Betting guru has advice for us Kiwis

by Brian de Lore
Published 8 November 2019

The headwinds for racing which were thought to
be zephyr-like at season’s start have strengthened to a steady trade wind as
Australian spring racing declines in both crowd numbers and betting turnover.

Bad publicity driven by animal activists
through the Australian ABC slaughterhouse program and the double-edged sword
recoil from the Point of Consumption (POC) levies are the two likely causes. That
double-whammy has both damaged racing’s image and reduced betting turnover.

Nearly all of Melbourne’s major spring race days have been down in crowd numbers and turnover. Yesterday’s Oaks Day Flemington was the lowest for 25 years following attendance declines on both Derby and Cup Day. Inclement weather didn’t help, but anecdotally the pundits are saying public resistance towards racing is building due to the perception that racing has been negligent on its handling of the animal welfare issue.

In New Zealand the latest release of TAB figures is also disheartening. Most thoroughbred meetings in the past fortnight show declines comparative to the same meetings in 2018. Trentham, for example, on October 26th was 42.8 percent down, which translated to $835,462 less turnover. Ellerslie on Melbourne Cup Day was 5.5 percent or $158,006 down in turnover on the previous year.

A closer look at the figures shows increases in Fixed Odds Betting (FOB) but substantial declines in the tote. Recent TAB promotions offering up a free $50 bet (Spring Loaded) on the same day if your FOB selection didn’t either win or finish last is a contributing factor to the continued decline of the tote. The problem with that promotion is that the FOB profit margin is reduced in favour of turnover but the tote from which the racing codes get their best margin (14% to 15%) is cannibalised.

Nevertheless, overall turnover is down which
highlights two more concerning issues. Firstly, it tells us that all the
predictions of the FOB being the golden bullet were false and $50 million may
as well have been flushed down the toilet, but we already knew that. Secondly,
the FOB to maintain the status quo in its financial return to racing had to
earn an extra $17 million in profit annually just to pay the fees committed in
the contract to Paddy Power and Openbet.

Building the FOB Platform and expecting it to
work for New Zealand racing was a bit like backing a maiden handicapper to beat
Winx in a Cox Plate. But that’s what happens when you put a non-racing bureaucrat
in charge of the TAB – the third one in succession.

POC issue in Australia is justifiably sited as a cause for the decline in
betting turnover. The reason is simply that when betting operators are required
to pay this levy they amend the profit margin of their book upwards to cover
the levy and maintain their margin. The skinnier prices offered results in less
return to the punters which reduces the available funds for reinvestment – the net
result is reduced turnover or churn.

bookmakers in Australia are unhappy about the POC levy because they claim they
already pay it when charged GST by the government. Point of Consumption refers
to the location of the customer and was introduced by the state governments of

POC levy was first introduced in the UK when most betting operators were
located off-shore and were not contributing to the racing-sporting bodies or
government in the UK, and is the reason why the Australian corporates claim the
levy as a domestic one is unfair.

Australia, Betfair claim that they pay 51 percent of their wagering revenue in
other taxes and fees but when the POC levy is added at the South Australian POC
rate of 15 percent, their taxes rise to 66 percent. South Australia’s levy of
15 percent is the highest in Australia with both NSW and Victoria having set it
at 10 percent. Whatever the bookmakers say, they will receive no sympathy from
the punting public who are out to beat them any way they can.

world of betting has been undergoing substantial changes in 2019 and more is on
the horizon for 2020. Moves are afoot for a number of corporates plus Flutter
Entertainment – the group that controls Paddy Power Betfair and Sportsbet
Australia – to merge with The Stars Group which is TSG, the owner of BetEasy.
TSG is a global leader in revenue management solutions.

object is to create the largest online wagering and gaming company globally,
based in Dublin, listed on the stock exchange and worth 10 billion pounds. The
move comes as a result of the recent trend for betting operator mergers and
especially after the liberalisation of sports betting in the USA.

for the potential merger which requires shareholder and government approvals
before it can proceed are saying that with the benefits of scale the fixed
costs annual savings will be in the vicinity of 140 million pounds.
Negotiations are expected to be finalised and the deal done by the middle of

TAB and the FOB will have to compete with a scale of operator never before
seen. How do you think we will fare? Imagine the potential for this group’s
marketing, IT development and ability to offer punters a better deal than any
rival operator.

