By Scott Woodward from www.ChampionProfits.com
Punters are the big losers following the High Court of Australia’s decision last Friday to reject Sportsbet and Betfair’s claims that the decision to impose a 1.5% wagering turnover fee for the right to publish NSW race fields was unconstitutional on the grounds that it is discriminatory and protectionist in its nature.
We have all consumed the biased views from Racing NSW, the corporate bookmakers as well as the betting exchange Betfair, so let us have an objective look from a punter’s perspective and how the decision will impact on them and their ability to wager in a competitive market place.
Racing NSW CEO Peter V’Landys said on TVN on Sunday: “this was never about the punter”, but what he has always failed to comprehend is that everything starts with the punters dollar and the finished product in his patch is likely now to be more expensive and slowly force racing punters to more attractive options, and they are plenty. He claims to want to look after the 50, 000 participants in the racing industry, but continues to ignore his most important and valuable participants, the four million punters who actually fund everyone’s job.
The burning questions being asked are:
What will happen to Betfair in Australia?
It remains to be seen if BF Australia will test their arm at the ACCC, but given their business model is based on punters betting against each other with high turnover and potentially little or no gross profit; the new tax would render their business on horse racing in NSW unsustainable. I.e. it is possible for two punters betting against each other to turnover say $1m and both could break even, but BF has to cough up 1.5% tax of the $1m ($15,000). Every day punters back horses at 1.01 “in the run” for large amounts and while the punter who may invest $1,000 would stand to win only $10, Betfair would be taxed $15.
James Packer, the 50% part owner of the Australian part of BF, is not noted for continuing to put in good money after bad and the only way likely for him to stay in would be for the exchange to apply for a corporate bookmakers licence, but the odds are he will either dilute or sever his ties to focus on his casino empire.
Given that it will now be six-times more expensive for Betfair to offer New South Wales racing to customers compared to offering racing from any other state in Australia, the only viable choice they appear to have is to withdraw and either “black list” racing in NSW, or market it from the U.K., which would dramatically and adversely impact liquidity and make the NSW racing product less attractive and competitive forcing thousands of punters to turn to sports betting and online casinos.
ChampionProfits.com trading guru Tony (The Badger) Hargraves underlined the dilemma facing BF Australia just on some typical trading scenarios that he experienced on Sunday. The Badger was pre-race trading on the Randwick meeting and on one race he turned over $2,400 and made a $30 profit on the race.
Betfair took a commission payment from the Badger of 60 cents, but now under the new 1.5% turnover tax law, a further $36 fee must be handed over to RNSW who will actually make a bigger profit than the Badger, but the big loser is BF Australia. This is a very typical trading scenario and one that the Badger typically implements on 15 or more races every day like thousands of other traders.
The flow on impact will also reduce turnover for other operators like the TAB as the very nature of the Betfair betting exchange generates millions of incremental dollars in bet backs and arbitrages.
There will be many nervous Betfair employees in Hobart and Melbourne this week wondering what Easter will bring.
The world’s second biggest Exchange, Betdaq, owned by Irish billionaire Dermot Desmond, pulled out of Australia last July, but promised to be back, but paying a tax based on turnover for any exchange does not compute.
A horse is traded at the odds of 1.01 on almost every race and below is the stark reality of the future of trading in the run on races in NSW.
|
|
Price |
Back |
Risk |
Result |
5% Comm |
Collect |
Summary |
| Punter A |
1.01 |
1,000 |
1,000 |
Wins 10 |
50 cents |
9.5 |
|
| Punter B |
1.01 |
10 |
Loses 10 |
0 |
|||
| Betfair |
-14.5 |
||||||
| Punter A | 50 cents | 50 cents | |||||
| Punter B | 0 |
0 |
|||||
| RNSW |
15 |
15 |
|||||
What will have happen to the bookmakers?
The major bookies will build the new tax into their product mix and look at different ways to develop incremental margin like promoting multis etc., but clearly the millions that they have invested into marketing racing in NSW will now be diverted into the other states and sport. They have been promoting racing in NSW with expensive TV commercials and adverts in the print media, but due to RNSW exclusive arrangement with their buddies at the TAB, the bookies have been banned at the track.
