There’s Nothing Like A Good Bookie

It’s not always easy to follow the West Australians. They are now debating whether to privatise their TAB – the last one remaining in government hands. Labor is against it while the Liberals-Nationals want to go ahead. These are the same Liberals that tried to stop Betfair operating in the state, only to be thwarted by the High Court ruling in favour of Betfair. A different Minister is now in charge.

Anyway, the important thing is to assess who would be better off with or without a sale.

Other states were quick to make the change, largely because their Treasurers liked the idea getting hold of big dollars to help with other state demands. Short term gains are always popular with politicians – the long term is someone else’s problem.

In part, there were usually quick payoffs to the racing codes to ensure their support yet that also came at a cost – ie racing lost most of its influence over what the TABs did.

However, all those sales came at a time when the racing scene was vastly different. Betting exchanges and NT bookmakers were either non-existent or not a significant force and life was much more stable. Not necessarily progressive, but more stable.

Today, there is no more dominant force in the racing industry than Tabcorp, by far the bigger of the two TABs. Not just because it controls NSW and Victorian TABs (and also hosts WA for the moment) but because it also owns SKY and most radio broadcasters and it alone decides when races will be run and at what tracks, and which codes get preference. Then there are all the international races that now have coverage, with more to come according to CEO Attenborough. These will shove greyhounds further into the background and there will be no appeal possible.

What we are left with now are two questions; are Tabcorp and Tattsbet efficient and are they helping the industry go forward?

In the power game, TattsBet is hardly relevant at the moment. Its pools are small and declining so its only hope is that state governments will get together and nationalise betting pools. It can then rely on service and marketing alone.

The arrival of NT bookmakers (so-called – they are not really bookmakers at all) has immediately demonstrated that there is a lot of padding in the “price” the TABs charge. That is, their legislated 16% average deduction from each dollar is well above what it costs the newcomers to operate, albeit that the TABs provide more services, particularly the across the counter betting facilities throughout the country. This factor alone produces instability.

One outcome is that the NT people, with base costs of around 6%, have a huge excess they can use to pay for publicity, advertising and sponsorship as well as to shift profits to their mostly overseas owners. They also pay smaller fees than the TABs so the more they succeed the less raceclubs rake in for a given amount of wagering (even after allowing for sponsorship payments etc). There is a counter argument that the NT guys have expanded the market but while that was certainly true at the beginning, it has been more of a once-off benefit than an ongoing one.

Another view is that the NT people provide real competition for the betting dollar yet that is getting to be a thin argument, mainly because they do not initiate price competition but simply copy what the TABs offer – albeit the customers get some help from “best of” payouts.

At heart, the TABs are still monopolists. But is a private monopoly better than a state-owned monopoly? That’s always a doubtful proposition. One acts in the interests of the average citizen, the other in the interests of its shareholders, who will expect useful and continuing dividends. Currently, actions by the TABs to jam more and more action into a small space – ie the racing calendar – and to push more strongly into the mug gambler sector are clearly more helpful to their shareholders than to the racing industry.

Over time, quality has bowed to quantity, thereby contributing to a downgrading of the customer profile. That alone creates some risk to the industry, as has already been evidenced by the massive drop in wagering’s share of the gambling market over the last 20 years – from 50% to around 10% now. While TAB policies are far from the only factor involved there, they are certainly influential.

On balance, it is hard to see what benefits the privatised TABs offer to customers or governments under the current regime. They are growth oriented but only in respect to what their shareholders might like, and then perhaps more short than long term.

Historically, TABs, and later SKY Channel, have provided hefty boosts to customer services and therefore to turnover. But those advantages seem to have run out of steam and are now on a downward slide due to the heavily overcrowded calendar. In any case, who is to say those gains would not have occurred were governments to have retained ownership?

Philosophically, I prefer privatisation of commercial activities, but not to private monopolies. The only other option would be that governments – or perhaps a National Racing Commission – take a much closer role in supervising what the privatised TABs do. That might be more cumbersome but it could also take TABs down a road that better serves the industry and its customers.

Another sensible measure would be to introduce more direct competition. That is readily available in the form of traditional bookmakers who have long been dudded by the same forces that influenced state Treasurers to grab as much money as they could out of TAB sales. That is, the excessive protection offered to TAB buyers as a part of the sale. For example, why not allow those bookmakers to operate shopfronts around the suburbs at their discretion, and to take bets any way and at any time they wish?

It’s as well to remember that the current wagering mess – which is what several high profile people claim it is – is a direct product of arbitrary restrictions placed on oncourse bookmakers by raceclubs and state governments. Out of economic necessity those bookies rebelled and decamped to the NT to ply their trade. All that can be traced back to poorly justified free kicks given to TAB buyers in the first place. In short, free enterprise did not triumph at all. Instead, private monopolies prospered but, in the long term, at some cost to racing.

That’s why I could have no confidence in the WA Liberals flogging off their TAB.