28 September 2001 - Offer letter to bookmakers

28 September 2001

Dear Sirs,

Subject to Contract

Following protracted negotiations with the CBA, representing the betting industry, and equally difficult negotiations with various rights holders, SIS are now in a position to offer bookmakers an integrated service beyond April 2002.

The service will be transmitted Mondays to Saturdays throughout the year, plus Sundays for the UK summer season, and evenings for the UK summer evening season. The content of this service would be the product listed below.

  • Pictures and commentary from the 49 non-GG Media courses and BHB data from all 59 courses, subject to you obtaining an appropriate licence from the BHB, and subject to the rider below.

  • Exclusive coverage of UK horseracing from the ten courses available to us through the GG Media deal (Exeter, Fakenham, Hexham, Kelso, Leicester, Perth, Sedgefield, Stratford, Taunton and Towcester). This represents 156 fixtures annually and includes access to on course data for those courses.

  • Exclusive BAGS service, incorporating the existing level of coverage, including two lunchtime meetings and a meeting each Saturday afternoon. Results from all other NGRC meetings.

  • Exclusive rights to include the production and distribution of numbers games and events developed by 49s.

  • Exclusive coverage of Irish horseracing and the exclusive right to go onto the courses to produce betting shows and results for inclusion in a service to betting shops.

  • Exclusive coverage of South African horseracing of one meeting per day, subject to availability.

  • An evening service for the UK evening racing season from May to August.

  • A Sunday service for the weeks of UK Sunday racing during the summer.

  • The Sports Daily news magazine programme.

Most of the above content is covered by long-term contracts between SIS and the rights holders. In all other cases, we are confident that we have sufficient rights to be able to supply the product as detailed.

Should the betting industry fail to reach agreement with the BHB, also available to bookmakers is the terrestrial broadcast of UK horseracing, from C4 and BBC. Whilst we would not be able to re-broadcast these races as part of our service, we will force-tune televisions in shops to receive the relevant terrestrial broadcast.

This service will be delivered over a new digital network, designed to reach all betting shops in the UK and Ireland.

All prices are expressed in £ sterling and will be converted to Euros at the exchange rate applicable at the end of March 2002 and annually thereafter, for services provided to shops in Ireland

We are offering two options on prices:

  1. Our price for a five-year contract is £5000 per shop, p.a., excluding V.A.T. The price includes evening and Sunday racing as detailed above and would be held at that level for the first two years of the contract, and then be subject to RPI changes in years 3 to 5.

  2. Our price for a two-year contract is £5250 per shop, p.a., excluding V.A.T. The price includes evening and Sunday racing as detailed above and would be held at that level for each of the two years. Customers would have the option of extending this contract for three more years, with the price being subject to RPI changes for years 3 to 5.

These prices would cover standard installations only, being direct-receive sites. Our treatment of the costs associated with cable-receive sites will be dealt with on a site by site basis, but will not be subsidised by the rest of the estate. We will give an option to cable site operators to pay either a lump sum installation fee or to spread the cost over a five year contract with the actual installation cost being split over that period and interest charged in line with charges from our bank for the borrowing facility.

Rider

In the event of the Betting industry not concluding a deal with the BHB, or SIS not being granted a licence by the BHB, we would reduce these prices by £500 p.a. to reflect the savings on picture provision. We believe that we could still provide commentaries for these races, and we would switch the shop television receiver to take free to air coverage of these races, at no cost to our customers.

There are certain elements of the service that, although included for delivery by SIS, will require separate licence fees to be paid by each user. These are:

  • 49s products, which will be a separate item on invoices. For this service, we merely pass on the charge made to SIS by 49s.

Other content

Other overseas racing has proved popular, but we do not currently have rights for its inclusion. We could deliver Emirates, French and Italian racing, and we are being pursued to discuss these deals. We would need to explore with our customers the viability of including this coverage on a regular basis and the impact this would have on the price.