U.K. Betting power house, Bet365 is one of the world’s largest gambling sites and has been set up in North Sydney for almost six months now waiting on the High Court’s decision. We can expect an announcement shortly once they re-write their business plan.
The small to medium bookies will likely struggle to maintain a tax on turnover and it is known that not all bookies accrued the back payments with at least one high profile medium bookie not expected to be splashing out of expensive eggs this weekend.
Sportsbet Executive Chairman, Matt Tripp, who also founded Sportingbet Aust., expressed concern that last Fridays decision may lead to reduced income for racing.
“As has been proven by the increase in wagering turnover since the emergence of corporate bookmakers, competition stimulates choice and in turn drives growth and revenue to racing. Giving the TAB a walk-up start will hinder competition, and restrict growth which may harm revenues to Racing.” Tripp said.
“However, we will continue to provide competition to the TAB by providing our one million-plus customers with the best prices, the best range of products, and the best service in Australia. For every dollar staked, the TAB takes more than twice as much from punters as we do. This won’t change as a result of the court’s decision.”, he added.
“If product fees are pushed too high, it has the potential to reduce both competition and consumer choice, to reduce racing’s wagering appeal compared to sports, and ultimately some wagering operators may decide to relocate offshore.”
The 10 to 20 year window
The major benefactors from the court decision is racing’s “fat cats”, the big breeders and owners, who can now buy and sell yearlings for more as the punters money will increase prize money.
“Things just got more expensive after Friday”, according to Sky Racing’s Ron Dufficy when asked if he will be buying at the sales.
Racing in NSW would have declined to prize money levels of the 60s had they been unsuccessful in court, and many observers are concerned that the industry should never have been put in such a precarious position, especially when Racing Victoria are thriving under a gross profit strategy with bookies.
RNSW were on their financial knees when they were defeated in the initial court case almost three years ago by the corporate bookmakers, giving them a powerful bargaining position, but in the interests of the racing industry, the bookies agreed to allow RNSW access to the accrued funds of some $150m. The bookies could have played hard ball and withheld the funds pending the appeal which would have activated enormous pressure to negotiate a mutual early agreement. What RNSW do not know is that the major bookies would have passed on the funds even if they were successful in the High Court as a gesture of good will and to cement their position as a future long term strategic partner.
Sadly, a tax on bookies turnover as opposed to gross profit will make the NSW racing product less attractive and competitive, and long term the turnover tax will continue to reduce consumer investment and crowds at the track. As Matt Tripp correctly pointed out, “the emergence of corporate bookmakers has been a wonderful shot in the arm for punters” as they have a choice now and experience expanded markets that are more attractive to consumers stimulating interest levels that where not prevalent when the punter only had the TAB and SP Bookie.
{ 31 comments… read them below or add one }
Killing the goose !
The major issue I have is that this critical information has not been widely distributed. Personally I only have some semblance of an idea of what is going on due to articles from CP and the Punters Show, but they are not exactly 2 mainstream media outlets. Duff knows his stuff and is in a position to make his feelings heard, but I havn’t read much in the papers telling people whats going on (open to being corrected though).
I read the article on Racenet after the decision was released. The comments were 90% in favour of Racing NSW and the few who were speaking poorly of the ruling were ridiculed. It is obviously a forum for people who are invested and interested in racing but the fact that so many were clearly so uninformed is really concerning. I’m not saying that the public opinion would have had any sway on the courts decision, but the more widespread the knowledge of the actual implications could only have been a good thing.
Clearly Peter Vlandys is passionate enough about racing to go to the lengths he has, but his blatant disregard for the punter (“this was never about the punters”) is scary.
Sam
The media is owned and controlled by the TAB in both Radio, TV and they spend a fortune in the print media and demand that other bookies are not promoted and the editorial copy is biased. So, people people like your good self get a one sided story.
This decision stinks. Mr V’landy’s is short sighted, like most racing offiicials he thinks punters will continue to bet no matter what. Just dangle the promise of winning in front of them and they will bet.
