Is Betfair Good for Australian Racing?
Pull the Pocket has a great post on the Australian Court ruling that Western Australian Racing’s decision to make betting with Betfair illegal was a restriction of trade.
In a unanimous ruling, seven High Court judges said WA’s Betting Control Act of 2007, which banned Betfair from operating in WA and punters from placing bets using Betfair, was a protectionist law.
Pull the Pocket predicted (correctly) an adverse reaction by those in power, the Australian TAB and by the controlling bodies of racing.
“What you will hear about this from now on is easy to predict. You will hear the same thing that was said during the fight to get it licensed in Tasmania. We all know that racing, or in reality all monopolies, hold on to their slice until you pry it out of their hands. It is the only way they know how to do business, and competing is a something that has never been asked of them. So you will hear demagoguery and fear-mongering that is usually reserved for a terse US presidential campaign.
Here is a primer for what to look for from racing:
1. They are pirates that do not contribute to racing.
2. It will kill racing and purses will be hurt, so much so that tracks will close.
3. You can bet to lose and that shakes the integrity of the game to the core.
Get ready for it.
The response is simple. Don’t buy it. It is a complete load of malarkey.”
The decision has other states worried.
The basic argument against the ruling is expressed by Perth Racing chairman Ted van Heemst:
“It undermines the financial viability long term, not just necessarily Betfair on its own, but just in terms of the big picture and what it represents,” Mr van Heemst said.
“The economic model that Betfair operates under does not compensate the industry for putting on the show.”
Some [mis?]information is going around with van Heemst declaring that Betfair pays the racing industry about 1 fortieth the amount the TAB does.
“Towards the end of your article you said, “…Betfair have offered to pay a fee of 27 cents out of every $100 bet. The TAB currently pays a fee of $5 in every $100 wagered!” Both those statements are false.
First, Betfair offered Racing NSW a product fee based on a percentage of gross profits; not turnover. We have never offered to pay Racing NSW (or any other racing body in Australia) a percentage of our turnover. Second, the TAB does not pay NSW Racing or the NSW Government as a percentage of its turnover. It makes its payments as a percentage of its revenue – just like Betfair has proposed. See the Betting Tax Act (NSW) 2001 to see exactly how the TAB is taxed.
The requirement to pay product fees to racing based on revenue is found in the Racing Distribution Agreement between the TAB and the industry – not surprisingly, we don’t have a copy but the payment model is referred to in Figure 20 of the Wagering Industry Review Issues Paper published last week by Alan Cameron AM. You can read a copy here.
To understand the practical difference between the TAB paying a percentage of turnover vs. a percentage of gross profits, you need only consider how much money goes to the racing industry or government when the TAB runs a zero take-out promotion such as “Fat Quaddies”. The result is that it doesn’t matter whether they “turn over” $100,000 or $10 million”, the industry and government receives nothing – because the TAB makes no revenue. That’s not a criticism of the TAB, they do it to get their aggregate takeout rates below the statutory threshold, and the promotions are great for racing, but it does highlight the false nature of the conventional wisdom that the TAB pays on turnover.
In relation to our offer to Racing NSW, its worth pointing out that Racing NSW has declined to tell anyone what they believe we or any other interstate wagering operator – including bookmakers and TABs – should be paying for the “right” to cover NSW racing. Nor will they say publicly whether they think that any interstate wagering operators who do pay a fee should be able to advertise, as the local operators can do. As a final point, before we were licensed in Australia, we offered to pay every State racing body 20% of our gross revenue (from our global customer-base related to betting on their races. That offer was rejected and discussions were cut off. We accrued product fees for the racing bodies at that rate the entire time we were licensed and we still hold them in trust. To date, only Tasmanian Racing and RVL have accepted the accrued product fees.”
For the legally inclined, here’s the Australian High Court’s ruling (Microsoft Word)
So what do you think? Is Betfair a positive step for the racing industry, or will it cripple racing?
April 2nd, 2008 at 7:43 pm
Of course it is and especilly for harness racing. The TAB is now an outdated wagering model that has been surpassed now by betfair. Why?? how many times have you had a bet on a harness race on the TAB only to have the price change dramatically from when you placed it to the final dividends. Harness racing has small pools that are subject to extreme volitility especially in the last 30 secs when nearly 50% of the final pool size is outlayed. Betfair doesnt suffer this problem. It is a fixed price. The price that you backed a horse at is what you get. Just like a bookie only you can bet from the comfort of your living room. Or, you can easily ‘lay’ a horse, also at a fixed price. For those that have used the wagering system it is a simple straight forward and convenient method of betting. And where betfair clearly surpasses the TAB is the margin or ‘cut’ that it takes from races. Anywhere usually from 5% to around 15%. The TAB alternatively takes around 18% on tote pools and 26% on their fixed markets. For the regular punter that is a huge difference. For example if you bet a couple of hundred dollars every week and managed to do well enough to finsh even at the end of the year betting on the tab, you would have have an extra $1000 (or more) in your pocket from wageing instead on betfair. This is the underlying factor why this is a superior system that the totaliser. In the current climate there are hundreds of ways to spend your betting dollar like there never has been before. If the racing industry continually uses the tabs their customers will loose too much (and they do!) and will inevitably spend money on small margin betting like the casinos or sports betting where your betting dollar will last that bit longer.
So what does betfair give to the racing industry?? Well that is upto the various representatives of the racing industry to decide but in the end they need betfair more that betfair needs them. The founders of betfair were clever enough to come up with the system (and it is a beautiful system) and the tab has been outdated.
April 3rd, 2008 at 5:59 am
Betting on harness racing has been in decline for many years… something drastic is needed to revive public interest. I started my betting on the trots many moons ago, now I don’t touch it unless I can do it via Betfair - it’s the only place I can get a fixed price> They can expand the interest in the sport and take a small percentage of additional betting volume as well as see a lot more advertising, or stick their hands in the sand and be left with four-fifths of stuff-all!