Our basis of charging for extra coverage would be the marginal cost of acquiring and producing that content for inclusion in the service.

Optional Services

We have not included certain items in the price of the FACTS service. These are either optional services, or other content that we would include, subject to discussion with our customers.

  • The Irish Service. We produce a dedicated service of Irish horseracing, delivered via satellite on a separate television screen and containing full coverage of all Irish races, uninterrupted by other content. Whilst primarily for the Irish market, this is available to all customers. The price is £345 p.a., excluding V.A.T.

  • The Non-UK Sunday Service. For the Sundays when there is no UK horseracing, we produce a service including BAGS, Irish, South African and Italian horseracing. The current price is £20 per week. We undertake that, as the number of subscribers
    increases, we will reduce the charges per customer for this service in line with the schedule proposed to the CBA.

Text And Data Services

We note our customers' concern that a turnkey solution be available and SIS is able to confirm its intention to continue supply of text and data services beyond 2002. To this
end, we are actively engaged in discussions with Alphameric and other suppliers of text display and other equipment, with a view to supplying you with more economic solutions than those currently available. We will use the buying power of SIS to deliver cheaper equipment, where possible, and will pass on the price savings made to our customers.

Data Feeds

EPOS systems - included in the price of the FACTS service is a licence to use the data SIS own to drive EPOS systems. However, data owned by the BHB and PA may be subject to an additional licence fee and SIS will pass on these third party charges at cost, as directed by the licensor.

Internet systems - licences for the use of SIS data on a customer's Internet site are available on an optional basis. It is not our intention to make any additional charges to customers for the SIS owned element of the data for use on customers' own Internet sites, subject to that customer already subscribing to an SIS raw data feed. We will need to pass on any third party costs, such as PA and BHB costs, and will do so without any surcharge.

Display systems - licences for the use of data supplied by SIS to operate the customers' own display systems will be available at current prices, subject to any increases imposed by third party suppliers, which will be passed on at cost.

Ad hoc - we do not anticipate any increase in the price of data feeds supplied to individual companies on an ad hoc basis, subject to any increases imposed by third party suppliers, which will be passed on at cost.

For your further information we have attached details of our technical offering

Once again, I extend our thanks to you for taking the time to read this offer and thank you for your patience during this process.

We enclose an Acceptance Letter for you to sign and return if you wish to take our service beyond April 30th 2002.

Yours sincerely


David Holdgate
Chief Executive

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SIS's Unique Technical Offering

SIS guarantees to be able to reach all betting shops in the UK and Ireland.

Installation is totally compatible with all the text and EPOS equipment already installed in the shops, and those being installed or likely to be installed over the next twelve months.

We use an encryption system that has not been broken.

We use a conditional access (CA) system that does not involve cards and so further reduces the risk of piracy.

The CA system is a commercial one, designed for targeting individual sites quickly and readily, offering individual services, unlike domestic variants.

The downlink equipment is of un-compromised quality being to business standards throughout (as opposed to domestic). The equipment has been designed for superb bad weather performance and extremes of temperature.

Satellite choice provides a non-preemptible service with levels of restorability in the event of service failure.

Installation can be performed with only a minor disruption to the service, including the attachment to the existing in-shop text and EPOS systems

An all-embracing Business Continuity Plan is in place: also Disaster Recovery Procedures exist that are tested on a regular basis in collaboration with our customers

We offer any number of data channels - all encrypted - up to virtually any (reasonable) speed, any number of audio channels - all encrypted, and up to 7 video channels- all encrypted.

The video bandwidth provided is sufficient to ensure high quality pictures during high speed movement.

We use non-PC based receivers, made specifically for the rugged business environment, tolerant of betting shop temperatures of up to 40 °C and the very high levels of dust and dirt.

The chosen receivers are expandable to TCP/IP data applications, thus future-proofing the installed equipment.

We are using tried and tested technology - the Irish Service and European sites have been running for two years using the identical equipment.
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