Waterhouse Shows How It Is Done
We must be living in a new world. After concluding a deal with the NRL, online bookmaker Tom Waterhouse has now committed over $100 million in promotion costs, much of it for this year. The majority of the cash does not involve racing but goes to sports in general.
Sports betting is the fastest growing sector of the business, while the gallops and harness codes are losing their shares of the market. Happily, greyhounds are still doing OK but only due to the addition of poor quality races, much of it at off-peak times.
But the real story lies in the shift of allegiances from traditional TABs to online bookies, who now
account for 20% or more of greyhound betting, and growing. The TABs themselves have reacted by developing fixed odds categories as well as forming their own bookmaking companies. Whether they are cutting their own throats by doing this is something time will tell.
In turn, the conduit for this development has been the massive jump in usage of hand-held devices to go with the home computer with its streamlined access to your favourite betting operator. Push-button betting is the name of the game, and of the future.
Technology is not the only change that made this possible. The three betting options – TABs, oncourse bookies and online bookies – are now differentiated primarily by the cost of doing business.
When it's all added up, TABs take around 18 cents out of your dollar, presenting a huge obstacle to punters trying to make a profit. At face value, it is not really possible. The genuine punter is limited to seeking out bet options that offer odds above a runner's true value, which is not easy to get these days, especially in small, volatile pools. That will rarely occur for Quinella and Trifecta bets where the Mystery bet volume is distorting the odds. And WIN betting, again in small pools, suffers from over-bet favourites.
Oncourse bookies are up for standing costs to the government, the raceclub and for labour, but their biggest battle is to overcome declining punter numbers which make it near impossible to run balanced books. Hence their falling membership, especially at dog meetings where they are often a thing of the past or only one bookie is prepared to stand up.
Many discerning punters have migrated to the online option, even though the standard procedure there is to offer no more than “the best of the TABs” prices. Clearly, that helps some of their customers but the main benefits are the convenience of the phone or internet access they get, and the ability to take a significant bet that would otherwise murder the posted TAB odds. Betting on the move, you might say. Equally, once a customer joins up to bet on sports it is only a short step to use the same operator for racing.
But while online betting is fashionable it also has marvellous built-in profits for the operator, including Waterhouse, whose costs are way below those of the TABs (a situation the Productivity Commission failed badly to assess in its report on problem gambling). The latter have to bear the burden of paying for outlets in clubs, pubs and main streets around the country.
This is why those NT bookies have been changing hands for upwards of $200 million, making them part of global betting empires.
The underlying nature of the beast is evident if you consider what went on during the High Court debate on the method of assessing racefield fees (Racing NSW v the bookies and Betfair). At the time I was pressing strongly the view – for a number of reasons – that doing that on a percentage of profits basis was poor policy for the industry. Amongst other factors, it would leave racing people dependent on the fortunes of each bookie, good or bad.
Coincidentally or not, GRNSW then pulled out figures showing that its percentage of profits approach had proved superior to a percentage of turnover. Obviously, this was true for them at that time but it also disguised how and why this happened, particularly as the major players (at the gallops) were eventually rewarded with huge increases in payments as they switched to the turnover route.
The GRNSW success is at odds with this. It could have been due to one or both of two factors: either the bookies were doing a fantastically effective job (ie high profits), or their customers were very bad on the punt (ie big losses). As illustrated above, online bookies start with a large cost advantage, which would suggest higher profits were potentially available in the first place. On the other hand, this period coincided with a general and continuing decline in the proportion of educated punters and a rise in the mug gambler influence. Clearly, betting markets at the gallops were much more mature that at the dogs, so the their margins were naturally smaller.
Therefore the most likely occurrence is that both factors were in play at the dogs. For example, punting on the run via an electronic device points to a probable lack of access to a decent formguide and/or the ability to use it (they, too, are in decline). In other words, good luck to NSW for its fortune but it is an artificial one. It represents an exception to the rule and one which may or may not continue in the future. Either way, the apparent lack of success by dog punters should be of concern.
Anyway, nominally Waterhouse and the online bookies are winning hands down – hence the huge promotional spending.
So what does this promise in the long term for TABs? There is nothing to suggest they will be able to reverse the drop-off in patronage so there will come a point when some parts of their operations will become so inefficient as to warrant shutdowns. So far, Tabcorp and Tatts have avoided much of that problem by creating their club/pub network. It does not pay particularly well but those people are already in business for other reasons and can carry the marginal load reasonably.
What it does not do is create a better betting environment. The ever-decreasing pool sizes and more mug gamblers are destroying the integrity and reliability of the betting product. Investing in a $5,000 or even $10,000 pool is pure speculation yet that is what greyhound punters face every day. Escaping to online operators is no real solution as they, too, are following the prices set by the volatile TAB pools. Consequently, nothing less that the creation of a larger national pool offers hope of forward progress.
Meantime, a whole host of people are paying for Tom Waterhouse's multi-million dollar promotions.
OH DEAR!
Irrespective of what you hear, Cranbourne's Cup night last Monday was a financial failure. It was also a predictable one as races had been shifted from its normal twilight slot to a conventional night timing. That's a guarantee of poor betting performance as night racing early in the week is a proven disaster.
WIN totes on the meeting averaged only $7,058 in NSW, equivalent to the worst results of the year. At that level, punting becomes a lottery dip (see also our 11 January article).
The bright spot of the night was that Cup winner, Cintiarna, ran a brilliant 29.95.