Racing Rip Off – TAB Tote’s Fooling The Market

It’s hard to know whether to laugh or cry.

With audacity that would make a snake-oil salesman proud, Tatts-UniTab boss Dick McIlwain has announced that fixed odds betting is the way of the future. It’s “set to take over from the traditional tote”, according to McIlwain’s advice to a Sydney Morning Herald finance reporter (Feb 25).

This is the same man who proclaimed at an AGM a few years ago that if Betfair ever got a license to operate in Queensland he would have to start up a betting exchange himself. It did and he hasn’t. So much for corporate huff and puff.

Tatts followed Tabcorp into the fixed odds arena after the latter became concerned about leakage of business to Northern Territory bookies and set up its competing Luxbet bookmaking operation in Darwin. It followed later with more widespread fixed odds in its traditional tote market.

Just a few days ago Tabcorp changed its main price screens to include two new columns for its fixed odds offerings. Simultaneously, it deleted information on pool sizes for exotic bets, thereby inconveniencing its traditional customers.

However, the fixed odds service is erratic and of unknown volume. It applies only to some meetings or some races and Tabcorp switches it on and off for unaccountable reasons. Contrast that with the conventional bookmaker who is bound to display and sell his odds from the second he post them until the start of the race, and to accept any reasonable bet put to him (unlike some NT bookies who are reported to be declining bets from punters who win too often).

But that’s just the tip of the iceberg. The real rip-off is the price Tabcorp charges for fixed odds – more than double that in its normal pool. The standard 14.5% deduction for Win bets compares with a book of 130% or more for fixed odds offerings. Obviously, that also doubles the profit for the jolly green giant and Dick McIlwain.

And the punter who can overcome a 30% markup has not yet been born.

In NSW at least, Tabcorp must average no more than a 16% overall deduction (all bet types) under state law. But that’s for a tote, not for a separate quasi-bookmaking operation. It’s a moot point as to where fixed odds fits into that equation. The cash is in a different ledger but it runs on the same tote platform. And the TABs get their ability to run fixed odds courtesy of exclusive tote licenses provided by the states.

Raising the price of its product is consistent with other moves Tabcorp has made to exploit the unsuspecting “mug gambler” market. Introducing lottery level windfalls such as Big 6 is one example. Another is the fake First Four dividend it often posts, where the alleged payout is higher because it is calculated on a 50 cent or smaller investment rather than the $1 bet that is standard on all other bet types. (The same trick applies occasionally to Exacta and Trifecta dividends). Heavy promotion of Mystery bets brings in the mugs but also destroys dividends paid out for Quinella and Trifecta winners. That duds genuine punters and discourages any or bigger investments, whether it be at Timbuktu or the Melbourne Cup at Flemington.

(Generating dividends at “unders” due to these devices also illustrates why NT bookies are now happily offering exotic bets in competition with TABs. Their returns would be huge by comparison with Win betting).

Tabcorp and Tatts may be reacting to a 20 year fall in wagering’s market share – from over 50% to around 10% today. But they have chosen a left-handed way of addressing the trend. Far better to have developed a fresh pool of better educated punters to replace those lost when SKY enticed punters away from the track and often, apparently, away from racing altogether.

Since tote licenses are up for grabs in 2012 and 2013 in Victoria and NSW respectively, governments must now consider how better to introduce real competition into the wagering marketplace. If they don’t, the Northern Territory certainly will, while Betfair will be laughing all the way to the bank.

An observer gets the impression that governments are wringing their hands and hoping the various racing codes will start waving their magic wands. But that is not about to happen. After all, it is governments that have set up the framework in the first place. Only they can create a more positive environment.

In any event, current dubious, monopolistic TAB policies prompt a review of numerous arbitrary restrictions on conventional bookmaking operations. Off-course shopfronts will be needed to combat TAB rip-offs, for example. Not only would these be of value to consumers but also they would serve to increase the size of the pie and therefore benefit state tax revenue which has degraded following the diversion of business to the NT.

(Due to the massive publicity given to industry squabbles about field fees recently, it may have been forgotten that any absolute or relative reduction in TAB turnover also reduces state tax income).

Concurrently, governments should enforce the creation of a national TAB betting pool, thereby encouraging price stability and more and better betting, particularly at small meetings. It would also highlight the nonsensical nature of fixed odds prices.

Meantime, the local TAB outlet is still the only way the average man in the street can have a legal bet. He warrants better service than this. Indeed, that thought was what prompted the formation of TABs in the first place – four decades ago. That move was a great success but we are operating in a very different world today. The community will hardly benefit from a resurgence in the operations of SP bookmakers, but, without remedial action, that’s one risk we run.