Nationalise Or Bust – Part 1
Written By Bruce Teague Thursday 4th July 2013
Racing finances are messy, even risky.
One clue (not that we needed it) came on reading a Sydney Morning Herald commentary on the NSW state budget. The Treasury records that gambling taxes in general are down while taxes on racing “plateaued” last year and are expected to fall by 1.2% over the next four years.
Of course, with over 20% of wagering now headed to online bookies and Betfair – neither paying any NSW taxes - it is natural that Tabcorp’s traditional business would suffer, and it reported exactly that for the last half of 2012. Results for the first half of 2013 will be even more interesting.
You might say it serves the government right because some years ago it emphatically rejected overtures from NT bookmakers and Betfair seeking local licensing, as did other states. It was whipped on by the then-AJC and Racing NSW which also severely hampered the ability of bookmakers to diversify or modernise, instead favouring the higher rewards then available from TAB takeouts.
The Northern Territory won by default as Brisbane, Sydney, Melbourne and Adelaide bookies decamped to Darwin and Alice Springs and steadily expanded, joined more recently by the ever-present Tom Waterhouse. Betfair went to Tasmania with help from a deal struck between half-owner James Packer and the Premier. Also note that Waterhouse not only took out an NT licence but also shifted his southern base from Sydney to Melbourne. Why? Because he said operating conditions for bookmakers were kinder down there and NSW has refused to update.
On the privatisation of Tab Ltd (now Tabcorp) fifteen years ago, the NSW government pulled in a few more millions in short term capital gains by offering exclusive rights over a long period (one just ending) and protecting the winner against any competition, including from a bookmaker group that was the longstanding core of wagering in this country. It is now paying the cost of that protectionism in lower tax income, and will continue to do so in the foreseeable future. It is a classic case of governments meddling with markets to the ultimate disadvantage of the public. A bit like pink batts.
Fortunately, the racing codes are not in quite the same boat. After initially rejecting them, they now deal directly with the online companies and, following the High Court ruling on racefield fees, still get a neat share of their turnover. However, two and two do not make five, or even four.
The problem is that wagering on the two smaller codes, but greyhounds in particular, depends on the stability of the Tabcorp/Tatts betting markets. They even form the basis of the NT bookies business model. As those core markets decline, and with more and more nondescript races being presented to thin out the punters, so price integrity suffers. Pools split between the three main totes are far too small to permit good wagers without destroying the prices. Another irony is that the TABs have accelerated that process by pushing Mystery bets, Trackside (a pseudo poker machine) and the like, leading to diversions from “normal” pools, more over-bet favourites and poor Quinella and Trifecta dividends. And their introduction of Fixed Odds options has further split the already small markets.
In effect, TABs are simultaneously trying to become pari-mutuel operators and bookmakers, with a dash of the lotteries thrown in, while bookmakers are concentrating on TAB odds. Strange indeed.
Consequently, punters have been going elsewhere – to Betfair, the gallops, sports or whatever, including death. Either way, the product is stuffed, to put it frankly, and heavily reliant on mug gamblers who don’t know the difference, as well as on the whims of state governments. It now lends itself to easy scamming, as we have found out more than once. Without the availability of small pools, those scams would have been very expensive – ie near impossible - to bring about.
A national solution is desperately needed, obviously starting with the formation of a national betting pool. Without it, wagering benchmarks will continue to fragment, thereby encouraging even more customers to leave. But if we had a national pool, greyhounds could compete with the best of them.
A further warning has been posted about state government finances in general, where total deficits in the immediate future are forecast to be just as great as those of the Commonwealth. (Deutsche Bank estimates collective deficits of $17 billion in 2013-14, following small deficits in the current year).
That does not auger well for areas looking to spend big money on track construction in the near future – Brisbane, Adelaide and Perth in particular. On top of that, a cash-strapped Queensland is already under legal scrutiny following alleged mis-allocation of some $150 millions to a number of gallops tracks without proper tender processes. One of those projects, at Toowoomba, has already failed practical testing and is being scrapped, leaving RQ with a $20 million eyesore. Then, after shutting down the Gold Coast dogs, the previous government promised greyhounds $10 million in compensation, which it has yet to see. Nor are there any meaningful plans for a replacement of the flood-prone Albion Park with its broken grandstand – waffle only – although hundreds of thousands have been spent on plans for proposed sites at Logan and Deagon.
These big financial questions are far from the only state-centric items needing attention but we will cover he others in part two of this review.
Meantime, the underlying challenge is whether the sport of greyhound racing is to flourish or dwindle in the long term. Our declining customer base and static dog population are already putting our future at some risk. More fragmentation of the betting market will not help. Neither will the public’s largely negative attitude to greyhounds. These issues desperately need attention. Yet in business negotiations, in government influence, in the daily media, greyhound racing lacks the clout needed to achieve progress.
For a comparison, go to America where a couple of national groupings exist but there is no authoritative national authority as there is in other sports. State-controlled greyhound racing in America is in steady decline, sometimes catastrophically, and is unable to maintain its list of tracks because it is losing political, community and economic support, to say nothing of closures due to opposition from anti-racing lobbies. Betting is also subject to state taxes at unproductive levels (20%-plus). Ireland has had mixed fortunes, including major losses in some years, and is lumbered with a dicey national economic situation while England is struggling for some of the same sorts of reasons as in America.
To overcome those challenges, and to prosper, the minimum requirement will be strong, independent and effective national control. We need professional management of the industry as a whole. To get it we need to have all the states say so, then do it. Don’t say it is all too hard, just do it.