs. Chris Bell also explained that he wanted non recreational bettors who lay more than 40 bets a month or make profits of £1,000+ a month to be registered, although he gave no indication of how this might help give any safeguards which are not already provided by the existing audit trail.

The discussion about integrity and the MoU closed with the news that despite their scepticism, the bookies have eventually followed the exchange’s lead and agreed to share some of their data with the racing authorities.

Undermining the starting price system

"The impact of the exchanges has meant that the bookmakers can’t control the prices as they could in the past. That has reduced their profits on horse racing and that has affected every one of their betting shops in the country."

Keith Elliot of The Horse Race Betting Levy Board

In this part of the programme the bookmakers complained about the way in which the betting exchanges had eroded their margins. I found it quite surprising that the bookmakers expected sympathy because they were making less money than they used to, particularly as the reason they are making less money is because the general public are getting better value.

The programme blindly accepted the proposition that the exchanges have caused an increase in the SP when not everybody agrees with this, as you will know if you have read Betfair’s funding report. Race course bookmaker Barry Dennis was seen with his son arbing via a mobile phone between the race course and Betfair. He explained:

"Once upon a time, the Big 3 could come along and have a big cash bet and I would reduce the price. Now with Betfair around, I can use their cash to pass on to Betfair at a profit and not reduce the price."

However, this statement seemed to be undermined earlier in the programme when Barry accepted a £1,000 bet from the on course Ladbrokes rep and immediately reduced his price from 5-1 to 4-1. Whether you accept the erosion of SP argument probably does not matter too much in this context as I do not feel it does the bookmakers any favours either way. As its also a hard concept for many people to grasp, you can’t blame the producers for wanting to keep it simple, as to get involved in that debate would probably help no-one.

Future of the bookies

"By offering ever more skill free betting games to their punters, the major bookies are gradually turning the high street betting shop into the high street mini casino"

According to the presenter even the bookies accept that the betting exchanges offer better value. However, Bell and Harding argued that their customers visit their shops for a leisure and social experience as well as for the pure gambling aspect. A worrying development for the bookies, therefore is the launch of easibet.net’s first high street betting exchange shop. Owner and former bookmaker Henry Spurway does not feel that the traditional bookmakers have too much to worry about from his competition. Despite opening his first shop next to a Ladbrokes and a William Hills he claims that he wants no more than 5% of their business, even though he does admit that he is looking to attract the big hitters. For Hills this assault on the High Street was too much and they took Spurway to court claiming it was illegal for people to lay bets without a bookmakers license. Fortunately for Spurway and the whole of the betting exchange industry, the case was quickly thrown out.

Conclusion

"Betfair’s new way of betting has already transformed British betting, now it looks like it is hear to stay."

There is no doubt that the betting exchanges came out on top, not because they have more clever spokesmen, although Mark Davies it must be said is particularly good. The reason why they came out on top was, quite simply, because they have the most powerful and effective arguments, compared with those of the bookies which are tired, flawed and transparently self serving.

This programme was a tremendous advert for Betfair. Significant coverage was given to their project and to the reasons for using it. Betfair came across as a young, exciting and innovative company, who are taking on the bookies on the behalf of the punters and giving them a bloody nose. In contrast the bookmakers seemed to have no genuine motives other than a desire to return to the good old days when they could get away with offering their customers inferior value, without the risk of them taking their business elsewhere. It is always going to be difficult for a bookmaker to gain any sympathy from the public and unfortunately for the bookies, the only likely reaction to this documentary is likely to be satisfaction that for once they are on their back feet.

Overall it was an excellent programme, well balanced and well informed . Above all it made a refreshing change to see coverage for betting exchanges in the mainstream media which reported the facts in a positive and objective manner.