The only reasons I came back to horse race betting was because of betfair especially and the corporate bookie somewhat. For example I backed a winner on saturday at caulfield that paid $47 after commision on betfair (other betfair backers got even more then that). Best tote paid $34 and Topfluc with bookies was $31. It was a small bet, I didn’t give it much of a chance but it was good value. However this was enough to put me in front at the end of the day even though my much larger bets on bel espirt, testacana and speediness flopped. Betfair has given me a fighting chance. Tax betfair on turnover like NSW wants and you will cut my opportunities in betting on races in this state.
I still remember back in the early nineties going to the races here in Adelaide and the bookies here in Adelaide would not give you call prices on interstate races and heaven forbid if a roughie got backed in, the bookies would drop it into near favourite. Even colin hayes was complaining about how bookies in Adelaide opened up on 160 plus on saturday race here and then don’t come down much either.
Oh and the TAB, yeah right, I back a lot of the fancied runners (usually not the favorite though) and so really get annoyed when I think I am going get sixers just before the jump and watch my pick continually tumble down in price as the race is near finished. Their fixed odds don’t compare to betfair in my experience.
Loose too often and with all these frustrations , I will walk away like I have done before.
This case for me was important as the decision highlighted the inadequacies that still exist in our legal system. The High Court decision allows the continuation of practices which are certainly protectionist, certainly short sighted and most certainly will decrease the returns received by punters.
I hope that this is not the end of this ‘case’. We definitely need legislative change. I find it an anomaly that our legal sytem can deliver a verdict that ultimately gives more to the moleskin mob in the Hunter Valley, and upholds the short sighted policies of the narrow minded buraeucrats that bat for them, and other ‘fat cats’, in political circles. These very same bureaucrats are those that have consistently shown over an extended period of time that they are incapable of managing the racing industry in NSW, or indeed a chocolate wheel at the local school fair. At the same time the decision reduces the efficiencies and competiveness of businesses that take less, and return more to the rank and file of the industry – the silent majority, the humble punter. I fail to see how we, the majority, the punters, can possibly applaud a decision that makes the wagering operators that take out less, and offer us more, less competitive, or in Betfairs case unviable. Makes no sense at all. Legislate to ensure the fat cats go on a diet, the influence of the bureacratic morons is minimised, and the rights of the punter, the foundation of the industry, are protected.
Stev
Brilliantly written.
RNSW are on record saying that punters will take any odds. Their view is that punters are stupid and regardless of our much the TAB take out they will still bet. This short sighted view was partly correct once but punters have a lot more choice now and they will avoid RNSW if the product is unattractive and uncompetitive.
Ashtar,
What our racing administrators dont get is that they are not the only game in town. Their market share is moving towards sport and online casinos, and sadly kids 16,17, 18 and 19 are not intersted in horse racing any more. That is the new generation that RNSW have allow to die.
The simplest answer for Betfair is to make it loud and clear that any NSW race has a 6.5% commission (5+1.5) . This doesnt completely address the turnover problem they have but goes some way to a) highlight to punters that these are less competitive value meetings to bet on b) defrays some of the offset fee Betfair has while still allowing them to host those meetings. The other alternatives is to insist people pay a tax when placing a wager like the old UK model (4% off course on stake, 9% oncourse) or another alternative would be declare the total profit in commissions they receieved on a NSW based race net of the turnover tax and compute a final tax figure for that race only for all participants. None off these are convenient or terribly popular options but they ate least allow Betfair to continue trading on these higher cost meetings. The only other alternative is to bypass betting on NSW meetings at all. Im sure the other states (and operators both corporate and TAB) wont mind!
AJ
I have the view that BF actually stimulates the market and increases turnover for the TAB and bookies. Every BF punter I know bet back and arb with all of them and I know many people who actually retired from punting and came back because of BF. The corporates and the TAB have benefitted from the flow on impact.
If you look at the TABs figures when BF came to Aust, you will see a revenue increase. Competition is good for every one.
Since Betfairs arrival in Australia RNSW has been trying to sink it, comments along the lines of Betfairs introductions will ruin the Australian racing industry. This is another step on that road.
