by Brian de Lore
Published 29 May 2020
Minister of Racing Winston Peters has today announced the departure of RITA henceforth and from June 1st racing will fall under the administrative control of WCTU NZ (Women’s Christian Temperance Union of New Zealand).
The Minister said he was forced to put the WCTU in charge when he came to his senses and realised it would be better, both for his image and for racing, to go bankrupt under the control of an organisation with good Christian values, which they exemplified on the website in their stance against the use of alcohol, tobacco, drugs, white slavery, child labour, and army brothels, than to fail under RITA which he embarrassingly appointed as MAC 18 months ago.
Peters also said that it would be healing for racing folk to follow these Christian beliefs of giving up drinking and smoking rather than go broke under the administrative ineptness of…
Of course, I’m making this up. It’s a spoof. None of the above is true except the bit about going broke – that still seems to be happening; listed on racing’s agenda and perhaps progressing at a faster rate than previously expected. What we have yet to discover is, is RITA going broke the cheap and fast way or will the Minister do what he alluded to in his pre-budget speech, and string it out for a more expensive canter into the sunset?
Either way, it seems the same destination has been dialled in on the GPS and getting there is looking more and more conclusive, the more you examine the finances.
Betting turnover at the TAB is well down – almost fifty percent below forecast according to the May 26th Update
Betting turnover at the TAB is well down – almost fifty percent below forecast according to the May 26th Update posted on the RITA website. But the loss of betting revenue is off-set by RITA not having to pay stakes money to the codes with harness and dogs only recently restarted and no thoroughbred racing until July.
The result of that could mean a positive cash-flow position for the TAB from April through to season’s end on July 31st. A hiatus of sorts during which time the TAB has been acting as an agent for Australian racing.
Costs are still incurred in idling mode for the codes and clubs, though, but might be only in the order of $3 million as opposed to an estimated $14 million had 2020 race meetings been numerically on par with 2019.
The $50 million isn’t going to save TAB, so something more has to be coming because the Minister must know the business model is broken and even though this week’s TAB redundancies are saving $11 million, it’s only five percent of RITA’s annual costs. The TAB has gone past the tweaking stage – it’s akin to mouth to mouth resuscitation while complying to the two-metre rule.
…the $50 million hasn’t yet turned up at RITA, so the owed $26 million remains unpaid…
To compound the situation, the $50 million (like a lot of other promised Government bail-outs) hasn’t yet turned up at RITA, so the owed $26 million remains unpaid, and this week was said privately by one observer to have been understated and the true amount was $35 million.
We’ll use the amount quoted by the Minister of $26 million for this exercise. Add $4 million for the redundancies and another $3 million for the codes and clubs sustainability in idle-mode, and that leaves $17 million from the 50 without thinking about repaying any of the ASB bank debt of $47 million.
That’s approximately the insolvent position of the TAB at the end of July. All the economists are saying we are heading into a recession post-COVID-19, so from August 1st, the level of revenue generated by the TAB is the big unknown. The loss of continuity, the loss of service by the TAB through media shutdowns, the loss of 35 percent of the customer base, and fewer races with smaller fields at fewer race meetings will all impact on TAB revenue in a downward spiral.
That unknown factor must make setting a calendar with stakes levels a tough assignment. It’s a given we will see numerical declines everywhere and especially in total stakes money for the season – based on a result of a $100 million bottom line season, the reduction is probably in the order of 40 to 50 percent.
To retrieve market share, customer-facing employees are vital but few remain after this week’s redundancies which impacts 30 percent of roles but saves only five percent of overall costs and leaves the executive team in place for the time being.
The FOB (Fixed Odds Betting) platform is an unqualified disaster and more than anything else is responsible for a decline in turnover and a loss of customers to Australian based corporates. They have better and more advanced technology, do far better promotions, and from sheer scale alone cannot be outperformed by anything east of the Tasman Sea.
…a one-time big punter who once turned over an average of $250,000 a month on the NZ TAB
For an independent view, I consulted a one-time big punter who once turned over an average of $250,000 a month on the NZ TAB. He said: “I won’t be going back as it makes no sense whatsoever when there are much better options off-shore.
“The TAB has lost focus on customer support. They have lousy pricing and no price boosts. The corporates offer price boosts and multi boosts on every race day, which is really looking after the customer and makes a whopping difference to the bottom line for punters.
“The New Zealand TAB go unders on every horse in a race, so punters searching for the best price will never bet with them again. That means they can dump anything they don’t want at a better price in Australia and turn a profit on the wager.
“Also, most off-shore corporates offer up to six ‘money back’ second or third (up to $200) a day, which is a great incentive if you horse places.
“To put it simply mate,” he said, “they saved a bit of money in salaries but sacked all the wrong people and took away on-course presenters so that we can no longer read trainers and drivers body language which was my go-to – and totally ruined any chance of redemption.”
In Australia, the market competitiveness of the corporate bookmakers sees some spend as much as $100 million annually on promotion. How are we supposed to compete in New Zealand trying to ‘lone it’ with no balance sheet and a $50 million FOB that is already breaking down and half obsolete?
The $17 million per annum committed to Paddy Power-Betfair and Openbet wasn’t fully paid up in year one…
The $17 million per annum committed to Paddy Power-Betfair and Openbet wasn’t fully paid up in year one of the FOB because of the lack of funds, which is just one of the many reasons why the whole thing has failed. We have Hughes, Allen and Saville to thank for that as the three protagonists who preferred job security in preference to the industry interests and seriously considering the authoritative Deloitte Report – it was the classic case of experts being reviewed by mugs.
RITA has existed for just on 11 months and unless the Minister extends their tenure, the Agency will wind up by June 30th. The Minister has to give 28 days notice in advance for an extension of time, so the announcement is required by this coming Tuesday, June 2nd. The following Monday, June 8th, is the day the rewriting of the legislation is tabled for the second reading.
The word in the corridors of the Beehive is, the Transport and Infrastructure Select Committee has done a sterling job for the racing industry and has changed most of that contemptuous proposed legislation in the first reading, which was early December. They have not achieved everything asked for, but a rewriting and substantial changes will mostly be in the interests of the submitters, and the participants of New Zealand racing.
At his pre-budget speech, the Minister said, “…an immediate grant was the most effective means to prevent default. PWC also advised close consideration should be given to recapitalising RITA. This work will proceed over the next three months.”
We want the legislation to say the codes and the clubs own the TAB, and the decision-making is devolved to the codes and the IP retained.
The racing industry doesn’t want recapitalisation of RITA because that would mean an extension of tenure. Where would the money come from, anyway? We want the legislation to say the codes and the clubs own the TAB, and the decision-making is devolved to the codes and the IP retained.
The Minister’s speech also said, “ More New Zealanders are turning to the off-shore online gambling through off-shore platforms. It is our intention to regulate the off-shore online gambling sector, and reset the on-shore online gambling sector. If there is going to be gambling by New Zealanders then it is our country that will benefit, not another.”
The Minister should probably know that the merger of Sportsbet and BetEasy was made official in the first week of May. It was a $10 billion merger which means Flutter, which owns Paddy Power, Betfair and Sportsbet, has merged with Stars Group which owns BetEasy.
The group has 13 million customers worldwide. They expect to save millions in costs and taxes. They are pooling all their resources for a better result; they understand that scale wins every time. How will the NZ TAB compete against them, is the question?
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