For an
overview of the New Zealand scene, I this week spoke to an Australian involved
in the betting world at a high level, and who was happy to project his view but
preferred not to be named.

said: “What I would say to New Zealand is that the local consumption market is
not enough to sustain the industry. New Zealand has brilliant rearing
conditions for growing horses and some excellent racing – you have a very good
product – it’s a solid product that can be improved. You need to think of
racing like your dairy industry and think of it as an export industry and
export it to the world – just like the NFL or the NBA.

the future for New Zealand where the local turnover isn’t going to be enough.
Whatever you’re charging in fees,  it’s
not going to be enough to sustain the industry over a long period. New Zealand
has a unique time-zone and you should exploit it.

Zealand needs to do a whole lot of stuff – when you walk into an Australian TAB
outlet today, more often than not New Zealand racing goes to the second
channel. There’s no audio, so punters don’t know where their horse is in the
running. Every other country is doing microchipping, which shows where your
horse is in the running. For whatever reason in New Zealand this doesn’t

“New Zealand
racing takes too long in the barrier and too long to do raceday control. The
longer you take to do those things the more money you are holding back in

“It also
needs to present its product better but you do have some advantages in your
time-line like 10 am betting for Australians. But what needs to be realised is that
in that time slot Australia is importing racing from places like Canada and
from the UK and various other places like Singapore and Hong Kong. And that
means that you guys need to up your game.

of the mid-week races in New Zealand are pretty innocuous but are holding
something like $50,000 or $60,000 a race. And that’s in pari-mutuel, so on top
of that you have the fixed odds and also the corporates. There is interest in
those races for what they are, but the crux is that even leaving aside the POC
levy, New Zealand doesn’t even charge a racefields fee.

has been losing ground every year to the corporates. From 89 percent in 2012 to
44 percent currently. That’s on total turnover. If New Zealand outsources there
are other options to Tabcorp. The corporates have devised some great promotions;
very innovative such as offering money back if your win bet runs second, third
or fourth or paying out if your horse loses on protest.

“There’s statutory law in Australian betting that
says the payout on the pari-mutuel win and place betting has to be 85 cents in
the dollar. But when betting on fixed odds, they are not restricted and bet
their own odds. And by our calculation, 40 to 50 percent of betting today is on
fixed odds.

“They are incentivising fixed odds betting so turnover is broadly coming down. Then you have sports betting, but the margin in a head-to-head situation is only about five percent. Turnover to racing is being lost to sports.

“On top of that you are losing turnover within
racing because the betting margins to bookmakers are getting larger. They are
doing that to compensate for racefields and POC tax, and at the same time, you
have got the TAB promoting the pari-mutuel into fixed odds, and then you have
the overall scenario where the corporate bookmakers are increasing their margin
share over the TAB.

“Bookmakers for years ran their books at about
114.5%. All that means is they were taking out 15 cents in the dollar. Now they
are averaging about 120 to 122 percent on FOB with the addition of racefields
and POC levies. Because the pari-mutuel has dropped so much the FOB is now
probably betting to a book of 120 to 125 percent.

“That means that at the start of betting, they’re
probably running at around 130 percent. Now that the fixed odds percentage is
so high, it means that less is paid out, due to racefields and POC, and
turnover decreases as a consequence.

“It’s inevitable that your FOB platform will be
obsolete in a very short time. From memory, even Sportsbet has outsourced their
underlying system  – by that I mean
product development. When they introduce exotic results for the punter, which
has to be put into the system – that’s where they run into problems because
they are always developing new options including addressing the online mobile
site which is just growing so quickly.

“Gross Gambling Revenue (GGR) in Australia is
around $3 billion per year. GGR is what the punters lose. After everything,
there’s probably about half a billion dollars in profit. That just wagering.

“We supply the pricing and data platform technology,
etcetera to all the major corporates. We are also helping racing bodies export
their products globally, and that’s why I’m interested in New Zealand.”

The post Betting guru has advice for us Kiwis appeared first on .

Related posts