Racing’s revenues called into question

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  • A shock ruling by the European Court of Justice (ECJ) threw a massive spanner in the British Horseracing Board’s (BHB) modernisation programme earlier this week.

    The ECJ decided on Tuesday that bookmaker William Hill did not infringe the BHB’s database rights when it published information on racing schedules, runners and riders on its website in 2001.

    The ruling has huge implications for every sport — from racing to football — where governing bodies raise funds by selling the contents of their database to third parties. The BHB in particular had long asked to have the statutory levy on betting turnover replaced by fees from data licensing to bookmakers, and the government has agreed to scrap the levy from September 2006.

    When William Hill published racecard information on its website, the BHB had argued that the practice violated its rights because it repeatedly used content from its database, which had taken time and money to compile.

    The High Court in London first ruled in favour of the BHB, but William Hill appealed. The Court of Appeal deferred matters to the European Court of Justice because the database rights legislation in the UK derives from a European Directive, which needed to be clarified.

    The ECJ unexpectedly gave a very narrow interpretation of database rights and ruled in favour of William Hill. The verdict’s wording also leaves room for media outlets and betting shops to argue that they can use racecard information for free. This could severely limit the BHB’s chances to sell their data to third parties — a business which is worth an estimated £100m a year.

    The matter will now be referred back to the Court of Appeal but “it seems there is very little scope for the Court of Appeal to do anything beyond ruling in favour of William Hill,” according to David Zeffman, a partner at legal firm Olswang, who specialises in gaming and betting issues. “I can’t say it’s impossible the Court of Appeal will find in favour of the BHB, but it’s very unlikely.”

    The ECJ’s decision means that racing will have to secure alternative revenue streams. It could also jeopardise the BHB’s Modernisation of British Racing programme, which heavily relies on funds from data licensing.

    “For horseracing — particularly for the way the BHB has restructured things — the licensing of data is the foundation of the entire structure. [The ECJ ruling] poses serious questions on whether the Modernisation of British Racing can now be implemented,” says Zeffman.

    The BHB remains confident that it can meet its targets. “We have now had an opportunity to review the judgement at length with Counsel and our legal advisers. Having done so, we believe that our objectives remain achievable,” says BHB Chief Executive Greg Nichols.

    “The judgement provides protection for the investment made in the obtaining and verifying of data. That is what we do. We are confident that, when the Court of Appeal assesses the judgement, it will find in favour of BHB. In addition, the existing contracts between BHB and betting organisations and others, which provide access to British Racing’s database, remain valid.”

    The BHB will also “continue to pursue vigorously any unauthorised use” of data, according to Nichols. “It should be remembered that BHB’s rights are protected by copyright as well as a database right.”

    But “using copyright law to protect [the BHB] data is not straightforward,” according to Zeffman, and an extension of the levy to finance racing now appears very likely.

    “In the first instance, we believe it is vital for racing to look at the possibilities for an extension to the levy,” says Vice-President of the Racehorse Owners Association, Stephen Crown. “The levy represents a safe pair of hands in what has become a world of uncertainty. We all have a responsibility to protect British racing and the Levy Board provides a stable and certain environment in which racing’s income is assured.

    The ROA thinks that the judgement could have “potentially devastating consequences” for the industry and would like to slow down the modernisation programme. “Until racing has established its exact legal and commercial position, it can only be sensible to place the Modernisation of British Racing and the formation of British Racing Enterprises on the back burner,” says Crown.

    His words are echoed by the Racecourse Association (RCA), which is calling for a phased introduction of the Modernisation of British Racing. The RCA is also seeking legal advice on the impact of the ECJ verdict, which it thinks could have “potentially enrmous consequences” for its members.

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