If Betfair & the corporates are forced to black list NSW racing then so be it and i will be happy to not bet there.
There’s plenty of other races & sports to bet on.
Peanuts
We would still have 1.85 lines if not for the corporates and BF.
Quote from a aricle in the Sydney Morning Herald 31st March 2012
Following the High Court’s ruling, Victorian authorities will now move to ensure a similar deal. The state’s Racing Minister, Denis Napthine, said new legislation would be aimed at ensuring the Victorian industry received fair and reasonable returns for its product from wagering entities.
Racing NSW’s counterparts, Racing Victoria and Racing Queensland, welcomed the news.
Under an agreement which expires in August, wagering operators pay Racing Victoria a fee based on gross revenue rather than turnover.
”A report will now be provided to the Racing Victoria Board that will determine the structure and timing of any changes to our product fee regime,” its chief executive, Rob Hines, said.
The current arrangements in Queensland expire on June 30.
Other sporting bodies say they will study the judgment to determine any course of action.
”It is a judgment that we will look at closely in terms of any opportunities it presents in terms of our arrangements with the betting operators,” the NRL chief executive, David Gallop, said.
”We’ve been at the forefront of working with the other codes in establishing the principle that sports are entitled to compensation from companies that make money by running betting markets on our events, and the decision reinforces that position.”
Read more: http://www.smh.com.au/national/high-court-rules-against-bookmakers-in-fee-case-20120330-1w3m8.html#ixzz1qwlpnXtp
the begining of the end?
That is horrific news. It pretty much spells the end of Betfair in Australia.
I’m another one who returned to punting after giving it up for years because I saw Betfair as a small window of opportunity for the studious and well-disciplined punter, a window which the TAB has never provided and which has progressively closed over the years as the on-course bookie rings have gotten smaller and less competitive.
Oh well … looks like it’s back to bowls.
I have read all the previous comments about the betting with interest but no mention has been made of the most important contributor to the racing industry, the owner.
Without owners all the punters would not have horses to bet on and aren’t they entitled to recoup a return on their investment?
This decision by the High Court will see prize money continue and increase that makes it viable for owners to continue to buy racehorses in the hope of racing for a profit, albeit not guaranteed.
But most of these comments are a bit short sighted not understanding that without owners who inject their hard earned cash punters would not have the betting median that now exists.
John,
Please allow me to explain why you are incorrect in my opinion, but I appreciate your view as an owner.
Prizemoney in Australia is already the best in the world and very few naive owners actually buy horses with a serious view of making a profit. Stats say the vast majority of owners have no hope of making a profit and clearly the motivation is for fun, prestige and doing something with some friends.
John if not for punters, owners would be racing for ribbons and that would mean we would have no owners so I stand by my statement that everything stems from the punters dollar.
As an owner, you should be concerned that RNSW have done nothing to stop the TAB from taking their market share on red blooded race horses to digital horse racing which is a goldmine for Tab Corp as the margin is 35% and races run every minutes 24/7 as the cost is nothing. Not only is this a major worry moving forward, but racing NSW get zero out of the rort as they sold their kick back rights so they can build a giant stand at Randwick when nobody sat in the smaller one.
It is obvious from your article who sponsors this web page.If you look at the UK racing prizemoney and costs to trainers and return to participants such as punters ,owners, and facilities at race tracks it is very poor.This is due to only one factor the domination of bookmakers.The choice of bets is pathetic with no decent pools on exotic bets such as tris, quinelas etc.the bookies have bleded UK racing and not many people would care if Betfare or any other foreign betting compamy shut up shop and went else where.They love you in USA the land of and little government control and private race tracks that foreign bookies are buying and as a result usa racing is in mess.
We have the best model for for racing.The non profit Club ownership of tracks, heavy government control and subsidy .If it wasnt for this we would have no regional racing( like USA).The greyhounds could not afford to econtinue without horse racing subsidies (and for bookies to exploit) and harness racing would be non existent like in Uk.
The local bookies are not going to go anywhere as there will always be plenty of big telephone punters with big losses .quality bookmakers will always be better than quantity.
