low margin bookies

After everything we’ve heard from TopSport in recent days, it shouldn’t be forgotten that they actually put up a very interesting proposal to help solve the issues they’ve raised.

Those issues, of course, revolve around it being nigh-on impossible for a bookmaker to operate in a sustainable manner on Victorian racing should they hope to offer competitive pricing and high limits for serious punters.

TopSport revealed that it pays an incredible 150% of its Victorian racing gross revenue in race field fees.

This was the case over last year’s four-day Flemington Carnival, when TopSport made gross revenue of $88k, and paid product fees of $149k.

So they lost $61k… and that’s before they paid their costs of doing business such as wages, rent, marketing and administration.

Furthermore, there’s now the dreaded point-of-consumption tax on top of that, which strips away a further chunk of revenue. And it’s calculated on the pre-race fields figure of $88k profit, not a $61k loss. A tax on a tax.

You don’t need a degree in accounting to know that’s unsustainable.

Now, that $88k in gross revenue came on turnover of $4.5 million. That’s a wafer-thin margin of around 2%.

The response to TopSport from some (including, it would appear, Racing Victoria) will be simple: your margin’s too low. Fix your business model.

But that ignores the very point that’s being made: TopSport have a different business model.

They service more serious, low-margin punters. Those that don’t lose enough and thus are limited by other wagering operators. Those that are price sensitive.

The fact they are price sensitive means that, by definition, they won’t bet if they can’t get the price they need.

So if a low-margin operator like TopSport can’t take them on, you run the risk of them being lost to the game completely. To other states, other sports or – worst of all – black-market betting operators.

Does Racing Victoria want that? Are they comfortable with turnover leaving Victorian racing?

Their response yesterday suggests they are.

But there might be another way. TopSport thinks there is, and they’ve suggested it to Racing Victoria – and other states too.

Under the proposed scheme, they’d be designated as a “low margin wagering operator”. This would qualify them for a 50 basis point reduction in their race field fees, and the ability to have their net revenue on Victorian racing calculated monthly, rather than daily – which helps to smooth out the variance that’s inevitable in a genuine bookmaking operation.

But not just any wagering operator could do it. Their end of the bargain would be to implement some qualifiers:

  • A minimum bet limit at all times (as opposed to only after 9am on raceday) – to ensure they’re bookmaking properly, and actually taking a bet.
  • A doubling of the minimum bet limit late in betting, during the official VOP period (the last 25 minutes before the jump) – to bring them into line at this time with what on-course bookies are required to accept.
  • A maximum market percentage that reflects a low margin operation.

As a bookmaker, you’re then actually incentivised to take risk,” TopSport’s Tristan Merlehan told the Betting 360 Podcast.

“Bookies don’t have to opt in and the bigger guys may not want to. But we just have to discuss these things and hopefully come up with a solution that’s workable for all parties.

“For the regulators, I can’t see how it won’t stimulate turnover. Sure, they’re getting a slightly lower percentage on the bets, but if that turnover goes up, then the dollar amount they receive shouldn’t work out much different.”

(You can listen to Tristan’s full interview on the Betting 360 Podcast here).

What’s notable is that these points address the gripes many serious punters have with the current wagering landscape. Those gripes reflect the approach of the major players.

These companies – generally multi-nationals that are publicly-listed in Europe – are not so much bookmakers, but more marketing and media firms dedicated to customer acquisition. The rebranding of Sportsbet’s parent company to “Flutter Entertainment” is somewhat instructive. They need casual punters who’ll have a flutter just for entertainment, who’ll lose enough to fund their business model: which is different to TopSport’s.

So would this scheme work? Would it allow serious punters more options to turn over the amounts they want, legally?

It’s hard to say, of course. But why not give it a go? How about a three-month or six-month trial to see the impact? It can then be reviewed and, if need be, changed back to the current system.

Racing Victoria currently recognise different wagering models, applying an appropriate fee model to the Betfair exchange – unlike Racing NSW, which continues to ignore the fact that a betting exchange is not a bookmaker.

So how about trying this one … if only to see how it goes?

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