headache aussie bookies

The Australian bookmaking industry shows little sign of settling down. With speculation about a fresh round of mergers and consolidations hitting the news, there are difficult times on the horizon for the Aussie bookies.

Crown jewels for sale

The latest headlines concern CrownBet, which may not be ‘CrownBet’ for much longer, with James Packer’s Crown Resorts having announced their intention to exit from the bookmaking business. Crown Resorts owns 62 per cent of CrownBet, with the remaining 38 per cent owned by CEO Matthew Tripp and his partners.

Tripp has been the driving force behind the business since he purchased it as Betezy in 2014, changing the name briefly to Beteasy. Soon after, he sold the majority stake to Crown, morphing it into CrownBet. Prior to this Tripp owned Sportsbet, which he purchased for $250,000 in 2005 and sold to Paddy Power for a whopping $330 million in 2011.

Tripp could buy the majority stake back, but would likely want a big-hitting partner or two in his corner were he to do so. He’s spent some time in Europe of late looking at options. Independent partners and financiers may allow the business to retain a link with Crown. This would ultimately allow the company to continuing using the CrownBet brand and the Crown loyalty program (for some period of time at least).

Otherwise Crown’s stake could be sold to another player in the Australian market, such as Sportsbet, William Hill or Ladbrokes, and ultimately absorbed into their business.

If CrownBet is to remain as an independent business once the ownership issues are sorted, then the immediate task will be getting into a position to take on a merged Tabcorp–Tatts Group.

Merger saga

That TAB-Tatts merger was given yet another green light last week, with the Australian Competition Tribunal (ACT) approving the tie-up – for the second time.

The merger was initially announced in October 2016, and required approval of the Australian Competition and Consumer Commission (ACCC). Tabcorp elected to bypass the ACCC and have the matter referred directly to the ACT, which approved the deal in June.

Both the ACCC and CrownBet appealed this decision to the Federal Court, claiming the merger would substantially lessen competition in the industry and thus be unfavourable for punters. The Federal Court agreed, quashing the ACT’s original approval and instructing the tribunal to examine the case again.

The ACT have now done so, and in approving the merger yet again have dismissed the arguments of CrownBet and the ACCC. So it’s set to proceed, creating a wagering giant that will control substantial online wagering (TAB.com.au, UBET and Luxbet), as well the retail wagering licenses and state totalisator pools in all Australian states (except Western Australia, which remains state-owned).

The ACT have now done so, and in approving the merger yet again have dismissed the arguments of CrownBet and the ACCC. So it’s set to proceed, creating a wagering giant that will control substantial online wagering (TAB.com.au, UBET and Luxbet), as well the retail wagering licenses and state totalisator pools in all Australian states (except Western Australia, which remains state-owned).

Corporate headache #1: In-play betting

The merged Tabcorp-Tatts Group is expected to provide stronger competition for corporate bookmakers, giving them yet another hurdle to clear among the multitude of challenges that have stacked up in front of them lately.

The first major blow to the corporate’s model has been the continued ban of online, live in-play betting on sport in Australia. In the UK – which many of the betting giants call home – sports betting exploded to the point where it now far outweighs what is wagered on the racing codes. A large reason for this is in-play betting.

The advantage racing has over sport in terms of wagering activity in Australia is the sheer number of events: there’s generally a new race for punters to bet on every few minutes, all day, every day. In-play sports betting brings that constancy to sport, as punters can continue to bet right throughout a match, rather than getting on and then simply watching the contest for the next couple of hours.

It’s banned online in Australia: if you want to bet during a game, you have to call the bookmaker and place it over the phone – something most punters don’t bother with. Corporate bookmakers in Australia had lobbied and were desperate for a change to this law to open up the lucrative revenue from in-play betting.

The Federal Government commissioned a review into the ageing Interactive Gambling Act to address this. The review was led by former NSW Premier Barry O’Farrell, and recommended the ban remain. In a further blow, it also recommended the banning of sneaky technology which bookmakers had employed to allow punters to place “telephone bets” over the internet, known as ‘click-to-call’.

Racing was obviously happy with the decision, as online in-play sports betting would likely have resulted in the bleeding of much betting turnover from racing to sport.

A short time later, Racing Australia named a new CEO: Barry O’Farrell.

Corporate headache #2: Advertising and promotion

The use of ‘click-to-call’ technology is seen by some as emblematic of the general approach the corporates have taken in Australia: push and push and push the envelope, pissing people off until they bite back.

There’s no better example of this than the relentless wave of marketing and advertising that has washed over the country. From bookie billboards on every street corner, to bookie ads in every commercial break. From bookmakers becoming part of television sports broadcasts, to blanket text message campaigns.

You’d have to be living under a rock not to have been constantly faced with betting in Australia in recent years. Although they’d probably find a way to find you under the rock as well.

Unfortunately for the bookies, a hell of a lot of Australians aren’t punters outside of an annual $10 flutter on the Melbourne Cup, and don’t traditionally equate their love of sport with having a bet.

What’s more, they’re annoyed by it and concerned about their kids growing up equating the two. The result? A fair bit of outcry, with the government set to act and limit when and where bookies can advertise on TV. This comes on top of almost all states banning the use of promotional offers like free bets and deposit matches to lure in new punters.

The new laws certainly won’t wipe out advertising completely, but it’s pretty clear which way the winds of change are blowing. The bookies are going to find marketing tougher in future.

Corporate headache #3: Taxation

Finally, the taxman has come knocking.

You might have noticed that almost all corporate bookmakers are based in the Northern Territory. That’s because the NT government put in a low cap on gambling taxes to attract the industry to Darwin. It worked.

The only problem is, now that the whole of Australia is betting into these NT-based accounts, the other states aren’t gathering any gambling tax from the bets.

So the state governments have set about implementing a new ‘point-of-consumption’ gambling tax. The operator will be taxed based on any bets placed by punters in their state… on top of what they pay (albeit not much) in the NT.

South Australia’s PoC tax is already up and running, Queensland’s isn’t far away, and the rest of the states are expected to follow pretty quickly.

There has been talk of the states taking a unified approach to the tax, but that’s yet to eventuate.

What does it all mean?

A tough and crowded market is expected to get tougher, which means only the strong will survive.

Expect to see more mergers and acquisitions, and perhaps even some international players bailing out altogether. Australia initially looked like a goldmine, but the good times may well be coming to an end.

There’s a credible view that the Australian market is over-crowded with a mountain of similar, medium-sized bookies anyway. Many of which offer no real point-of-difference over their competitors.

Perhaps that means industry consolidation is inevitable in any case. Having said that, it’s hard to think of an example where less competition was a good thing for consumers.

On top of that, additional costs imposed on bookies by way of taxes are sure to end up costing punters, as the businesses increase their margins to cover them.

Punters will be hoping a strong level of competition remains in the market to ensure prices remain favourable. In part two of this series we will look at each of the corporate bookies and assess where they sit in the overall Australian betting landscape.

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