France has the best racing in europe and guess what NO bookies.REMEMBER ALL TABS have fixed odds betting -bookmaking.
Good try but sounds like very sour grapes.We welcome betfare playing the game under our rules but otherwise go home.
Georgina
Based on your spelling, grammar and views we can only conclude that you are either from RNSW or just unintelligent.
The best racing model in the world is clearly Hong Kong because they own 100% of everything which means they get all the profits. Sadly, the advent of the TAB prevented us from having this model.
I don’t agree with you about Greyhound racing and under a GP model they are thriving in NSW. As for the trots, when the RNSW CEO Peter V’landys was in charge they had over 35 bookies and by the time he left they only had a couple. It is not rocket science to see that he has done everything in his power to kill off bookies and promote the TAB.
It is foolhardy to compere other countries with Australia as we have our own culture that started over 200 years ago which was about heaps of bookies and big on course crowds. I would have no problem not having any bookies if we could have the HK model, but that horse has bolted.
I dont think itelligence has much to do with spelling otherwise we are both are both in trouble– compere??
Any way don’t need to get personal I am a subcriber to your site which i enjoy.I am not from rnsw but a punter.
I never said greyhounds or trots are thriving I said they are subsidsed by horse racing.
I disagree Hong Kong has the best model.They have the largest turnover and goernment owned.they dont allow competion ie bookies or other tote operators not a good model. i am not anti bookie as i have account with all tabs and most bookies in australia and shop around cant do that in hong kong.
Scott,
what you say is true for horse racing in NSW but not for greyhound racing.
Greyhound racing declined to support the gross turnover model and have implemented a profit model, which has been running for a few years now. They also allow corporate bookmakers and betfair to sponsor race clubs, awards eg ‘The Betfair Greyhound of the Year Awards’
Ironically, GRNSW say that having had the gross profit model has been financially superior for them to the turnover model – see the Blog written by GRNSW CEO Brent Hogan yesterday http://www.thedogs.com.au/DPage.aspx?id=54
Perhaps the betting houses, exchanges, journalists and commentators that care about the punter, should be promoting and publicising that greyhound racing in NSW that has taken a more inclusive approach than the horse racing codes, which one would presume will lead to better wagering competition in NSW greyhound racing and therefore lead to better value for the punter. – Julian
greedy greedy people betfair is great you can win good money betting losers think about it if we all stopped punting where would all these people get a job. maybe gillard will give them some money from carbon tax to keep racing going at the end of the day governments and high court make some dum decisions
Chris
My greatest concern is the direction that racing in NSW is going. It is run by a CEO, a Chairman and Board who all have their own agenda, but no one can see that they are losing market share and have implemented a stop strategy.
The subject of gambling is vetry complex that view people fully comprehend and certainly the legal world do not. Trying to get legal council to convince a judge on thius subject is like the blind leading the blind
What one must remember is that for a while now, corporate bookies and betfair ran virtually unchecked and with little/no accountability to the racing bodies that form the very core of their business. You may remember that not long after betfair won its high court decision to be able to operate in all states, racing bodies and governments asked betfair to disclose how much money they were making from racing, but with no accountability, betfair persistently refused.
I actually agree at this tax is too high, and no doubt racing NSW took the stance that not only did they have to charge now and into the future, they also had to regain lost potential profits from the past. However, anyone quick to jump to the defense of corporate bookies and say they’re good for the industry need to look around a bit. Whilst NSW and Victoria may do ok with what they get back, look at the affect corporate bookies have had in Perth. Prize money is stagnant and has been for a few years, and in fact one Saturday race every week is now run below Saturday class so prize money can be lower, and the Wednesday city meet is often dropped altogether in favour of country/provincial meets
. Just as the TAB gives a set amount to the state racing body, I believe corporate bookies should give a set amount of profit , in a way that is consistently monitored, ensuring transparency between the bodies and an end to the hostility between racing bodies and the big bookies.
Dave
Everything is consistently monitored and I agree with your last par, they should give a set amount of PROFIT as oppossed to turnover which does not encourage growth, and in Bertfair’s case is not viable.
V’Landys would know the BF model and that they cannot pay on turnover and you have to wonder why he wants to kill a potential major business partner.
ANSWER: The Tab
The entire Racing Board in Aust is made of Ex this or Ex that…Frankly they have had this negative view from day1 of BF commencing in Aust. To all the Ex ….lot This is another nail in the coffin to burry it. They control all the media TV and Radio and not 1 dare to speak against it to see the puters pespective. They all are hiding the skirt of the ARB like little farrets. Their advise is not regulated via any independant Institurion or Govt authority. Thats what V’landy’s should fix not BF. Regulate the Form experts like the Financial Advisers bill which went via the Australian Parliment. Check it out. These lot should be accountable to so authority.
So Mr V’landy’s go ahead and fix your tracks, price pool and build beautiful stands for patrons less that 60,000 of race goes in NSW. Keep docking the numbers by counting one-of teenagers who to go to races for fashion or rock concert. Just have a look at he comments people make on the seven &Nine network they are all non Racing. Mr V… You are floging a dead industry….the sooner you introduce compettition the better your product will look. BF was your savior and you have just killed the chicken which was laying the goldern egg. The past Old Punters were not mugs…they have carried this industry for years.
Mr. V look at the industry from puters pespective we give the industry the fame and interest and you are trying to limit our choice. Were are you going to get your money when they all pull out. Have asked the question.
RBS
Well said.
It is a very political world at RNSW.
Their priority should be to grow the pie, but a tax on turnover will have an opposite impact, unless you are a fat cat who owns a stud and some race horses. The battling punter gets the raw end of the deal again.
Three words only…. Typical Political Bastards!!!
I’ll repeat a point made on the Punters Show. Mr V’landys has made a big deal about how this fee will increase prize money on provincial & country meetings, and he’s right it will but not for the benefit of the small time trainer who races his horses week in week out.
Increased price money will now attract the Waterhouses, Wallers, Prides and Snowdons who will go to the country for a easy kill. The small trainer will have to go further afield to find races he can win thus increasing his costs
I can’t see much benefit in that
boy has this been one hellava opionated one against the other as i agree with a lot of the comments above their is one thing i must state is you arid the tab where would all these corporates get their fixed prices from the tab seems to be the first up and all these others just follow god forbid they would have to hire form students so paying the bit extra only makes that part of bussiness seem fair looks like they be baring more winners to cover the extra overheads in any bussiness good customer service is your number 1 priority to making dollars these corporates have failed dismally in this area if they had good customer service and an inch of balls they be king and not the tab only them selves to blame but i do feel for the betfair punters though that part of the argument seems unfair and it will be a shame to lose them
Having been a punter for over 40 years and an owner,currently, and on and off for the last 10 years the arguments that have been presented on this blog do seem a bit strange, punters crying about bookmakers?????????
Have I missed something? Having worked with a number of good friends over the years who are on course bookmakers, who have been paying turnover tax forever none of them have highlighted that as a major problem, the biggest issue has been the exponential increase in information available to punters and the growth in professional and semi-professional punters.
I think the point has been missed that the ownership of racehorses by syndicates has been of enormous benefit to all in the industry, given that on average the cost of training a horse in the Sydney metro area is around the $50K pa mark, without syndication the industry would be in even more trouble. Given the statistics on how many horses actually win a Saturday metro race even through syndication owning a racehorse can still be an expensive excercise. The argument that punters are the backbone of the industry does a have an air of self-interest on this site, if prizemoney continued at it’s present level, other than for the very wealthy, owning even a small share in a racehorse would become an unattractive proposition.
As for Betfair, with whom I do have an account, I find it quite extraordinary that they even became involved in a case with bookmakers. I can only assume that they had access to the best legal talent that money could buy, in saying that I just cannot understand why they did not mount a totally separate case based on their model being distinguished from the bookmaking model.
I do know that if I put on my punters hat I would be more than happy to pay a membership fee to be part of a betting exchange, for the simple reason that the value I can get would more than cover any such fee.
Paul,
Does Betfair need directions to Mascot Airport
Betfair should move to New Zealand.